2013 (10) TMI 992 - AT - Central Excise

Interest on Duty - Whether interest on duty/ cenvat credit demanded by applying proviso to Section 11A or Section 11AA with Cenvat Credit Rules or under Rule 57(I), is payable under Section 11AB prior to 11.05.01 - Held that - Following EXOTIC ASSOCIATES Versus COMMISSIONER OF CENTRAL EXCISE 2009 (11) TMI 293 - GUJARAT HIGH COURT - the demand relates to the period subsequent to 28-9-1996 and the earlier provision of Section 115 was not considered by the Tribunal, the order of the Tribunal is set aside on this point and remand the matter to the Adjudicating Authority to decide the whole issue with regard to charging of interest keeping in mind the provisions contained in unamended Section 11AB of the Act - the interest liability arises on the appellants under the provisions of Section 11AB of Central Excise Act, 1944, and even prior to 11.05.2001. The provisions for charging of interest under the Central Excise Act was brought in for the first time from 28.09.96 by introduction of Section 11AB to the Central Excise Act, 1944 - The provision mandated levy of interest on duty not paid, or short paid or erroneously refunded from the first day of the succeeding the month in which the duty ought to have been paid - These provisions of Section 11AB as introduced from 28.09.96, were, however limited to cases of demand arising due to reason of fraud, collusion or any wilful mis -statement or suppression of facts with intent to evade payment of duty - prior to introduction of Section 11AB in the Statute, interest was liable to be paid by introduction of provisions of Section 11AA in the statute which came into effect from 26.05.95, which provided for interest on the demand of the duty which were confirmed under the provisions of sub-section 2 of Section 11AB of the Central Excise Act, 1944 - Noting the lacuna which failed to enable levy of interest in cases wherein there was an element of fraud, collusion or any wilful mis -statement or suppression of facts with intent to evade payment of duty, provisions of Section 11AB was introduced w.e.f . 28.09.96 - On a holistic reading of the amendment w.e.f . 11.05.01, the amendment has enlarged the scope of the coverage of recovery of interest to all cases wherein the demand has been confirmed by the authorities or has been voluntarily paid by an assessee - The amendment does not wipe out the existing liability to pay interest in respect of cases involving fraud, collusion, any wilful mis-statement of facts with intent to evade payment of duty - the amended sub-section 2 of Section 11AB from 11.05.01 only mandates that interest liability cannot be fastened under the amended Section 11AB prior to 11.05.01 Decided against Assessee.

Summary

Issues:
Interpretation of interest liability under Section 11AB of the Central Excise Act, 1944 prior to and post 11.05.01.

Analysis:
The case involved a crucial issue regarding the interpretation of interest liability under Section 11AB of the Central Excise Act, 1944, both before and after 11.05.01. The appellant's counsel argued that prior to 11.05.01, interest was chargeable under Section 11AA and 11AB, and the latter had no application for the period before 11.05.01. They cited legal precedents, including the decision of the Larger Bench in Ramkumar Mills Pvt. Ltd., to support their stance that interest under Section 11AB was not applicable before 11.05.01. They also highlighted the retrospective nature of the amendment to Section 11AB and the legislative intent behind the simultaneous amendments to Sections 11AA and 11AB.

On the other hand, the Additional Commissioner argued that the amendment to Section 11AB from 11.05.01 did not render the liability to pay interest prior to that date obsolete. They referred to the judgment of the Hon'ble High Court of Gujarat in Exotic Associates and the Tribunal's decision in EON Polymers Ltd. to support their position.

After considering the submissions and relevant case laws, the Tribunal analyzed the provisions of Section 11AB both pre and post 11.05.01. They noted that the amendment from 11.05.01 expanded the scope of interest recovery to all cases where duty was confirmed or voluntarily paid. The Tribunal disagreed with the appellant's contention that interest liability was eliminated for cases involving fraud, collusion, or misstatement post the 11.05.01 amendment.

The Tribunal referenced the judgment of the Hon'ble High Court of Gujarat in Exotic Associates, which clarified the applicability of Section 11AB pre and post 11.05.01. The court's ruling emphasized that the amended Section 11AB did not negate the existing liability to pay interest for cases involving fraudulent activities. The Tribunal concluded that interest liability under Section 11AB existed for the appellants even before 11.05.01, contrary to the appellant's arguments.

In light of the above analysis, the Tribunal answered the reference by affirming the interest liability on the appellants under Section 11AB of the Central Excise Act, 1944, even prior to 11.05.01. The judgment provided a comprehensive interpretation of the relevant legal provisions and clarified the applicability of interest liability in excise duty cases.