2010 (3) TMI 384 - HC - Central Excise

Interest and Penalty- Exemption under Notification No. 2/2001-C.E.- The assessee is engaged in the manufacturing of motor vehicles. Under the Notification No. 2/2001-C.E. (N.T.), dated 27-1-2001, assessee was exempted from payment of excise duty in respect of excisable goods cleared by the assessee to NGOs, Trusts, etc. in order to provide relief and rehabilitation to the victims of Gujarat earthquake. Show cause notice issued after 4 years for levy of interest and penalty. Held that- interest and penalty leviable if there is adjudication under section 11A(2) of act. Such adjudication possible if there is fraud, collusion or any willful statement or suppression of facts. SCN silent with regard to averments as required under section 11A. revenue claim barred by limitation and in view of non-adjudication under sub-section (2) of section 11A substantial question answered in favour of assessee.

Summary

Issues:
1. Recovery of interest from an assessee for delayed payment of duty under exemption notification.
2. Imposition of penalty for not fulfilling conditions of the exemption notification.

Analysis:
1. The assessee, engaged in manufacturing motor vehicles, was exempted from excise duty under a notification for providing relief to Gujarat earthquake victims. The assessee paid the duty for certain vehicles as utilization certificates couldn't be obtained within the stipulated period. Revenue issued a notice for interest and penalty, which the assessee contested, stating no willful default. The appellate authorities upheld the demand, but CESTAT ruled the proceedings were time-barred and set aside the orders. Revenue appealed challenging the decision.

2. The Revenue argued that the delayed duty payment by the assessee should be considered willful disobedience, justifying interest and penalty. The assessee's counsel contended that since there was no willful default, interest and penalty were not applicable. The court noted the facts were undisputed regarding the exemption and duty payment delay, leading to the key question of whether Revenue could collect interest and penalty for delayed duty payment.

3. The court examined Sections 11AA, 11AB, and 11AC of the Central Excise Act, which allow interest and penalty under specific conditions like fraud or willful misstatement. It emphasized that interest and penalty could only be levied after adjudication under Section 11A(2), involving fraud or willful default. As the show cause notice lacked essential allegations and was issued four years after duty payment, the court deemed the claim time-barred. Citing legal precedents, the court ruled in favor of the assessee, dismissing the appeal due to the absence of adjudication and the notice being beyond the time limit.

4. The judgment clarified that interest and penalty could not be imposed without meeting the statutory requirements of fraud, collusion, or willful misstatement. In this case, as the show cause notice was untimely and lacked necessary details, the court held that Revenue could not levy interest and penalty. The decision highlighted the importance of adherence to procedural and substantive legal requirements before imposing financial obligations on taxpayers under excise laws.