SANDVIK ASIA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) The appellant is engaged in the manufacture of inserts (Chapter 82 of the Central Excise Tariff Schedule). On 19.8.1992, they reported that 2477 units of inserts having assessable value of Rs. 68,079.97 and involving duty of Rs. 15,658.39 had been found missing from their bonded warehouse despite tight security control. In a subsequent report dated 7.9.1992, they stated that 5207 inserts having assessable value of Rs. 1,38,787.68 and involving duty of Rs. 31,920/ - were missing. On 21.10.1992, they filed an application for remission of duty on the said goods. On the same date, the department issued a show -cause notice to the party for recovery of basic excise duty of Rs. 27,751.13 and special excise duty of Rs. 4,163.57 totaling to Rs. 31,920.00 as also for imposing penalty under Rule 173Q of the Central Excise Rules, 1944. This show -cause notice proceeded on the premise that the goods had been clandestinely removed without payment of duty. The demand of duty and the proposal for penalty were contested. In adjudication of this dispute, the original authority confirmed the demand of duty against the party and imposed on them a penalty of Rs. 1,500/ - under Rule 173Q. It also held them liable to pay interest under Section 11AA of the Central Excise Act. This order of adjudication was passed on 30.5.2003. The party preferred an appeal to the Commissioner (Appeals) against the said order. While this appeal was pending, the appellant received a letter dated 31.3.2006 of the Joint Commissioner of Central Excise, Pune -I, wherein it was communicated that their application for remission of duty had not been accepted by the Commissioner on certain grounds. Against the Joint Commissioner's communication, the party preferred an appeal to the Commissioner (Appeals). The appellate authority took up both the appeals and passed a common order against the appellant. One of the present appeals is directed against the rejection of the remission application, while the other appeal is directed against the demand of duty with interest thereon as also against the penalty.

(2.) After hearing both sides, I find that the appellant is not entitled to remission of duty on the goods in question, in the facts of this case. Their claim is directly hit by the Tribunal's Larger Bench decision in Gupta Metal Sheets v. CCE, Gurgaon, 2008 (232) ELT 796 (Tri. -LB) cited by the learned Advocate himself. The Larger Bench held that theft or dacoity was neither a natural cause nor an unavoidable accident and, therefore, goods lost in theft or dacoity were not eligible for remission of duty under Rule 49 of the Central Excise Rules, 1944/Rule 21 of the Central Excise Rules, 2002. In the instant case, the assessee even failed to prove theft of the goods in question. They chose to pay duty on the goods after the order of adjudication was passed by the original authority, which was not a payment under protest. Disappearance of the goods from the bonded warehouse is an admitted fact. What was pleaded by the appellant was only theft and nothing else. In the absence of proof of theft, there can be no inference other than clandestine removal of the goods without payment of duty. In other words, the substantive allegation raised in the show -cause notice stands substantiated. The demand of duty stands confirmed.

(3.) The surviving issues pertain to the demand of interest under Section 11AA and the levy of penalty under Rule 173Q. The relevant show -cause notice did not expressly demand any such interest, as rightly noted by the appellant in the memo of appeal. The learned SDR has argued that, where an amount of duty was determined under Sub -section (2) of Section 11A of the Act, the assessee's liability to pay interest thereon would follow, whether or not any express demand therefore is raised by the department. According to the learned Counsel, no such interest was payable in the absence of a specific demand in the show -cause notice. After considering these arguments, I am of the view that the liability of an assessee to pay interest on duty is a statutory liability which requires to be honoured by the assessee without insisting on specific demand. In the present case, there was a determination of duty under Sub -section (2) of Section 11A by the adjudicating authority on 30.5.2003. In terms of the provisions of Section 11AA of the Act, the appellant was liable to pay interest on duty for the period after three months from the date of determination of duty. This, however, did not happen in this case. The appellant paid duty as late as on 16.11.2006. They ought to have paid this duty on or before 30.8.2003. It would follow that the appellant is liable to pay interest on the aforesaid amount of duty for the period from 30.8.2003 to 16.11.2006 in terms of Section 11AA of the Central Excise Act.