Integral Coach Factory Vs Commissioner of GST & Central Excise (CESTAT Chennai)
Brief facts of the case are that appellants are engaged in the manufacture of railway coaches and are registered with the Central Excise Department. On specific intelligence that they were clearing railway coaches without payment of duty, the officers of the Preventive Unit visited the premises and verified the records. It was found that for the period 20.04.2011 to 31.12.2011, the appellant had not been paying Excise Duty on the finished goods cleared from their factory. Show cause notice was issued proposing to demand the duty along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand and appropriated the amount paid by the appellant. The original authority ordered for payment of appropriate interest and also imposed penalty of Rs.10,000/- under Rule 25 of Central Excise Rules, 2002. Aggrieved by such order, the appellant is now before the Tribunal.
The contest in the appeal is confined only to the demand of interest and penalty of Rs.10,000/- imposed on the appellant. 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. We do not find any 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 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. On this score, we find no grounds to interfere with the demand of interest and imposition of penalty.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts of the case are that appellants are engaged in the manufacture of railway coaches and are registered with the Central Excise Department. On specific intelligence that they were clearing railway coaches without payment of duty, the officers of the Preventive Unit visited the premises and verified the records. It was found that for the period 20.04.2011 to 31.12.2011, the appellant had not been paying Excise Duty on the finished goods cleared from their factory. Show cause notice was issued proposing to demand the duty along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand and appropriated the amount paid by the appellant. The original authority ordered for payment of appropriate interest and also imposed penalty of Rs.10,000/- under Rule 25 of Central Excise Rules, 2002. Aggrieved by such order, the appellant is now before the Tribunal.
2. Ld. Counsel Ms. Meera Gananasekar appeared and argued for the appellant. She submitted that the appellant is not contesting the demand confirmed and the amount has been paid during pendency of the adjudication itself. The contest in this appeal is confined to the demand of interest and the penalty imposed. Ld. Counsel explained that the appellant comes under the Ministry of Railways belonging to the Central Government. The goods cleared by the appellant was exempt from the levy of Excise Duty as per Notification No.62/1995-CE dated 16.03.1995. The appellant was under the bonafide belief that even subsequent to the Budget 2010-2011, they were exempt from the levy of Excise Duty. When the Department had enquired with regard to the non-payment of Excise Duty, the appellant vide letter dated 09.03.2011 had informed the Range Officer that Notification No.62/95-CE dated 16.03.1995 is still in application and therefore they are not required to pay the excise duty. This would establish that the appellant was under bonafide belief that the notification continued to be in application and has not been rescinded. Further, the appellant did not receive any reply to the above letter and they were under the impression that the view taken by the appellant has been accepted by the Department and that they are not liable to pay excise duty.
3. On receipt of information that exemption notification under Sl.No.16 (i) of GE No.16 has been rescinded, the appellant took steps to inform the Ministry of Railways to make arrangements in their budget for allocation of fund to pay the duty demand. The appellant being part of the Central Government, there were several procedures to be followed. Only after obtaining the sanction from the Central Government, the allocation could be made in the Budget by the Ministry of Railways for payment of the excise duty.
4. The entire duty demand was paid on 31.01.2012. There was no intention on the part of the appellant to evade payment of duty or not to pay the excise duty. They had failed to pay duty only because there was an exemption prior to the period of dispute. Ld. Counsel prayed that demand of interest and imposition of penalty may be set aside.
5. The decision of the Hon’ble High Court of Bombay, Nagpur Bench in Central Excise Appeal No. 14 of 2016 dated 01.12.2021 was relied by the Ld. Counsel to argue that in the said case, the duty demand and interest were set aside. She prayed that the appeal may be allowed.
6. Ld. A.R Ms. K. Komathi supported the findings in the impugned order. It is pointed out by Ld. A.R that appellant is liable to pay the duty when the notification exempting the goods has been rescinded. The demand of interest automatically follows the duty liability and therefore the appellant cannot claim any relief from the payment of interest on the duty paid by them. Further, taking note of the fact that appellant is a Central Government undertaking, the adjudicating authority has imposed a meagre penalty of Rs.10,000/- only. Show cause notice is issued for the normal period and therefore the decision relied by the Ld. Counsel for appellant is distinguishable on facts. She prayed that the appeal may be dismissed.
8. Heard both sides.
9. The contest in the appeal is confined only to the demand of interest and penalty of Rs.10,000/- imposed on the appellant. 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. We do not find any 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 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. On this score, we find no grounds to interfere with the demand of interest and imposition of penalty.
10. From the foregoing, we find no merit in the appeal. The appeal is dismissed.
(pronounced in open court 07.03.2023)
