Tribunal overturns penalty for non-payment of interest on duty, citing appellant's compliance and resolution.

The Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 25(1) of the Central Excise Rules, 2002, due to the non-payment of interest chargeable under Section 11AB on the differential duty paid. The Tribunal found that the appellant's actions did not constitute the contraventions specified under Rule 25(1) and that the payment of interest before the appeal hearing demonstrated compliance and resolution of the issue.

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Issues Involved:
- Non-payment of interest chargeable under Section 11AB on the differential duty paid
- Imposition of penalty under Rule 25(1) of the Central Excise Rules, 2002

Analysis:

Issue 1: Non-payment of interest chargeable under Section 11AB on the differential duty paid
The appellant, a manufacturer of goods under Chapter 39 of the Central Excise Tariff, supplied goods to customers with retrospective price increases. They paid the differential duty on the escalation amount under supplementary invoices but did not pay the interest under Section 11AB on the differential duty, amounting to Rs. 9,01,128/-. A show cause notice was issued for recovery, leading to an order confirming the interest demand and imposing a penalty. The Commissioner (Appeals) reduced the penalty as the interest was paid before the hearing. The appellant argued that they paid the duty under the impression that no interest was payable on the differential duty. The Tribunal found that the failure to pay interest was treated as a default under Rule 8 but concluded that no penalty was imposable under Rule 25(1) as it did not fall under the contraventions listed in the rule. The appellant's payment of interest before the appeal hearing further supported the decision to set aside the penalty.

Issue 2: Imposition of penalty under Rule 25(1) of the Central Excise Rules, 2002
The Tribunal examined the provisions of Rule 25(1) which allow penalties for specific contraventions related to excisable goods. It was noted that the appellant's failure to pay interest on the differential duty did not align with the contraventions listed in the rule. Additionally, the appellant had paid the interest before the appeal hearing, indicating a proactive resolution of the issue. Consequently, the Tribunal held that the penalty imposed by the Commissioner (Appeals) was not sustainable and set it aside, allowing the appeal and stay application.

In summary, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 25(1) of the Central Excise Rules, 2002, due to the non-payment of interest chargeable under Section 11AB on the differential duty paid. The Tribunal found that the appellant's actions did not constitute the contraventions specified under Rule 25(1) and that the payment of interest before the appeal hearing demonstrated compliance and resolution of the issue.

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