2017 (9) TMI 1053 - AT - Central Excise

Liability of interest - whether the appellant is required to pay interest against reversal of inadmissible credit? - time limitation - Held that - the appellant had reversed the credit on 18.6.2010 and demand notices were issued on 13/19-7-2011 which is beyond the period of limitation as prescribed under Section 11A of CEA, 1944 for recovery of interest on the credit without allegation of suppression, mis-declaration etc. - demand of interest do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Whether the appellant is required to pay interest against reversal of inadmissible credit.

Analysis:

Issue 1: Applicability of limitation period under Section 11A of CEA, 1944 for recovery of interest on reversed credit.

The short issue in the present appeals revolved around whether the appellant is obligated to pay interest following the reversal of inadmissible credit availed on various inputs during February 2008 to October 2009. The appellant had reversed the credit on 18.6.2010, and subsequently, demand notices for recovery of interest were issued on 13/19-7-2011, which the appellant contended were beyond the limitation period prescribed under Section 11A of CEA, 1944. The appellant's advocate relied on the decision of the Hon'ble Delhi High Court in the case of Hindustan Insecticides Ltd. vs. C.C.E., LTU - 2013 (297) ELT 332(Del.) to support the argument that the demand notice was issued after the limitation period and hence unenforceable.

Issue 2: Interpretation of the limitation period for recovery of interest under Section 11A of CEA, 1944.

The Member (Judicial) referred to the judgment of the Hon'ble Delhi High Court in Hindustan Insecticides Ltd.'s case, emphasizing that the limitation period prescribed under Section 11A for recovery of interest equally applies. The Member distinguished the case from other judgments citing that the payment of interest under Section 11A mandates adherence to the limitation period. The Member highlighted the decisions of various High Courts and the Supreme Court, establishing that proceedings for recovery must be initiated within a reasonable time. Consequently, the Member ruled in favor of the appellant, emphasizing that the appellant is entitled to succeed based on the distinguishing feature of the case and the applicable legal provisions.

Outcome:

In line with the legal analysis and precedent, the Member set aside the impugned order and allowed the appeals, granting consequential relief as per the law. The judgment favored the appellant, concluding that the demand notices issued for recovery of interest on the reversed credit were beyond the prescribed limitation period under Section 11A of CEA, 1944, thereby ruling in favor of the appellant and against the respondent-Revenue.