2005 (9) TMI 155 - AT - Central Excise

Summary

Issues:
1. Claim of exemption under Notification No. 108/95-C.E.
2. Imposition of penalty on the appellants.
3. Demand of interest against delayed payment of duty.

Analysis:

Issue 1: Claim of exemption under Notification No. 108/95-C.E.
The appellants were engaged in manufacturing Towers and Tower accessories for a project financed by an international organization. Initially, they claimed exemption under Notification No. 108/95-C.E. based on a certificate from APTRANSCO. However, it was later discovered that the funding agency, JBIC, was not approved under the said notification, leading to the withdrawal of the certificate. Consequently, the duty became payable as the goods were not entitled to exemption. The appellants voluntarily paid the duty, acknowledging the ineligibility for exemption. The Tribunal held that duty demand can be made when conditions of an exemption notification are violated, citing the decision in Mediwell Hospital and Health Care Pvt. Ltd. v. Union of India. The payment of duty was not contested by the appellants.

Issue 2: Imposition of penalty on the appellants
The appellants argued that since the duty was paid before the show cause notice, no penalty should be imposed. They relied on various case laws to support their contention. The Tribunal observed that the exemption was availed based on a certificate from a State Government authority, and thus, the imposition of penalty was deemed unjustified. Additionally, the appellants had received a cash refund from DGFT as terminal excise duty on the goods, treated as deemed export, further supporting the decision to set aside the penalty.

Issue 3: Demand of interest against delayed payment of duty
Regarding the demand of interest under Section 11AB of the Central Excise Act, 1944, the Tribunal held that interest is payable from the date of enactment of the Finance Act, 2001, irrespective of whether the duty demand was determined before or after the show cause notice. The specific wording of Section 11AB mandates the payment of interest on deferred duty payment. Therefore, the Tribunal concluded that interest is payable on the delayed payment of duty, even if the duty was paid before the issuance of the show cause notice.

In conclusion, the appeal was partly allowed, setting aside the penalty imposed on the appellants. The judgment highlighted the importance of adhering to exemption conditions, the justification for penalty imposition, and the obligation to pay interest on deferred duty payment as per the provisions of the Central Excise Act, 1944.