2013 (3) TMI 299 - HC - Central Excise

Demand of differential duty, penalty and interest u/s 11AA from Unit I - Assesses claimed rebate of duty from Unit II - Revenue adjusted rebate from Unit II towards interest due from Unit I- Held that - the rebate cannot be adjusted towards the interest due of the assesses Section 11 of the Central Excise Act, 1944 does not contemplate adjustment of monies due to the assessee towards the amount due to the revenue So after making refund of the amount which is due it is open to the revenue to proceed against the assessee to recover the amounts under the provisions of the Act. Accordingly the appeal is dismissed. However, the dismissal of the appeal will not come in the way of the revenue recovering the amount due if any.

Summary

Issues:
1. Adjustment of rebate claimed against Department's claims.
2. Interpretation of Section 11 of the Central Excise Act, 1944 regarding adjustment of amounts due.

Issue 1: Adjustment of rebate claimed against Department's claims
The case involved an appeal by the revenue challenging a Tribunal's order interfering with the assessing authority and the first appellate authority's decision on the adjustment of rebate claimed by the assessee against the Department's claims. The assessee, a manufacturer of tread rubber, was issued a show cause notice for the demand of differential duty and penalty. The adjudicating authority determined the duty payable and imposed a penalty, which was later confirmed on appeal with a reduced penalty amount. The assessee requested to pay the amount in installments, but the Department did not agree. The assessee paid two installments but did not pay the interest as required under Section 11-AA of the Act. The assessee also claimed a rebate of duty paid, which was sanctioned but later appropriated towards the interest due, resulting in an appeal by the assessee to the Tribunal. The Tribunal held that the rebate cannot be adjusted towards the interest due, leading to the revenue's appeal.

Issue 2: Interpretation of Section 11 of the Central Excise Act, 1944 regarding adjustment of amounts due
The revenue contended that under Section 11 of the Central Excise Act, 1944, they were empowered to adjust amounts due to them by way of interest out of the rebate due to the assessee. The revenue argued that the Tribunal erred in interfering with the adjustment order. However, the Court analyzed Section 11, which deals with the recovery of sums due to the Government, and found that it allows the revenue to proceed against a person owing money to the assessee but does not authorize the adjustment of monies due to the assessee against amounts due by them to the revenue. The Court emphasized that without a specific statutory provision enabling such adjustment, it is improper for the revenue to make such adjustments. The Court rejected the revenue's reliance on CESTAT judgments allowing adjustments, stating that such adjustments were not based on any statutory provision. Ultimately, the Court upheld the Tribunal's decision, ruling that the revenue could not adjust amounts due to the assessee without proper authority and dismissed the revenue's appeal.

The Court clarified that the dismissal of the appeal does not prevent the revenue from recovering any amounts due from the assessee through appropriate legal means.