2004 (8) TMI 472 - AT - Central Excise

Summary

Issues:
1. Applicability of interest under Section 11AA or Section 11AB in cases where duty is not determined under Section 11A(2).
2. Imposition of penalty when duty is discharged before a show cause notice is issued.

Analysis:
1. The main issue in this case was whether interest under Section 11AA or Section 11AB could be demanded when duty was not determined under Section 11A(2). The Commissioner (Appeals) contended that interest could be levied in all cases, but the judgment clarified that interest under Section 11AB cannot be demanded when duty is paid before a show cause notice is issued. The legal position established that the payment of duty before the issuance of a show cause notice precludes the demand for interest under Section 11AB. Therefore, the demand for interest was not justified in this scenario.

2. Another crucial aspect addressed was the imposition of a penalty on the appellant. Despite the appellant promptly paying the differential duty upon being informed about the correct assessable value calculation, a penalty of Rs. 5,000 was imposed by the original authority and confirmed by the Commissioner (Appeals). However, the judgment highlighted that since the appellant had rectified the situation immediately upon notification, there was no valid reason for imposing a penalty. Consequently, the appellate tribunal allowed the appeal concerning the demand for interest and the imposition of the penalty, setting aside the penalties and interest while confirming the demand for the differential duty.

In conclusion, the judgment clarified the legal stance on the imposition of interest under Section 11AA or Section 11AB and the justification for penalties in cases where duty is discharged promptly upon notification of an error. The decision favored the appellant by disallowing the demand for interest and penalty while confirming the differential duty payment.