Interest liability follows automatically, and Section 11AC penalty was upheld but confined to the statutory concession already paid.
Interest liability was upheld in remand proceedings because it follows automatically and did not require a separate notice for recovery. The Tribunal also upheld the penalty under Section 11AC, noting that it had been imposed after allowance of part of the Modvat credit and that the assessee had already paid 25% of the penalty without any contrary material being shown. The penalty was therefore confined to the statutory concession already availed, while the demand of interest and the underlying penalty liability were maintained.
Issues: (i) Whether the demand of interest could be sustained in the remand proceedings; (ii) Whether the penalty under Section 11AC was sustainable and, if so, to what extent.
Issue (i): Whether the demand of interest could be sustained in the remand proceedings.
Analysis: The dispute before the Tribunal was confined to the later order passed after remand. The appellate authority had, for the first time, demanded interest while disposing of the matter. The Tribunal proceeded on the footing that interest liability follows automatically and does not require a separate written notice for recovery.
Conclusion: The demand of interest was upheld.
Issue (ii): Whether the penalty under Section 11AC was sustainable and, if so, to what extent.
Analysis: The Tribunal noted that the penalty under Section 11AC had been imposed in the reduced quantified amount after allowing part of the Modvat credit. It further noted the assessee's statement that 25% of the penalty had already been paid, and no contrary material was placed to dispute that position. The Tribunal therefore upheld the penalty but limited it to the statutory concession already availed.
Conclusion: The penalty under Section 11AC was upheld, but it was restricted to 25% of the penalty amount already paid by the assessee.
Final Conclusion: The appeal succeeded only to the limited extent of restricting the penalty, while the demand of interest and the substantive penalty liability were otherwise maintained.
TaxTMI 
AI Drafter ✕
TaxTMI 
