2003 (9) TMI 426 - AT - Central Excise

CESTAT Mumbai: Interest on term loan not included in duty calculation. Sections 11AB and 11AC not applicable.

The Appellate Tribunal CESTAT, Mumbai, ruled in favor of the appellants in a case involving the inclusion of interest on a term loan in duty calculation. ... Interest and penalty Issues:1. Inclusion of interest on term loan in assessable value for duty calculation.2. Applicability of Sections 11AB and 11AC for penalty and interest imposition.Issue 1: Inclusion of interest on term loan in assessable value for duty calculationThe case involved the manufacturing of Soda Ash by the applicants in their Bhavnagar factory and clearing it by paying duty, with the credit taken by another factory of the same manufacturer. A dispute arose regarding whether the interest on a term loan could be included in the assessable value. Despite the department's insistence, the duty was paid, including the interest element on the term loan in the cost of production. The learned Counsel argued that there was no suppression on the part of the applicants, and no such finding was made by the Adjudicating Commissioner. The Counsel contended that provisions of Section 11AB and Section 11AC, requiring payment of interest and imposition of penalties in cases of suppression or misstatement, were not applicable. The liability to pay the duty amount was not disputed and had been paid even before the issuance of the Show Cause Notice (SCN).Issue 2: Applicability of Sections 11AB and 11AC for penalty and interest impositionAfter hearing both parties and examining the case records, it was concluded that the provisions of Section 11AB and Section 11AC, as they stood during the relevant period from July 2000 to March 2001, were not applicable in this case. Consequently, the impugned order imposing a penalty under Section 11AC and demanding interest under Section 11AB was set aside, and the appeal was allowed. The decision was based on the satisfaction that the mentioned provisions were not applicable to the circumstances of the case, leading to the favorable outcome for the appellants.This detailed analysis of the legal judgment from the Appellate Tribunal CESTAT, Mumbai, highlights the issues regarding the inclusion of interest on a term loan in duty calculation and the applicability of Sections 11AB and 11AC for penalty and interest imposition. The judgment provided clarity on these matters, ultimately resulting in the appeal being allowed in favor of the appellants.