2016 (9) TMI 281 - AT - Central Excise

Recovery of interest and penalty - Section 11AB(1) of the Central Excise Act, 1944 - used the credit of AED (T&TA) for payment of AED (GSI) - duty paid immediately after the same is pointed out - Held that - the proviso to the said sub-section becomes operational only when duty become payable, consequent to issue of an order/instruction or direction by the payment under Section 37B. In the instant case, there is no such 37B order and therefore, the proviso to said sub-section cannot be invoked. The said sub-section provides that interest can be demanded even when the duty has been paid. - Decided against the appellant

Summary

Issues:
1. Utilization of credit of AED (Textile & Textile Articles) towards payment of AED (Goods of Special Importance)
2. Demand of interest without a show-cause notice for duty
3. Interpretation of Section 11AB(1) of the Central Excise Act, 1944

Analysis:
1. The appellant, a manufacturer of pile fabrics, used yarn falling under Chapter 54 & 55 as input, subject to Cenvat duty and Additional Duty of Excise (Textile & Textile Articles). The final products were not charged with Additional duty of Excise (Textile & Textile Articles). The appellant utilized the credit of AED (T&TA) for payment of AED (GSI). A show-cause notice for interest recovery was issued, alleging impermissible credit use. The original authority confirmed interest and penalty, upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

2. The appellant paid the amount from their Cenvat credit account but did not clear the interest liability. The appellant argued that interest cannot be demanded without a duty demand. They contended that they rectified the payment mistake promptly upon notice without a duty demand or show-cause notice. Reference was made to Section 11AB(1) to support the argument that immediate duty payment upon notice precludes interest demand without a show-cause notice.

3. The Tribunal examined Section 11AB(1) of the Central Excise Act, 1944, which outlines interest on delayed duty payment. The section allows interest payment when duty has not been levied or paid correctly. The proviso exempts interest if duty is voluntarily paid in full within 45 days of a Board order. The Tribunal noted that the proviso requires a 37B order for duty payment, absent in this case. Thus, interest can be demanded even if duty has been paid, as per the section. Consequently, the Tribunal dismissed the appeal, finding no merit in the appellant's arguments.

This detailed analysis covers the issues of credit utilization, interest demand, and statutory interpretation, providing a comprehensive understanding of the legal judgment.