2012 (11) TMI 909 - HC - Central Excise

Whether adjudication is called for before raising demand of interest under Section 11AA of the Central Excise Act and also under Section 75 of the Finance Act, 1994 Held that - If duty is paid against demand with delay other than through adjustment of credit available, interest is automatic and it is a matter of voluntary payment of interest by the assessee or payment on demand by the adjudicating officer which does not require any adjudication except the arithmetical calculation for which no adjudication is called for Adjudication is called for in this case, where additional excise duty demand was fully settled through adjustment of duty credit available - adjudicating authority directed to decide the matter through proper adjudication

Summary

Issues:
Whether adjudication is required before demanding interest under Section 11AA of the Central Excise Act and Section 75 of the Finance Act, 1994.

Analysis:

The judgment in the connected Writ Appeals dealt with the question of whether adjudication is necessary before raising a demand for interest under Section 11AA of the Central Excise Act and Section 75 of the Finance Act, 1994. The case involved conflicting views by two learned Single Judges, leading to appeals by both the assessee and the Revenue. One Judge believed that interest for default is automatic, while the other opined that adjudication is required before demanding interest. The High Court examined the provisions and found that the liability for interest on default is automatic under both Section 11AA and Section 75. However, the interest liability is declared on the default amount for the period of default, especially in cases where the demand was not paid but set off by adjustment from duty credit available on input purchase. The controversy arose regarding whether there was a default when duty was paid through belated adjustment of duty credit. The Court concluded that adjudication is necessary in such cases where the duty demand was settled through adjustment of duty credit.

In cases where duty is paid against demand with delay other than through adjustment of available credit, interest is considered automatic and does not require adjudication. It becomes a matter of voluntary payment of interest by the assessee or payment on demand by the adjudicating officer. However, the Court held that adjudication is required when additional excise duty demand is fully settled through the adjustment of available duty credit. Therefore, the Court allowed the Writ Appeal filed by the assessee, directing the adjudicating authority to treat the relevant document as a show cause notice, provide an opportunity for objections, conduct a hearing, and decide the matter through proper adjudication. The adjudicating officer was instructed to address all raised issues independently of previous judgments. Consequently, the Writ Appeal filed by the Revenue was dismissed.