2017 (1) TMI 537 - AT - Central Excise

Interest on differential duty - Supplementary invoices - Time limitation - Held that - Supreme Court of India in the case of CCE Vs. SKF India Ltd. reported in 2009 (7) TMI 6 - SUPREME COURT wherein it has been held that whenever the assessee recovered differential price by raising supplementary invoices and paid differential duty it implies that there was a short payment of duty though completely unintended and without any element of deceit and such payment of differential duty clearly came under sub-section (2B) of Section 11A and attract levy of interest under Section 11AB of the Act - the legal position is not in doubt that interest is liable to be paid from the date of original clearance of goods till the date of payment of differential duty on supplementary invoices. Regarding time limitation - when the normal time limit prescribed is one year from the relevant date for recovery of the principal amount, it is reasonable to adopt the same period for recovery of interest as well. Therefore in the instant case, we are of the view that Department should have initiated the proceedings for recovery of interest within a period of one year from the date of filing of monthly returns. Since the show-cause notice for payment of interest has been issued only on 20.01.2010 for recovery of interest for the period June 2007 to December 2007, it will be beyond the period of one year and therefore will be barred by limitation - Appeal allowed - decided in favor of the assessee.

Summary

Issues involved:
1. Liability to pay interest on differential duty.
2. Time limitation for issuance of show-cause notice for recovery of interest.

Issue 1: Liability to pay interest on differential duty:
The appellant, engaged in the manufacture of Electrical Conductors, raised supplementary invoices post-clearance, leading to differential duty payment without interest as per Section 11AB of the Central Excise Act 1944. The Department demanded interest on the differential duty paid during June to December 2007. The contention was whether interest should be paid on such duty and from which date. The Hon'ble Supreme Court rulings in CCE Vs. SKF India Ltd. and CCE Vs. International Auto Ltd. clarified that interest is leviable on unintentional short payment of duty. The Court also noted the pending issue of interest chargeability referred to a Larger Bench. The legal position established that interest is payable from the original clearance date till the payment of differential duty on supplementary invoices.

Issue 2: Time limitation for issuance of show-cause notice for recovery of interest:
The appellant argued that the show-cause notice issued on 20.01.2010 for interest recovery from June to December 2007 was time-barred, citing the need for notice within one year under Section 11A. The Department contended that there is no time limit for interest recovery notices, supported by the case of M/s. SKH Auto Components Ltd. The Tribunal analyzed the definition of the relevant date in Section 11A and the prospective nature of amendments. Referring to the decision in Commissioner Vs. T.V.S. Whirlpool Ltd., the Tribunal held that the one-year limitation for principal amount recovery should apply to interest claims as well. As the notice was issued beyond one year from the relevant date, it was deemed barred by limitation, especially considering a prior notice for a different period had been quashed.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, emphasizing the importance of adhering to the prescribed time limits for interest recovery notices, aligning them with those for principal amount claims.