2010 (2) TMI 440 - AT - Central Excise

Interest and Penalty - The appellants took a wrong credit in PLA amounting to Rs. 1,32,000/-. This error has led to short payment of education cess. This error in taking credit consequent to short payment of education cess was detected by the appellant themselves in September, 2006 and accordingly, they voluntarily debited the short paid amount of Rs. 34,498/- along with interest on 3-11-2006. Held that - short payment in present case to be treated as due to clerical mistake and cannot be considered as deliberate action or default. Short payment due to bonafide mistake. Mens rea not attributable. Demand of interest and penalties not sustainable.

Summary

Issues Involved:
- Wrong credit in PLA leading to short payment of education cess
- Show cause notice for demanding duty, interest, and penalty
- Applicability of Section 11A(2B) of the Central Excise Act
- Violation of Rule 8 of Central Excise Rules, 2002
- Imposition of penalty under Rule 25 of Central Excise Rules, 2002

Analysis:
1. Wrong credit in PLA leading to short payment of education cess:
The appellants mistakenly took credit in PLA amounting to Rs. 1,32,000, resulting in a short payment of education cess of Rs. 34,498 for the period in question. The error was self-detected by the appellants, who voluntarily rectified it by debiting the short paid amount along with interest. This clerical mistake was acknowledged by both sides.

2. Show cause notice for demanding duty, interest, and penalty:
A show cause notice was issued proposing that duty should have been paid on consignment basis from PLA without using Cenvat credit, leading to a demand for duty, interest, and penalty. The Original Authority ordered the payment of duty, interest, and imposed a penalty of Rs. 50,000 under Rule 25 of Central Excise Rules, 2002.

3. Applicability of Section 11A(2B) of the Central Excise Act:
The appellant argued that Section 11A(2B) should apply as they self-ascertained the duty shortfall and made the payment before any notice was served. The Tribunal agreed, noting the absence of mens rea and the appellant's proactive rectification of the mistake, leading to the conclusion that the demand for interest and penalty was not sustainable.

4. Violation of Rule 8 of Central Excise Rules, 2002:
The violation of Rule 8 of the Central Excise Rules, 2002 was raised by the Respondent, justifying the consequences mentioned in the Commissioner's order. However, the Tribunal found that the error was a clerical mistake, not a deliberate default, and therefore, the demand for interest and penalty was deemed unjustified.

5. Imposition of penalty under Rule 25 of Central Excise Rules, 2002:
The Respondent justified the penalty imposed under Rule 25 of Central Excise Rules, 2002, citing the clear violation of Rule 8. However, the Tribunal, considering the circumstances and the proactive steps taken by the appellant, allowed the appeal, providing consequential relief as per the law.

In conclusion, the Tribunal allowed the appeal, emphasizing the appellant's proactive rectification of the mistake and the absence of mens rea, leading to the rejection of the demand for interest and penalty. The judgment underscored the importance of self-ascertainment under Section 11A(2B) and the distinction between clerical errors and deliberate defaults in excise duty matters.