2010 (7) TMI 964 - AT - Central Excise

Summary

Issues:
- Appeal against dismissal of demand of interest under Section 11AA of the Central Excise Act, 1944.
- Provisional clearance of goods under Rule 9B of the Central Excise Rules, 1944.
- Non-payment of duty on freight and insurance charges.
- Show cause notice for recovery of interest due to late payment of duty.
- Pending finalization of assessment order.
- Applicability of interest and quantification thereof.

Analysis:
1. The appeal was filed against the dismissal of the demand of interest under Section 11AA of the Central Excise Act, 1944, by the Commissioner (Appeals), Chandigarh. The appellants, engaged in the manufacture of Malted Food products, transferred goods in bulk to depots for repacking. The issue arose when audit revealed non-payment of duty on freight and insurance charges, leading to a demand for interest amounting to Rs. 1,11,01,660 under Section 11AA.

2. The audit party observed that duty amounting to Rs. 3,62,94,447 was required to be deposited within three months of a specific judgment. The appellants, after depositing the duty amount in instalments, filed for a refund contending they were not liable to pay. A show cause notice was issued for the interest due on late payment of duty, which was confirmed by the adjudicating authority, leading to the present appeal.

3. The key contention revolved around the pending finalization of the assessment order for the relevant period. The Apex Court's decision in a related case emphasized that a proceeding under Section 11A cannot be initiated without completing the assessment proceedings. The final assessment was still pending, indicating that the quantification of the principal liability was yet to be finalized.

4. The Tribunal highlighted the importance of finalizing the quantification of interest, if any, along with the completion of the assessment. It was noted that the Department could recover any amount found due after the final assessment, but claiming interest prematurely, before finalizing the principal liability, would be unjustified.

5. Considering the legal principles and the pending assessment, the Tribunal allowed the appeal, setting aside the impugned order. The issue of interest liability and its quantification were to be decided along with the finalization of the assessment for the relevant period. The cross-objections by the Department were disposed of as mere comments without any formal filing.