2013 (12) TMI 284 - AT - Central Excise

Demand of interest Held that - Assessee contended that there is no intention to evade any excise duty by undervaluing the goods merits consideration as there is no dispute that the appellant s sister concern has consumed the goods cleared by the appellant and has discharged Central Excise duty on the final products so manufactured - there can be no intention to evade the duty, as any duty paid by the appellant would have resulted in CENVAT Credit to the appellant s sister concern Following Commissioner of Central Excise & Customs, Vadodara-II Vs. Gujarat Narmada Fertilizers Co. Ltd. 2012 (4) TMI 309 - GUJARAT HIGH COURT - the demand of interest which is beyond the period of one year from the date of issuance of show-cause notice is unsustainable - As regards the demand of interest, within a period of one year from the date of issue of show-cause notice, such demand is upheld Decided partly in favour of Assessee.

Issues:
Undervaluation of goods on stock transfer basis, demand of interest, imposition of penalty, invocation of extended period of limitation, intention to evade duty, applicability of CENVAT Credit, challenge to demand of interest, legal precedent on interest liability, sustainability of interest demand beyond one year.

Analysis:

1. Undervaluation of Goods on Stock Transfer Basis:
The case involved undervaluation of goods removed on stock transfer basis to a sister concern for captive consumption during a specific period. The departmental officer discovered the undervaluation during a visit to the appellant's premises, leading to the initiation of proceedings against the appellant.

2. Demand of Interest and Imposition of Penalty:
The appellant initially agreed to the objection raised by the department, paid the differential duty, and later received a show-cause notice proposing further actions including the demand of interest and penalty. The adjudicating authority confirmed the demands, appropriated the amounts paid, demanded interest, and imposed a penalty. The appellant contested the show-cause notice, leading to an appeal before the first appellate authority.

3. Invocation of Extended Period of Limitation and Intention to Evade Duty:
The appellant contested the demand of interest primarily on the grounds that the extended period of limitation invoked was incorrect as there was no intention to evade duty. The goods were transferred to their sister concern for captive consumption, and any duty paid by the appellant would have resulted in CENVAT Credit to the sister concern, indicating no intention to evade duty.

4. Legal Precedent and Interest Liability:
The appellant relied on a decision by the Hon'ble High Court of Gujarat to support their contention that no duty liability arose, hence no interest liability should exist. The Revenue, however, argued that interest was still payable based on a judgment by the Hon'ble High Court of Bombay, emphasizing the obligation to pay interest even if no notice was issued.

5. Sustainability of Interest Demand Beyond One Year:
The appellate tribunal, after considering the arguments from both sides and examining the records, found merit in the appellant's contentions. The tribunal agreed that the demand of interest beyond the period of one year from the date of the show-cause notice was unsustainable. Citing the legal precedent and interpretation of relevant provisions, the tribunal set aside the demand of interest beyond the one-year limitation period.

6. Decision and Disposition of Appeal:
The tribunal upheld the demand of interest within the one-year limitation period and directed the appellant to calculate and pay the interest liability within 30 days. The impugned order was modified accordingly, and the appeal was disposed of based on the findings related to the demand of interest within the prescribed limitation period.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal precedents cited, and the final decision rendered by the appellate tribunal regarding the demand of interest in the case.

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