2011 (1) TMI 115 - AT - Central Excise

Compounded Levy Scheme - Exercised their option to pay duty under Rule 96ZO (3) of the Central Excise Rules, 1944 - In the case of Arun Smelters Ltd. Vs CCE Chennai 2008 -TMI - 34436 - CESTAT, CHENNAI , the Tribunal has held that since Rule 96ZO (3) of the erstwhile Central Excise Rules, 1944 was couched in mandatory language, the assessee could not escape the liability to pay interest at the prescribed rate, in the event of default/delay in payment - Held that the impugned order are set aside and allow the appeal of the Revenue

Summary

Issues:
1. Liability to pay interest under Rule 96ZO of the Central Excise Rules, 1944.
2. Applicability of time limit for recovery of interest.
3. Interpretation of mandatory language in Rule 96ZO (3) of the Central Excise Rules, 1944.

Issue 1: Liability to pay interest under Rule 96ZO:
The case involved manufacturers of MS ingots operating under the Compounded Levy Scheme. The duty liability was determined based on their annual production capacity. The duty was required to be paid in two equal instalments failing which interest at 18% per month was applicable until payment. The assessee defaulted in payment for a specific period, leading to a demand for interest. The jurisdictional range officer issued a letter for interest payment, followed by a show-cause notice for recovery. The Asst. Commissioner confirmed the interest demand, which was later set aside by the lower appellate authority citing time-bar. The Revenue appealed this decision.

Issue 2: Applicability of time limit for recovery of interest:
The appellate tribunal analyzed the proviso to sub-rule (3) of Rule 96ZO, emphasizing that the liability to interest runs concurrently with duty liability. The tribunal disagreed with the lower authority's reliance on a Supreme Court decision related to the Customs Act, stating that a specific time limit was prescribed in the Central Excise Rules. Referring to the case of Arun Smelters Ltd. Vs CCE Chennai, the tribunal held that the mandatory language of Rule 96ZO (3) mandated the assessee to pay interest at the prescribed rate in case of default/delay without the necessity of a show-cause notice for interest recovery. Consequently, the tribunal set aside the lower authority's decision and allowed the Revenue's appeal.

Issue 3: Interpretation of mandatory language in Rule 96ZO (3):
The tribunal's decision was based on the interpretation of the mandatory language in Rule 96ZO (3) of the Central Excise Rules, 1944. By citing the case of Arun Smelters Ltd. Vs CCE Chennai, the tribunal established that the assessee could not evade the liability to pay interest in case of default or delay in payment. This interpretation emphasized the strict adherence to the provisions of the rule, highlighting the mandatory nature of the requirement to pay interest as prescribed. The tribunal's decision aligned with the precedent set in the Arun Smelters case, which directly applied to the facts of the present case, leading to the allowance of the Revenue's appeal.

This detailed analysis of the judgment highlights the issues surrounding the liability to pay interest under Rule 96ZO, the applicability of time limits for interest recovery, and the interpretation of mandatory language in the Central Excise Rules, 1944. The tribunal's decision focused on the strict enforcement of the rule, emphasizing the mandatory nature of interest payment in case of default or delay, ultimately leading to the allowance of the Revenue's appeal.