2017 (11) TMI 688 - AT - Central Excise

Short payment of duty - suppression of facts - Held that - During the period prior to 11.05.2001, the levy of interest under section 11AB was linked with the short levy, non-payment or erroneous refund being on account of fraud, wilful misstatement suppression of facts etc. Since these elements are not present in this case and since for this reason only, the Commissioner (Appeals) has set aside the penalty under section 11AC, there would not be any interest liability in this case, as the alleged short payment is in respect of the clearances made prior to 11.05.2001. Time limitation - Held that - Since the elements for invoking longer limitation period under proviso to Section 11A (1) are not there, in any case, the interest demand made after expiry of one year from the relevant date is time barred. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Charging of interest on differential duty under section 11AB.
2. Imposition of penalty under section 11AC.
3. Time bar for interest demand.

Analysis:
1. The appellants, manufacturers of sugar, cleared a quantity of sugar as 'levy sugar' on loan basis during October and November, 1997, which was later converted into purchase of free sale sugar by the Central Government. The appellant paid the differential duty of &8377; 1,99,551/- on 5/6.11.2001. Subsequently, a show cause notice was issued on 12.12.2001 for charging interest on the differential duty under section 11AB and imposing a penalty under section 11AC. The Assistant Commissioner confirmed the interest demand and imposed a penalty. On appeal, the Commissioner (Appeals) set aside the penalty but confirmed the interest demand under Section 11AB, leading to the current appeal.

2. The appellant argued that the interest liability under section 11AB should not arise as the alleged short payment was not due to fraud, wilful misstatement, or suppression of facts. The appellant contended that the interest liability under Section 11AB arose only in cases involving intentional violations. The appellant also highlighted that the show cause notice was issued after the expiry of one year from the date of payment of duty, making the interest demand time-barred. The appellant relied on the judgment of the Hon’ble Delhi High Court in Hindustan Insecticides Ltd. Vs. CCE, LTU to support their argument that the limitation period prescribed in Section 11A is applicable for the demand of interest.

3. The Tribunal considered the submissions and records, concluding that the alleged short payment was not due to any fraudulent actions but rather a result of the circumstances. As the elements for invoking a longer limitation period were not present, the interest demand made after the expiry of one year from the relevant date was deemed time-barred. The Tribunal found that since the alleged short payment was in respect of clearances made prior to 11.05.2001 and did not involve intentional violations, there was no interest liability. Consequently, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

Conclusion:
The Tribunal ruled in favor of the appellant, setting aside the interest demand under section 11AB due to the absence of intentional violations and the time-barred nature of the demand. The appeal was allowed, emphasizing the importance of the circumstances surrounding the alleged short payment and the applicability of the limitation period for interest demands as per legal precedents.