2015 (2) TMI 340 - AT - Central Excise

Duty demand u/s 11D - Interest u/s 11AB - Reversal of CENVAT Credit - appellant were using common Cenvat credit availed inputs for manufacture of dutiable final product and exempted final products and in respect of clearance of exempted final products, in accordance with the provisions of Rule 57CC of Central Excise Rules, were paying an amount equal to the 8% of the sale value - appellant were mentioning this amount being paid to the Government under Rule 57CC of the Central Excise Rules, 1944 in their invoice as modvat reversal and were recovering this amount from the customers - Department seeks to recover the amount recovered from customers - Held that - Initially there was no provision for charging of interest on the amount determined as payable under Section 11D (3). Such a provision was made by inserting Section 11DD w.e.f. 14/5/03. The amount payable under Section 11D is not the same as the duty which has not been levied or paid or has been short paid or which has been erroneously refunded and whose recovery is recovered by Section 11A. The provisions of Section 11AB are applicable only to the duty which has not been levied or has been short levied or short paid or has been erroneously refunded and has been held as recoverable from a person in terms of Sub-Section (2) of Section 11A. We are of the view Section 11AB is not applicable to the amount recoverable under Section 11D (3) readwith Section 11D (1) and 11D (2). The provisions of recovery of interest on the amount determined as payable under Section 11D (3) was made only w.e.f. 14/5/03 by inserting Section 11DD and in absence of any specific provision regarding its retrospective application, the same cannot be applied retrospectively. Therefore, no interest under Section 11AB was chargeable on the demand confirmed under Section 11D (3). - impugned order upholding the recovery of interest under Section 11AB on the amount demanded under Section 11D (3) by adjustment against refund claim payable to the appellant is not sustainable. The same is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Whether interest under Section 11AB is chargeable on the amount payable under Section 11D.
2. Whether the provisions of Section 11DD can be applied retrospectively.
3. Whether the orders of the Joint Commissioner, Commissioner (Appeals), and Tribunal regarding the levy of interest under Section 11AB are valid.

Analysis:

Issue 1:
The appellant used common Cenvat credit for dutiable and exempted final products, paying 8% of the sale value of exempted products under Rule 57CC. The Department claimed this amount was excise duty recoverable from the appellant. The Joint Commissioner confirmed a demand under Section 11D, with interest under Section 11AB and penalty under Section 11AC. The Commissioner (Appeals) upheld the demand and penalty, but was silent on interest. The Tribunal confirmed the demand but set aside the penalty. The appellant argued that interest under Section 11AB should not apply as the amount under Section 11D is not excise duty. The Tribunal agreed, stating Section 11AB doesn't apply to Section 11D payments.

Issue 2:
Section 11D (1) mandates the collection of excess duty from buyers to be paid to the Central Government. Section 11DD, effective from 14/5/03, introduced interest provisions for Section 11D payments. The Tribunal held that Section 11AB doesn't apply to Section 11D payments, as there was no retrospective application mentioned for Section 11DD.

Issue 3:
The Revenue argued that the CCE (Appeals) and Tribunal upheld the interest levy under Section 11AB. However, the CCE (Appeals) order was silent on interest, and the Tribunal's order didn't mention interest under Section 11AB. The Tribunal clarified that interest liability under Section 11AB doesn't automatically apply to demands under Section 11D. As Section 11DD wasn't retrospective, interest under Section 11AB wasn't applicable to the demand confirmed under Section 11D during the dispute period.

In conclusion, the Tribunal set aside the order upholding the interest recovery under Section 11AB on the amount demanded under Section 11D, as it was deemed unsustainable. The appeals were allowed, emphasizing the inapplicability of Section 11AB to Section 11D payments during the dispute period.