2018 (1) TMI 1126 - AT - Central Excise

Interest on delayed payment of duty - section 11 A of the Central Excise Act, 1944 - extended period of limitation - Held that - The SCN as well as the impugned order has invoked section 11 AA for demanding the interest liability. As brought out by the argument of the Id. counsel for the appellant, the said section has been introduced only in 2011 and therefore not applicable to the disputed period. Thus, the demand raised in the SCN has no legal basis - The Hon ble High Court in the case of Hindustan Insecticides Ltd. 2013 (8) TMI 225 - DELHI HIGH COURT , held the issue in favor of assessee holding that limitation would mutatis mutandis apply for demand of interest - the impugned order is modified only to the extent of setting aside the demand of interest without disturbing the appropriation of the duty amount paid by the appellant - appeal allowed in part.

Summary

Issues:
Applicability of interest demand under section 11AA of Central Excise Act, 1944 for belated payment of duty.

Analysis:
The case involved the appellants, engaged in the manufacture of oil seeds, who took physical stock verification of finished and semi-finished goods periodically. Any shortages noticed during verification were written off as expenditure in the books of accounts and the excise duty involved was discharged. A show cause notice was issued to the appellants for belatedly discharging excise duty for the period 2008-09 to 2010-11 and demanding interest under section 11AA of the Central Excise Act, 1944. The original authority and Commissioner (Appeals) confirmed the interest demand.

On appeal, the appellant's counsel argued that the demand of interest was time-barred as the show cause notice was issued beyond the five-year period. It was contended that section 11AA, invoked for demanding interest, was not applicable to the disputed period as it came into force only in 2011. The appellant had paid the duty in 2012 along with interest, and there was no suppression of facts regarding the write-off of goods in their accounts.

The Assistant Commissioner, representing the respondent, supported the findings of the impugned order and emphasized the liability of the appellant to pay interest for belated duty payment under section 11AA.

The Tribunal noted that the appellants had paid the duty in 2012, and the show cause notice was issued in 2015 for the period 2008-09 to 2010-11, exceeding the limitation period of five years under section 11A of the Act. The demand for interest was based on section 11AA, which was introduced in 2011 and not applicable to the disputed period. Referring to a judgment of the Delhi High Court, it was observed that the limitation period should apply mutatis mutandis for the demand of interest. Consequently, the Tribunal set aside the interest liability, modifying the impugned order.

In conclusion, the impugned order was partly allowed by setting aside the demand for interest while upholding the appropriation of the duty amount paid by the appellant. The decision was pronounced in open court on 25.10.2017.