2015 (10) TMI 913 - AT - Central Excise

Demand of interest - Invocation of extended period of limitation - whether the respondent is entitled to adjust the abated amount in their duty liability for the month of February, 2011 or not - Held that - The adjustment of abated amount against the duty liability for the month of February, 2011 was intimated by the respondent to the department well within time and department has not taken any action thereon. Further, the liability of duty against the respondent is as per Section 3A(3) of Central Excise Act, 1944 read with Pan Masala Packing Machine Rules, 2008. On going through the above said provisions, there is no procedure for filing the abatement claim and same cannot be utilized without prior sanction of the departmental officers. The amount of abatement is not in dispute when the respondent applied for adjustment on 2-2-2011 the claim of abatement if at all required by the revenue to be sanctioned the same was to be sanctioned immediately but same has not been done. Moreover, when there is a short payment of duty for the month of February, 2011, no show cause notice for demand of duty has been issued to the respondent. Therefore, demand of interest is not sustainable. - Admittedly, in this case the fact of adjustment of abetment amount to duty against the duty liability for the month of February, 2011 was in the knowledge of the department. Therefore, show cause notice cannot be issued by invoking extended period of limitation. Admittedly, in this case show cause notice has been issued by invoking extended period of limitation. - Decided against Revenue.

Summary

Issues:
Demand of interest on dropped amount by Commissioner (A) - Appeal by Revenue - Entitlement to adjust abated amount in duty liability for February 2011 - Validity of demand of interest - Limitation period for demanding interest.

Analysis:
The case involved an appeal by the Revenue against the dropped demand of interest by the Commissioner (A) amounting to Rs. 18,74,131. The respondent, a manufacturer of Pan Masala, had paid duty for 81 FFS machines but claimed abatement for the period of closure in January 2011, resulting in an excess payment of Rs. 5,22,58,065. The respondent intended to adjust this abated amount against the duty liability for February 2011. The Revenue argued that as abatement is akin to a refund, the credit cannot be taken suo motu, citing a precedent. On the other hand, the respondent contended that there was no requirement to file an application for abatement, and they had intimated the department in advance about adjusting the abated amount. They argued that no notice of demand was issued for any shortage of duty in February 2011, making the demand of interest unsustainable and time-barred.

The main issue was whether the respondent was entitled to adjust the abated amount in their duty liability for February 2011. The Tribunal noted that there was no provision in the Pan Masala Packing Machine Rules requiring an application for abatement. The respondent had informed the department in advance about the adjustment, and no action was taken by the department. The Tribunal observed that the abatement claim, if required to be sanctioned, should have been done promptly. As no show cause notice for demand of duty was issued to the respondent for February 2011, the demand of interest was deemed unsustainable. The Tribunal also considered the limitation period for demanding interest, noting that the show cause notice was issued beyond the normal one-year period. Citing a relevant case, the Tribunal upheld the Commissioner (A)'s decision to dismiss the appeal by the Revenue, concluding that the demand of interest was not sustainable and the impugned order was upheld.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner (A) to drop the demand of interest. The Tribunal found no infirmity with the decision and concluded that the demand of interest was not sustainable in this case.