2009 (12) TMI 491 - AT - Central Excise

Liability to pay interest and penalty for short payment of duty - on account of fraud, collusion, suppression of facts, willful misstatement or contravention of any provisions of the act or rules with intent to evade payment of duty - short payment occurred only due to ignorance on the part of the respondents Held that - Appeal for interest and penalty is dismissed.

Summary

Issues:
1. Appeal against order dropping proposal to penalize and demand differential excise duty on finished goods.
2. Imposition of penalty under Section 11AC and recovery of interest for delay in payment of short paid duty.
3. Existence of fraud, collusion, willful misstatement, or suppression of facts to evade payment of duty.

Analysis:

1. The appeal was filed by the Revenue against the order of the Commissioner (Appeals) sustaining the decision of the original authority to drop the proposal to penalize the respondents and demand differential excise duty on the clearance of finished goods, cylinder liners, during a specific period. The Revenue contended that the respondents were liable to pay Central Excise duty based on the sale price of its sister unit. However, the original authority accepted the voluntary payment made by the respondents before the show cause notice was issued, considering it as full and final payment. The Commissioner (Appeals) also found no suppression or intention to evade payment of duty by the respondents and rejected the appeal seeking interest and penalty.

2. In the appeal before the Tribunal, the Revenue sought to impose a penalty on the respondents under Section 11AC and recover interest for the delay in payment of the short paid duty. The Revenue argued that interest is a civil liability arising from the retention of revenue by the respondents, and the duty confirmation was based on findings of fraud, collusion, willful misstatement, or contravention of provisions to evade payment. On the other hand, the respondents urged to uphold the impugned order in their cross objection.

3. The Tribunal carefully considered the submissions and found that the short levy on clearances made during a specific period was voluntarily paid by the respondents before the show cause notice was issued. The duty was paid even though the demand was raised after a significant period and was mostly barred by limitation. The Tribunal noted that the lower values adopted by the trading division of the respondent were not considered in computing the differential duty, leading to a demand based on higher values. However, the original authority found this approach contrary to accepted valuation principles. The Tribunal emphasized that liability for interest and penalty arises in cases of fraud, collusion, suppression of facts, willful misstatement, or contravention to evade duty payment, which was not established by the Revenue. The lower authorities concluded that the short payment was due to ignorance on the part of the respondents, leading to the dismissal of the Revenue's appeal and disposal of the cross objection.

This comprehensive analysis covers the issues involved in the legal judgment, detailing the arguments presented by both parties and the Tribunal's reasoning for the final decision.