2010 (3) TMI 985 - AT - Central Excise

Interest u/s 11AA of CEA - Penalty - valuation - operational cost u/r 8 of the Valuation Rules - includibility - Held that - Sub-section (2) of section 11AA says that sub-section (1) is not applicable where the duty became payable on or after the date on which the Finance Act 2001 received Presidential assent. It was on 11-5-2001 that the Finance Act 2001 came into force. In this scenario there can be no levy of interest under sub-section (1) of Section 11AA on the amount of duty paid by the assessee for the period upto 10th of May 2001 - the appellant is liable to pay interest under Section 11AB of the Act on that part of the amount of duty which pertains to the period from 11-5-01 to 30-6-01 and such interest shall be paid for the period from the due date to the date of payment (20-4-02). Penalty - Held that - there was admittedly undervaluation of the goods whether deliberate or not - The undervaluation per se amounted to breach of Rule 173F of the CER 1944 and the same would attract the penal provisions of Rule 173Q. Therefore penalty u/r 173Q in this case is irresistible - however a penalty of Rs. One lakh does not appear to be reasonable We reduce the penalty to Rs. 10, 000/-. For the limited purpose of requantification of the amount of interest we send this case back to the original authority - appeal allowed by way of remand.

Summary

Issues:
- Penalty imposed on the appellant
- Demand of interest on differential duty
- Excisability of the goods in question

Penalty Imposed on the Appellant:
The appellant, engaged in the manufacture of cold-rolled/hot-rolled sheets and mild steel plates, faced a penalty of Rs. One lakh imposed by the lower authorities. The penalty was a result of undervaluation of goods cleared to a sister unit, leading to a demand of over Rs. 80 lakhs in differential duty. The appellant contended that the process undertaken before removal to the sister unit did not amount to manufacture, thus denying duty liability. The Asstt. Commissioner confirmed the duty demand, interest under Sec. 11AA, and imposed the penalty. The Commissioner (Appeals) upheld the decision, prompting the appellant's appeal against the penalty.

Demand of Interest on Differential Duty:
The appellant argued against the interest on duty under Sec. 11AA, stating that the duty was paid within the prescribed period. The appellant's counsel cited precedents to support their case against the penalty, emphasizing lack of mala fide intention to evade duty payment. The JDR contended that interest under Sec. 11AB was applicable and justified the penalty based on a Supreme Court judgment. The Tribunal analyzed the provisions of Sec. 11AA and 11AB, concluding that interest was leviable on the duty paid for a specific period, despite timely payment.

Excisability of the Goods in Question:
While the appellant pursued the plea of non-excisability before lower authorities, this ground was not raised in the present appeal. The focus shifted to the penalty and interest issues. The Tribunal clarified the liability for interest under Sec. 11AB on the duty paid for a specific period, irrespective of the timely payment. The penalty imposed on the appellant was reduced to Rs. 10,000 from Rs. One lakh due to mitigating factors, including the appellant's prompt payment of the duty amount post-adjudication. The case was remanded to the original authority for the correct quantification of interest, providing the appellant with a reasonable opportunity to be heard.

This detailed analysis of the judgment highlights the intricacies of the penalty, interest, and excisability issues addressed by the Appellate Tribunal CESTAT MUMBAI in this case.