2008 (1) TMI 240 - AT - Central Excise

Application for waiver of predeposit & stay of recovery of interest due for delayed payment & penalty - price escalation clause - assessee is liable to pay interest only if there was any delay in payment of differential duty after the assessee learnt of the upward price revision in the instances covered by the material period - appeal is allowed by way of remand to the original authority to take a decision afresh in view of findings of HC of Bombay in similar case, in which demand was set aside

Summary

Issues:
1. Waiver of predeposit and stay of recovery of demanded amount.
2. Liability to pay interest for delayed payment of duty.
3. Interpretation of relevant legal provisions and judgments.

Analysis:
1. The application filed by M/s. Senthil Engineering Co. sought waiver of predeposit and stay of recovery of an amount demanded as interest due for delayed payment of duty and penalty imposed under Central Excise Rules, 2002. The company manufactures transformers and supplies them to Tamil Nadu Electricity Board under a contract with a price escalation clause. The original authority demanded interest on duty for additional amounts realized for clearances made during a specific period. The company contended that they paid the differential duty immediately upon receiving supplementary amounts following price revision from TNEB.

2. The learned SDR argued that duty is payable on excisable goods cleared on the date of clearance, and in this case, there was a time gap between clearance and payment of duty, making the assessee liable for interest on the delayed payment. Referring to a judgment of the High Court of Bombay and a decision of the Tribunal, the SDR emphasized that interest is a form of compensation for the revenue being deprived of tax benefit during the unpaid period. The Tribunal noted that the judgment relied upon by the SDR did not advance the Revenue's case as the provisions of the Income-Tax Act were not disclosed.

3. The Tribunal, after considering the submissions, referred to the judgment of the Bombay High Court, which held that interest is not payable if the differential duty was paid immediately upon learning of the price revision. The Tribunal highlighted that the High Court's decision was based on specific facts and relevant law, emphasizing that interest is only payable if there was a delay in payment of differential duty after learning of the price revision. Consequently, the appeal was allowed, and the case was remanded to the original authority to reconsider in light of the Bombay High Court's findings.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI provides a comprehensive understanding of the issues related to waiver of predeposit, liability for interest on delayed duty payment, and the interpretation of legal provisions and precedents cited during the proceedings.