2016 (10) TMI 72 - AT - Central Excise

Period of limitation - recovery of interest - late payment of duty - Section 11AB of Central Excise Act, 1944 - assembly/manufacture of Heat Exchangers on job work basis - Held that - it is found that the first instalment against the duty liability was discharged by the appellant on 09.7.2008 and the final instalment was paid on 31.3.2009 against the total outstanding amount of ₹ 1,80,33,487/-. The Hon ble Delhi High Court in the case of Hindustan Insecticides Ltd (supra) observed that the recovery of interest should be made within the reasonable time ie., the period prescribed for recovery of duty under Section 11A of Central Excise Act, 1944. Hence, in the present case also the interest on the outstanding amount is recoverable within the period prescribed under Section 11A of the Act. Therefore, the matter is remanded to the Adjudicating Authority for re-computation of the interest taking into consideration of the normal period prescribed under Section 11A of the Central Excise Act, 1944. Imposition of penalty - Rue 25 of the Central Excise Rules 2002 - Held that - it is found that the appellant was registered with the Central Excise Dept., and they had cleared the manufactured goods on payment of substantial amount of duty while executing first stage of the contract, but failed to discharge duty in executing the 2nd stage of the contract by manufacturing the Heat Exchangers. Even though no suppression has been alleged in the notice, however, the manufactured goods had been cleared from the factory without payment of duty and following the procedure prescribed under relevant provisions of Central Excise Act and the Rules made there under, hence, penal provision is definitely attracted as it is a settled principle of law that for imposition of penalty mens rea need not invariably present. However, I find that the imposition of penalty of ₹ 45,08,372/- is too harsh in the present circumstance, hence, penalty of ₹ 1,00,000/- shall meet the ends of justice. - Appeal disposed of

Summary

Issues:
1. Duty liability on the manufacture and clearance of Heat Exchangers on job work basis.
2. Recovery of interest under Section 11AB of Central Excise Act, 1944.
3. Imposition of penalty under Rule 25 of Central Excise Rules 2002.

Analysis:
1. The appellant was engaged in manufacturing Filtration Equipments and Heat Exchangers. They cleared goods under two contracts with M/s Essar Power Ltd, paying duty for the first part but not for the Heat Exchangers. The appellant argued that duty exemption applied as the goods were made from duty-paid raw materials. The Tribunal found duty was due on the Heat Exchangers manufactured. The appellant paid the duty but disputed the interest recovery notice's timing, citing a Delhi High Court case. The Tribunal agreed that interest recovery must be within a reasonable time, as per Section 11A of the Act.

2. The appellant contended that no penalty under Rule 25 was warranted, as they were registered and had paid substantial duty for the first contract. The Revenue argued for penalty due to contravention of Central Excise Act provisions. The Tribunal acknowledged no suppression allegation but noted the duty evasion on Heat Exchangers. It held that penalty could be imposed without mens rea. However, it deemed the original penalty amount too severe and reduced it to meet the ends of justice, setting it at &8377; 1,00,000. The matter was remanded for re-computation of interest within the prescribed period under Section 11A, and the penalty was reduced accordingly. The appeal and Stay petition were disposed of with the above decisions.