2016 (12) TMI 1457 - AT - Central Excise

Recovery of interest and penalty - revision of prices of manufactured goods - duty not paid on revised prices - on pointing out duty was paid - time bar - whether extended period of limitation in terms of the Proviso to Section 11A ibid can be invoked for recovery of interest on delayed payment of principle amount; and penalty can be imposed where there is no element of suppression fraud misstatement etc with intent to evade payment of duty? - Held that - this Tribunal in the case of Emco Ltd. 2012 (4) TMI 609 - BOMBAY HIGH COURT has held that period of limitation not only applies to the principle amount but also the same applies for recovery of interest - interest liability confirmed in the impugned order will not stand for judicial scrutiny. Imposition of penalty u/r 25 read with Section 11AC of the Central Excise Act - Held that - the authorities below have not specifically brought on record any evidence regarding the malafides on the part of the appellant to defraud the Government Revenue. Since Rule 25 ibid is subject to the provisions of Section 11AC ibid which clearly provides that in case of fraud collusion willful misstatement suppression of facts equal amount of penalty shall be imposed and in absence of any specific findings to that effect by the authorities below I am of the view that penalty imposed in the adjudication order and confirmed in the impugned order is not sustained in the eyes of law. Demand of interest and penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Time limitation for recovery of interest and imposition of penalty.
2. Applicability of Rule 25 read with Section 11AC of the Central Excise Act for penalty imposition.

Issue 1: Time limitation for recovery of interest and imposition of penalty

The appeal involved a case where the appellant, engaged in manufacturing motor vehicles, had paid a differential duty amount of ?5,57,885 on 11.01.2005 after an oversight in not paying the duty on a revised price. Subsequently, a show-cause notice (SCN) was issued on 15.04.2008 seeking recovery of interest and imposition of penalty. The central question was whether the extended period of limitation could be invoked for interest recovery and penalty imposition in the absence of fraud or intent to evade duty. The appellant argued that since the SCN was issued after one year of the duty payment and there was no element of fraud, the proceedings should be time-barred. The Tribunal referred to the Emco Ltd. case, holding that the limitation period applies not only to the principal amount but also to interest. Citing the TVS Whirlpool Ltd. case, the Tribunal ruled that the limitation period for interest recovery should align with that for the principal amount. The Tribunal concluded that the interest liability confirmed in the impugned order was not sustainable.

Issue 2: Applicability of Rule 25 read with Section 11AC of the Central Excise Act for penalty imposition

Regarding the penalty imposed under Rule 25 read with Section 11AC of the Central Excise Act, the appellant contended that the penalty was unjustified as there was no evidence of malafides or intent to defraud the government revenue. The Tribunal noted that Section 11AC mandates penalty imposition in cases of fraud, collusion, willful misstatement, or suppression of facts. Since the authorities had not provided any specific findings of malafides by the appellant, the Tribunal held that the penalty imposed was not in accordance with the law. Consequently, the Tribunal allowed the appeal, setting aside the confirmed interest and penalty amounts in the impugned order.

This judgment clarifies the application of time limitations for interest recovery and penalty imposition in excise duty cases, emphasizing the requirement of fraud or intent for penalty imposition under the Central Excise Act.