2010 (3) TMI 655 - HC - Central Excise

Interest - Misdeclaration of value of machinery (Less than Rs. 3 crore) availed Compounded levy scheme Differential duty paid before issuance of show cause notice respondent fully knew that value of their plant and machinery was well above Rs. 3 crores and hence they were not entitled to pay the duty of excise under the compounded levy scheme - Held that - The respondent had mis-declared the value of plant and machinery and was liable to pay the differential duty of excise along with interest.

Summary

Issues:
Interpretation of Section 11AB of the Central Excise Act, 1944 regarding the levy of interest on differential duty paid voluntarily before the issuance of a show cause notice.

Detailed Analysis:

1. Facts of the Case:
The respondent paid duty on processed fabrics under different schemes based on the value of their plant and machinery. A physical verification revealed misdeclaration, resulting in the payment of differential duty by the respondent before any show cause notice was issued.

2. Legal Arguments by Appellant:
The appellant argued that interest is payable on all cases of duty short paid, short levied, or erroneously refunded, even in cases of genuine errors. Citing Commissioner of Central Excise, Pune v. SKF India Ltd., they contended that interest is applicable from the month following the duty payment.

3. Legal Arguments by Respondent:
The respondent contended that as they paid the differential duty before any show cause notice, no interest should be levied. They relied on previous tribunal judgments and the decision in Commissioner of Central Excise, Aurangabad v. M/s. Rucha Engineering to support their stance.

4. Analysis of Legal Precedents:
The court considered the provisions of Section 11AB and the impact of sub-section 2B of Section 11A. Referring to SKF India Ltd., the court highlighted that interest is chargeable on delayed duty payment irrespective of the reason, unlike penalties for specific violations.

5. Court's Decision:
The court held that the Revenue was entitled to charge interest on the duty, even if paid voluntarily before the show cause notice. The judgment favored the Revenue, setting aside the Tribunal's decision and reinstating the orders of the adjudicating authority and the Commissioner (Appeals). Consequently, the respondent was deemed liable to pay interest under Section 11AB of the Central Excise Act, 1944.

In conclusion, the judgment clarified the application of interest under Section 11AB, emphasizing that duty payment delays attract interest regardless of the reason, as per the statutory provisions.