Appellate Tribunal upholds Commissioner's order on interest & penalty under Central Excise Rules

The Appellate Tribunal CESTAT Chennai upheld the order of the Commissioner (Appeals) in a case involving differential interest and penalty under the Central Excise Rules, 2002. The Tribunal found that the demand of interest at a fixed daily rate was unsustainable, following a precedent set by the Rajasthan High Court. Consequently, the appeal filed by the Revenue was dismissed, and the cross-objection by the respondents was also disposed of accordingly.

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Issues:
1. Appeal against order passed by Commissioner (Appeals) regarding differential interest and penalty under Central Excise Rules, 2002.

Analysis:
The Appellate Tribunal CESTAT Chennai heard an appeal filed by the Revenue against an order passed by the Commissioner (Appeals). The original authority had demanded a sum as the differential interest payable under Rule 8 of the Central Excise Rules, 2002, and imposed a penalty. However, the Commissioner (Appeals) set aside the adjudication order. It was noted that the respondent had delayed payment of duty under Rule 8 of the said Rules but subsequently paid the duty along with interest under Section 11AB of the Central Excise Act, 1944. The issue revolved around a show-cause notice proposing interest payment under Rule 8. Reference was made to a judgment by the Hon'ble Rajasthan High Court in Lucid Colloids Ltd. Vs. Union of India, which held that the part of Rule 8(3) specifying interest rates was invalid. The High Court ruled that interest on delayed payment should be computed at the rate of 2% per month or 24% per annum as notified by the State Government, falling within the permissible limits of Section 11AB.

The Appellate Tribunal, in light of the Rajasthan High Court decision, found that the demand of interest at a fixed daily rate was unsustainable. Consequently, the Tribunal upheld the order passed by the Commissioner (Appeals) and dismissed the appeal filed by the Revenue. It was further mentioned that the cross-objection filed by the respondents was also disposed of in this regard. The judgment was dictated and pronounced in open court by one of the judges.

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