2014 (6) TMI 855 - AT - Central Excise

Interest demand - Valuation of goods - cost of the free issue materials were not included in the value of finished goods - Demand of differential duty - whether interest under Section 11AB of CEA, 1944 is attracted on account of the major portion of differential duty paid in July, 2001 and balance in March, 2003 for the clearances effected during July, 1996 to March, 2001 - Held that - Under sub-section (1) of Sec. 11AA of the Act, as this provision stood at the material time, an assesse who fails to pay the duty determined under sub-section (2) of Section 11AA of the Act, within 3 months from the date of determined of duty is bound to pay interest at the prescribed rate for the period of delay. Sub-section (2) says that sub-section (1) is not applicable where the duty became payable on or after the date on which the Finance Act, 2001 received Presidential assent. It was on 11/5/2001 that the Finance Act, 2001 came into force. In this scenario, there can be no levy of interest under sub-section (1) of Section 11AA on the amount of duty paid by the assesse for the period upto 10th of May, 2001. In respect of the amount of duty paid for the period from 11/5/2001, interest on duty is leviable under Section 11AB of the Act in as much as sub-section (1) of Section 11AA opens with the clause subject to the provision of Section 11AB . In the result, interest can be levied on that part of the amount of duty which pertains to the period from 11/5/2001 to 30/6//2001. This liability, obviously, is unaffected by the fact that such duty was paid within the period of 3 months prescribed under Section 11AA (1). It is, therefore, held that the appellant is liable to pay interest under Section 11AB of the Act on that part of the amount of duty which pertains to the period from 11/5/01 to 30/6/01 and such interest shall be paid for the period from the due date to the date of payment - Decided against assessee. Penalty u/s 11AC - Held that - Issue of inclusion of value of Moulds supplied free of cost in the value of the finished goods, during the relevant period was unsettled due to conflicting views/decisions on the subject. The said issue got settled only after the Larger Bench decision in the case of Mutual Industries Ltd. (2000 (3) TMI 74 - CEGAT, COURT NO. I, NEW DELHI). In view of the judgment in Anil Polymers case (2008 (12) TMI 138 - CESTAT MUMBAI), I find merit in the submission of the Ld. Advocate for the applicant on the issue of allegation suppression and consequent imposition of penalty. Thus, the penalty imposed on the appellant is not sustainable and accordingly, the same is set aside. - Matter remanded back - Decided partly in favour of assessee.

Summary

Issues:
- Levy of interest under Section 11AB of CEA, 1944 for the period prior to 11/05/2001
- Imposition of penalty under Section 11AC of CEA, 1944

Levy of Interest under Section 11AB:
The case involved an appeal against an order passed by the Commissioner of Central Excise (Appeals) regarding the inclusion of the cost of free issue moulds in the assessable value of finished goods. The appellant recalculated the assessable value, paid the differential duty, and was later issued a Show Causecum-Demand Notice for additional duty and interest. The appellant challenged the correctness of the levy of interest, arguing that interest cannot be demanded prior to 11/05/2001 based on the Larger Bench judgment and the Division Bench judgment of the Tribunal. The Revenue contended that interest was payable for clearances after 28/09/1996 under Section 11AB. The Tribunal analyzed previous judgments and held that interest under Section 11AB is attracted for the period after 11/05/2001, remanding the matter for the calculation of interest on the amount paid post the specified date.

Imposition of Penalty under Section 11AC:
The issue of penalty under Section 11AC arose due to the inclusion of the value of moulds supplied free of cost in the finished goods during a period when conflicting views existed on the matter. The Larger Bench decision in a related case settled the issue, indicating that there was no suppression of facts or mis-declaration by the appellant. Citing a specific Tribunal judgment, the appellant argued that no penalty could be imposed. The Tribunal, in line with the referenced judgment, found merit in the appellant's submission and set aside the penalty imposed under Section 11AC, concluding that it was not sustainable based on the circumstances of the case.

In summary, the Tribunal's judgment in this case addressed the issues of interest levy under Section 11AB for a specific period and the imposition of penalty under Section 11AC. The decision clarified the applicability of interest based on relevant legal provisions and previous judgments, ultimately remanding the matter for further calculation. Additionally, the Tribunal found the penalty imposed on the appellant to be unwarranted due to the unsettled nature of the issue during the relevant period, setting it aside accordingly.