2010 (8) TMI 896 - AT - Central Excise

Summary

Issues:
1. Calculation of duty payment based on Rule 8 of Central Excise Valuation Rules, 2000.
2. Liability to pay interest under Section 11AB of Central Excise Act, 1944.
3. Interpretation of Section 11A(2B) in relation to duty payment and interest liability.
4. Application of precedents SKF India Ltd. and International Auto Ltd. on interest liability.
5. Assessment of whether interest is payable on voluntary duty payments beyond the normal limitation period.

Analysis:
1. The appellant, engaged in yarn manufacturing, cleared products to a sister unit and paid duty without considering Rule 8 of Central Excise Valuation Rules, leading to a differential duty payment after an audit.
2. The issue revolved around the liability to pay interest under Section 11AB of the Central Excise Act, 1944, as the duty demanded was not initially demandable, raising questions regarding penalty invocation and the absence of fraud or suppression.
3. The appellant argued that Section 11A(2B) applies only within the normal limitation period and doesn't mandate interest recovery on voluntary duty payments beyond the limit, emphasizing the absence of suppression or misdeclaration.
4. The Department cited precedents SKF India Ltd. and International Auto Ltd. to support interest leviability irrespective of duty demandability, highlighting the general principle of interest for revenue loss.
5. The judgment analyzed Sections 11A(1) and 11A(2B) to distinguish scenarios where duty payment is voluntary beyond the limitation period without fraud, indicating that interest recovery is not automatic in such cases due to the absence of demandable duty.

Conclusion:
The Tribunal ruled in favor of the appellant, stating that interest on duty payments beyond the limitation period without suppression or misdeclaration is not mandatory under Section 11AB. The judgment differentiated between duty liability and voluntary payments, emphasizing the absence of principal duty demand in such cases, making interest recovery unwarranted. Precedents were deemed inapplicable due to the unique circumstances of the case, leading to the appeal's allowance and relief for the appellants.