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TMI Blog2007 (7) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... being pointed out by the audit party. They had assured to pay the balance and accordingly paid the balance Rs.46,819/- on 5.8.2004. Show cause notice was issued on 29.7.2004 and served on 11.8.2004. Thus, factually it is evident that major portion of the short duty was paid before issuance of show cause notice and a small chunk was paid, although after issuance of notice, before service of notice upon the assessee. 3. Show cause notice was confirmed by Joint Commissioner, Central Excise & Customs, Aurangabad, vide order in original dated 18.2.2005. The Commissioner was pleased to confirm demand of Rs.8,84,547/- and ordered appropriation of amount already paid. He also ordered imposition of equal amount of penalty u/s 11AC of the Central Excise Act, 1944 read with Rule 173Q of the Central Excise Rules, 1944. In addition, he also ordered recovery of interest at appropriate rate as u/s 11AB of the Act. The assessee approached Commissioner (Appeals), who decided the appeal by judgment and order dated 29.7.2005. The learned Commissioner concluded the appeal thus: "In view of above, I hold the appellants were not liable for imposing any penalty. The penalty imposed in the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance of the learned counsel representing both the parties, we have gone through Sections 11A, 11AA, 11AB and 11AC of the Central Excise Act, 1944. It is evident that Section 11AA enables the department to charge interest if, even after determination u/s 11A (2) of duty short paid, the assessee does not pay the duty so determined within a period of three months from the date of determination. Interest chargeable u/s 11AB stands on different footing. From the clause - ".......... the person who is liable to pay duty as determined under sub-section (2) or has paid the duty under sub-section (2B) of Section 11A, shall in addition to the duty, be liable to pay interest at such rate not below 10% and not exceeding 36% p.a., as is for the time being fixed by the Central Government by notification in the official gazette, ..... " On comparison of the language of Sections 11AB and 11AC, it can be seen that the opening part is identical. The interest chargeable u/s 11AB is determinable by the Central Government and imposable in accordance with the rates published in the official gazette, but not below 10%, as against which Section 11AC imposes penalty equal to the amount of duty evaded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew was confirmed by the Hon'ble the Apex Court while dismissing the appeal of the department, that in case the duty is paid before issuance of show cause notice, no penalty u/s 11AC is imposable, was a decision of the Tribunal at Bangalore dated 13.11.2002. Taking into consideration the hierarchy of authorities under the Central Excise Act, 1944 i.e. Assessment Officer conducting enquiry and determining the duty evaded or short paid, Commissioner (Appeals) and thereafter CESTAT, it can safely be said that this was a decision regarding the non payment of duty of the period prior to insertions by Amendment Act No.14/2001 with effect from 11.5.2001 by which sub-sections (2A), (2B) and (2C) are inserted in the main Act. Naturally, the Explanation (1) to sub-section (2B), reproduced hereinabove, was neither on the statute book nor was under consideration before the Tribunal or before the Hon'ble the Supreme Court. If the effect of Explanation is taken into consideration, the liberty to pay evaded excise duty as may be ascertained by Central Excise Officer u/s 11A(2) or on the basis of duty ascertained by himself, was not available to the assessee prior to 11.5.2001. We must say that by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had suppressed the fact that they had cleared the SDS (Special Denatured Spirit) for captive consumption. Further I do not find any evidence on record as to what the appellants had mis-stated or suppressed, to prove that they had intention to do so. The mere fact that the value and quantity of captive consumption and domestic sale of ethyl alcohol (SDS) were not shown separately in the RT-12 returns submitted by the appellants from time to time will not prove that they had mala fide intention to do so and make them liable for imposition of equal amount of penalty as provided under the Act / Rules." Learned counsel Shri Kolte did not fail to point out that this judgment by Commissioner (Appeals) was suffered by the department, in the sense department did not challenge it before CESTAT and more particularly this finding of fact. The appeal before CESTAT was by the assessee thereby challenging imposition of interest u/s 11AB, which was not set aside by Commissioner (Appeals). Having acquiesced to finding of fact that there were no mala fide intentions on the part of the assessee, now it is not open for the department to say that penalty is imposable. This is because of absence of bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her payment of duty before issuance of show cause notice exempts the assessee from liability to pay interest u/s 11AB. Learned counsel Shri Kolte had placed reliance upon concluding para in the judgment of CESTAT Bangalore in the matter of Rashtriya Ispat Nigam Ltd. V/s Commissioner of Central Excise, Visakhapatnam, which reads thus: "In these circumstances, there is no justification on the part of the department to impose penalty u/s 11AC as well as under Rule 173Q of the Central excise Rules, 1944. Consequentially, no interest also is payable." In the matter, penalty u/s 11AC is held non-imposable because the amount of duty was paid before issuance of show cause notice. The observation "consequentially no interest is also payable", according to Advocate Shri Kolte, was confirmed by the Hon'ble the Supreme Court while dismissing the appeal of the department. First of all, with due respect, it must be said that on going through the entire judgment of the Tribunal at Bangalore, there does not appear any submissions advanced regarding the issue of interest. The stray reference to interest has come in the judgment of the Tribunal unsupported by any reasons except that it has treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d determination can go on if the short duty is not paid, but even if short duty is paid by taking liberty under sub-section (2B), we are afraid, that does not absolve the assessee from the liability to pay interest thereon. In case by proceeding with the show cause notice, if the Central Excise Officer determines short duty payable higher than as ascertained and paid by the assessee himself, the assessee would be liable to pay interest u/s 11AB upon the same. Emphasis by Advocate Shri Kolte was on the tail piece of sub-section 2B. According to him, once the short duty is paid before issuance of show cause notice, the department is prohibited from issuing show cause notice and, therefore, there can not be any adjudication u/s 11A (1) and (2) and, therefore, there can not be any imposition of either interest u/s 11AB or penalty u/s 11AC. We quote the tail piece, relied upon by Advocate Shri Kolte: ".......On receipt of such information (regarding payment under sub-section 2B) shall not serve any notice under sub-section (1) in respect of duty so paid." We are afraid, the proceedings starting with the show cause notice u/s 11A (1) are prohibited so far as duty paid. It does not make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the main provision, it can not nullify the effect of main provision. If Explanation (2) interprets as attempted by learned counsel due to the phrase with which it ends "but for this sub-section", the explanation will have to be ignored being in conflict with sub-section (2B), which it explains. However, the meaning of this clause "but for this sub-section" can be enlightened when we refer to Section 11AB (1), we have reproduced two portions of this provision (in parts) in the earlier part of this judgment and for the sake of convenience, now we are quoting entire sub-section (1) of Section 11AB, which reads: "11AB. Interest on delayed payment of duty : (1) where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section (2B) of Section 11A, shall in addition to duty be liable to payinterest at such rate, not below 10% ....from the first date of the month succeedingthe month in which the duty ought to have beenpaid under this Act or from the date of sucherroneous refund as the case may be,but for the provisions c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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