2024 (6) TMI 375 - AT - Central Excise

Demand of differential duty with interest and penalty - value of power units supplied by M/s. AVTEC to the appellant was undervalued which was due to the reason that the appellant had undervalued the components supplied by them to M/s. AVTEC - HELD THAT - As regards the submission made by the Ld. Counsel that they were not required to pay duty had they adopted the procedure provided under Rule 4(5)(a) of CCR.The same cannot be accepted as the appellant had themselves chosen to follow the procedure under Rule 3(5) of CCR and pay duty on clearance of inputs and instead of getting the goods manufactured on job work basis they had placed a purchase order on their suppliers. As both the provisions had their own set of conditions and manners of payment of duty to be followed their claim that duty and consequently interest was not required to be paid if they had followed the procedure under Rule 4(5)(a) of CCR cannot be accepted. Interest - HELD THAT - As far as the recalculation of interest by the department is concerned it is found that interest recalculated will directly be a direct consequence of re-determination of duty from date of clearance from September 2003 to 31.03.2006 instead of 01.04.2004 to 31.03.2006 as determined by the appellant. Re-determination of duty for the period 01.09.2003 to 31.03.2006 will clearly be hit by the embargo of limitation period of maximum five years under Section 11A even in the case of fraud willful misstatement etc. It is not a case of merely short payment of interest on the differential duty paid by the appellant but it amounts to re- determination of duty by the appellant which is hit by time limitation. Penalty imposed upon the appellant under Section 11AC - HELD THAT - The same cannot be sustained as the imposition of penalty under Section 11AC is subject to determination of duty under Section 11A. As no duty under Section 11A has been determined in the impugned order a penalty under Section 11AC cannot be imposed and therefore the imposition of penalty under Section 11AC of Central Excise Act without determination of duty is legally not sustainable. The Hon ble Apex Court in UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. 2009 (5) TMI 15 - SUPREME COURT has held that the penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC. Appeal allowed.

Summary

Issues Involved:
1. Validity of differential duty payment.
2. Demand of interest on differential duty.
3. Imposition of penalty u/s 11AC of the Central Excise Act, 1944.

Summary:

1. Validity of Differential Duty Payment:
The appellant argued that the differential duty of Rs. 2,67,64,913/- was not payable as they were entitled to clear the inputs without payment of duty u/s 4(5) of CCR for job-work. However, the Tribunal did not accept this argument since the appellant chose to follow Rule 3(5) of CCR, paying duty on clearance of inputs. The Tribunal held that the appellant's claim that duty and consequently interest was not required if they had followed Rule 4(5)(a) of CCR was not acceptable.

2. Demand of Interest on Differential Duty:
The Tribunal found that the recalculation of interest by the department was a direct consequence of re-determination of duty from the date of clearance (September 2003 to 31.03.2006) instead of the appellant's determined period (01.04.2004 to 31.03.2006). This re-determination was hit by the limitation period of five years u/s 11A, even in cases of fraud or willful misstatement. The Tribunal cited the judgments in Commissioner V. TVS Whirlpool Ltd. -2000 (119) E.L.T. A177 (S.C.) and Kwality Ice Cream Company V. Union of India -2012 (281) ELT 507 (Del.), holding that the demand of interest of Rs. 70,54,947/- was barred by limitation. However, the Tribunal upheld the appropriation of Rs. 45,81,942/- already deposited by the appellant.

3. Imposition of Penalty u/s 11AC of the Central Excise Act, 1944:
The Tribunal held that the penalty of Rs. 2,67,64,913/- imposed u/s 11AC was not sustainable as the imposition of penalty u/s 11AC is subject to determination of duty u/s 11A. Since no duty was determined u/s 11A in the impugned order, the penalty could not be imposed. The Tribunal referred to the Apex Court's judgment in UNION OF INDIA Versus RAJASTHAN SPINNING & WEAVING MILLS - 2009 (238) E.L.T. 3 (S.C.), which stated that the penalty provision of Section 11AC would come into play only after an order is passed u/s 11A(2) with a finding of deception by the assessee.

Conclusion:
(i) The demand of interest of Rs. 45,81,942/- already deposited by the appellant is time-barred but upheld as it was voluntarily paid.
(ii) The penalty of Rs. 2,67,64,913/- imposed u/s 11AC is not sustainable due to the absence of duty determination u/s 11A.

The appeal was allowed in the above terms.