2003 (10) TMI 132 - AT - Central Excise

Summary

Issues:
1. Whether a person who has reversed wrongly taken credit before the issue of notice is required to pay interest on credit in terms of Section 11AA read with Rule 57AH.

Analysis:
The appellant, engaged in the manufacture of pharmaceutical products, took credit under Rule 57Q of the entire duty paid on pipes and pipe fittings brought into its factory in April and May 2000. However, realizing the mistake, the appellant reversed half of the credit in September 2000 and informed the Department. This led to a notice proposing recovery of the wrongly taken credit, penalty under Rule 173A, and interest under Rule 11AA. The Deputy Commissioner confirmed the liability but offset the reversal made by the appellant, imposed a penalty, and demanded interest under Section 11AA. On appeal, the Commissioner (Appeals) set aside the penalty but did not interfere with the rest of the decision, leading to the current appeal.

The main issue to be decided was whether a person who has reversed wrongly taken credit before the issue of notice is required to pay interest on the credit as per Section 11AA read with Rule 57AH. Section 11A applies when a person fails to pay the duty determined under sub-section (2) of Section 11A within three months of such determination. However, in the present case, none of the requirements for Section 11A to apply were met. The credit wrongly taken was repaid eight months before the notice was issued, and even if it had not been repaid before the notice, if paid within three months of the duty determination, interest payment would not be required. Therefore, in this case, the payment of interest was deemed unnecessary, and the appeal was allowed with the impugned order set aside.