2016 (8) TMI 1070 - AT - Central Excise

Refund claim of interest paid for the delay in discharging adjudication levies imposed on them - liability to pay interest under Section 11AB of the Central Excise Act 1944 - Held that - the impugned order is not sustainable in law on the ground that interest cannot be demanded from the appellant under Section 11AB which was never resorted to in the show-cause notice and in the Order-in-Original. All along the proceedings the case of the department was that the appellant is liable to pay interest under Section 11AA and not liable to pay interest under Section 11AB of the Central Excise Act 1944. The impugned order setting up a new case on behalf of the Revenue is not permissible under law as held by various judgments. Similarly the Board s circular dated 26.08.2002 also clarified that Section 11AB can be invoked only in respect of the clearances made after 28.09.1996 irrespective of the date of passing of the adjudication order and admittedly the clearances in the present case were made during the period 1984-85 to 09.05.1989 which is much before 28.09.1996. Further the Board s Circular is binding on the Revenue in view of the various judgments. - Decided in favour of the appellant with consequential relief

Summary

Issues:
Refund claim rejection under Section 11AA and 11AB of the Central Excise Act 1944.

Issue 1: Refund Claim Rejection under Section 11AA
The appellant filed a refund claim for interest paid due to delay in discharging adjudication levies. The department seized documents suspecting duty evasion, leading to a series of adjudication orders and appeals. The Commissioner of Central Excise, Mangalore reduced the duty but imposed penalties. The appellant contended that Section 11AA, introduced in 1995, did not apply to their case as duty became payable after the Finance Bill 2001. Despite the Commissioner (Appeals) ruling in favor of the appellant on this issue, the appeal was rejected based on liability under Section 11AB. The appellant argued that Section 11AB was not part of the original dispute and cited various cases to support the principle that new grounds cannot be introduced beyond the original order or show-cause notice.

Issue 2: Liability under Section 11AB
The appellant further argued that even under Section 11AB, they were not liable to pay interest as per a Board circular clarifying that Section 11AB applies only to clearances made after 1996. The appellant cited a Madras High Court case and a Tribunal decision to support this argument. The appellant also contended that the Revenue cannot demand interest without a proposal in the show-cause notice, citing a Madhya Pradesh High Court case. The department argued that interest under Section 11AB is retrospective and can be demanded even if not initially invoked in the notice or order.

Judgment:
After considering arguments and case laws, the Tribunal held that the impugned order was not sustainable as interest could not be demanded under Section 11AB, which was not part of the original dispute. The Tribunal emphasized that new grounds cannot be introduced beyond the original order or notice. The Board's circular specifying the applicability of Section 11AB to clearances made after 1996 was deemed binding. Therefore, the Tribunal set aside the impugned order, allowing the appeal of the appellant with any consequential relief.