2016 (3) TMI 438 - AT - Central Excise

Interest not paid and penalty imposed under Section 11AC read with Rule 25 - goods cleared to the DTA unit in the month of January, April, May and August, 2011, without payment of duty - as per assessee they already paid the entire duty demanded and the same was appropriated in the OIO itself - Held that - The adjudicating authority had rightly computed the interest amount from the due date to till the date of payment in respect of demand for the month of January, 2011. Since the appellants paid the amount on 8.10.11, 12/12/2011 and 31.03.12, Revenue has correctly worked out the interest @ 13% upto 31.03.2011 for 54 days and for the remaining period the interest was computed by adopting 18% rate of interest. Whereas, on perusal of the computation done by the appellants at page 16 and 17 of the paper book for the total delayed payment of duty for the month of January, 2011 they have computed by taking the rate of interest @13%. Therefore, we do not find any merit in the appellant s contention and they are liable to pay the total interest of ₹ 17,35,425/-. Since they have already paid the interest of ₹ 15,45,788/-, the differential amount of interest of ₹ 1,87,637/- is liable to be reversed. As regards penalty, on perusal of the show cause notice, we find the penalty was proposed under Section 11 AC of the CEA as well as under Rule 25 of CER. The adjudicating authority recorded in his findings that they have indicated the duty amount in the column duty payable but the column under duty paid was left blank. We find that the entire case is basically of delayed payment under Rule 8 and the consequential demand by the department. We find that the show cause notice was issued on 20.01.2012. Before the issue of SCN itself, the appellant paid ₹ 25,00,000/-, ₹ 20,00,000/- was proposed for appropriation in the SCN and the balance amount was paid with interest before issue of adjudication order. Therefore, we hold that there is no mensrea or intention to evade payment of duty so as to invoke penalty under Section 11 AC. Accordingly, the penalty imposed under Section 11AC is not sustainable and liable to be set aside. As regards penalty proposed under Rule 25 of CER, the adjudicating authority imposed penalty by invoking Section 11 AC read with Rule 25 of CER. We hold the appellants are liable for penalty under Rule 25 of CER. - Decided partly in favour of assessee

Summary

Issues:
- Appeal against order of Commissioner of Central Excise
- Demand of duty, interest, and penalty under Central Excise Act, 1944 and Central Excise Rules, 2002
- Contesting interest amount and penalty under Section 11AC
- Calculation of interest and penalty
- Appellant's arguments on interest and penalty
- Respondent's arguments on interest and penalty
- Appellate Tribunal's decision on interest and penalty

Analysis:
The appeal was filed against the Commissioner of Central Excise's order demanding duty, interest, and penalty from the appellant, a 100% EOU engaged in manufacturing. The appellant cleared goods to their DTA unit without payment of duty, leading to a show cause notice for duty of &8377;1,12,25,765 along with interest and penalty. The adjudicating authority confirmed the duty demand, interest of &8377;17,35,425, and imposed a penalty under Section 11AC of the Central Excise Act, 1944. The appellant contested the interest amount and penalty, arguing no intention to evade duty payment and citing timely duty payments and ER-2 returns filing.

During the hearing, the Managing Director of the appellant reiterated the grounds of appeal, focusing on disputing a portion of the interest amount and the penalty under Section 11AC. The appellant contended that interest was already paid as per calculations and penalty should be waived due to no mis-declaration or intent to evade duty payment. On the other hand, the respondent reiterated the findings of the Order-in-Original, emphasizing the duty clearance without payment and justifying the interest and penalty imposition.

The Appellate Tribunal found that the appellant contested only a portion of interest and penalty as they had paid the entire demanded duty. Regarding interest, the Tribunal upheld the interest demand of &8377;17,35,425, stating the appellant's computation error in interest rate calculation. The Tribunal reversed the differential interest amount of &8377;1,87,637. Concerning penalty, the Tribunal set aside the penalty imposed under Section 11AC due to no intention to evade duty payment but upheld the penalty under Rule 25 of Central Excise Rules, 2002, imposing a penalty of &8377;5,00,000. Consequently, the appeal was partly allowed, confirming the demand and interest but modifying the penalty imposition.

In conclusion, the Appellate Tribunal's decision upheld the duty demand and interest while setting aside the penalty under Section 11AC and imposing a penalty under Rule 25 of Central Excise Rules, 2002.