2000 (9) TMI 185 - AT - Central Excise

Summary

Issues Involved:
1. Validity of the show-cause notice issued by the Department.
2. Whether the demand raised in the show-cause notice is barred by limitation.
3. Legitimacy of the claim of interest on the alleged dues of Central Excise duty.

Detailed Analysis:

1. Validity of the Show-Cause Notice:
The appellants were engaged in the manufacture of various types of yarns and fabrics and consumed the same captively for the manufacture of fabrics without paying Central Excise duty. The Department issued a show-cause notice dated 10-9-1988 to recover over Rs. 30 lakhs as Central Excise duty along with interest at 12% per annum. The appellants contended that no duty was payable as there was no "removal of the yarns from the factory" under Rules 9 and 49 of the Central Excise Rules. The Supreme Court's interim order dated 28-4-1988 allowed the Department to realise dues for the past six months preceding the notice date under Section 11A of the CESA. However, the show-cause notice issued on 10-9-1988 demanded dues for the period from June 1981 to March 1983, which was beyond the six-month limitation.

2. Limitation of the Demand:
The appellants argued that the demand was contrary to the Supreme Court's order and barred by limitation under Section 11A of the CESA. The Department's reliance on entries in R.T.12 returns as substitutes for a formal notice under Section 11A was rejected. The Tribunal held that the demand raised in the show-cause notice was time-barred and contrary to the Supreme Court's mandate, thus liable to be set aside.

3. Legitimacy of the Interest Claim:
The Department claimed interest at 12% per annum based on the Supreme Court's order dated 11-9-1985, which was an interim order in writ petitions relating to special/additional duty of excise. The Tribunal noted that there was no provision under the CESA for levying interest on excise duty dues and that the Supreme Court's interim order should not be taken as a general mandate for levying interest. The High Court of Andhra Pradesh's decision in Delta Paper Mills Ltd. v. CCE, Guntur supported the appellants' argument that interest could not be levied without statutory authority.

Conclusion:
The Tribunal set aside the impugned order, holding that the show-cause notice was invalid and the demand of duty was time-barred. The claim of interest was also rejected as it lacked statutory backing. The appeal was allowed, and the cross-objections by the Department were considered as submissions but were not maintainable. The final decision in the appellants' Civil Appeal No. 430/83 by the Supreme Court on 4-1-1989 was noted but not available for consideration in this judgment.