Custom, Excise & Service Tax Tribunal
Indian Oil Corporation Ltd vs Vadodara-I on 1 February, 2019
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No. E/972/2011-DB
[Arising out of OIO-01-DEMAND-COMMR-I-2011 Dated 06.05.2011 passed by Commissioner of
Central Excise, Customs and Service Tax-VADODARA-I]
M/s Indian Oil Corporation Ltd Appellant
Vs
C.C.E. & S.T., - Vadodara-i Respondent
Represented by:
For Appellant: Shri W. Christian (Advocate) For Respondent: Shri Sameer Chitkara (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing: 08.01.2019 Date of Decision: 01.02.2019 Final Order No. A / 10211 /2019 Per: Ramesh Nair The issue is whether the appellant is liable to pay interest under Section 11AB and penalty under Rule 25 of Central Excise Rules, 2002 on differential duty paid by them voluntarily, even though such differential duty was not lawfully payable as per the appellant and the SCN demanding interest was issued after normal limitation period. The brief facts of the case are that the appellant had manufactured and cleared un-branded Motor Spirit (Petrol) and HSD (Diesel) on payment of duty to M/s BPCL and M/s HPCL during the period from March 2008 to October 2009 in terms of Notification No. 4/06-CE dated 01.03.2006. The appellant had paid the duty at lower rate as applicable to Motor Spirit/HSD intended for sale without a brand name. However, subsequent to the clearance of goods to buyers M/s BPCL and M/s HPCL, in some cases they had converted the same quantity of such duty paid un-branded Petrol/Diesel into branded Petrol fuel by adding some additives under the misconception of law. The appellant voluntarily paid
2|Page E/972/2011-DB differential duty on such branded fuel, as and when they received necessary details from the said buyers M/s BPCL and M/s HPCL. The payment of duty was reflected in their ER-1 returns. On that basis SCN dated 30.07.2010 demanding interest on the aforesaid duty in respect of clearances made during the period from March 2008 to October 2009 was issued. The adjudicating authority confirmed the demand of interest under Section 11AB and also imposed penalty under Rule 25 of Central Excise Rules, 2002, therefore, present appeal only for setting aside the interest and penalty.
2. Sh. W. Christian Ld. Counsel appearing on behalf of the appellant submits that the appellant have cleared fuel sale to M/s BPCL and M/s HPCL in un-branded condition which were not liable for payment of differential duty only for the reason that buyers subsequently converted their un-branded fuel into branded fuel. In support of his submission, he relied upon following judgments:
Mahindra & Mahindra Ltd 2010 (262) ELT 366 (T) Mahindra & Mahindra Ltd 2016 (334) RLT 193 (SC) He submits that there is no dispute that the Notification No. 4/06-CE dated 01.03.2006 provides lower rate duty subject to condition (Intended for sale without brand name) since the appellant have sold un-branded fuel, had no intention to sale un-branded petrol/diesel.
Subsequent conversion of un-branded fuel into branded fuel cannot disentitle the appellant from availment of lower rate of duty in terms of Notification No. 4/06-CE. He relied upon the judgments in the case of state of Haryana Vs. Dalmia Dadri Cement Ltd 2004 (178) ELT 13 (SC).
He also placed reliance on the following judgments:
Hindustan Petroleum Corporation Ltd 2009 (234) ELT 648 (T)
3|Page E/972/2011-DB Bharat Petroleum Corporation Ltd 2013 ( (295) ELT 106 (T) Bharat Petroleum Corporation Ltd 2009 (240) ELT 403 (T) Bharat Petroleum Corporation Ltd 2018 (361) ELT 950 (T)
3. He submits that the Commissioner has unjustly held that, once the appellant has paid differential duty, interest should also be payable inevitable. He submits that once duty itself admittedly not payable, question of consequential penalty and interest does not arise. He placed reliance on the following judgments:
Bonanaza Engineering & Chemicals Pvt. Ltd 2012-TIOL-25-SC Narsepalli Oil Mills MANU/KA/0032/1973 Gujarat Narmada Fertilizers Co. Ltd 2010 (262) ELT 829 (T) Gujarat Narmada Fertilizers Co. Ltd 2012 (285) ELT 336 (Guj.) Subray Catal chemicals P. Ltd 2010 (261) ELT 1170 (T) He also submits that the SCN dated 30.07.2010 issued for longer period is patently time barred in terms of Section 11A. He takes support of the following judgments:
Hindustan Insecticides Ltd 2013 (297) ELT 332 (Del.) Gujarat Fertilizers & Chemicals Ltd 2016 (8) TMI 38-CESTAT- Ahmedabad
4. Sh. Sameer chitkara Ld. Additional Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He submits that once the appellant had admitted to duty liability, the interest on such duty has to be paid in terms of Section 11AB. He further submits that the appellant on their own ascertainment paid the duty, therefore, the provision of sub section (2B) of Section 11A was complied, according to which the appellant was required to pay not only the duty but also the interest. He placed reliance on the decision of
4|Page E/972/2011-DB hon'ble Supreme Court judgment in the case of CCE-Pune Vs. SKF India Ltd. 2009 (239) ELT 385 (SC).
