2014 (5) TMI 567 - HC - Central Excise

Interest demand - whether the liability to pay interest on differential excise duty already paid at the time of issue of supplementary invoices would continue and if so can such interest liability be demanded beyond the normal period of limitation of one year from the date of supplementary invoice under Section 11A read with Section 11AB of the Act - Held that - As the period of limitation that applies to recovery of the principal amount shall also apply to the claim for interest thereon, the demand is time barred - Issuance of show cause notice for interest on the delayed payment should also be within a period of one year as stipulated under Section 11-A of the Act - Therefore, department has absolutely no jurisdiction to issue show cause notice after expiry of the period of limitation for interest on the delayed payment for the period - period of limitation, unless otherwise stipulated by the statute, which applies to a claim for the principal amount should also apply to the claim for interest thereon - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of provisions of Central Excise Act regarding charging interest.
2. Invocation of extended period of limitation for charging interest.
3. Validity of order passed by Tribunal and appellate authority.
4. Applicability of period of limitation for interest on delayed payment.
5. Jurisdiction of the department to issue show cause notice after the expiry of the limitation period.

Issue 1: Interpretation of provisions of Central Excise Act regarding charging interest
The appeal under Section 35G of the Central Excise Act, 1944 raised substantial questions of law regarding the justification of upholding the order for charging interest under Section 11AB. The appellant questioned the correctness of the order passed by the Tribunal, arguing that the extended period of limitation for charging interest was invoked without proper consideration of the appellant's conduct and the legal prerequisites. The Tribunal's decision was challenged based on the interpretation of statutory provisions governing the liability to pay interest on differential excise duty.

Issue 2: Invocation of extended period of limitation for charging interest
The appellant contested the Tribunal's decision to invoke the extended period of limitation for charging interest under Section 11AB. The questions raised focused on whether the Tribunal erred in not following relevant decisions of courts and Tribunals regarding the applicability of the limitation period for interest on delayed payments. The issue revolved around the Tribunal's authority to make findings of fact without proper records and documents, leading to alleged injustice and prejudice to the appellant.

Issue 3: Validity of order passed by Tribunal and appellate authority
The controversy involved the validity of the order passed by the Tribunal and the appellate authority confirming the demand for interest on the appellant. The appellant argued that the order was erroneous, passed hastily without due consideration of factual and legal submissions. The Tribunal's failure to follow established decisions of higher courts and Tribunals was highlighted as a ground for challenging the order, emphasizing the need for a fair and objective adjudication process.

Issue 4: Applicability of period of limitation for interest on delayed payment
The case delved into the applicability of the period of limitation for interest on delayed payment of excise duty. The appellant's liability to pay interest on the differential duty was questioned beyond the normal limitation period of one year from the date of the supplementary invoice. The dispute centered on whether the department had the jurisdiction to issue a show cause notice for interest beyond the statutory limitation period, raising concerns about the legality of demanding interest on clearances made earlier.

Issue 5: Jurisdiction of the department to issue show cause notice after the expiry of the limitation period
The jurisdictional aspect of the department's authority to issue a show cause notice after the expiry of the limitation period for charging interest was a crucial issue in the appeal. The appellant contended that the show cause notice based on audit objections was time-barred, emphasizing the statutory provisions under Section 11A and Section 11AB of the Act. The dispute highlighted the importance of adhering to the prescribed limitation period for initiating proceedings related to interest on delayed payments.

This judgment by the Punjab and Haryana High Court addressed various legal issues concerning the interpretation of provisions of the Central Excise Act related to charging interest, invocation of the extended period of limitation, validity of orders passed by the Tribunal and appellate authority, applicability of the limitation period for interest on delayed payments, and the jurisdiction of the department to issue show cause notices within the statutory timeframe. The decision favored the appellant, emphasizing the need for adherence to legal precedents and statutory provisions in determining the liability for interest on excise duty payments.