2008 (10) TMI 470 - AT - Central Excise

Summary

Issues:
Claim for interest on Modvat credit reversal and re-credit.

Analysis:
The case involved an appeal regarding the claim for interest on Modvat credit reversal and re-credit. The appellants had imported raw material duty-free under Quantity-Based Advance Licences and Customs Notification No. 204/92 for replenishment of inputs used in exported goods. They voluntarily reversed Modvat credit before exports, totaling over Rs. 65 lakhs, and later re-credited the amount following an appellate authority's decision. The appellants then claimed interest at 24% on the reversed amount, citing "excess amount collected and retained by the department." The claim was rejected by the original and first appellate authorities, leading to the present appeal.

During the proceedings, the appellants' counsel argued that the government retained the Modvat credit amount between the reversal and re-credit period, invoking Section 11AA of the Central Excise Act for interest payment. However, the Revenue's counsel contended that Section 11AA only allows the recovery of interest by the government and does not cover Modvat credit amounts. Both sides focused on the principle of compensation, with the appellants failing to cite any other statutory provision to support their claim.

The tribunal analyzed the situation, noting that compensation typically applies in cases of contract breach or statutory violations. In this instance, the appellants reversed the Modvat credit voluntarily and promptly re-credited it upon the appellate authority's decision. Since there was no evidence of departmental coercion, the tribunal concluded that the government was not obligated to compensate the appellants with interest payment. Additionally, as the claim under Section 11AA was unsubstantiated and no other legal provision was presented, the appeal was dismissed.

In conclusion, the tribunal upheld the decisions of the lower authorities and dismissed the appeal, emphasizing that the government was not liable to pay interest on the Modvat credit reversal and re-credit in the absence of statutory support or evidence of coercion.