2011 (2) TMI 498 - AT - Central Excise

Demand - Notification No. 20/94-C.E., dated 1-3-94 - Classification - Provisional assessment - The appellant has submitted that in the affidavit filed before the Hon ble High Court of Bombay, the department wherein the High Court had clearly stated that the assessments are provisional demand for interest has been raised on the ground that the demand for duty was under Section 11A. - the provisional assessments have to be finalized and the final duty amount has to be determined under the provisions of Rule 9-B of Central Excise Rules, 1944 and duty cannot be demanded under Section 11A, as has been held in the judgements cited - Appeal is allowed

Summary

Issues:
1. Claim of exemption under Notification No. 20/94-C.E.
2. Denial of benefit of concessional duty under Notification No. 20/94
3. Classification dispute regarding product manufactured
4. Demand for differential duty and subsequent legal actions
5. Demand for interest on duty amount

Analysis:

Issue 1:
The appellant, a manufacturer of decorative laminates, claimed exemption under Notification No. 20/94-C.E. for the period from 2-2-94 to 31-7-94. A show-cause notice was issued proposing denial of the exemption claimed, leading to legal proceedings.

Issue 2:
The Asst. Collector denied the benefit of concessional duty under Notification No. 20/94, resulting in a duty demand for a specific period. A classification dispute arose regarding whether the product should be classified under Chapter 48 as a paper product or under Chapter 39 as a plastic product, which was subjudice.

Issue 3:
The appellant faced a demand for payment of differential duty, leading to legal actions including approaching the High Court for withdrawal of the demand order. The High Court directed provisional assessment under specific tariff headings and allowed the appellant to execute a bank guarantee.

Issue 4:
A subsequent demand for interest on the duty amount was made by the Deputy Commissioner based on the Central Excise Act. The appellant argued that since the assessments were provisional and not finalized, there was no legal basis for demanding interest.

Issue 5:
The Commissioner (Appeals) upheld the demand for interest, but the Tribunal ruled in favor of the appellant. The Tribunal found that as the assessments were provisional and subsequently finalized, interest could not be demanded under Section 11AA when duty demand is raised on finalization of provisional assessment. Citing legal precedents, the Tribunal allowed the appeal, emphasizing that interest cannot be charged when duty cannot be demanded under Section 11A.

In conclusion, the Tribunal allowed the appeal, highlighting that interest cannot be demanded when duty assessments are provisional and finalized under specific provisions of the Central Excise Rules. The judgment provides clarity on the legal position regarding the demand for interest on duty amounts in cases of provisional assessments.