Judgment:
1. Heard both sides. The appellant manufacture fabricated and galvanized transmission line towers and parts thereof. Initially exemption under Notification No. 108/95 dated 28.8.1995 was claimed by the appellants on the ground that the impugned goods were to be utilized in project funded by the World Bank. However, Subsequently the World Bank declined to fund the project. As such, the duty amounts have been paid on the imported raw materials and on the finished goods after taking credit of the additional duty of Customs. The Adjudicating authority has appropriated the duty payments made before issue of show cause notice and has also approved of the credit of input duty taken by the appellants. He has also refrained from imposing any penalty on the ground that initially the project authority has certified regarding funding by the World Bank However, he has confirmed the duty amount paid short to the extent of a small amount of Rs. 3,77,156/-. He has also ordered payment of interest on late payment of duty w.e.f.
11.05.2001, i.e. from the data section 11AB of the Central Excise Act, 1944 became operative. He has also recorded that with regard to payment of interest, the appellants had agreed that they were liable to pay interest.
2. The learned advocate appearing for the appellants, however, argues before us that he appellants are not liable to pay duty and interest on the ground of time bar as the period in dispute is from March 2002 to July 2002 and the Show Cause Notice has only been issued in September 2003.
3. After considering arguments from both sides and perusal of case records, we find that het impugned goods were allowed duty-free clearance under Notification No. 108/95 subject to the condition that the project in which these goods would be utilized would be financed by the World Bank as per the condition in the Notification. This condition has been violated subsequently as World Bank has refused to finance the project. accordingly, the duty leviable under the impugned goods is payable by the appellants and they have paid an amount of Rs. 5,47,51,217/- after taking input duty credit of Rs. 3,84,68,069/-.
Taking into account the fact that the appellants had a certificate regarding World Bank funding from the project authority, the Adjudicating Commissioner has taken a liberal view in allowing adjustment of input duty credit and in refraining from imposing any penalty. However, since subsequently the condition of the notification has been violated in view of World Bank not funding the project, we are of the view that he duty amount voluntarily paid by the appellant has been rightly appropriate by the adjudicating Commissioner. We are also of the view that if the condition of a notification is violated, the duty can be demanded in terms of the notification as held by the Apex Court in para 12 of its decision in the case of Mediwell Hospital and Health Care Pvt. Ltd. V/s U.O.I - . Such demand does not fall foul of the limitation prescribed in the case of Short levy and non levyas held by the Honourable High Court of Karnataka, in the case of Medical Relief Society of South Kanara Vs. Union of India - . As such, we do not see any merit in the arguments made by the learned advocate that the demand is barred by limitation.
Accordingly, we uphold the demand of the balance amount of Rs. 3,77,156/- against the appellants. As regards, the interest on duty, we are of the view that the interest on account of deferred payment is payable under Section 11AB w.e.f. 11/05/2001, i.e. from the date of enactment of the Finance Act, 2001. The wording of the Section 11AB clearly stipulates that interest is payable on duty whether the same is determined under Section 11A(2) or paid under Section 11A(2B) before issue of show cause notice.