2011 (6) TMI 603 - AT - Central Excise

Tribunal rules on interest and penalty reduction under Section 11AC, emphasizes timely payment

Commissioner of Central Excise & Customs, Nashik Versus Bemco Sleeper Ltd.

The Tribunal ruled in favor of the Revenue in an appeal concerning the dropping of interest demand and reduction of penalty under Section 11AC. It held ... Interest - mandatory penalty – Held that:- demand of interest has been dropped by the First Appellate Authority on 17/10/2003, the benefit of reduced penalty is available to the respondent. But when the Commissioner (Appeals) has re-confirmed the demand of interest through corrigendum dated 22/10/2003 the liability of payment has arisen. Therefore, it has to be verified that whether the respondent has paid the interest within 30 days from the date (22/10/2003) of confirmation of interest demand. matter remanded back to the original authority to ascertain the facts whether the respondent has paid the interest within 30 days from the date of confirmation by the Commissioner (Appeals) or not? If the respondent has paid the interest within 30 days, then the penalty ought to be reduced to 25% of duty amount. Appeal is disposed of by way of remand. Issues:- Appeal against dropping demand of interest and reducing penalty under Section 11AC- Interpretation of provisions of Section 11AC regarding mandatory penalty- Verification of payment of interest within 30 days for benefit of reduced penalty- Remand to original authority for further assessmentAnalysis:The judgment involves an appeal by the Revenue against an order where the demand of interest was dropped and the mandatory penalty under Section 11AC was reduced to 50% of the duty confirmed. The Revenue argued that as per settled law by the Hon'ble Apex Court, the penalty under Section 11AC should be equal to the duty confirmed. The Revenue further contended that since the interest was not paid within 30 days of adjudication, the benefit of reduced penalty should not apply. The Tribunal noted that the demand of interest was initially dropped but later re-confirmed through a corrigendum. The Tribunal held that if the interest was paid within 30 days of the corrigendum, the penalty should be reduced to 25% of the duty confirmed. Therefore, the matter was remanded back to the original authority to verify if the interest was paid within the stipulated time frame.The Tribunal considered the submissions made by the Revenue and observed that the Commissioner (Appeals) had initially dropped the demand of interest but later re-confirmed it. The Tribunal emphasized the importance of timely payment of interest to avail the benefit of reduced penalty under Section 11AC. The Tribunal directed the original authority to ascertain whether the interest was paid within 30 days from the date of confirmation by the Commissioner (Appeals) to determine the appropriate penalty amount. If the interest was paid within the specified period, the penalty should be reduced to 25% of the duty confirmed; otherwise, the penalty equivalent to 100% of the duty amount would be applicable. The Tribunal disposed of the appeal by way of remand, highlighting the need for further assessment based on the payment status of interest within the prescribed timeline.In conclusion, the judgment addressed the issues related to the demand of interest, the interpretation of Section 11AC regarding mandatory penalty, and the verification of timely payment of interest for the benefit of reduced penalty. The Tribunal's decision to remand the matter back to the original authority reflects the importance of compliance with payment obligations within the specified period to determine the appropriate penalty amount in such cases.