2014 (9) TMI 740 - AT - Central Excise

Demand of differential duty - appellant cleared certain quantity of sugar during November 1997 to December 1997 paying the concessional rate of duty applicable to levy sale sugar @ ₹ 52/- per quintal - Sale was treated as sale from Free Sale Sugar - Subsequently Directorate paid the differential amount of price between levy sale sugar and free sale sugar amounting to ₹ 46,17,427.28 which was received by the appellant in January 1999 - Assessee did not pay the differential duty of ₹ 5,17,473/- on the clearances of 15,681 quintals of sugar - Held that - From a reading of the tariff description CETH 1701.30 under which the appellant cleared the goods were required by the Central Government to be sold under the provisions of Essential Commodities Act. In the present case though the Directorate of Sugar vide release order dated 30/09/97 and 27/10/97 had directed the appellant to release sugar of quantity of 16,587 quintal under levy sugar quota, subsequently, vide letter F. NO. 1-5/97 SC-II dated 20/10/1997 had directed that the sale be treated as free sale sugar and not as levy sugar. The goods were cleared during November to December 97 and therefore, at the time of clearance of the goods, the goods were treated as free sale sugar and not as levy sugar. Further, vide letter dated 11/12/98, the appellant/assessee was paid differential amount of price between levy sugar and free sale sugar amounting to ₹ 46,17,427.26 and therefore, clearances of sugar was under free sale quota and therefore, the discharge of duty liability on such clearance under levy sugar quota was not in accordance with law. Similarly, interest was demanded under Section 11AB and penalty was sought to be imposed under Rule 173Q read with Section 11AC. Though, the Central Excise Rules, 1944 were substituted by Central Excise Rules, 2002, the provision for demand of duty short paid, not paid or erroneously refunded is Section 11A of Central Excise Act, which was in existence both in 1997 as well as in 2002. Similarly, the provisions for demand of interest invoking Section 11AB is also correct as the said provision was in existence both at the time of clearance a well as at the time of issue of show-cause notice. Therefore, it is incorrect to say that the notice was issued under non-existent provision. It is clear from the records that when the Directorate of Sugar converted the release from levy sugar into free sale quota, the said fact was never intimated to the department by the appellant. Further, even when the consideration was received for the clearances of sugar under free sale quota, the appellant did not inform the department of the receipt of enhanced consideration. Therefore, there was a suppression or willful mis-statement of fact on the part of the appellant as alleged in the show-cause notice and therefore, the invocation of extended period of time is clearly sustainable. Interest is applicable when there was a short payment for the delay in payment of duty. In any case, interest is a compensatory payment for the delay in payment of duty. Accordingly, whenever there is a delay in payment of duty, interest liability has to be discharged from the due date of payment till the actual date of payment. However, penalty is set aside - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Time-barred demand and applicability of provisions.
2. Invocation of extended period of time for demand.
3. Liability for payment of duty on conversion from levy to free sale sugar.
4. Applicability of interest on delayed payment.
5. Imposition of penalty in the given circumstances.

Analysis:

1. Time-barred demand and applicability of provisions:
The appellant contended that the demand is time-barred as the show-cause notice was issued after the clearances of sugar took place. They argued that invoking non-existent provisions renders the demand unsustainable. However, the Tribunal found the demand under Section 11A of the Central Excise Act, 1944, and Section 11AB for interest to be valid, as these provisions were applicable both at the time of clearance and notice issuance. The reliance on case laws was deemed unsustainable.

2. Invocation of extended period of time for demand:
The Tribunal noted that the appellant failed to inform the department about the conversion of sugar from levy to free sale quota, despite receiving consideration for the free sale release. This omission constituted suppression of facts, justifying the invocation of the extended period of time. Previous Tribunal decisions supported the requirement to pay differential duty and interest in such cases.

3. Liability for payment of duty on conversion from levy to free sale sugar:
The appellant's argument that they were not liable to pay the differential duty on free sale sugar was rejected. The Tribunal found that the duty liability was valid as the sugar was cleared under free sale quota, not levy sugar, and the appellant failed to inform the department about the change in classification.

4. Applicability of interest on delayed payment:
The Tribunal upheld the interest liability, stating that interest is compensatory for delayed duty payment. The appellant's delay in paying the duty warranted the imposition of interest from the due date until the actual payment date.

5. Imposition of penalty in the given circumstances:
Regarding the penalty, the Tribunal held that since the clearances were in accordance with the government's release order, there was no basis for imposing a penalty. Consistent with previous decisions, the Tribunal set aside the penalty imposed on the appellant.

In conclusion, the Tribunal upheld the demand for duty and interest while setting aside the penalty. The appeal was partly allowed based on the above analysis.