2018 (4) TMI 1147 - AT - Central Excise

Liability of interest - Valuation - Appellant cleared automobile parts to their depots at Delhi, Mumbai and Kolkatta which were registered as manufactured locations - Section 4 of the Central Excise Act, 1944 - extended period of limitation - Held that - It is an undisputed fact that the differential duty liability, though conceded by the assessee has been paid by them after issue of SCNs dt. 05.12.2003 and 06.05.2004 respectively in respect of the periods 09/12 to 03/13 and 04/13 to 09/13 respectively. It is evident that there has been a gap of time between the point when the differential duty liability has arisen and when it was actually discharged by the assessee - interest liability will therefore accrue and will have to be paid up by the appellant. Penalty u/s 11AC - Held that - invocation of extended period cannot be made in periodical show cause notices. Once the ingredients which allow for invocation of extended period are not present, there can be also no question of imposition of penalty under Section 11AC. When the dispute per se is already mired in litigation there can be no imposition of penalty under Rule 25 of the CER either. Appeal dismissed - decided against appellant.

Summary

Issues: Valuation under Section 4 of the Central Excise Act, 1944; Differential duty demand; Interest liability; Imposition of penalty under Section 11AC; Interpretation of revenue-neutrality in penalty imposition; Applicability of interest on delayed duty payment; Invocation of extended period for penalty imposition.

Valuation under Section 4 of the Central Excise Act, 1944:
The appellants, engaged in manufacturing Original Equipment items for a specific company, cleared automobile parts to various depots. The Department contended that valuation should have been done only under Section 4 of the Central Excise Act, 1944, leading to show cause notices for differential duty demand.

Differential duty demand and Interest liability:
Show cause notices were issued for a significant differential duty demand with interest, which was confirmed by the adjudicating authority. The appellants challenged the interest liability through appeals, arguing that the duty paid would be eligible as cenvat credit by the recipient unit, thus precluding penalty imposition.

Imposition of penalty under Section 11AC and Revenue-neutrality interpretation:
The adjudicating authority dropped penalty proceedings under Section 11AC, prompting appeals from both the appellants and the Department. The appellants cited a precedent to support their stance against interest and penalty imposition, while the Department argued for the confirmation of demand and interest.

Applicability of interest on delayed duty payment:
The Tribunal noted a gap between the differential duty liability arising and its subsequent payment by the appellants after the issuance of show cause notices. It deemed interest liability as accruing during this period, dismissing the appellants' reliance on a case law to counter interest imposition.

Invocation of extended period for penalty imposition:
Regarding the Department's appeals, the Tribunal referenced a previous decision against penalty imposition under Section 11AC for an earlier period. It held that the invocation of an extended period for penalty could not be justified in periodical show cause notices, emphasizing the absence of necessary ingredients for penalty imposition.

In the final judgment, the Tribunal dismissed both the appellants' and the Department's appeals, upholding the differential duty demand and interest liability while rejecting penalty imposition under Section 11AC for the appellants. The Department's appeals were also rejected based on the inapplicability of penalty under Rule 25 of the Central Excise Rules due to ongoing litigation.