2016 (2) TMI 285 - AT - Central Excise

Demand of of interest and penalty - Extended period of limitation invoked - Held that - In absence of any such voluntary payment, recovery of the unpaid duty would not have been possible. In that view of the matter, we do not find the case would fall under sub-section (2B) of Section 11A of the Act. Sub-section (2B) of Section 11A of the Act applies in a case where there is voluntary payment of unpaid duty before issuance of show cause notice under sub-section (1) of Section 11A. When the provision refers to show cause notice, it means a show cause notice which could have been validly issued and surely not a notice which had become time-barred. If by efflux of time and in absence of availability of extended period of limitation, such show cause notice itself had become time-barred, any payment made voluntarily by the manufacturer cannot be viewed as one made under sub-section (2B) of Section 11A of the Act. In the present case, we have already held that time for issuing such a notice was one year, which period had already expired. Accepting the stand of the Department that even in such a case once the payment of duty is made, interest liability would follow would bring about an incongruent situation. The recovery of the unpaid or short paid duty would become time-barred. If the manufacturer does not pay it voluntarily, it would not be possible for the Department to recover the same. But if he does it voluntarily despite completion of period of limitation, he would, further be saddled with the liability to pay statutory interest. Surely, this was not the intention of the Legislature while sub-section (2B) was introduced in Section 11A of the Act. Thus we hold that the impugned order is unsustainable and liable to be set aside

Summary

Issues Involved:
Challenge to liability for interest and penalty on inputs/capital goods cleared during a specific period.

Analysis:
The appeal addressed the challenge by the appellant against the findings that they were liable for interest and penalty on inputs/capital goods cleared during a particular period. The appellant's factory was audited, revealing that they had removed inputs/capital goods and paid a differential duty amount. The lower authorities issued a show-cause notice for recovery of interest and penalty, which the appellant contested. The appellant argued that the show-cause notice was time-barred and did not allege any suppression of facts. The appellant accepted the duty payment but sought relief from interest and penalty. The Department argued that interest and penalty were correctly imposed due to the appellant's position in the organized sector, implying knowledge of the law.

The Tribunal found that the arguments by the Department were not valid as the show-cause notice was time-barred and sought to appropriate the differential duty payable during a specific period. Citing a judgment by the Hon'ble High Court of Gujarat, the Tribunal noted that the extended period could not be invoked for duty demand. The Tribunal highlighted the provisions of Section 11A, emphasizing that voluntary payment of duty before a show-cause notice did not apply in cases of time-barred notices. The Tribunal concluded that the appellant was not liable to pay the basic duty as the period of limitation had expired, and the Department could not recover the duty under Section 11A(1) without voluntary payment. Therefore, the impugned order was deemed unsustainable and set aside, allowing the appeal.

In summary, the Tribunal's decision revolved around the time-barred show-cause notice, the applicability of Section 11A provisions, and the absence of suppression of facts by the appellant. The judgment emphasized the limitations on duty recovery in cases of time-barred notices and voluntary payments, ultimately leading to the setting aside of the impugned order and allowing the appeal.