2008 (3) TMI 75 - AT - Central Excise

Interest for delay in payment of duty clearance of goods to assessee s own unit differential duty because of valuation dispute - by less or late payment, the appellant gets no benefit and conversely the department suffers no loss- When the differential duty required to be paid is available as credit to the same appellant s own recipient unit, the interest on such differential value is required to be charged or not matter referred to larger bench for consideration of this question

Summary

Issues:
1. Liability to pay interest under Section 11AB of Central Excise Act, 1944 for delayed payment of duty.
2. Applicability of interest when the duty paid is available as credit to the recipient unit.

Analysis:

Issue 1: Liability to pay interest under Section 11AB
The appellant cleared Absonal San Resin to their own factory, but the assessable value adopted was incorrect. The differential duty amount was deposited by the appellant without dispute. The main issue was whether interest under Section 11AB was applicable for delayed duty payment. The original adjudicating authority confirmed interest and imposed a penalty, which was set aside on appeal. The appellant argued that since the duty was not determined or paid under specific sections of Section 11A, Section 11AB did not apply. However, the Commissioner (Appeals) and Tribunal held that interest is payable on duty even if paid before the show cause notice, as the liability to pay duty is determined later. The Tribunal's decision in similar cases supported this interpretation, emphasizing that interest is payable on the amount paid by the person. The contention that interest should not be charged was rejected based on these legal principles.

Issue 2: Applicability of interest when duty paid is available as credit
Although the appellant paid the differential duty, it was available as modvat credit to their own unit where the goods were sent, making it a revenue-neutral exercise. The Tribunal noted that interest is meant to compensate for delay and reward the payee, but in this case, the appellant did not benefit from the delayed payment, and the department did not suffer any loss. Therefore, charging interest in such scenarios seemed unjustified. However, the Tribunal did not accept the argument that interest should not be charged when the principal amount is available as credit to the recipient unit. To resolve this issue, the matter was referred to a Larger Bench to determine whether interest should be charged on the differential value when the duty paid is available as credit to the appellant's recipient unit.

This comprehensive analysis of the judgment highlights the legal interpretations and implications of the issues involved in the case, providing a detailed understanding of the reasoning behind the decision.