IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, MUMBAI
Arising out of the Order-in-Appeal No.AH/162/M-III/2009 Dated: 13.4.2009
Passed by the Commissioner of Central Excise (Appeals), Mumbai
Date of Decision : 15.10.2009
M/s WASP PUMPS PVT LTD
COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III
Appellant Rep by: Shri Bharat Raichandani, Adv.
Respondent Rep by: Shri P K Agarwal, DR
CORAM : P G Chacko, Member(J)
Delay in payment of duty and late filing of E.R.1 returns leading to demand for duty, interest and penalty - Duty admitted and paid but challenge to payment of interest @ Rs.1000/- per day by relying on judgement in Lucid Colloids Limited vs UOI 2006-TIOL-250-HC-Raj-CX which struck down interest provision of Rs.1000/- per day - Plea also made for reduction of penalty on financial grounds - Ratio of judgement of Rajasthan High Court (supra) applicable and interest is payable as prescribed under Section 11AB of the Act - Considering facts of the case, penalty of Rs.30,000/- under Rule 25 reduced to Rs.10,000/- - Penalty imposed under Rule 27 set aside as being beyond the scope of show cause notice
Per : P G Chacko:
After examining the records and hearing both sides, I am of the view that the appeal itself requires to be disposed of finally at this stage. Accordingly, after dispensing with pre-deposit, I take up the appeal.
2. The appellant is engaged in the manufacture of excisable goods. They are required to pay duty in accordance with Rule 8 of the Central Excise Rules, 2002. However, for the period from January 2005 to December,2005, they committed default. The duty for this period was belatedly paid. Before this payment, the department issued a show-cause notice for recovery of duty with interest and for imposition of penalty. Interest on duty was sought to be levied at the rate of Rs. 1000/- per day under Rule 8 on the amount of duty for the period January to March 2005 Interest was also sought to be levied at the rate of 13% on the amount of duty for the period from April to December, 2005. A proposal for penalty was raised under Rule 25 of the Central Excise Rules. The notice also proposed to, forfeit the facility of monthly payment of duty for a period of two months under Rule 8 (3A) of the said Rules. These demands/proposals were contested by the noticee. In adjudication of this dispute, the original authority passed the following order:-
"1) I order recovery of Central Excise duty amounting to Rs. 3,27,708/- and Education Cess amounting to Rs. 6,981/- from the assessee under provisions of Section 11A of the Central Excise Act, 1944 as they have failed to pay duty in respect of the excisable goods cleared by the assessee during the period from January, 2005 to December, 2005.
2. I order recovery of interest @ Rs. 1,000/- per day under Rule 8 of the Central Excise Rules, 2002 from the assessee, as default has been committed by the assessee company about payment of duty in respect of excisable goods cleared during the period from January, 2005 to March, 2005.
3. I order recovery of interest @ 13% p.a. under provisions of Rule 8 of the Central Excise Rules, 2002 from the assessee as they have defaulted payment of amount of duty in respect of excisable goods cleared during the period from April, 2005 to December, 2005.
4. I impose penalty amounting to Rs. 30,000/- under Rule 25 of the Central Excise Rules, 2002 on the assessee for short payment of Central Excise duty relating to the excisable goods cleared during the period from January, 2005 to December, 2005.
5. I impose penalty amounting to Rs. 5,000/- under Rule 27 of the Central Excise Rules, 2002 on the assessee for non filing of E.R.1 returns within time limit prescribed vide Rule 12 of the Central Excise Rules, 2002 during the period from April, 2005 to December, 2005.
6. I impose penalty amounting to Rs. 5,000/- under Rule 27 of the Central Excise Rules, 2002 on the assessee, for repeated failure to file monthly return in proper form and within the time limit prescribed under Rule 12 of the Central Excise Rules, 2002 and sub rule 5 of Rule 7 of the CENVAT Credit Rules, 2004 during the period from April, 2005 to December, 2005.
7. I impose penalty amounting to Rs. 5,000/- under Rule 27 of the Central Excise Rules, 2002 on the assessee, for not showing correct details of Education Cess in statutory accounts and returns filed by them during the period from January, 2005 to September, 2005. I also direct the assessee to show correct details about the Education Cess in the statutory accounts and returns filed by them.
