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2006 (7) TMI 33 - AT - Central ExciseCentral Excise Demand of interest not upheld under Section 11AB of C.E. Act 1944 when amount of duty have been discharged even much before issue of SCN Penalty under Rule 173Q cannot upheld when act is bona fide mistake and no mala fide established
Issues:
1. Recovery of interest and imposition of penalties on duties paid on imported capital goods under the EPCG Scheme. 2. Applicability of Section 11AB provisions for interest when demands of principal amount have been discharged before the show cause notice. 3. Determination of contributory negligence by the Customs officer and the validity of the plea of bona fide mistake by the assessee in availing credit entry. 4. Assessment of penalty under Rule 173Q of the Central Excise Rules for taking credit of duty not permissible. Analysis: 1. The appellants, a Public Sector Unit under the Central Excise Act, imported capital goods under the EPCG Scheme. Due to an error by the Customs officer, the Basic Custom Duty was charged as CV Duty, resulting in the appellants availing credit of Rs. 2,28,94,628.00. Upon realizing the mistake, they reversed the credit and informed the authorities. Subsequently, a notice was issued proposing interest recovery and penalties under the Central Excise Rules. 2. The Commissioner confirmed the recovery of interest and imposed a penalty under Rule 173Q of the Central Excise Rules. However, it was argued that when the principal amount of duty had been paid before the show cause notice, interest under Section 11AB provisions could not be upheld, citing a precedent. Therefore, the interest on demands confirmed under Section 11AB was deemed invalid. 3. The Tribunal found that there was contributory negligence by the Customs officer in the error, and the appellants' plea of bona fide mistake in availing the credit entry was upheld. The error was detected by the appellants themselves before the department initiated proceedings, indicating no mala fides on their part. As a result, the penalty under Rule 173Q for taking credit of duty not permissible was not applicable, as the mistake was genuine and not done knowingly. 4. Considering the bona fide nature of the mistake and the absence of mala fides, the Tribunal set aside the order for recovery of interest and imposition of penalties. The appeal was allowed, and the penalty was not upheld based on the facts of the case. The decision was made after careful consideration of the circumstances and legal precedents. (Dictated and pronounced in the open Court)
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