2017 (2) TMI 762 - AT - Central Excise

MODVAT credit - recovery along with interest - the appellant opted to avail the benefit of N/N. 16/97, dated 1-4-1997. Subsequently, the appellant informed the department that it did not want to avail the benefit contained in the said Notification - whether, once the entire duty of ₹ 2,21,712/- paid by the appellant can be appropriated partially and demand be confirmed for the balance amount of ₹ 1,00,000/- and interest can be demanded? - Section 11AA ibid - Held that - since the Central Excise duty liability was paid by the appellant prior to passing of the said adjudication order, the provisions of Section 11AA would not be applicable for confirmation of the interest liability - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availing of SSI exemption and Notification No. 16/97 benefits.
2. Recovery of Modvat credit.
3. Adjudication proceedings and order confirmation.
4. Appropriation of paid amount and interest demand.
5. Applicability of Section 11AA of the Central Excise Act, 1944.

Analysis:

1. The appellant, engaged in manufacturing electrical equipment, initially availed the SSI exemption during 1996-97 and later opted for benefits under Notification No. 16/97 for 1997-98. However, the appellant subsequently informed the department of not wanting to avail the benefits under the said Notification. This led to the department issuing a Show Cause Notice (SCN) proposing the recovery of Modvat credit availed by the appellant.

2. The SCN was adjudicated by the department, resulting in a demand for recovery of ?2,21,712 against the appellant. An amount of ?1,21,712 previously deposited by the appellant was appropriated, leaving a balance of ?1,00,000 to be paid. Additionally, interest at 20% per annum on the total demand was confirmed under Section 11AA of the Central Excise Act, 1944.

3. The issue before the Tribunal was whether the balance amount of ?1,00,000 could be demanded from the appellant after partial appropriation of the paid sum and if interest under Section 11AA was applicable. The Hon'ble Delhi High Court, in a previous judgment, directed the department to calculate the duty payable by the appellant, leading to the current situation.

4. Regarding the interest payment, the adjudicating authority invoked Section 11AA, which mandates interest payment if duty is not deposited within three months of determination. However, since the duty liability was determined and paid before the adjudication order, the Tribunal held that Section 11AA did not apply to confirm the interest liability.

5. Consequently, the Tribunal set aside the impugned order confirming the adjudication and allowed the appeal in favor of the appellant, emphasizing that the interest liability under Section 11AA was not applicable in this case.