2009 (3) TMI 833 - AT - Central Excise

Summary

Issues Involved:
1. Appropriation of interest amount by the Adjudicating Authority.
2. Determination of interest payable under Section 11AA of the Central Excise Act, 1944.
3. Requirement of show cause notice and appealable order for interest demand.

Issue-wise Detailed Analysis:

1. Appropriation of Interest Amount by the Adjudicating Authority:
The appellant had filed for a rebate of Rs. 1,67,400/-, which was sanctioned by the Adjudicating Authority. However, the authority appropriated an amount of Rs. 1,82,734/- as interest, which the appellant contested. The appellant argued that the interest amount was never determined by the lower authorities initially and that they had been requesting the issuance of a show cause notice and an appropriate order for the demand of interest. The learned Commissioner (Appeals) upheld the Order-in-Original, leading to this appeal.

2. Determination of Interest Payable under Section 11AA of the Central Excise Act, 1944:
The appellant contended that under Section 11AA, the period of three months for payment of interest is allowed from the date of determination of duty by the appellate authority. They relied on the decision in Mirc Electronics Ltd. v. CCE, Mumbai-II, which supports this interpretation. The revenue argued that interest is payable once it is due, and the appropriation from the rebate amount was correctly done under Section 11 of the Central Excise Act, 1944.

3. Requirement of Show Cause Notice and Appealable Order for Interest Demand:
The appellant received a letter from the Superintendent of Central Excise requesting payment of interest on the duty amount. The appellant replied, requesting a show cause notice and an appealable order if the matter was to be pursued further. Despite this, the revenue authorities did not issue such a notice or order. The Tribunal observed that without a determination of interest under Section 11AA, there could be no liability on the appellant to pay interest.

The Tribunal noted that the interest calculation provided by the authorities was under Section 11AA, which requires interest payment only after three months from the determination of the final amount. The final amount was determined by the Tribunal's order dated 10-1-2005, and the appellant's reliance on the Mirc Electronics Ltd. case was found to be applicable. The Tribunal concluded that the impugned order was incorrect and set it aside, allowing the appeal with consequential relief.

Conclusion:
The Tribunal found that the appropriation of the interest amount by the Adjudicating Authority was improper as the interest was not determined as required under Section 11AA of the Central Excise Act, 1944. The demand for interest required a show cause notice and an appealable order, which were not issued. The appeal was allowed, and the impugned order was set aside.