Tribunal Partly Allows Appeal: Penalty Set Aside Due to Financial Crisis, Interest Recalculated at Lower Rate.

The Tribunal partly allowed the appeal, setting aside the penalty imposed under Rule 25, as the appellant's delayed payment of excise duty was due to a financial crisis and not an intent to evade duty. The Tribunal confirmed the interest demand but modified the calculation, ruling that the interest rate of Rs. 1000/- per day was ultra-vires and should be recalculated at 2% per month (24% per annum) as per Rule 8(3). The decision emphasized that the appellant's consistent disclosure of liability negated the presumption of evasion.

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Issues:
Late payment of excise duty, imposition of penalty under Rule 25, calculation of interest under Rule 8(3) of the Central Excise Rules, 2002.

Analysis:
The appellant, engaged in manufacturing electric motors, fans, and PD pumps, paid excise duty amount late due to financial crisis, leading to two show cause notices and imposition of a penalty of Rs. 9,65,000/- under Rule 25 and interest under Rule 8(3). The Appellate Commissioner reduced the penalty to Rs. 2,50,000/- while confirming the demand under Rule 8(3.

The appellant argued that there was no intention to evade duty as the liability was disclosed from the beginning, and the delayed payment was due to financial crisis. It was contended that penalty under Rule 25 could not be imposed without contravening rules with intent to evade duty. Additionally, the appellant challenged the interest rate of Rs. 1000/- per day under Rule 8(3) as ultra-vires Section 11AB(1) of the Central Excise Act, 1944.

The department's representative supported the penalty and interest imposed, suggesting that the delay indicated an intention to evade duty. He argued that interest should be calculated as per Rule 8(3).

The Tribunal noted that the appellant consistently disclosed the liability and financial crisis as the reason for the delay, indicating no intent to evade duty. Therefore, imposing a penalty under Rule 25 was unwarranted. Regarding interest, the Tribunal held that the interest rate of Rs. 1000/- per day was ultra-vires the Act and should be calculated at 2% per month (24% per annum) as per Rule 8(3), setting aside the penalty and confirming interest with modifications.

In conclusion, the Tribunal partly allowed the appeal, setting aside the penalty and confirming the interest calculation under Rule 8(3) at the revised rate, emphasizing that delay in payment due to financial crisis did not imply an intent to evade duty.

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