2009 (12) TMI 745 - AT - Central Excise

Summary

Issues:
- Challenge to order allowing refund application
- Appropriation of interest amount by Original Authority
- Interpretation of Section 11AA of the Central Excise Act, 1944
- Merger of orders and liability to pay interest
- Application of interest on delayed payment of duty
- Contention regarding lack of demand for interest
- Adjustment of interest amount by the Lower Appellate Authority

Challenge to Order Allowing Refund Application:
The appellant challenged the order passed by the Commissioner (Appeals) allowing the appeal filed by the respondent regarding the interest amount of Rs. 42,00,801.35, which was sought to be deducted by the Original Authority while allowing the refund application. The Asst. Commissioner had appropriated this sum in terms of proviso to Section 11AA of the Central Excise Act, 1944.

Appropriation of Interest Amount by Original Authority:
The duty liability on pan masala Gutkha manufactured by the respondents was confirmed by the Adjudicating Authority, and the interest amount payable on the delayed payment of duty was appropriated by the Original Authority. The matter was carried in appeal before the Commissioner (Appeals) by the respondent, and the appeal was allowed under the impugned order.

Interpretation of Section 11AA of the Central Excise Act, 1944:
The appellant argued that the interest liability should commence from the date of determination of duty by the Original Authority, as confirmed by the Supreme Court. The respondent contended that the order of the Original Authority merged into the order of the Tribunal, and there was no demand for interest before the Apex Court's decision.

Merger of Orders and Liability to Pay Interest:
The Tribunal clarified that the order of the Supreme Court confirming the Original Authority's order fixed the duty liability from the date of determination by the Original Adjudicating Authority. The order of the Supreme Court became the executable order, and all rights and obligations arose from the date of the Original Authority's determination.

Application of Interest on Delayed Payment of Duty:
Section 11AA deals with interest on delayed payment of duty, and the liability to pay interest arises after three months from the date of determination of duty liability. The proviso explains the scenario when duty is not paid within three months from a specific date. The liability to pay interest by the assessee in this case was upheld based on the statutory provisions.

Contention Regarding Lack of Demand for Interest:
The contention that no demand for interest was made by the Department was not considered as it was not raised before the Lower Authority, and interest liability flows from the statutory provision itself.

Adjustment of Interest Amount by the Lower Appellate Authority:
The Lower Appellate Authority set aside the adjustment of interest solely based on the timing of the Supreme Court's order. However, this was not a valid ground for setting aside the Original Authority's decision. The appeal succeeded, and the impugned order was set aside, restoring the order passed by the Original Authority with consequential relief.