2012 (12) TMI 464 - AT - Central Excise

Duty demand classification of sugar - rate of duty applicable depended upon the nature of clearance - whether for free sale or as levy sugar at price fixed by the Government - Government clarified that differential duty would be reimbursed to the Sugar Mills which would indicate that the Government intended to treat these sugar sales as free sale sugar, the appellant received the differential duty only in August, 2001 and before that, i.e. in June, 2001, they had paid the differential duty Held that - Short-payment of duty in this case, which was made goods by the appellant on their own on 7-6-2001, much before the issue of show cause notice on 21-9-2001, can not be attributed to fraud, wilfil mis-statement, mis-declaration, suppression of facts or contravention of any provisions of Central Excise Act, 1944 or of the rules made thereunder with intent to evade the payment of duty duty upheld - imposition of penalty on the appellant under Section 11AC is not sustainable. Interest on duty under Section 11AB Held that - As per the provisions of Section 11AB, interest under this Section was chargeable only in those cases where short-payment, non-payment or erroneous refund of duty were due to fraud, wilful mis-statement, mis-declaration, suppression of facts, etc. - fraud, wilful mis-statement, mis-declaration, suppression of facts, etc. are absent, interest on differential duty under Section 11AB would not be chargeable

Summary

Issues:
Interpretation of Sections 11AB and 11AC of the Central Excise Act, 1944 regarding the imposition of interest and penalty on the appellant for short-payment of duty.

Analysis:
The case involved a dispute regarding the classification of sugar produced by the appellant as levy sugar or free sale sugar under the Central Excise Tariff. The appellant was directed by the Directorate of Sugar to sell a specific quantity of sugar as levy sugar at a fixed price, with different duty rates for levy sugar and free sale sugar. The appellant cleared sugar as levy sugar based on government orders and paid the duty applicable to levy sugar. Subsequently, the government reimbursed the differential duty amount to the appellant.

The appellant argued that the provisions of Sections 11AB and 11AC, which attract interest and penalty for non-payment or short payment of duty, were not applicable in this case as they had voluntarily paid the differential duty before any notice was issued. They relied on tribunal judgments to support their position.

The Departmental Representative defended the imposition of interest and penalty, citing a judgment of the Karnataka High Court that voluntary payment of duty after investigation does not exempt the assessee from penalty provisions.

The Tribunal considered the facts that the appellant had correctly classified the sugar as levy sugar at the time of clearance, had paid the differential duty before any notice was issued, and had received reimbursement from the government later. The Tribunal concluded that the appellant's actions did not involve fraud, wilful misstatement, or suppression of facts to evade duty payment.

The Tribunal held that for the imposition of penalty under Section 11AC, the presence of elements like fraud or wilful misstatement is necessary, which were absent in this case. Regarding interest under Section 11AB, the Tribunal noted that the provisions applicable prior to a certain date required the presence of fraud or wilful misstatement for interest to be chargeable. Since these elements were absent, interest on the differential duty was not applicable.

In the final decision, the Tribunal upheld the duty demand but set aside the interest under Section 11AB and the penalty under Section 11AC imposed on the appellant. The order of the Commissioner of Central Excise (Appeals) was modified accordingly.

This judgment provides a detailed analysis of the application of Sections 11AB and 11AC in cases of duty payment discrepancies, emphasizing the importance of intent and compliance with statutory provisions in determining the imposition of interest and penalty.