2023 (3) TMI 945 - AT - Central Excise

Manufacturer penalized for failure to pay excise duty despite belief in exemption

The Tribunal upheld the demand of interest and the penalty of Rs.10,000 against the appellant, a manufacturer of railway coaches, for failing to pay ... Demand of interest and penalty u/r 25 of Central Excise Rules, 2002 - Levy of Excise Duty as per Notification No.62/1995-CE dated 16.03.1995 - notification has been rescinded or not - HELD THAT:- Ld. Counsel has explained that the appellant is a Central Government undertaking and had omitted to pay the excise duty only because they were under the bonafide belief that the goods cleared by them (railway coaches) are exempted from excise duty as per notification. They have paid the duty on 31.01.2012. The appeal is filed against the demand of interest. There are no ground to set aside the demand of interest. As rightly argued by Ld. A.R in the decision of the Hon’ble High Court of Bombay relied by Ld. Counsel for appellant in WATER RESOURCES DEVELOPMENT FORMERLY KNOWN AS IRRIGATION, VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR [2021 (12) TMI 427 - BOMBAY HIGH COURT] the question is whether the demand under the SCN is barred by limitation or not - In the case on hand, the demand raised is within the normal period. Further, there is no penalty imposed under Section 11AC of the Central Excise Act, 1944. The Commissioner has considered all the facts and imposed penalty of Rs.10,000/- only. There are no grounds to interfere with the demand of interest and imposition of penalty - appeal dismissed. Issues:- Duty demand confirmation- Payment of interest- Imposition of penalty- Applicability of exemption notification- Bonafide belief of the appellant- Legal arguments presented- High Court precedent reference- Defense by the Additional Commissioner- Adjudication and decisionDuty Demand Confirmation:The case involved the confirmation of duty demand against the appellant, a manufacturer of railway coaches, for not paying excise duty on finished goods cleared during a specific period. The original authority confirmed the demand, leading to the appellant's appeal before the Tribunal.Payment of Interest:The appellant contested the demand of interest and penalty imposed, arguing that they belonged to the Central Government under the Ministry of Railways and believed their goods were exempt from excise duty. Despite paying the duty later, the appellant sought relief from interest payment.Imposition of Penalty:The original authority imposed a penalty of Rs.10,000 under Rule 25 of the Central Excise Rules, 2002, in addition to demanding interest. The appellant challenged the penalty, emphasizing their bonafide belief in the continued applicability of the exemption notification.Applicability of Exemption Notification:The appellant relied on Notification No.62/1995-CE to support their belief that their goods were exempt from excise duty, even after subsequent budget changes. They argued that their failure to pay duty was due to this belief and sought to set aside the interest and penalty.Bonafide Belief of the Appellant:The appellant maintained that they acted in good faith based on their understanding of the exemption notification's validity. They highlighted their communication with the Range Officer and subsequent steps taken upon learning about the rescission of the exemption.Legal Arguments Presented:The appellant's counsel presented arguments based on the appellant's status as a Central Government undertaking, the interpretation of the exemption notification, and the absence of willful evasion in failing to pay duty.High Court Precedent Reference:The appellant cited a High Court decision where duty demand and interest were set aside, seeking a similar outcome in their case. However, the Additional Commissioner distinguished the present case based on factual differences.Defense by the Additional Commissioner:The Additional Commissioner contended that the appellant was liable to pay duty upon the rescission of the exemption notification, justifying the demand for interest. The meager penalty imposed was considered appropriate given the circumstances.Adjudication and Decision:After considering the arguments from both sides, the Tribunal upheld the demand of interest and the penalty of Rs.10,000, finding no grounds to interfere. The appeal was dismissed based on the lack of merit in challenging the interest and penalty imposition.This detailed analysis covers the key issues, arguments, and the Tribunal's decision in the legal judgment.