2015 (11) TMI 600 - HC - Central Excise

Demand of interest - Delayed payment of differential duty - whether on the delayed payment of differential duty, the respondent/assessee is liable to pay interest as provided under sub-rule (3) of Rule 8 at the rate as provided in the Notification issued under Section 11AB of the Act - Held that - where the duty component involved is less than ₹ 2 lakhs, excluding mandatory penalty and any other penalty imposed under the law in force at the relevant time, no appeal shall be filed before the High Court. In the present case, it is admitted by either side that the differential duty component is more than ₹ 26 Lakhs, which has been paid by the respondent/assessee, though belatedly, on which interest is sought to be levied by the appellant/Revenue. In the present appeal, the imposition is only interest on delayed payment of duty component. Therefore, by no stretch of imagination, the argument of the learned counsel for the respondent/assessee could be accepted, as there is no duty involved in this case and it pertains only to interest on delayed payment of differential duty. Therefore, even at the threshold, the said objection is negatived. Show cause notice is issued in terms of Section 8 (1) of the Central Excise Rules and sub-rule (3) of Rule 8 makes it an obligation on the assessee to pay interest on account of delayed payment of duty in terms of the notification issued under Section 11AB of the Central Excise Act. - entire proceedings, in the instant case, is on the basis of the delayed payment of differential duty in terms of Section Rule 8 (1) of the Central Excise Rules, for which interest is leviable under sub-rule (3) of Rule 8 at the rate notified under Section 11AB of the Act. The show cause notice was issued under Rule 8 (1) of the Central Excise Rules, 2002 for failure to pay the duty in terms of Rule 8 (1) and, therefore, liability to pay interest specified under Section 11AB of the Act was mulcted on the assessee in terms of sub-rule (3) of Rule 8. Sub-Rule (3) of Rule 8 provides for quantum of interest, viz., interest as notified in terms of Section 11AB of the Act. However, the Tribunal, without going into the factual aspect of the show cause notice, laid emphasis on Chloritech Industries case (2008 (7) TMI 278 - GUJARAT HIGH COURT ) to allow the appeal in favour of the assessee. The Tribunal has not adverted to the merits of the matter and also the relevant provisions of law for levying interest, viz., Rule 8 (3), but decided the issue in the light of the decision in Chloritech Industries case (2008 (7) TMI 278 - GUJARAT HIGH COURT ), which has been subsequently reversed in Chloritech Industries case (2011 (4) TMI 1274 - GUJARAT HIGH COURT). - Matter remanded back - Decided in favour of Revenue.

Summary

Issues Involved:
1. Whether the Tribunal disregarded the Supreme Court ruling in CCE, Pune vs. M/s. SKF India Ltd.
2. The liability of the respondent to pay interest on delayed payment of differential duty under Section 11AB of the Central Excise Act.
3. The applicability of the National Litigation Policy regarding the monetary limit for filing appeals.
4. The relevance of the Tribunal's reliance on the Chloritech Industries case.

Issue-wise Detailed Analysis:

1. Whether the Tribunal disregarded the Supreme Court ruling in CCE, Pune vs. M/s. SKF India Ltd.
The High Court noted that the question of law framed was incorrect because the Tribunal's decision predated the Supreme Court ruling in the SKF India case. Thus, the Tribunal could not have considered a decision that had not yet been delivered.

2. The liability of the respondent to pay interest on delayed payment of differential duty under Section 11AB of the Central Excise Act.
The respondent was engaged in manufacturing conductors, cables, and transformers, and had a price variation clause in their contract with TNEB. They paid the differential duty of Rs. 26,63,848 through supplementary invoices but did not pay the appropriate interest. The adjudicating authority demanded interest under Section 11AB and imposed a penalty under Rule 25 of the Central Excise Rules, 2002. The Tribunal's reliance on the Chloritech Industries case was found to be misplaced as it was subsequently reversed by the Gujarat High Court, which followed the Supreme Court's decision in the SKF India case. The High Court emphasized that interest is payable on delayed payment of differential duty as per Rule 8(3) of the Central Excise Rules, which refers to the rate notified under Section 11AB.

3. The applicability of the National Litigation Policy regarding the monetary limit for filing appeals.
The respondent argued that the appeal should not have been filed due to the National Litigation Policy, which sets a monetary limit of Rs. 2 Lakhs for filing appeals in High Courts. However, the High Court clarified that the case involved an interest component on a differential duty of over Rs. 26 Lakhs, thus not falling under the purview of the monetary limit set by the policy. Consequently, the preliminary objection regarding the monetary limit was rejected.

4. The relevance of the Tribunal's reliance on the Chloritech Industries case.
The Tribunal had relied on the Chloritech Industries case to rule in favor of the respondent. However, the High Court pointed out that the decision in Chloritech Industries was reversed by the Gujarat High Court following the SKF India ruling. The High Court noted that the Tribunal did not address the merits of the case or the relevant legal provisions, particularly Rule 8(3) of the Central Excise Rules, which mandates the payment of interest on delayed duty payments.

Conclusion:
The High Court allowed the appeal by remanding the matter back to the Tribunal for reconsideration in light of the legal positions discussed. The Tribunal was directed to re-evaluate the issue, particularly the applicability of Rule 8(3) and Section 11AB, without relying solely on the previously overturned Chloritech Industries case. The appeal was allowed without any order as to costs.