2009 (12) TMI 828 - AT - Central Excise

Liability of interest - case of Revenue is that the determination of duty has taken effect in January and February itself and therefore due to delay in payment of duty the assessees are liable to pay interest - Held that - The relevant date for commencement of time the interest would be from the date the duty is determined if not paid within three months. Once there be an order setting aside the entire order of determination there is no ascertained duty payable. In the instant case therefore though there was original order passed on 14th June 1993 that was set aside on 14th July 2000. The matter was before the A.O. for fresh determination on which an order came to be passed on 22nd March 2002 and consequently the duty came to be ascertained on 22nd March 2002. Duty was paid on 17th July 2002. Once the duty was ascertained on 22nd March 2002 no interest could have been demanded under sub-section (1) of Section 11AA in view of sub-section (2) as inserted in Section 11AA on 11th May 2001. The assesses are not liable to pay interest - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against Commissioner (Appeals) order setting aside interest liability of Rs. 40,21,272/- for the period 26-8-1995 to 31-3-2001.

Analysis:
The appeal was made by the Revenue challenging the Commissioner (Appeals) order that set aside the liability to interest amounting to Rs. 40,21,272/- for the period from 26-8-1995 to 31-3-2001. The Revenue contended that since a demand of over Rs. 34 lakhs was determined against the assessees in January and February 1995, and even though it was set aside by the Commissioner (Appeals) in June 1995, it was re-confirmed in December 2000. The Revenue argued that due to the delay in payment of duty, the assessees should be liable to pay interest. However, the Tribunal agreed with the respondents' counsel that the determination of duty can be considered to have been made only on 26-12-2000, following the decision of the Hon'ble Bombay High Court in Blue Star & Another v. Union of India & Another. The High Court's decision emphasized that interest is compensatory and should be paid when there is an ascertained duty that needs to be paid. In cases where the original order is set aside, there is no duty ascertained, and thus, no interest would be payable. The Tribunal upheld the finding that the assessees are not liable to pay interest based on this legal principle and the relevant explanations under Section 11AA.

The Tribunal further explained the impact of setting aside the original order and remanding the matter for fresh consideration. Setting aside an order means there is no order in place, and the case is sent for fresh adjudication. The Tribunal clarified that the stage of adjudication does not amount to a determination; the actual determination of duty happens when an order is issued. In cases where an order is set aside entirely, there is no ascertained duty payable until a new order is issued. Therefore, in the present case, the duty was ascertained only on 26-12-2000, and interest could not be demanded under Section 11AA(1) once the duty was paid on 17th July 2002. The Tribunal followed the legislative intent as explained in the Bombay High Court's decision and rejected the Revenue's appeal, upholding the impugned order that the assessees are not liable to pay interest.

Regarding the cross-objection, it was noted that it was merely in the nature of comments or a reply to the Revenue's appeal and was dismissed accordingly. The Tribunal concluded the proceedings by dictating and pronouncing the decision in open court.