2017 (2) TMI 1167 - AT - Central Excise

Interest u/s 11AA - whether the interest under Section 11AA was recoverable particularly when in the earlier show-cause notice, the same interest was demanded under Section 11AB and the same was dropped for a part period as Section 11AB was not existing prior to 28.9.1996? Held that - before 28.9.1996, the interest was chargeable u/s 11AA. Though initially it was proposed u/s 11AB but subsequently by issuance of fresh SCN, the interest was demanded u/s 11AA. There is no restriction that as regards recovery of interest once the SCN was issued, another SCN cannot be issued. Limitation does not apply in case of recovery of interest. Section 11AA provides for charging the interest - the demand of interest upheld. Imposition of penalty u/r 25(1) of the CER, 2002 - Held that - appellant had the bona fide belief that the interest is not chargeable once the proceedings for the interest for the same period has been dropped in the earlier proceedings - the imposition of penalty of ₹ 20,000/- is not correct. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
- Whether interest under Section 11AA is payable by the appellant for the period prior to 28.9.1996?
- Whether the imposition of a penalty of &8377; 20,000/- under Rule 25(1) of the Central Excise Rules, 2002 is justified?

Analysis:

Issue 1:
The case involved a dispute regarding the demand for interest under Section 11AA for a period prior to 28.9.1996, despite the dropping of interest under Section 11AB in an earlier proceeding. The appellant argued that since interest was already demanded under Section 11AB, it could not be subsequently demanded under Section 11AA. However, the tribunal held that there was no restriction on issuing a fresh show-cause notice for interest under Section 11AA even if a previous notice had invoked Section 11AB. The tribunal emphasized that Section 11AA allowed for charging interest, and the absence of an adjudication order did not negate the liability of the assessee to pay interest under Section 11AA. Therefore, the tribunal upheld the demand for interest under Section 11AA for the period in question.

Issue 2:
Regarding the imposition of a penalty of &8377; 20,000/- under Rule 25(1) of the Central Excise Rules, 2002, the tribunal considered the appellant's contention that they believed in good faith that interest was not chargeable after it was dropped in the earlier proceedings. Given this belief, the tribunal found that the penalty was not justified and decided to waive the penalty amount. Consequently, the tribunal partially allowed the appeal by upholding the demand for interest under Section 11AA but waiving the penalty imposed under Rule 25(1) of the Central Excise Rules, 2002.