2009 (8) TMI 184 - AT - Central Excise

Appellant s rebate claim was sanctioned by the Assistant Commissioner but adjusted against an outstanding amount , which according to the Assistant Commissioner, was pending as interest amount in respect of some earlier confirmed demand. interest was confirmed on ground that cash payment required and credit not utilizable - in terms of the law declared by the Larger Bench in the case of Noble Drugs Limited v. CCE, Nasik, no interest is required to be paid where duties actually paid from the Modvat credit account instead of paying in cash. order of Commissioner (Appeals) holding interest liable to be paid, were not challenged by appellant before higher appellate forum but quantum of interest not confirmed in such order - in the light of the Larger Bench judgment of the Tribunal, it transpires that no interest is required to be confirmed in terms of Section 11AB. Inasmuch as even the earlier orders were for confirmation of interest in terms of Section 11AB, which is found to be Nil in terms of the Larger Bench judgment, it can safely be concluded that the interest required to be paid would be Nil. In such a case, the rebate claim sanctioned is required to be refunded instead of adjusting the same against the interest amount

Summary

Issues:
1. Adjustment of rebate claim against outstanding interest amount.
2. Liability to pay interest under Section 11AB.
3. Challenge of earlier orders by the appellant.
4. Interpretation of law declared by the Larger Bench regarding interest payment from Modvat credit account.
5. Justification of adjusting sanctioned rebate claim against interest amount.

Analysis:
1. The appellant had filed a rebate claim of Rs. 3,59,856/- for exported goods, which was sanctioned but adjusted against an outstanding interest amount of Rs. 6,85,075/- by the Assistant Commissioner. The question arose whether the interest amount against which the rebate claim was adjusted should be paid by the assessee.

2. The Original Adjudicating Authority had confirmed demands of duties and interest, which were challenged by the appellant before the Commissioner (Appeals). The appeals were rejected, and no further appeal was filed. The Revenue argued that the interest liability remained as no appeal was made against the appellate authority's order.

3. The appellant contended that no interest was quantified in the earlier orders and referred to a judgment by the Larger Bench stating that no interest is required to be paid when duties are paid from the Modvat credit account. As per Section 11AB, the interest liability was considered nil, and the adjustment of the rebate claim against the interest amount was deemed unjustified.

4. Despite not challenging the earlier orders before a higher appellate forum, the Tribunal found that those orders did not confirm any specific interest amount but only stated that interest under Section 11AB was to be paid. Considering the judgment of the Larger Bench, which interpreted Section 11AB, it was concluded that no interest was required to be paid, leading to the decision that the rebate claim should be refunded instead of being adjusted against the interest amount.

5. In light of the above analysis, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant. The Tribunal disposed of the stay petition and appeal accordingly, emphasizing the interpretation of Section 11AB and the judgment of the Larger Bench regarding interest payment from the Modvat credit account.