2007 (5) TMI 404 - AT - Central Excise

Interest on demand - Relevant date - Held that - the re-quantification of duty is the determination of duty for purposes of Section 11AA of the Central Excise Act. Accordingly, no interest is leviable on the amount of duty which, admittedly, was paid within 15 days from the date of re-quantification - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay interest on the duty amount under Section 11AA of the Central Excise Act with reference to the original order or the de novo order.

Analysis:
The judgment by the Appellate Tribunal CESTAT, CHENNAI involved the issue of whether interest should be paid on a duty amount of Rs. 42,49,950/- under Section 11AA of the Central Excise Act with reference to the original order dated 28-2-2001 passed by the Commissioner or with reference to the de novo order dated 20-9-2005. The appellants contended that interest should be calculated based on the order under Section 11A(2) of the Act passed on 20-9-2005, as the duty amount was determined only at that time. On the contrary, the Revenue argued that the duty amount should be considered part of the larger amount demanded in the original order, thus attracting interest from a specific date. The Tribunal examined the arguments in light of Explanation 1 to Section 11AA(1) of the Act, which clarifies the date of determination of payable duty in case of reduction by authorities. The Tribunal rejected the Revenue's argument, emphasizing that the re-quantification of duty by the Commissioner after the Tribunal's remand order constituted the determination of duty for Section 11AA purposes. As the duty was paid within 15 days of this re-quantification, no interest was deemed payable under Section 11AA.

The Tribunal's decision highlighted the distinction between the original order demanding duty and the subsequent re-quantification by the Commissioner as directed by the Tribunal. It emphasized that the date of determination of duty for interest calculation purposes was the date of re-quantification after considering input-duty credit and SSI exemption. The Tribunal clarified that the earlier direction to re-determine the duty did not amount to determining the duty itself, which occurred only during the re-quantification process. Consequently, the Explanation regarding reduction of duty did not apply in this scenario. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellants, providing them with consequential relief.

In conclusion, the judgment resolved the issue of interest payment on the duty amount by establishing that interest under Section 11AA should be calculated based on the re-quantified duty determined by the Commissioner after the Tribunal's remand order, rather than the original order. The decision provided clarity on the applicable date for determining duty liability for interest calculation, ensuring a fair outcome for the appellants in this case.