2001 (3) TMI 216 - AT - Central Excise

Summary

Issues involved: Liability to Central Excise duty, penalty under Section 11AC, interest demand under Section 11AB, invocation of Rule 173Q of Central Excise Rules.

Liability to Central Excise duty: The appellants, manufacturers of Mazza, became liable to Central Excise duty from 14-5-97 under the Finance Act but started payment only from 6-6-97, resulting in non-payment for clearances between 14-5-97 to 5-6-97. A penalty equivalent to the unpaid duty was imposed under Section 11AC, along with an interest demand at 18% under Section 11AB.

Penalty under Section 11AC and interest demand under Section 11AB: The appellant contended that penalty and interest were wrongly imposed as they had paid the unpaid duty before the show cause notice was issued. The appellant argued that Sections 11AC and 11AB apply in cases of short levy due to fraud or suppression, which were not alleged or proven in this case. The Tribunal agreed, noting that both sections require a demand for evaded duty, which was not the case here as duty was paid before any demand was raised.

Invocation of Rule 173Q of Central Excise Rules: The Department argued that penalty was justified as the appellants intentionally evaded duty by not paying for clearances between 14-5-97 to 5-6-97 until 13-11-97. They also invoked Rule 173Q for penalty imposition. However, the Tribunal held that penalty under Section 11AC was sufficient and that invoking other provisions simultaneously did not change the penalty's nature.

Conclusion: The Tribunal found that the penalty and interest demanded were not legally justified as duty was paid before any demand was raised, rendering Sections 11AC and 11AB inapplicable. The penalty imposed and interest demanded were set aside with consequential relief to the appellant.