Interest payable but no penalty if differential duty amount paid suo motto before SCN.

PJ/Case Law/2013-14/2027

Case:-BOSTIK INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BANGALORE-I

Citation:- 2013 (294) E.L.T. 118 (Tri.- Bang.)

Brief facts:- This appeal is directed against demand of interest on duty raised under Section 11AB of the Central Excise Act as also against penalty of Rs. 5000/- imposed under Rule 25 of the Central Excise Rules, 2002. The appellant had paid differential duty of Rs. 15,36,812/- in respect of goods cleared from the factory to Kanpur Depot for the period from October,2004 to September,2007 and differential duty of Rs. 20,362/- in respect of goods cleared to Kolkata Depot for the period from September,2006 to September, 2007. Department issued a show cause notice on 30-12-2008 for recovery of interest on the above duty amounts under Section 11AB and for imposition of penalty under Rule 25. These demands were contested. In adjudication of the dispute, the original authority confirmed the demand of interest and imposed a penalty. Its decision was upheld by the Commissioner (Appeals). The present appeal of the assessee is directed against the appellate Commissioner’s order.

Appellant’s contention:- The appellant submitted that the duty amounts were paid at “Places of Removal” (Depots) within the statutory period and hence, the question of payment of interest thereon did not arise. In similar lines, the penalty also is questioned. As regards the interest on duty, the appellant has claimed support from Chamundi Steel Castings (India) Ltd. V. CESTAT, Chennai [2009 (247) E.L.T.116 (Mad.)].

Respondent’s contention:-On the contrary, the respondent relied on the case of Commissioner of C. Excise, Bangalore v. Presscom Products [2011 (268) E.L.T. 344 (Kar.)] and submitted that the appellant is liable to pay interest under Section 11AB of the Act inasmuch as the payments of duty were made under sub-section (2B) of Section 11A of the Act. .

Reasoning of Judgment:- Having heard both sides and pursuing the records, it cannot be denied that the duty payments were made under Section 11A (2B) of the Central Excise Act. This is because each payment of differential duty at depot was tacit admission of Short payment of duty at factory gate. The duty short- paid was self- determined by the assessee and voluntarily paid before issuance of any show-cause notice to them. They also added that as per the contention of the appellant about the payment of the differential duty under intimation to the proper officer of the Central Excise, then the assessee was working under sub section (2B) of Section 11A of the Act. They placed Explanation 2 & 3 to this sub-section are also relevant to this case:

“Explanation 2.- For the removal of doubts, it is hereby declared that the interest under Section 11AB shall be payable in the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub-section.”

“Explanation 3. – For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this rules made thereunder shall be imposed in respect of payment of duty under this sub-section and interest thereon.”

After this explanation 2, they added that the assessee has a liability to pay interest on the differential duty under Section 11AB. But Explanation 3 protects them from penalty. Though this explanation was inserted only in 2010, it is a clarificatory provision having retrospective effect. Therefore, the appellant is entitled to claim the benefit of the same. Hence the demand of interest on differential duty is sustained and penalty is set aside.

Decision:- Appeal partly allowed.

Comment:- The crux of the case is that if an assessee pays the differential excise duty suo moto before issuance of SCN, then interest is required to be paid as there was short payment of duty. However, no penalty is imposable on the assessee in view of the Explanation no. 3 to section 11A (2B) of the Central Excise Act, 1944.

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