2011 (6) TMI 946 - AT - Central Excise

Summary

Issues involved: The liability to pay interest on additional excise duty, demand of interest on differential excise duty, applicability of extended period for invoking interest demand, interpretation of Section 11AB of Central Excise Act, 1944, relevance of previous judicial decisions on interest payment, impact of recent amendments in Finance Act, 2011 on interest demands.

Issue 1: Liability to pay interest on additional excise duty:
The appellant, engaged in manufacturing conductors, faced a demand for interest on differential excise duty paid during a specific period. The Commissioner (Appeals) had earlier concluded that the appellants are not liable to pay interest on such additional excise duty. However, a subsequent show cause notice was issued demanding interest, leading to the current dispute.

Issue 2: Demand of interest on differential excise duty:
The show cause notice did not allege suppression, mis-declaration, fraud, or collusion, despite the demand relating to a period beyond the normal limitation period. The revenue argued that interest is automatically payable once the duty liability is determined, citing Section 11AB of the Central Excise Act, 1944. The appellant contended that interest liability does not automatically arise without a determination of duty liability under Section 11A.

Issue 3: Applicability of extended period for invoking interest demand:
The appellant argued that the extended period should not have been invoked for demanding interest, emphasizing that interest is an appendage to the principal duty. The absence of a proposal to determine duty liability under Section 11A in the show cause notice raised questions about the validity of the interest demand.

Issue 4: Interpretation of Section 11AB of Central Excise Act, 1944:
The debate centered on whether Section 11AB mandates automatic interest liability once duty is determined payable. The appellant highlighted the lack of evidence regarding payment of differential duty under Section 11A(2B) and the necessity of intimating such payment to the department.

Issue 5: Relevance of previous judicial decisions on interest payment:
Reference was made to various judicial precedents, including the decision in the case of SKF Ltd., which held that interest is payable even when supplementary invoices are raised. The appellant argued that each case must be assessed based on its unique circumstances, and the decision in SKF India Ltd. cannot be blindly applied to the current case.

Issue 6: Impact of recent amendments in Finance Act, 2011 on interest demands:
The appellant highlighted the amendments in the Finance Act, 2011 merging Sections 11AA and 11AB of the Central Excise Act. The introduction of a non obstante clause indicated that for the earlier period, the time limit under Section 11A should apply, potentially affecting the validity of the interest demand.

Conclusion:
Considering the arguments presented and the lack of evidence supporting the demand for interest, the Tribunal set aside the demand for interest confirmed against the appellants, ultimately allowing the appeal in their favor.