2014 (6) TMI 236 - AT - Central Excise

Demand of differential interest per day - Delay in payment of duty - Held that - The part of Rule 8(3) which includes expression at the rate of two per cent, per month or rupees one thousand per day, whichever is higher is held to be invalid. Consequently, interest chargeable on delayed payment had to be only at the rate of 2% per month or for that matter 24% per annum as notified by the State Government in terms of the Section 11BC, which is between the permissible limits in terms of Section 11AB. Consequently, the demand notices are quashed and interest on delayed payment has to be recomputed - Following decision of Lucid Colloids Ltd. Vs. Union of India 2005 (8) TMI 134 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR - Decided against Revenue.

Summary

Issues:
1. Appeal against order passed by Commissioner (Appeals) regarding differential interest and penalty under Central Excise Rules, 2002.

Analysis:
The Appellate Tribunal CESTAT Chennai heard an appeal filed by the Revenue against an order passed by the Commissioner (Appeals). The original authority had demanded a sum as the differential interest payable under Rule 8 of the Central Excise Rules, 2002, and imposed a penalty. However, the Commissioner (Appeals) set aside the adjudication order. It was noted that the respondent had delayed payment of duty under Rule 8 of the said Rules but subsequently paid the duty along with interest under Section 11AB of the Central Excise Act, 1944. The issue revolved around a show-cause notice proposing interest payment under Rule 8. Reference was made to a judgment by the Hon'ble Rajasthan High Court in Lucid Colloids Ltd. Vs. Union of India, which held that the part of Rule 8(3) specifying interest rates was invalid. The High Court ruled that interest on delayed payment should be computed at the rate of 2% per month or 24% per annum as notified by the State Government, falling within the permissible limits of Section 11AB.

The Appellate Tribunal, in light of the Rajasthan High Court decision, found that the demand of interest at a fixed daily rate was unsustainable. Consequently, the Tribunal upheld the order passed by the Commissioner (Appeals) and dismissed the appeal filed by the Revenue. It was further mentioned that the cross-objection filed by the respondents was also disposed of in this regard. The judgment was dictated and pronounced in open court by one of the judges.