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2011 (6) TMI 567 - AT - Central ExciseApplicability of period of limitation on demand of Interest - price variation clause - department was fully aware that the assessee was raising supplementary invoices for recovery of differential prices subsequent to the clearance of the goods and they were also discharging differential duty liability on issue of supplementary invoices Held that - department should have initiated the proceedings for recovery of interest within a period of one year from the date of filing of monthly returns. Since the demand notice is issued only on 07/08/2009 the demand for recovery of interest for the period prior to July 2008 will be beyond the reasonable period of one year and therefore the same is barred by limitation. Only for the period from July 2008 (for which the return is required to filed in August 2009) the demand for interest can be considered to be within the reasonable period. order and direct the original adjudicating authority to re-quantify the interest liability for the normal period of one year
Issues Involved:
1. Violation of principles of natural justice due to non-issuance of show-cause notice for interest recovery. 2. Time-barred demand for interest on delayed payment of duty. Detailed Analysis: 1. Violation of Principles of Natural Justice: The appellant argued that the recovery notice for interest under Section 11AB of the Central Excise Act, 1944, was issued without a prior show-cause notice, violating the principles of natural justice. They contended that without such notice, they could not be legally required to pay interest. The appellant supported their argument with multiple judgments, emphasizing the necessity of a show-cause notice for any recovery action. The respondent, however, argued that interest liability is automatic and does not require a separate notice, citing the Hon'ble apex Court's decision in Commissioner of Trade Tax Vs. Kanhai Ram Thekedar, 2005 (185) ELT 3 (SC). The Tribunal also referred to its own decisions in Dodsal Engineering & Construction Pvt Ltd., Vs. CCE, Bangalore, 2010 (262) ELT 706 (Tri.Bang) and Commissioner of Service Tax Vs. Pepsi Cola, 2007 (8) STR 246 (Tri-Ahmd), which held that no specific provision mandates a separate notice for interest recovery. The Tribunal concluded that the appellant's contention was devoid of merit. It stated that interest liability arises automatically upon delayed payment of duty, and no separate notice is required for its recovery. 2. Time-Barred Demand for Interest: The appellant also argued that the demand for interest was time-barred, as the differential duty was paid voluntarily from May 2004 to March 2009, and the demand notice was issued only on 07/08/2009. They claimed that the bulk of the demand was issued after more than one year, without any allegations of suppression, fraud, or collusion to invoke the extended period. The Tribunal referred to the apex Court's judgment in CCE Vs. International Auto Ltd., 2010 (250) ELT 3 (SC), which clarified that interest liability under Section 11AB is consequential and arises whenever there is a delayed payment of duty. The Tribunal noted that Section 11AB does not specify any time limit for the recovery of interest. However, the Tribunal also considered the principle of exercising authority within a reasonable period, as established in GOI Vs. Citedal Fine Pharmaceuticals, 1989 (42) ELT 515 (SC). It noted that the Central Excise Act provides a time limit of one year for duty recovery in normal circumstances and five years in cases involving fraud or suppression. Since there were no allegations of fraud or suppression, the Tribunal held that the department should have initiated interest recovery within one year from the date of filing of monthly returns. The Tribunal concluded that the demand notice issued on 07/08/2009 was beyond the reasonable period for the period prior to July 2008. Therefore, the demand for interest for the period before July 2008 was barred by limitation. Only the interest demand for the period from July 2008 onwards was considered within the reasonable period. Conclusion: The Tribunal set aside the impugned order and directed the original adjudicating authority to re-quantify the interest liability for the normal period of one year. The appellant was instructed to discharge the interest liability as re-quantified. The appeal and the stay application were disposed of accordingly.
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