2017 (10) TMI 746 - AT - Central Excise

Demand of interest - interpretation of statute - Rule 173G(1)(d) - Held that - during the relevant period of time, there was no provision in the Central Excise Act to charge interest where duty has been paid before issuance of show-cause notice - in the present case duty has not been determined either under Section 11AA or 11AB of the Central Excise Act, 1944. Section 11AB was amended from 11/05/2011 whereby it has been provided that interest would be liable from the first day of the month succeeding the month in which duty ought to have been paid - The period involved in the present case is prior to the amendment dt. 11/05/2001. Therefore in the present case, the appellant was not liable to pay the interest but he paid the interest in order to settle the audit objection and the same was paid before the issuance of the show-cause notice. The appellants are liable to pay interest on the differential duty liability amounting to ₹ 3,77,833/-. For quantification of the interest on this amount, adjudicating authority will compute the interest liability of the appellant - appeal allowed by way of remand.

Issues involved:
- Appeal against rejection of appeal by Commissioner(Appeals)
- Interpretation of Rule 173G(1)(d) regarding interest on differential duty
- Applicability of Section 11AA and Section 11AB of the Central Excise Act, 1944
- Amendment to Section 11AB from 11/05/2011
- Liability to pay interest before issuance of show-cause notice
- Adjustment of duty short paid against duty excess paid
- Quantification of interest on the differential duty liability

Analysis:

1. Appeal against rejection of appeal by Commissioner(Appeals):
The present appeal challenges the impugned order passed by the Commissioner(Appeals) rejecting the appeal of the appellant. The appellant contended that the impugned order was contrary to statutory provisions and binding judicial decisions. The argument focused on the proper interpretation of Rule 173G(1)(d) and the scope of interest liability in cases of differential duty payment.

2. Interpretation of Rule 173G(1)(d) regarding interest on differential duty:
The appellant argued that Rule 173G(1)(d) does not cover interest on differential duty paid voluntarily by the assessee subsequently. Citing judicial decisions, the appellant highlighted that interest liability under Section 11AA and Section 11AB applies only in specific scenarios, such as duty determined through adjudication or instances of fraud or collusion. The appellant emphasized that the duty in this case was paid voluntarily before the issuance of a show-cause notice, and hence, interest liability should be restricted.

3. Applicability of Section 11AA and Section 11AB of the Central Excise Act, 1944:
The discussion revolved around the provisions of Section 11AA and Section 11AB, emphasizing the conditions under which interest liability arises, particularly in cases of duty determination and fraud or collusion. The appellant argued that the duty was not determined under Section 11A(2) in this case, thereby impacting the applicability of interest provisions.

4. Amendment to Section 11AB from 11/05/2011:
The amendment to Section 11AB from 11/05/2011 was analyzed to determine its relevance to the case at hand. The change in the provision regarding interest liability from the first day of the month succeeding the due date of duty payment was considered, along with the impact of the date of duty becoming payable on the interest calculation.

5. Liability to pay interest before issuance of show-cause notice:
The appellant's voluntary payment of interest to settle audit objections before the issuance of a show-cause notice raised questions about the obligation to pay interest in such circumstances. The absence of a provision during the relevant period to charge interest in such cases was a crucial aspect of the argument.

6. Adjustment of duty short paid against duty excess paid:
The principle of adjusting duty short paid against duty excess paid was highlighted by the appellant to support the contention that interest liability should be computed after netting the shortfall against the excess payment. This adjustment was crucial in determining the interest liability in the present case.

7. Quantification of interest on the differential duty liability:
Considering the arguments presented and the legal precedents cited, the Tribunal partly allowed the appeal by determining the appellant's liability to pay interest on the specific amount of differential duty. The adjudicating authority was directed to compute the interest liability on this amount and adjust it against the interest paid under protest, with any remaining amount to be refunded to the appellant in accordance with the law.

This detailed analysis of the judgment covers the various legal issues involved and the Tribunal's decision on each aspect of the case.

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