2017 (4) TMI 936 - AT - Central Excise

Liability of interest - short payment of tax - the actual cost of cement and steel is much higher during the said period compared to the price fixed by APSEB and the respondents - assessee claims that there was no demand for interest either in the show cause notice or in the duty confirmation orders and therefore they are not liable to pay interest - Held that - there was no demand of interest in the show cause notice and there was no confirmation of liability to pay interest in the adjudication order also. As there was confusion in the law regarding the liability to pay interest, Section 11AA was introduced. The first proviso to this section speaks about liability to pay interest on all orders passed prior to 1995, if not paid within three months of the date of determination of duty. Explanation (1) and (2) explains how the date of determination of duty is to be reckoned. These explanations deal only with date of determination of duty when the demand is reduced or increased in further stage of appeal. It does not speak of a situation of remand, or a situation where the duty determined is maintained by the appellate forum. Since the appellate authority vide order dated 05.01.2001 has not modified, but maintained the order passed by the adjudicating authority, the liability to pay duty starts from the date of determination of duty which the date of the adjudication order i.e. 04.12.1996. The respondent having not paid the duty within three months from 04.12.1996, the respondent is liable to pay interest till the date of payment of duty - the respondent is liable to pay interest on ₹ 4,12,050/- from 04.12.1996 till date of payment of duty. In regard to the duty demand of ₹ 6,20,103/- the argument of the department that the date of determination of duty is the date of first Order-in-Original i.e. 30.04.1997 is not tenable. In this matter, the Tribunal had remanded the matter for denovo adjudication. Even though in denovo adjudication the very same amount was determined, it will not set the clock back regarding date of determination of duty. Remand by the Tribunal would mean that the order under challenge has lost it s significance - respondent is not liable to pay any interest in respect of demand of ₹ 6,20,103/-. Appeal allowed - decided partly in favor of Revenue.

Issues Involved:
1. Liability to pay interest under Section 11AA of the Central Excise Act, 1944.
2. Determination of the relevant date for computing the interest liability.
3. Applicability of sub-section (2) of Section 11AA.
4. Effect of remand orders on the determination of duty and interest liability.
5. Impact of appellate orders on the original adjudication orders.

Issue-wise Detailed Analysis:

1. Liability to Pay Interest Under Section 11AA of the Central Excise Act, 1944:
The core issue revolves around whether the respondent is liable to pay interest on the differential duty amounts confirmed by the adjudicating authorities. The department contends that interest is chargeable if the duty is not paid within three months from the date of determination. The respondent argues that there was no demand for interest in the show cause notices or adjudication orders, and thus, they are not liable to pay interest.

2. Determination of the Relevant Date for Computing the Interest Liability:
The department calculated interest from the dates of the original adjudication orders (04.12.1996 and 30.04.1997). The Commissioner (Appeals) considered the dates of the denovo adjudication order (31.12.2003) and the appellate order (05.01.2001) as the relevant dates for determining the duty. The Tribunal held that for the duty demand of ?4,12,050/-, the date of determination is 04.12.1996, as the appellate order did not modify the original order. For the duty demand of ?6,20,103/-, the Tribunal held that the date of determination is 31.12.2003, as the original order was set aside and remanded for denovo adjudication.

3. Applicability of Sub-section (2) of Section 11AA:
Sub-section (2) of Section 11AA, introduced in 2001, states that the provisions of sub-section (1) shall not apply to cases where the duty becomes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President. The Commissioner (Appeals) applied this sub-section to hold that interest is not chargeable on the duty demand of ?6,20,103/-, as the denovo adjudication order was passed after 2001.

4. Effect of Remand Orders on the Determination of Duty and Interest Liability:
The Tribunal analyzed the effect of remand orders on the determination of duty. It held that when an order is set aside and remanded for denovo adjudication, the original order loses its significance, and the date of determination of duty is the date of the denovo order. This principle was supported by judgments in Blue Star Ltd. Vs Union of India and CCE, Chennai-II Vs Lucas TVS Ltd.

5. Impact of Appellate Orders on the Original Adjudication Orders:
The Tribunal disagreed with the Commissioner (Appeals) on the merger of the original order with the appellate order in the case of ?4,12,050/-. It held that since the appellate order did not modify the original adjudication order, the date of determination of duty remains the date of the original order (04.12.1996).

Conclusion:
The Tribunal concluded that the respondent is liable to pay interest on ?4,12,050/- from 04.12.1996 till the date of payment of duty. However, the respondent is not liable to pay interest on ?6,20,103/-, as the date of determination of duty is 31.12.2003, which falls after the introduction of sub-section (2) of Section 11AA. The appeal filed by the department was partly allowed, modifying the impugned order accordingly.

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