2011 (7) TMI 258 - HC - Central Excise

Demand - Cenvat credit availed when goods were dutiable - subsequently goods exempted from excise duty - Notification No.30/2004-CE dt. 9.7.2004 - assessee ought to have reversed cenvat credit - There was a delay in reversal of those entries (cenvat credit) - it is contended that the payment of interest is now well settled as compensatory in nature when the duty is payable on a particular date and if it is paid on a subsequent date the Revenue has to be compensated for the delay in payment of duty - interest to be paid - decided against the assessee.

Summary

Issues:
- Appeal against the order passed by the Tribunal regarding the confirmation of interest under Sec.11AB of Central Excise Act.
- Interpretation of the applicability of interest when duty is paid before the issue of show cause notice.
- Whether delay in reversal of Cenvat credit justifies the payment of interest.

Analysis:
1. The High Court heard an appeal challenging the Tribunal's decision on the confirmation of interest under Sec.11AB of the Central Excise Act. The Tribunal set aside the confirmation of interest, leading to the Revenue's appeal. The Tribunal based its decision on the premise that no interest is payable if duty is deposited before the issue of a show cause notice, citing various judgments supporting this view.

2. The Revenue argued that a previous judgment established that interest follows any delay in duty payment, regardless of payment before the show cause notice. The Revenue contended that the duty payment timing does not absolve the assessee from paying the tax, emphasizing the compensatory nature of interest for delayed duty payments.

3. Conversely, the assessee maintained that the Tribunal's decision was based on irrelevant judgments, providing relief that did not apply to the case. The assessee explained that the delay was in the reversal of Cenvat credit, not in the duty payment, as the goods were exempt from tax from a specific date. Therefore, the assessee argued against the liability to pay interest in this scenario.

4. The assessee's position was that interest serves as compensation for delayed duty payments, which did not occur in this case due to the exemption from tax after a certain date. The Tribunal's failure to consider these crucial facts led the High Court to conclude that the Tribunal's order was not sustainable. Consequently, the High Court set aside the Tribunal's decision and remanded the matter for fresh consideration, emphasizing the need for a proper assessment of the facts and applicable laws in the case.

5. In summary, the High Court allowed the appeal, overturned the Tribunal's order, and directed a reevaluation by the Tribunal in light of the factual circumstances presented during the appeal. The decision highlighted the importance of considering all relevant factors, such as the nature of the delay and the compensatory purpose of interest, in determining the applicability of interest under the Central Excise Act.