2008 (9) TMI 289 - AT - Central Excise

Demand of Interest on delayed payment of duty or reversal of cenvat credit- The consignment was cleared for export by the Customs as per the respondent s reply to the Show Cause Notice furnished to the original authority. Later on, on the basis of rumours of theft, the consignment was called back by the respondent when it was found that the goods had been substituted by sand bags. The respondent s complaint in the jurisdictional police station for pilferage/theft of the export consignment is pending. Following their failure to export the consignment, the respondent honoured the directions of the departmental authorities and paid the central excise duty due on the goods covered by the ARE 1 No. 248/03-04 since it is not a case of short payment of duty, demand of interest is not sustainable Further no interest is payable on reversal of unutilized cenvat credit.

Summary

Issues:
- Appeal against Order-in-Appeal No. 8/2006 passed by the Commissioner (Appeals), Chennai regarding payment of central excise duty and interest on delayed payment.
- Liability to pay interest on delayed payment of excise duty and reversal of Modvat credit.
- Interpretation of Section 11A and applicability of interest provisions.
- Waiver of interest due to goods cleared under bond for export being exported.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner (Appeals) regarding the payment of central excise duty and interest on delayed payment. The case involved the clearance of a consignment for export, which was later called back due to suspected theft and replaced with sand bags. The respondent paid the excise duty after failing to export the consignment, leading to a demand for interest on the delayed payment and reversal of Modvat credit irregularly taken.

2. The Commissioner (Appeals) vacated the demand for interest, amounting to Rs. 48,711, citing that duty liability arose due to the pilferage of the consignment and replacement with sand bags. He found that the respondent was not liable to pay interest based on judicial precedents where interest demands were vacated if duty was paid before the issuance of a Show Cause Notice, even in cases of clandestine removal.

3. The Revenue argued that the decisions relied on by the Commissioner (Appeals) were based on cases before the introduction of sub-section 2(B) of Section 11A. The respondent contended that this provision applied only to cases of the assessee rectifying short payment of duty on their own ascertainment. The Tribunal found that the respondent was not liable to pay interest as the goods cleared for export had been exported, and the principal duty was not due from them, making the demand for interest unsustainable.

4. Regarding the interest on belatedly reversed Modvat credit, the respondent maintained that the amount was not utilized, and therefore, they were not required to pay any interest as compensation to the Government. Citing a precedent, the Tribunal held that in the absence of credit utilization, no interest could be confirmed against the respondent. The Tribunal dismissed the Revenue's appeal, upholding the decision to waive the interest demands.

In conclusion, the Tribunal dismissed the Revenue's appeal, ruling in favor of the respondent based on the interpretation of relevant provisions and judicial precedents regarding the payment of excise duty and interest on delayed payments and Modvat credit reversal.