2006 (12) TMI 357 - AT - Central Excise

Summary

Issues: Appeal against appropriation of sanctioned rebate claim towards outstanding arrears of interest without confirmed demand.

Summary:
The appeal challenged the appropriation of the sanctioned rebate claim towards outstanding arrears of interest without a confirmed demand. The duty demand in question dated back to 1982, a period when no law regarding charging interest existed, and no show cause notice was issued by the Department. The appellants argued that without a confirmed demand, the interest amount could not be adjusted as per Section 11AA of the Central Excise Act, a contention rejected by lower authorities.

The learned Counsel contended that appropriation against pending demands can only occur if confirmed by an order under Section 35 of the Act. Citing precedents such as Indian Aluminium Co. Ltd. v. CCE, Cochin and Executive Engineer, K.S.E.B. v. CCE, Cochin, it was argued that adjustment of amounts without a confirmed demand is not justified. The Tribunal held in various cases, including Jay Kay Synthetics v. CCE, Chandigarh, that amounts cannot be adjusted without adjudication through a show cause notice.

After considering submissions and records, the Tribunal found that the rebate claim of Rs. 2,29,433/- was rightfully sanctioned to the assessee, who was eligible for the amount. However, the Department sought to adjust this against interest due for belated duty payments from 1982-1984 without issuing a show cause notice for the interest. The Tribunal ruled that only adjudicated amounts can be adjusted with dues to the assessee as per Section 11AA, in line with established legal principles. Consequently, the impugned order was set aside, allowing the appeal with any consequential relief.