2008 (5) TMI 484 - AT - Central Excise

Liability of Interest - section 11AB - Held that - it is not in dispute that the Central Excise Duty on the goods procured indigenously became payable prior to 2001. Precisely, the date is 11-5-2001, because the amended provisions of Section 11AB came into effect only with effect from 11-5-2001. As the duty involved in this case is prior to that, this provision cannot be made applicable - demand of interest set aside - appeal allowed.

Summary

Issues:
Challenge against the demand of interest under Section 11AB of the Central Excise Act.

Analysis:
The appeal was filed against Order-in-Original No. 12/2007 by the Commissioner of Central Excise, Bangalore-III. The de novo order was issued following Final Order Nos. 553-554/2005, where the Central Excise Commissioner was required to calculate the Central Excise Duty liability on goods procured indigenously without Central Excise Duty and not used in goods for export. The High Court of Karnataka upheld the Tribunal's order, leading to the Commissioner demanding Central Excise Duty and interest under Section 11AB. The appellants challenged only the interest portion, not the duty quantification, as it had already been paid. The focus was on the demand of interest.

The appellant's representative referred to Section 11AB(2) of the Central Excise Act, highlighting that interest provisions did not apply if duty was payable or should have been paid before the Finance Bill of 2001 received the President's assent. The amendment in 2001 made interest payable for all demands, not just for cases of fraud or suppression of facts. In this case, since no penalty was imposed due to clear Tribunal findings, interest should not be levied for duty prior to 11-5-2001, when the amended Section 11AB came into effect. As the duty in question was before this date, the demand for interest was not legally justified. The Tribunal ruled in favor of the appellants, setting aside the interest demand and allowing the appeal on this ground.

In conclusion, the Tribunal held that the demand for interest under Section 11AB of the Central Excise Act was not valid for duty payable before 11-5-2001, as per the provisions of the Act. The appeal was allowed, and the interest demand was set aside based on the legal interpretation of the relevant law and amendments.