2015 (10) TMI 2456 - HC - Central Excise

Duty demand u/s 11AB - Whether the appellant is liable to pay interest under Section 11AB of the Act or interest liability is to be determined in terms of clause (v) of Section 88(4) of the Finance Act, 2004 as incorporated by Section 124 of the Finance Act, 2005 - Held that - Section 88(1) of the 2004 Act retrospectively amended Rule 3(6) of the 2002 Rules providing that AED (GSI) Credit accrued prior to 1.4.2000 could not be used for payment of BED and SED. However, sub-section (4) of Section 88 thereof provided for recovery of AED (GSI) Credit prior to 1.4.2000 which was availed for payment of BED and SED - Section 11A of the Act provides for recovery of duties not levied or not paid or short levied or short paid or erroneously refunded. Section 11AB of the Act as it existed at the relevant time mandates payment of interest on delayed payment of duty. The relevant date specified in the provision as 10.9.2004 is for the purpose of determining the period of limitation for issuing show cause notice for recovery under Section 11A of the Act and not for levy of interest under Section 11AB of the Act. The appellant had wrongly utilized AED (GSI) Credit pertaining to period prior to 1.4.2000 in 2003 immediately after amendment to Rule 3(6) of 2002 Rules. Thus, the interest liability under Section 11AB of the Act would commence from 1st day of the following month when wrong utilization had taken place till the payment of wrongly utilized credit. - The relevant clause (v) of sub-section (5) thereof stipulates that interest on the amount of credit utilized for paying CENVAT duty shall be @ 13% per annum for the period beginning on and from the day when each time the amount of credit was utilized and ending on 10.9.2004. Though subsection (5) added to Section 88 of 2004 Act starts with non obstante clause and would have an overriding effect on sub-section (4) of Section 88 of 2004 Act, nonetheless it would apply only to those cases where the wrongly utilized AED (GSI) Credit still remains outstanding on the date of the coming into force of Finance Act, 2005. - No substantial question of law arises - Decided against assessee.

Summary

Issues:
1. Liability to pay interest under Section 11AB of the Act or as per Section 88(4) of the Finance Act, 2004.

Analysis:
The appellant filed an appeal under Section 35G of the Central Excise Act, 1944 against an order by the Tribunal. The appellant, engaged in tyre manufacturing, claimed modvat/cenvat credit on inputs, including tyre cord fabric. The dispute arose regarding the utilization of Additional Excise Duty (AED) credit accrued before and after 1.4.2000 for discharging duty liability. The Finance Act, 2003 and subsequent amendments specified the utilization of AED credit. The adjudicating authority confirmed a duty demand, and the appellant deposited the amount. The Tribunal upheld the order, leading to the present appeal.

The primary issue before the Court was the liability to pay interest under Section 11AB of the Act or as per Section 88(4) of the Finance Act, 2004. The Court noted that Section 88(1) retrospectively amended Rule 3(6) of the 2002 Rules, affecting the utilization of AED credit accrued before 1.4.2000. Recovery provisions under Section 88(4) mandated the recovery of wrongly utilized credit along with interest. The Court analyzed the relevant statutory provisions, including Section 11A, Section 11AB, and Rule 12 of the 2002 Rules, to determine the interest liability.

The Court clarified that interest under Section 11AB of the Act would be leviable from the month following the erroneous credit utilization until the payment of the wrongly utilized credit. The appellant's utilization of AED credit from the period before 1.4.2000 in 2003 triggered interest liability from the date of such utilization. Additionally, the Court considered the appellant's claim for the benefit of the amendment introduced by the Finance Act, 2005, which specified interest rates on wrongly utilized credit. The Court emphasized that the Tribunal's decision was in line with the statutory provisions and did not warrant interference. No substantial question of law arose, leading to the dismissal of the appeal.

In conclusion, the Court's detailed analysis focused on the retrospective amendments, recovery provisions, interest liability, and the impact of subsequent legislative changes on the appellant's case. The judgment provided a comprehensive interpretation of the relevant legal framework governing the utilization of AED credit and the associated interest obligations, ultimately upholding the Tribunal's decision.