2013 (2) TMI 392 - AT - Central Excise

Interest on the amount of duty liability discharged through cenvat account and later on by cash - Held that - Assessee was a DTA unit prior to December 2007. In this case, they had procured inputs and capital goods by way of import and also from indigenous sources and had taken CENVAT credit of CVD/Central Excise duty paid thereon. Apparently, it was out of such accumulated credit that the respondent made part-payment of duty on the inputs (imported duty-free under Notification No. 52/2003-Cus.) cleared as such to the DTA unit. It is not deniable that such DTA clearances were made on payment of duty of excise which was calculated in terms of the proviso to Section 3(1) of the Central Excise Act. There is no dispute regarding the amount of duty so paid. According to the appellant, it was customs duty which was paid by the respondent on the DTA clearances. The show-cause notices were issued on this premise. It is settled law that what is paid by a 100% EOU on DTA clearances is duty of excise (for the period of dispute in this case) which is calculated as aggregate of duties of customs which would have been leviable if the same goods had been imported at the relevant time. The duties of customs constitute just a measure of the duty of excise to be paid on the DTA clearance. This legal position was settled by this Tribunal and appellate courts long ago. No overriding decision of any competent court to the contra has been cited. Since the issue involved in the case in hand is now squarely covered by the decision of the Tribunal in MATRIX LABORATORIES LTD. case 2012 (11) TMI 726 - CESTAT, BANGALORE there cannot be any question of interest on the amounts which has been debited by the appellant through cenvat account, when they cleared the inputs to DTA.

Summary

Issues:
1. Liability to pay interest on duty liability discharged through Cenvat account and later by cash.

Analysis:

Issue 1: Liability to pay interest on duty liability discharged through Cenvat account and later by cash

The case involved the appellant, engaged in manufacturing Bulk Drugs & Fine chemicals under Chapter 29 of the Central Excise Tariff Act, 1985, holding a 100% EOU license. The appellant cleared imported and indigenous goods in DTA, paying duties through Cenvat Credit Account and cash. Subsequently, they were asked to pay customs duty through cash for clearances not utilized in exports. The appellant was issued demand notices for interest under Section 28AB of the Customs Act, 1962. The adjudicating authority confirmed the interest amounts, leading to an appeal by the appellant. The first appellate authority upheld the requirement to pay interest on duty liability debited in Cenvat account and paid later by cash.

The appellant argued that they cleared raw materials duty-free under Notification No.52/03-Cus. to DTA, debiting the duty amount from the Cenvat account. The Commissioner objected, requiring cash payment through TR-6 challan. The Tribunal's decision in Matrix Laboratories Ltd. was cited, supporting the appellant's position. The issue revolved around interest on duty discharged through Cenvat account and later by cash. The Tribunal noted the appellant's compliance with duty liability discharge procedures under Section 3(1) of the Central Excise Act, 1944, approved in previous cases. The Tribunal emphasized that duties of customs were a measure of excise duty on DTA clearances for 100% EOUs, settling the legal position. As the issue was covered by precedent, the Tribunal found no basis for interest on duty debited through Cenvat account during DTA clearances.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal due to the settled legal position on duty liability discharge by the appellant through Cenvat account for DTA clearances, eliminating the requirement for interest payment on the debited amounts.

This judgment clarifies the liability for interest on duty liability discharged through Cenvat account and later by cash, providing guidance based on established legal principles and precedents in similar cases.