Case Note & Summary
The case involves an appeal by the Revenue (Commissioner of Central Excise and Customs) against an order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) confirming the Commissioner (Appeals)'s order that set aside the Deputy Commissioner's direction for recovery of interest under Section 11AB and penalty under Section 11AC of the Central Excise Act, 1944. The respondent-assessee, M/s Ahmednagar Forging Ltd., is engaged in manufacturing motor vehicle parts. During July 2004 to March 2005, the assessee cleared excisable goods on payment of duty based on purchase order prices. Subsequently, the assessee claimed enhanced prices from customers due to increased costs, leading to a short payment of duty. The Deputy Commissioner ordered recovery of interest and penalty. The Commissioner (Appeals) and CESTAT set aside both interest and penalty. The Revenue appealed, raising the sole substantial question of law whether interest under Section 11AB could be waived. The High Court held that interest under Section 11AB is mandatory and cannot be waived, even if penalty is waived. The court allowed the appeal, set aside the orders of the Commissioner (Appeals) and CESTAT to the extent they waived interest, and restored the Deputy Commissioner's order regarding interest. The court did not disturb the waiver of penalty.
Headnote
A) Central Excise - Interest - Section 11AB of Central Excise Act, 1944 - Mandatory Nature - The issue was whether interest under Section 11AB can be waived by appellate authorities. The court held that interest under Section 11AB is mandatory and cannot be waived, even if penalty under Section 11AC is waived or reduced. The Commissioner (Appeals) and Tribunal erred in setting aside the interest component. (Paras 1-4)
Issue of Consideration
Whether the adjudicating authorities have acted in conformity with the provisions of law in waiving the interest imposed under Section 11AB of the Central Excise Act, 1944?
Final Decision
Appeal allowed. The orders of the Commissioner (Appeals) and CESTAT are set aside to the extent they waive interest under Section 11AB. The Deputy Commissioner's order regarding interest is restored. The waiver of penalty is not disturbed.
Law Points
- Interest under Section 11AB of Central Excise Act is mandatory and cannot be waived
- even if penalty is waived or reduced
