Tribunal rules no interest or penalty on voluntary duty payment

The Tribunal ruled that the appellant was not liable to pay interest under Section 11AB and penalty under Rule 25 of Central Excise Rules, 2002 on the differential duty paid voluntarily. Since the duty was not lawfully required and no show cause notice was issued within the limitation period, interest and penalty were deemed inapplicable. The Tribunal clarified that interest under Section 11AB is payable only when duty lawfully due remains unpaid, excluding situations where duty was voluntarily paid but not legally owed. The appeal was allowed, emphasizing that interest and penalty provisions apply when duty lawfully due is not paid.

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Issues:
Whether appellant is liable to pay interest under Section 11AB and penalty under Rule 25 of Central Excise Rules, 2002 on differential duty paid voluntarily, even though not lawfully payable, and SCN issued after limitation period.

Analysis:

1. Liability for Interest and Penalty:
The appellant cleared un-branded Motor Spirit and HSD on lower duty rates under Notification No. 4/06-CE but later converted some into branded fuel, paying differential duty voluntarily. The issue was whether interest and penalty were justified. The appellant argued that duty was not lawfully payable, citing relevant judgments. The department demanded interest under Section 11AB and imposed penalty under Rule 25. The Tribunal found that duty paid was not lawfully required, as lower rates applied to un-branded fuel, and no SCN was raised against the appellant. Thus, interest and penalty were not applicable.

2. Interpretation of Section 11AB:
Section 11AB states interest is payable if duty is not levied or paid. The appellant paid duty voluntarily, not being liable. The Tribunal clarified that interest applies only when duty lawfully required is unpaid. The provision does not cover situations where duty was paid voluntarily but not legally due. Therefore, interest under Section 11AB was not warranted in this case.

3. Sub Section (2B) Application:
Sub Section (2B) allows payment based on self-ascertainment before notice issuance. The appellant did not opt for this provision as they paid only duty, not interest. Moreover, explicit written notification to the department is required, which was absent. As the duty was not lawfully payable, Sub Section (2B) did not apply, precluding the imposition of interest or penalty.

Conclusion:
The Tribunal held that as duty paid voluntarily was not lawfully required, interest and penalty could not be demanded. The impugned order was set aside, and the appeal was allowed, emphasizing that interest and penalty provisions apply only when duty lawfully due is not paid.

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