2018 (1) TMI 642 - HC - Central Excise

Demand of interest u/r 96ZO(3) of the CER, 1944 - quantification of interest - Held that - a stand has been taken that several notices were issued to the petitioner for payment of interest, but they have not complied with the said demand. Since the Court was not satisfied with the contentions raised by the petitioner, it directed the respondent to produce the original files by order dated 31. 07. 2017. However, files are not forthcoming from the Department and the Department has not given any instruction to the learned Senior Panel Counsel in this regard. There will be a direction to the first respondent to issue a fresh demand giving breakup details as to how the interest had been computed and thereafter, proceed to recover the interest in accordance with law - petition disposed off.

Summary

Issues:
Challenge to notice for interest payment under Order-in-Original, Quantification of interest amount, Lack of notice prior to demand, Non-compliance with demand notices, Failure to produce original files by Department, Breakup details for interest computation.

Analysis:

1. The petitioner contested a notice from the first respondent demanding payment of interest amounting to ?15,49,857 following Order-in-Original No. 25 of 2002. The interest was calculated under Rule 96ZO(3) of the Central Excise Rules, which was deemed unconstitutional by the Supreme Court in a previous case. Despite this, no saving clause was provided for past cases, leading to the petitioner's liability for the interest payment.

2. The petitioner argued that they were unaware of how the interest amount was determined and claimed their liability was only ?1.91 lakhs, highlighting a significant discrepancy. Additionally, the petitioner contended that no prior notice was served before the demand was made. However, the court dismissed this argument, stating that interest payment becomes automatic post Order-in-Original issuance.

3. The counter affidavit revealed that multiple notices were issued to the petitioner for interest payment, which they failed to comply with. The court, dissatisfied with the petitioner's contentions, directed the Department to produce original files. However, the Department failed to provide the files, and no instructions were given to the Senior Panel Counsel regarding the same.

4. Despite rejecting most of the petitioner's contentions, the court agreed that the petitioner has the right to understand how the interest amount was calculated. Consequently, a direction was issued to the first respondent to issue a fresh demand with a detailed breakup of the interest computation before proceeding with the interest recovery in compliance with the law.

5. The Writ petition was disposed of without costs, emphasizing the importance of providing transparency in the calculation of interest amounts demanded from parties involved in legal proceedings.