2018 (7) TMI 1197 - AT - Central Excise

Recovery of Interest - Wrong utilization of credit of AED (GSI) - Section 11AB of the Central Excise Act, 1944 - Held that - On perusal of Rule 12 of the Cenvat Credit Rules, 2002 and Section 11AB of the Central Excise Act, 1944, it is found that Rule 12 provided for recovery of interest only along with recovery of Cenvat credit taken or utilized wrongly - further, Section 11AB of the Central Excise Act, 1944 is invocable only when Section 11A of the Central Excise Act, 1944 has been invoked. In the present case, the learned Original Authority has held that the credit was properly taken and correctly utilized and therefore, there was no confirmation of demand of duty either under Rule 12 of Cenvat Credit Rules, 2002 nor under Section 11A of the Central Excise Act, 1944 - in the absence of any confirmation of demand under Section 11A of the Central Excise Act, 1944 or under Rule 12 of the Cenvat Credit Rules the interest demanded does not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Utilization of Additional duty of Excise credit for payment of Central Excise duty
- Validity of interest charged under Rule 12 of Cenvat Credit Rules, 2002 and Section 11AB of the Central Excise Act, 1944
- Applicability of limitation period for demand of duty and interest

Issue 1: Utilization of Additional duty of Excise credit for payment of Central Excise duty
The appeal challenged an Order-in-Original regarding the utilization of Additional duty of Excise (AED) credit for Central Excise duty payment. The appellants had defaulted Central Excise duty, which was paid using the accrued AED credit. The Revenue contended that this contravened the Central Excise Act, leading to a Show Cause Notice. The Original Authority held that the AED credit was correctly used for duty payment, directing interest payment on the defaulted amount. The Tribunal found that the credit was properly utilized, dismissing the Revenue's claim for recovery.

Issue 2: Validity of interest charged under Rule 12 of Cenvat Credit Rules, 2002 and Section 11AB of the Central Excise Act, 1944
The appellant argued against invoking Rule 12 and Section 11AB for interest recovery, citing the Supreme Court's ruling on the limitation period for interest claims. The Revenue justified the interest demand based on the delay in crediting due duty. The Tribunal analyzed Rule 12 and Section 11AB, determining that interest recovery required a confirmed demand under Section 11A. Since no such confirmation existed in this case, the Tribunal set aside the interest payment order.

Issue 3: Applicability of limitation period for demand of duty and interest
The appellant contended that the demand for interest was unsustainable due to the expiration of the normal limitation period for duty demand. The Revenue argued that interest payment was legitimate given the delay in crediting the due duty. The Tribunal considered the contentions, emphasizing the necessity of a confirmed demand under Section 11A for invoking interest recovery under Section 11AB. As the demand lacked such confirmation, the Tribunal ruled in favor of the appellant, setting aside the interest confirmation.