2017 (9) TMI 1172 - AT - Central Excise

Demand of interest - suo moto payment of differential duty - case of Revenue is that since it was a case of delayed payment of the duty the interest was payable by the appellant - extended period of limitation - Held that - the Department has issued a SCN dt. 13.08.2010 for interest on the differential duty paid voluntarily by the appellant on their own. Differential duty was paid on 10.07.2007. The SCN has been issued beyond the period of limitation. However the extended period has not been invoked in the SCN nor is there any allegation in that regard. In the SCN penalty has also been proposed but again there is no basis given for imposition of penalty in the SCN. Hon ble High Court of Delhi in the case of Kwality Ice Cream Company Vs. UOI 2012 (1) TMI 88 - Delhi High Court that the period of limitation that applies to a claim for the principal amount should also apply to the claim of interest thereon. In this case too the extended period has not been invoked in the SCN and the entire demand is beyond the period of limitation - demand of interest not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against impugned order for differential duty payment, interest demand, and penalty imposition.

Analysis:
The appellant, a manufacturer of P&P Medicaments, voluntarily paid differential duty of ?40,54,450/- based on actual cost of production higher than initially calculated duty liability. The Department demanded interest of ?5,20,411/- and proposed penalty under Rule 25 of Central Excise Rules. The Ld. Commissioner (Appeals) upheld the demand but set aside the penalty. The appellant contended that the demand was time-barred as no extended period was invoked in the show cause notice. Citing case laws, the appellant argued for limitation on interest demand.

The Tribunal found the show cause notice for interest issued beyond the limitation period without invoking the extended period. Referring to legal precedents, it held that the period of limitation for interest demand should align with the principal amount's limitation period. As the demand for interest was made beyond one year, it was deemed unsustainable. The Tribunal followed Supreme Court and High Court judgments emphasizing the limitation principle for interest demands. Consequently, the demand for interest and penalty were set aside due to exceeding the limitation period.

The Tribunal concluded that since the demand was not sustainable based on limitation grounds, it did not delve into the case's merits. Therefore, the order of the Ld. Commissioner (Appeals) was set aside, and the appeal by the appellant was allowed. The Tribunal pronounced the operative part of the order in open court, granting relief to the appellant.