High Court held that interest on duty evaded was payable

1. Padamshri VV Patil Sahkari manufactured excisable goods i.e. denatured spirit.

2. The Department held that respondent had undervalued the excisable goods and evaded excise duty for the period from June 2000 to June 2001.

3. Respondent paid the said duty in two instalments,and paid the balance on 5.8.2004.

4. Show cause notice was issued on 29.7.2004 and served on 11.8.2004.

5. JC, CEC confirmed the demand and ordered appropriation of amount already paid, and imposed penalty, and recovery of interest.

6. Commissioner (Appeals) quashed imposition of penalty, but confirmed the demand and interest.

7. Tribunal set aside the order of interest.

On appeal, the High Court held as under:

8. Interest chargeable Under Section 11AB is a sort of civil liability of the assessee, who has failed to pay the duty or who has short paid the duty.

9. In other words, the proceedings of ascertainment of evaded duty, imposition of interest and penalty can not be dropped by virtue of above terminal clause of Sub-section (2B) in the cases of assessees, who had intentionally evaded payment of duty by use of fraud, collusion etc. as contemplated by Section 11AC.

10. There is no discretion with the authorities to impose any lesser penalty than 100% and 25% in case duty after being determined Under Section 11A(2), the assessee pays it within 30 days.

11. Upon reading Section 11AB togetherwith Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional.

12. We are unable to agree with the proposition that interest Under Section 11AB is also not chargeable in case the short duty or unpaid duty is deposited with the Government before issuance of show cause notice.

Case Reference - Commissioner Of Central Excise vs Padmashri V.V. Patil Sahakari.

Bombay High Court