2015 (9) TMI 566 - AT - Central Excise

Demand of interest u/s 11AB - interest on reversal amount of cenvat credit - whether interest is payable by the appellant under Central Excise Law when a monthly payment prescribed is not paid by the appellant, but entire payment of a Financial Year is paid subsequently within the specified due date under Rule-6(3A) of CCR - Held that - In a situation when common inputs are used for making dutiable and exempted Final Products and separate accounts are not maintained, then appellate is required to follow a prescribed procedure. As per this procedure prescribed appellant was required to determine and pay every month of a Financial Year an amount provisionally on the basis of certain parameters of the preceding Financial Year. At the end of the current Financial Year exact amount of inadmissible Cenvat Credit was required to be worked out and paid before 30th June of the Succeeding Financial Year. - It has thus been correctly observed by the first appellant authority in para-10 of the OIA Dated 10/01/2013 that appellant cannot take the shelter of Rule-6(3A)(e) of the CCR to avoid payment of interest. Once a monthly payment mode is prescribed the same is required to be discharged by the appellant. By not doing so interest is payable from that due date of payment till the amount is paid as per the provisions of Section 11 AB (upto 30/03/2011) or Section 11 AA of the Central Excise Act 1944. I find no reason to interfere with the order of the first appellant authority on merits and appeal to that extent is rejected. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1) Whether interest is payable under Central Excise Law when monthly payments are not made but the entire payment for the financial year is paid subsequently within the specified due date under Rule-6(3A) of CCR.
2) Whether the demand of interest is time-barred when no extended period has been invoked in the Show Cause Notice.

Analysis:

Issue 1:
The appellant argued that they were engaged in manufacturing both dutiable and exempted goods and availed Cenvat Credit on inputs under Cenvat Credit Rules 2004. They contended that they reversed proportionate Cenvat Credit for input Furnace Oil used in manufacturing exempted goods by the end of the financial year. The appellant claimed that the demand for interest was time-barred as no extended period was invoked in the Show Cause Notice. The authorized representative, however, argued that a provisional amount was required to be reversed each month under Rule-6(3A) of CCR based on previous years' consumption of Furnace Oil for exempted goods. The appellate tribunal noted that if the entire differential amount is not paid by the due date, interest on the differential amount is required to be paid as per Rule 6(3A)(e) of CCR. The tribunal upheld the decision that interest is payable when monthly payments are not made, and the appellant cannot avoid payment of interest under Rule 6(3A)(e) of CCR.

Issue 2:
Regarding the time-barred nature of the demand of interest, the tribunal observed that neither of the lower authorities addressed this issue when raised in the appellant's prayers. As a result, the tribunal remanded the issue to the Adjudicating Authority for denovo consideration. The Adjudicating Authority was directed to decide on the time-barred nature of the demand in light of the relied-upon Case Laws and provide the appellant with a personal hearing to explain their case. The appeal was allowed by way of remand solely on the issue of time-barred demand.

In conclusion, the appellate tribunal upheld the decision that interest is payable under Central Excise Law when monthly payments are not made as required by Rule-6(3A) of CCR. However, the issue of the demand being time-barred was remanded to the Adjudicating Authority for further consideration.