8. In exercise of power vested in me under Rule 8(3A) of the Central Excise Rules, 2002, I forfeit assesses facility, provided under Rule 8(1) of the Central Excise Rules, 2002 to pay the duty in monthly payment installments, for a period of two months from the date of communication of this order to the assessee."
An appeal filed against the above order did not succeed. The present appeal is against the order of the ld.Commissioner(Appeals).
3. After hearing both sides, I find that the amount of duty for the period from January to December, 2005 was paid by the assessee after the order of adjudication was passed, a fact noted by the appellate authority. There is no challenge in so far as the duty liability is concerned. The delay of payment of duty is a fact not in dispute. The assessee's liability to pay interest under Rule 8 at the rate of 13% p.a. prescribed under Sec.11AB of the Central Excise Act also has been conceded. However, the challenge to the demand of interest at the rate of Rs. 1000/- per day survives. In this regard, the ld.counsel has referred to the Hon'ble Rajasthan High Court's judgment in Lucid Colloids Limited vs. Union of India [2006 (200) ELT 377 (Raj) = (2006-TIOL-250-HC-Raj-CX), wherein, that part of Rule 8(3) which provided for interest on delayed payment of duty 'at the rate of 2% per month or Rs. 1000/-per day, whichever is higher', was struck down. Consequent upon the landmark decision of the Hon'ble High Court, interest chargeable on delayed payment of duty was to be only at the rate of 2% per month (24% per annum), as notified by the Central Government under Sec.11AB. In this scenario, the demand of interest at the rate of Rs. 1000/- per day under Rule 8 on the amount of duty belatedly paid for the period from January to March, 2005 requires to be set aside and it is ordered accordingly. However, in terms of the Hon'ble High Court's decision in Lucid's case, the assessee will have to pay interest at the rate prescribed under Sec.11AB of the Act. In the result, it is ordered that interest at the rate of 13% per annum notified under Section. 11AB during the material period be paid by the appellant on the amount of duty paid belatedly for the period from January to December, 2005.
4. Coming to penal liability, I note that the ld .counsel has pressed the plea for reducing the quantum of penalty imposed under Rule 25, on the ground of financial hardships. It has been pointed out that the assessee has suffered huge loss as evidenced by audited balance sheet and Profit & Loss Account for the period 2007-08. The arguments against the above penalty altogether are too feeble to be accepted. Under Rule 25, the assessee is liable to be penalized for non-payment of duty for the relevant period. The lower authorities have imposed a penalty of Rs. 30,000/-, which appears to be a little less than10% of the duty amount. In this case, the assessee did not come forward to pay the admitted duty amount even upon receipt of the show-cause notice. They paid the duty amount only after the order of adjudication was passed. The appellant has no case that during the interval between the show-cause notice and the order-in-original, they were suffering financial hardships. In the circumstances, I find no bonafides in their plea that they could not pay the duty within the prescribed period on account of financial hardships. Nevertheless, I am of the view that a penalty of Rs. 30,000/- is on the higher side in the facts and circumstances of the case. I reduce it to Rs. 10,000/- (Rupees Ten thousand only). Yet another penalty imposed on the appellant is the one imposed under Rule 27. A penalty of Rs. 5000/- was imposed under this provision of law for non-filing of return within the prescribed time limit. Equal amount of penalty was imposed under the same provision on the ground that the returns subsequently filed were not in the proper form. Again, equal amount of penalty was imposed under the same provision on the ground that the correct details of Education Cess etc. were not furnished in the returns. I find that there is no proposal in the show-cause notice to impose penalty under Rule 27 at all. Hence, the above total penalty of Rs. 15,000/-imposed on the appellant under Rule 27 is beyond the scope of the show-cause notice. This penalty is set aside.
5. In the result, the appeal is disposed of by holding that the appellant is liable to pay interest on duty at the rate of 13% per annum on the amount of duty belatedly paid for the period January to December, 2005 and is also liable to pay penalty of Rs. 10,000/- imposed under Rule 25. These payments shall be made within a period of 30 days from the date of receipt of a certified copy of this order.
(Pronounced in court)
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