2012 (7) TMI 712 - AT - Central Excise

Demand of interest on the amount of differential duty - enhancement of price as per the price variation clause of the relevant contract - differential duty was paid - demand of interest on the amount of differential duty Held that - Payment of differential duty was under sub-section 2(B) of Section 11A of the Central Excise Act and, therefore, interest was leviable thereon under Section 11AB of the Act Against assessee

Summary

Issues:
1. Whether interest under Section 11AB of the Central Excise Act is recoverable on the differential amount of duty paid by the assessee.
2. Whether the appeals filed by the department are maintainable as per the National Litigation Policy.
3. Whether the demand of interest in this case is time-barred.

Analysis:

Issue 1:
The core issue in this case was whether interest under Section 11AB of the Central Excise Act is recoverable on the differential amount of duty paid by the assessee. The Tribunal held that the assessee, who paid duty based on the original price but later paid differential duty due to a price escalation clause, is liable to pay interest under Section 11AB from the date of clearance of goods to the date of payment of differential duty. This decision was based on precedents set by the apex court and followed by the Karnataka High Court.

Issue 2:
A preliminary objection was raised regarding the maintainability of the appeals filed by the department under the National Litigation Policy. The counsel for the respondent argued that the appeals infringe the policy as they involve revenue exceeding Rs.1 lakh. However, the Tribunal overruled this objection, stating that the High Court's judgment cited in support of the objection did not apply to the present case, thereby allowing the appeals to proceed.

Issue 3:
The question of whether the demand of interest was time-barred was also raised. The Tribunal discussed the absence of a prescribed period of limitation in the Central Excise Act for recovery of interest under Section 11AB. It was concluded that since the liability to pay interest on duty is co-extensive with the duty itself and is a continuing liability, there is no specific period of limitation. The Tribunal rejected the argument based on the Emco Ltd. case and held that interest on tax is automatic, accruing to the revenue until paid by the assessee.

In conclusion, the Tribunal set aside the impugned orders, allowing the appeals filed by the department and affirming the liability of the assessee to pay interest on the differential duty paid.