2016 (1) TMI 479 - HC - Central Excise

Levy of interest on differential duty - scope of Section 11AA before 11-5-2001 - Whether the CESTAT has not erred in law in holding that duty liability arises and commences from the date of the order of determination and not from the date of the actual liability especially when an order of determination always dates back to the actual date of liability? - Held that - So far as this case is concerned, the contention of the learned counsel for the Assessee is that, Section 11AA of the Act providing for charging of interest, came into effect only from 26.05.1995 (as per Finance Act, 1995) and as the tax liability of the Assessee was pertaining to the periods, 01.01.1994 to 31.01.1994 and 01.07.1994 to 30.12.1994, and that the amount of duty payable was remaining undetermined till the Order-in-Original was confirmed by the Order-in-Appeal, dated 26.12.2000 (which was communicated later) and that within three months, as the duty has been paid by the assessee, the question of payment of interest does not arise. The demand made for interest for the period from 26.08.1995 to 31.03.2001 has been rightly rejected by the Commissioner (Appeals) and as well as by the CESTAT, Chennai, is perfectly valid and is in accordance with the judgment rendered in Blue Star Limited s case 2009 (10) TMI 257 - BOMBAY HIGH COURT - Decided against the revenue.

Summary

Issues:
1. Classification of goods under different tariff headings.
2. Liability for payment of differential duty.
3. Interest payable on delayed payment of duty.
4. Interpretation of Section 11AA of The Central Excise Act, 1944.
5. Validity of interest demand from a specific date.

Classification of Goods under Different Tariff Headings:
The case involved a dispute over the classification of 'Wiper Motor Assembly' by M/s. Lucas TVS Ltd. The Revenue classified it under Tariff Sub Heading No.8501.00, while the manufacturer argued for classification under Tariff Sub Heading No.8512.00 due to a difference in excise duty rates. The initial order directed the manufacturer to pay a differential duty amount.

Liability for Payment of Differential Duty:
After appeals and remands, the final order confirmed the classification under Tariff Sub Heading No.8512.00 and upheld the demand for a specific duty amount. The interest payable was calculated from the date of the Finance Bill, 1995, getting presidential assent.

Interest Payable on Delayed Payment of Duty:
The main issue revolved around the interest payable on delayed duty payment and the relevant date from which interest accrues. Section 11AA of the Act stipulated the conditions for interest payment, emphasizing duty determination as the trigger for interest liability.

Interpretation of Section 11AA of The Central Excise Act, 1944:
The interpretation of Section 11AA was crucial in determining the liability for interest payment. The court referred to a Bombay High Court decision for guidance, highlighting that interest becomes due only upon the ascertainment of duty liability.

Validity of Interest Demand from a Specific Date:
The court rejected the Revenue's argument that interest should be payable from the date of the original order determining liability. Instead, it upheld that interest accrues from the date of ascertainment of duty, not the date of the initial order. The court dismissed the appeal, affirming the validity of the interest demand as per the relevant legal provisions and precedents.

This detailed analysis of the judgment covers the issues of classification of goods, liability for duty payment, interest calculation, statutory interpretation, and the validity of interest demand, providing a comprehensive understanding of the legal complexities involved in the case.