2013 (9) TMI 581 - AT - Central Excise

Refund - claim of interest - Period of limitation that applies to a claim for the principal amount should also apply to the claim for interest thereon - Demand notice is issued only on 7-8-2009, the demand for recovery of interest for the period prior to July, 2008 will be beyond the reasonable period of one year Held that - Demand of interest is blatantly barred by limitation - Only for the period from July, 2008 (for which the return is required to be filed in August, 2009), the demand for interest can be considered to be within the reasonable period. Accordingly, directed the original adjudicating authority to re-quantify the interest liability for the normal period of one year as discussed above and communicate the same to the appellant who shall, thereafter, discharge the interest liability. As per the decision in the case of Kwality Ice Cream Company & Anr. 2012 (1) TMI 88 - Delhi High Court wherein their lordship relying upon the judgment of TVS Whirlpool Ltd. 1999 (10) TMI 701 - SUPREME COURT OF INDIA has held that the period of limitation prescribed for demand of duty under Section 11A is normally one year and, in exceptional circumstance of a case falling under the proviso to Section 11A(1) the period of limitation is five years. But that would be applicable only in case of misstatement, fraud, concealment etc., which is not the case here. As such, in the present case, the period of limitation for the demand for duty would be one year. By the same logic, the period of limitation for demand of interest thereon would be one year - Show cause notice issued on 26-4-2005 for the demand of the interest for a period from April 2001 to March 2004 is blatantly time-barred and any order confirming the demand of the interest due under such show cause notice is unsustainable Decided in favor of Assessee.

Summary

Issues:
1. Liability to discharge interest on duty liability for non-intended use of Naphtha.

Analysis:
The judgment deals with an appeal against an order-in-appeal regarding the liability to discharge interest on duty liability for the non-intended use of Naphtha by the appellants, who are engaged in the manufacture of Fertilizer, Caprolactum, etc. The appellants procured Naphtha without payment of duty for manufacturing fertilizer but used some quantity for purposes other than intended. The issue arose when a show cause notice was issued proposing penalty and interest on the diverted quantity of Naphtha. The original authority confirmed the charges, leading to appeals and remand orders. The subsequent de novo proceedings resulted in the confirmation of interest demand under Rule 6 of the Central Excise Rules, 2001. The main contention was whether the demand for interest was time-barred.

The key issue revolved around the time limitation for demanding interest on duty liability. The appellant argued that the show cause notice for interest dated 26-4-2005 was time-barred as it was issued beyond the normal one-year period without any allegation of willful suppression of facts. The appellant relied on judicial precedents such as the case of EMCO Ltd. and the judgment of the Hon'ble High Court of Delhi in the case of Kwality Ice Cream Company & Anr. The appellant contended that interest liability should be recalculated from the first date of the month succeeding the duty payment date. Additionally, it was argued that any duty paid for non-fertilizer use was availed as Cenvat credit, ensuring revenue neutrality.

The Tribunal analyzed the submissions and referred to relevant case laws to determine the time limitation for demanding interest on duty liability. Citing the principles laid down by the Supreme Court in various cases, the Tribunal held that the show cause notice issued on 26-4-2005 for demanding interest for the period from April 2001 to March 2004 was time-barred. The Tribunal emphasized that in the absence of any allegation of fraud or suppression of facts, the demand for interest should be made within a reasonable period, not exceeding one year. Accordingly, the Tribunal set aside the impugned orders confirming the interest demand as time-barred and allowed the appeal of the appellant solely based on the limitation issue.

In conclusion, the judgment focused on the time limitation aspect of demanding interest on duty liability for non-intended use of Naphtha. By applying relevant judicial pronouncements, the Tribunal ruled in favor of the appellant, highlighting that the demand for interest beyond a reasonable period of one year was unsustainable. The decision was based on the principle that the period of limitation for demanding interest should align with the period applicable to the principal amount, ensuring fairness and adherence to legal provisions.