2008 (10) TMI 427 - AT - Central Excise

Summary

Issues Involved:
1. Irregular availment of Cenvat credit.
2. Applicability of interest u/s 11AA and 11AB of the Central Excise Act, 1944.
3. Retrospective application of amended provisions of Section 11AB.

Summary:

1. Irregular Availment of Cenvat Credit:
During the periods from December 1997 to August 2001 for M/s. Nirayu P. Ltd. and from July 1997 to August 2001 for M/s. Alembic Ltd., demands for irregular availment of Cenvat credit were made and upheld by the Tribunal. The Tribunal remanded the matter to the Commissioner (Appeals) to decide on the liabilities of interest on the confirmed demand amounts. The Commissioner (Appeals) confirmed the liability of interest amounting to Rs. 1,12,15,994/- for M/s. Nirayu and Rs. 47,07,648/- for M/s. Alembic.

2. Applicability of Interest u/s 11AA and 11AB:
The appellant argued that different rules covered the issue of demand of Cenvat credit availed wrongly during the disputed period. They contended that the amended provisions of Section 11AA and Section 11AB are applicable to their case, as the show cause notices were issued after the amendment dates. They cited several Tribunal decisions supporting their argument that interest can only be demanded for the period w.e.f. 11-5-2001. The Commissioner, however, confirmed the demand for interest on the grounds that the demand was confirmed invoking the extended period due to fraud, collusion, willful misstatement, or suppression of facts, making interest payable under Section 11AB both prior to and after 11-5-2001.

3. Retrospective Application of Amended Provisions of Section 11AB:
The Tribunal noted that throughout the period of irregular availment of Cenvat credit, the applicable rules (Rule 57-I, Rule 57AH, and Rule 12) provided for interest as determined under Section 11AA or Section 11AB. The Tribunal observed that the intention was to charge interest as applicable under Section 11AB for Cenvat credit availed wrongly prior to 11-5-2001 when the proviso to Rule 57-I or Section 11A was invoked. The Tribunal emphasized that the amendment of Section 11AB did not extinguish the liability of interest for demands arising from fraud, suppression, etc., prior to 11-5-2001. The Tribunal also considered several judgments that supported the view that Section 11AB would not have retrospective effect, but found itself unable to agree with this view.

Conclusion:
In light of conflicting judgments, the Tribunal directed the Registry to place the matter before the Hon'ble President for constituting a Larger Bench to decide whether interest on duty/Cenvat credit demanded by applying the proviso to Section 11A or under Rule 57-I is payable under Section 11AB prior to 11-5-2001.