Interest and Penal liability on differential duty - Clearance of Goods from one unit to another without duty

PJ/Case Laws/2011-12/1380

Case: VIDYUT METALLICS PVT. LTD. Versus COMMISSIONER OF C. EX., MUMBAI

Citation: 2011 (271) E.L.T. 570 (Tri. - Mumbai)

Issue:- Goods cleared from one plant to another without payment of duty – single registration application granted for later period – Differential duty paid – whether interest liability and penalty imposed tenable – prima facie case made out - stay granted.

Brief Facts:- Appellant have two plants, namely, Plant No. 1 & Plant No. 2. At the relevant time these plants had separate excise registration. They were clearing excisable goods manufactured in plant No. 2 for captive consumption to their plant No. 1 and also to the job workers. Since there was no sale, the assessable value was declared on the basis of cost of production as per the provisions of Section 4 of the Central Excise Act, 1944 read with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. The costing was done prior to the finalization of balance sheet and duty liability discharged on that basis.

After the finalization of the balance sheet, the department demanded differential duty for the period from April 2005 to March 2006 and an amount of Rs. 2,87,296/- was confirmed under Section 11A (1) of the Central Excise Act. The Adjudicating Authority also confirmed the demand for recovery of interest on the above amount under Section 11AB of the said Act, and also imposed an equivalent amount of penalty under Section 11AC read with Rule 25 of the Central Excise Rules, 2002.

In the appeal before the Lower Appellate Authority, the appellant did not contest the duty demand but contested only payment of interest under Section 11AB and also imposition of penalty under Section 11AC.

The Lower Appellate Authority while setting aside the penalty, confirmed the demand for recovery of interest as per the provisions of Section 11AB of the Act. Against this order, the appellants have filed this appeal before the Tribunal.

Appellant’s Contention:- Appellant submitted that they had applied for grant of single registration for their Plant No. 1 & Plant No. 2 as early as July 2001. The said application was rejected by the department and on appeal this Tribunal by order dated 25-4-2007 had allowed single registration. The department's appeal against the said order of the Tribunal before the High Court of Bombay was dismissed on 30-8-2007 and thereafter a single registration for both the plants was granted. In other words, if the department had acceded to the request for grant of single registration in 2001 itself, they would not have been required to pay any duty on the goods captively consumed in terms of Notification No. 67/95-CE. If no duty payment is required, consequently there will not be any need to pay interest either.

Appellant submitted that this Tribunal in their own case wherein a similar issue had arisen regarding payment of differential duty and interest, vide Order No. S/197/2001/EB/C-II, dated 28-2-11 [2011 (271) E.L.T. 556 (Tribunal)] had stayed the recovery of amount demanded and waived the pre-deposit of the amount involved. Therefore, in this case also since the facts are similar they should be granted stay of the interest amount confirmed by the impugned order.

Respondent’s Contention:- Revenue submitted that once the assessee has accepted that they are liable to pay differential duty and have paid the same, the demand for interest is automatic and consequential. Therefore, notwithstanding the grant of single registration subsequently, during the period of demand, there were separate registrations for Plant No. 1 & Plant No. 2 and clearances from Plant No. I to Plant No. 2 were made on payment of duty. Therefore, the appellants cannot escape from the payment of interest on account of delayed payment of duty, in terms of Apex Court judgment in the case of CCE, Pune v. SKF India Ltd. [2009 (239) E.L.T. 385 (S.C.)]; CCE v. International Auto Ltd. [2010 (250) E.L.T. 3 (S.C.)] andRaj Leather Cloth Industries Pvt. Ltd. v. UOI [2010 (256) E.L.T. 209 (P & H)].

Reasoning of Judgment:- The Tribunal held that though as per the Apex Court judgment, whenever there is a delay in payment of duty, interest is automatic and consequential, however in the instant case the facts are different and distinguishable. The appellant had applied for single registration, which was denied to them initially and subsequently after the order of this Tribunal, which was upheld by the High Court, they were granted single registration in 2007. If the single registration were granted initially itself, the appellant would have been eligible for the benefit of Notification No. 67/95-C.E. and there will not be any requirement of payment of differential duty in such an event. In this case, the Tribunal noticed that the appellant had already deposited the amount of duty confirmed.

In the end it was held that prima facie case if made out by appellant for waiver of interest on the duty demanded.

Decision:- Stay granted.

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PJ/Case Laws/2011-12/1380

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