Whether assessee is liable to pay interest and penalty for bonafide short payment of duty?

PJ/Case law/2013-14/1908

Case:- BOSTIK INDIA PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BAGALORE-I

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

Brief facts:- This appealis 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 above duty amounts under Section11AB 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 “place of removal” (Depots) within the statutory period and hence , the question of payment of interest on duty does not arise. The learned Counsel has claimed support from Chamundi Steel Castings (India) Ltd. v. CESTAT, Chennai [2009 (247) E.L.T. 116 (Mad.)].

Respondent’s contention:- The respondent relying on Commissioner of C. Excise, Bangalore v. Presscom Products [2011 (268) E.L.T. 344 (Kar.)] and submitted that the appellant was liable to pay interest under Section 11AB of the Act in as much as the payments of duty were made under sub section (2B) of Section 11A of the Act. He also made an attempt to justify the penalty imposed on the appellant.

Reasoning of Judgment:- After hearing both sides and perusing the records, it cleared that it could not be said 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. The CESTAT also submitted that these payments of differential duty were made under intimation to the proper officer of Central Excise. If that be so, the assessee was working under sub-section (2B) of Section 11A of the Act. 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 11 AB shall be payable on 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 Act or the rules made thereunder shall be imposed in respect of payment of duty under this sub-section and interest thereon.”
Thus, it was concluded that the assessee has a liability to pay interest on the differential duty under Section 11 AB and not for Penalty. This clarificatory provision having retrospective effect may be useful for the appellant. At last, thus the demand of interest on differential duty is sustained and the penalty is set aside.

Decision:- Appeal partly allowed.

Comment:- This case confirms the settled position that interest is required to be paid in every case of short payment but if the short payment is made good by the assessee suo motto and even before issuance of the show cause notice, penalty is not warranted.

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PJ/Case law/2013-14/1908

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