5. We have carefully considered the submissions made by both the sides and perused the records, we find that the revenue has demanded the interest under Section 11AB and imposed penalty under Rule 25 of the Central Excise Rules, 2002 on the ground that the appellant has delayed the payment of duty. We find that the duty so paid by the appellant was not lawfully payable on the ground that the appellant had admittedly cleared un-branded Petrol and Diesel which attracts lower rate of duty in terms of Notification No. 4/06-CE. On this issue, the department has also not raised any SCN, therefore, the department itself has admitted that the appellant was eligible for lower rate of duty in terms of aforesaid Notification. Therefore, differential duty was not payable at all by the appellant. The interest was demanded under Section 11AB, which reads as under:
Section 11AB: Interest on delayed payment of duty "(1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section 2(B), of section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below 3[ten per cent.] and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 11A till the date of payment of such duty:
Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid.] [(2) The provisions of sub-section (1) shall not apply to cases where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President.]
5|Page E/972/2011-DB Explanation 1.-- Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal 5[, National Tax Tribunal] or, as the case may be, the Court, the interest shall be payable on such reduced amount of duty.
Explanation 2.--Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal 5[, National Tax Tribunal] or, as the case may be, the Court, the interest shall be payable on such increased or further increased amount of duty.]"
6. From the plain reading of above section 11AB, it is seen that the interest is chargeable only in case where any duty of excise has not been levied or paid or has been short levied or short paid and erroneously refunded, the person, who is liable to pay duty as determined under sub section (2) or has paid the duty under sub section (2B) of Section 11A shall be liable to pay interest. That means, the first condition is, the person, who did not pay the duty which he was liable to pay. In this case, the duty which was paid by the appellant for which they were not liable to pay, the duty was paid voluntarily by the appellant. Therefore, the duty which was not lawfully required to be paid even though the appellant pay on their own, the department has no authority to recover interest or impose penalty with respect to such payment of duty even though belatedly. In our view the provision of Section 11AB of Central Excise Act shall be applicable only in case where the duty which is lawfully required to be paid by an assessee and the same is not paid.
7. As regard the submission made by Ld. AR on the issue of sub section (2B). Sub section (2B) reads as under:
"(2B) Where any duty or excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty 71 [on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer] before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid:
6|Page E/972/2011-DB Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub- section (1) shall be counted from the date of receipt of such information of payment.
Explanation 1. --Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty.
Explanation 2. --For the removal of doubts, it is hereby declared that the interest under section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub-section.] [ Explanation 3 .--For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of duty under this sub-section and interest thereon.]"
8. As per reading of above sub section (2B), we are of the view that above sub section (2B) is also applicable only in case where duty is payable with authority of law. Moreover, the appellant have not opted for sub section (2B) explicitly for the reason that, firstly, they have only paid the duty but did not pay the interest. Secondly, after payment of duty and interest, the appellant has to opt this provision in written by informing to the department which is not the case here, therefore, sub section (2B) is also not applicable.
9. As per our above discussion, we are of the clear view that the duty which was not admittedly payable but paid by the appellant voluntarily, no interest or penalty can be demanded from the appellant. Accordingly, the impugned order is set aside and appeal is allowed.
(Pronounced in the open court on 01.02.2019)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Seema