2015 (9) TMI 92 - AT - Central Excise

Demand of interest u/s 11AB on differential duty - Extended period of limitation - Held that - The relevant date for demanding interest will have to be mutatis mutandis, one year from the date of payment of interest made under Section 11A of the Central Excise Act, 1944, because on the date of payment of duty only the exact amount of interest, from the date of clearances to the date of payment of differential duty, can be calculated for the purpose of issuing a quantified demand on account of interest. The demand for interest was thus issued within a period of one year. Non-payment of interest on account of Revenue Neutrality - Held that - none of these two High Court orders were placed before the cases relied upon by the learned Authorised Representative. Jurisdictional Gujarat High Court held in CCE &C, Vadodara-II Vs Indeos ABS Ltd (2010 (3) TMI 656 - GUJARAT HIGH COURT) that when supplies are made to the sister concerns then demand cannot be upheld on Revenue Neutrality which means both differential duty and interest cannot be demanded. Further, in view of Hon ble Bombay High Courts order in the case of CCE Pune II Vs Siddheshwar Textile Mills Pvt.Ltd. (2014 (11) TMI 621 - BOMBAY HIGH COURT) when duty demand itself is not sustainable on Revenue Neutrality, it will not be correct to demand interest on differential duty voluntarily paid by the Appellant. - Decided in favour of assessee.

Summary

Issues:
1. Time-barred demand of interest under Section 11AB of the Central Excise Act, 1944.
2. Applicability of Revenue Neutrality in demanding interest on differential duty.

Issue 1: Time-barred demand of interest under Section 11AB:

The Appellant challenged the demand of interest confirmed under Section 11AB of the Central Excise Act, 1944, in their appeal against OIO No.38/Demand/Commr.1/2008. The Advocate for the Appellant argued that the show cause notice demanding interest for clearances made during April to December 2006 was time-barred, relying on case laws such as GSFC Ltd Vs CCE Vadodara-I. The Revenue contended that the demand was not time-barred as the relevant date under Section 11A should be calculated from the date of payment of differential duty, which was within one year in this case. The Tribunal observed that the demand for interest was issued within a period of one year from the date of payment of duty, rejecting the Appellant's argument that the period should be calculated from the date of clearances. The appeal was allowed based on this analysis.

Issue 2: Applicability of Revenue Neutrality in demanding interest on differential duty:

The second issue revolved around the applicability of Revenue Neutrality in demanding interest on differential duty. The Appellant supplied Caprolactum to their sister concern, and the duty was discharged based on cost data and a CAS-4 certificate. The differential duty was paid for clearances made during April 2006 to December 2006, and a show cause notice was issued in July 2008. The Advocate for the Appellant argued that Revenue Neutrality should apply, citing case laws like CCE & C Vadodara-II Vs Indeos ABS Ltd. The Tribunal noted that the High Courts had held that demands cannot be upheld in a revenue-neutral situation, especially in cases of supplies to sister concerns. Since the duty demand itself was not sustainable on Revenue Neutrality, demanding interest on the voluntarily paid differential duty was deemed incorrect. The appeal of the Appellant was allowed based on the settled proposition of law and the observations made.

In conclusion, the judgment by the Appellate Tribunal CESTAT AHMEDABAD addressed the issues of a time-barred demand of interest under Section 11AB and the applicability of Revenue Neutrality in demanding interest on differential duty. The detailed analysis considered arguments from both sides, relevant case laws, and legal provisions to arrive at a decision allowing the appeal of the Appellant.