2017 (10) TMI 278 - AT - Central Excise

Penalty - the goods could not be exported within the time limit of 6 months from the date of export - Held that - appellant had desired to export the bus and the fact of failure to export was known to the appellants immediately after clearances of the bus from the factory, as the order was cancelled - The appellants paid the duty and part of interest before show-cause notice. However, it is apparent that it was not a voluntary effort. In these circumstances, when the fact of cancellation of order was known to the appellants, the failure to comply with the provisions of law and deposit differential duty clearly indicates to malafides - penalty upheld. Demand of interest - the demand of interest for the period from obtaining the said chassis and payment of duty on bus was confirmed - Rule 7 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules - Held that - The said rule clearly prescribes that in such circumstances, interest is recoverable - interest upheld. Appeal dismissed - decided against appellant.

Summary

Issues involved:
1. Imposition of penalty under Section 11AC(1)(b) of Central Excise Act for failure to export buses and pay duty liability.
2. Levy of interest on a delay in respect of duty recoverable on the chassis under Rule 7 of Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules.

Analysis:

Issue 1: Imposition of Penalty
The case involved M/s. Anthony Garages P. Ltd., who were body builders for M/s. Ashok Leyland and obtained chassis for making buses. The order for exporting buses was canceled, leading to duty liability on the bus. The appellants argued that they had done everything necessary for export and that such events occur in the normal course of business. However, the revenue contended that the failure to export was noticed during an audit, and the appellants did not disclose this fact voluntarily. The tribunal found that the appellants knew about the cancellation of the order but did not repay the dues voluntarily. This failure to comply with the law and deposit differential duty indicated malafides, justifying the imposition of penalty under Section 11AC, which was upheld.

Issue 2: Levy of Interest on Delay
Regarding the levy of interest on a delay in paying duty recoverable on the chassis, Rule 7 of Central Excise Rules was considered. The rule states that if goods cleared for a concessional rate are not used for the intended purpose, the manufacturer is liable to pay the duty difference along with interest. The appellants argued that since they paid duty on the full bus, there was no loss to the government. However, the tribunal disagreed, stating that had duty been paid on the chassis, cenvat credit would have been available immediately, resulting in a loss to the government. Therefore, interest was held to be recoverable under Rule 7 in such circumstances.

In conclusion, the tribunal found no merit in the appeal of the appellants and dismissed the same, upholding the imposition of penalty under Section 11AC and the recovery of interest as per Rule 7 of Central Excise Rules.