2011 (6) TMI 931 - HC - Central Excise

Summary

Issues:
Challenge to demand of interest under Section 11AA of the Central Excise Act, 1944 - Maintainability of writ application - Interpretation of statutory provisions - Jurisdiction of Writ Court.

Analysis:
The case involved a challenge to a demand for interest under Section 11AA of the Central Excise Act, 1944. The Revenue appealed against an interim order staying the demand of interest. The Court decided to hear the writ application itself as it raised a pure question of law. The writ petitioners contended that the writ application was maintainable despite the availability of an alternative remedy under the Act. The Court held that a Writ Court can entertain a writ application challenging an illegal demand even if an alternative remedy exists. The key issue was whether the demand of interest by the Revenue was tenable under Section 11AA of the Act.

The facts revealed that the demand of duty against the respondents, manufacturers of railway wagons, was confirmed by the authority. However, the Tribunal set aside the order and directed a re-quantification of the duty demand. The original authority then passed a fresh order allowing Modvat credit and confirming the duty demand. Subsequently, interest was demanded under Section 11AA based on an earlier order that had been set aside. The respondents argued that no interest was payable post the enactment of the Financial Bill, 2001.

The Court analyzed Section 11AA of the Act and concluded that the demand of interest was based on the original order passed after 11th May, 2001, making sub-section (2) of Section 11AA applicable. The Court rejected the Revenue's argument that the earlier order should be considered the original order. It held that the date of determination for interest calculation should be the date of the fresh order. The Court found that the Revenue acted without jurisdiction in demanding interest under Section 11AA.

The Revenue's contention that misinterpretation of statutory provisions does not warrant a writ application was dismissed. The Court clarified that any infringement of legal rights enables a Writ Court to entertain a writ application under Article 226 of the Constitution. The Court held that the demand for interest violated the legal rights of the respondents, making the writ application maintainable. Consequently, the Court set aside the demand, ordered refunds, and disposed of the writ application without costs.

In conclusion, the Court found the demand for interest under Section 11AA to be without jurisdiction and allowed the writ application. The judgment emphasized the importance of upholding legal rights and ensuring proper interpretation of statutory provisions in matters concerning demands and appeals under the Central Excise Act, 1944.