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TMI Blog2006 (9) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... nd paid the duty thereon. They did not pay interest for delay in payment of such duty. A show cause notice dated 26-9-2005 was issued to the appellants for demanding interest imposing penalty. The show cause notice has been decided as mentioned above. Being aggrieved by the said order the appellants have preferred this appeal on the following grounds :- (a) they had discharged the duty liability as per valuation determined and available at the time of clearances of the goods and therefore had discharged the duty liability under Section 3 read with Section 4 of the Central Excise Act 1944 and Rule 8 of the Central Excise Rules, 2002 . (b) as soon as the accounts balance sheet was finalized and the value was found to be on higher side , they have discharged the duty. Therefore, there was no delay in payment of duty and the question of interest should not be arise. Duty liability arises only after approval of balance sheet and if the duty was not discharged within prescribed period then the interest could have arisen. (c) In terms of Section 11AB interest is payable if the appellants failed to pay duty liability on determined under Section 11A(2) within three mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajendra Khadilkar, Consultant and Sanjay Bhalerao, Sr. Officer Excise attended the hearing. In this case duty was paid before issue of Show Cause Notice. The appellants have citied many case laws according to which if duty is paid before issue of Show Cause Notice then no interest is payable. Duty has already been paid. A prima facie case is made out for waiver of pre-deposit. I therefore take up the main appeal. 5. The appellants have made following submissions - (i) The appellants had discharged the duty liability as per valuation determined and available at the time of clearances of the goods and therefore had discharged the duty liability under Section 3 read with Section 4 of Central Excise Act, 1944 and Rule 8 of Central Excise Rules, 2002. (ii) As soon as accounts and Balance sheets were finalized and the value was found to be on higher side, they have discharged the duty. Therefore there was no delay in payment of duty and the question of interest should not arise. Duty liability arises only after approval of balance sheet and if the duty was not discharged within prescribed period then the interest could have arisen. (iii) In terms of Section 11AB inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the value was higher and therefore the appellants issued supplementary invoices and discharged the duty thereon. There is a time gap between the initial payment of duty and discharge of differential duty on account of escalating the price. The department has confirmed the interest and imposed penalty. The appellants are contesting the same. The appellants have raised two main issues - (a) Since at the time of clearances enhanced price was not known and the duty was discharged at the known price and subsequently when higher price was determined, differential duty was discharged, there is no delay in payment and question of interest does not arise. (b) In view of various case laws no interest under Section 11AB is payable since the duty was discharged before the issue of Show Cause Notice. 7. I take up the first issue - No doubt at the time of clearances of the goods correct higher price was not known. However, it is a fundamental principle of Central Excise law that Central Excise duty liability arises as and when the goods are manufactured. Duty is collected at the time of clearances of goods with further facility of payment of such duty after one month clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fact, mis-statement were pre-requisite. On 11-5-01, section 11AB was substituted by another new Section 11AB, according to which in all cases (whether involving suppression etc. or not) of non-levy/short payment of duty etc as determined under Section 11A(2) or paid under Section 11A(2B) interest was also payable. 11. Thus it can be seen that in the new Section 11AB pre-requisite of suppression of fact, mis-statement was absent. Besides this, payment of duty under Section 11A(2B) was also brought under the purview of the new Section 11AB for interest recovery. Section 11AC as already observed above came into effect from 28-9-96, Section 11AC requires imposition of mandatory penalty in the case of determination of duty under Section 11A(2) for the case of fraud/suppression of fact/mis-statement etc. In the present Section 11AC w.e.f. 11-5-01 also the ingredient regarding the suppression of facts continued. 12. The above chronological narrative leads to following inferences - During the period 28-9-96 to 10-5-01 suppression of fact etc. was prerequisite for invoking interest under Section 11AB and also for imposing penalty under Section 11AC. For invoking Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11AB are inapplicable. It is not clear from this order to which period this case pertained. However in para 2 of the said CESTAT order of Machino Montell it is stated that the revenue on the other hand submitted that when fraud, collusion, wilful mis-statement are alleged against the assessee, penalty under Section 11AC can be invoked irrespective of fact that the assessee has deposited duty before the issue of Show Cause Notice. It is therefore clear that mens rea was alleged. But the Tribunal referring to earlier decisions held that since the duty was paid before the issue of Show Cause Notice there was no mens rea and therefore Section 11AB and Section 11 AC were inapplicable. 14. Above discussions make it clear that when duty is paid before the issue of Show Cause Notice mens rea is held to be absent and in that case mandatory penalty under Section 11AC is not imposable, whether the case pertained to period prior to 11-5-01 or otherwise. If mens rea is absent and if the duty is paid before the issue of Show Cause Notice, Section 11AB is not attracted if the case pertained to period prior to 11-5-01. From this analysis it can also be concluded that even if the duty is pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002 (141) E.L.T. 278 (Tribunal). I find that the MRF case is not relevant because in that case Supreme Court held that fluctuation in prices subsequently will not affect duty liability. Eicher case pertained to period prior to 28-9-96 and therefore not applicable to the present case. In W.S. Industries case it was voluntary reversal of credit and there was no proceedings initiated under Section 11A(2). In this case the reversal was made prior to period 28-9-96 therefore these cases are not relevant for deciding the applicability of Section 11AB as it stands now with effect from 11-5-01. Larger Bench decision in the case of Shri Ram Aluminium Ltd., Final Order A/1937 to 1939/WZB/2005/C-V/SMB, dated 7-11-05 [2006 (199) E.L.T. 331 (T)], in this case also the relevant period was prior to 11-5-01. National Rubber Corporation - 2005 (189) E.L.T. 359 - This case related to delay in encashment of cheque, hence not relevant. Javs Engineers - 2004(170) E.L.T. (438) - This case pertained to period prior to 11-5-01. EID Parry India Ltd., reported in 2003(156) E.L.T. 753 - In this case the Tribunal relied upon judgment reported in 2002 (140) E.L.T. 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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