CX - Tribunal had upheld duty liability but remanded matter only for re-computing duty after extending cum-duty and MODVAT benefit - in this view of matter, appellant is required to pay interest u/s 11AA on re-determined duty: CESTAT
By TIOL News Service
MUMBAI, JAN 22, 2016: THE appellants are engaged in manufacturing of corrugated galvanised sheet from plain galvanised sheet. A demand notice was issued to the appellant for payment of duty on the corrugated galvanised sheets. Appellants were not paying the duty on the ground that the activity does not amount to 'manufacture'.
The Commissioner confirmed the CE duty demand.
In appeal, the Tribunal held that the activity amounts to manufacture. However, the Bench held that the appellant would be entitled to MODVAT credit on the inputs and also cum-duty benefits in computing the duty demand. Accordingly, the matter was remanded.
Consequent to the said direction of the Tribunal, the CCE, Aurangabad passed the impugned order. After extending the benefit of cum-duty, the duty demand got reduced to Rs.46,22,322/- and the quantum of MODVAT credit entitled was arrived at Rs.43,59,689/-; thus the effective duty required to be paid by the appellant was held to be Rs.2,62,633/- which was confirmed along with interest. A penalty of Rs.1 lakh was imposed u/r 173Q of the CER, 1944.
Aggrieved by this order, the appellant is again before the CESTAT.
They do not contest the duty liability and inform that the said amount was paid on 31.05.2005, the order being passed on 31.03.2005. The appellant is disputing the interest liability and penalty imposed. It is submitted that the period involved is April 1997 to August 1997 and the SCNwas issued on 13.10.1997 (i.e. within normal period); that since duty is paid within three months of the o-in-odt. 31.03.2005, no interest is chargeable u/s 11AA and so is penalty in view of Bombay High Court decision in Blue Star Ltd. - 2009-TIOL-650-HC-MUM-CX & Vardhaman Industries Ltd. - 2008-TIOL-88-SC-CX.
The AR referred to the Explanation 1 to Section 11AAand justified the interest demand and the penalty imposed for not paying CE duty on the activity undertaken.
The Bench extracted section 11AA of CEA, 1944, the operative portion of the remand order of the Tribunal, paragraph 17 of the Bombay High Court decision and observed -
++ It is very clear from the Tribunal's order that duty liability was upheld. The order of the Commissioner was not set aside, the matter was sent back only for redetermination keeping in view the cum-duty benefit and extending the benefit of modvat credit. In view of the said factual position and keeping in view the Explanation 1 of the Section 11AA as also the observation of the Hon'ble Bombay High Court in first para 17 quoted above, we are of the view that the appellant is required to pay interest under Section 11AA on the re-determined duty of Rs.2,62,633/- with reference to the date of passing of the first order and not with reference to the passing of impugned order till the date of payment of the said amount.
In the matter of imposition of penalty u/r 173Q of CER, 1944, the Tribunal observed that the decisions cited by the appellant in the matter of 'corrugation' are in a different context and moreover as far as the question whether activity of corrugating steel sheets amounts to manufacture or not, it has been consistent stand of the Tribunal as also the P&H High Court that the said activity amounts to manufacture and that the Appellant had not produced any judgment taking a contrary view.
The Bench, therefore, held that penalty is imposable u/r 173Q but keeping in view the duty amount and also the nature of dispute, the same was reduced to Rs.20,000/- only.
The appeal was dismissed except for the above modification of quantum of penalty.
(See 2016-TIOL-234-CESTAT-MUM)
