2024 (12) TMI 1134 - AT - Central Excise

Liability of appellant to pay interest u/s 11AA of the Central Excise Act, 1994 when neither the show cause notice nor the adjudication order therein propose levy of interest - principles of natural justice - HELD THAT - When, admittedly, the said provision was not there in the statute at the time of issuance of show cause notice nor specified in the Order-in-Original therein. Admittedly the said provision were inserted w.e.f. 26.5.1995 vide Section 73 of the Finance Act, 1995 which provides that Where a person chargeable with duty determined under sub-section (2) of Section 11A, fails to pay such duty within three months from the date of such determination, he shall pay in addition to the duty, interest at the rate not below 18% and not exceeding 36% per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till date of payment of such duty. On identical issue, a co-ordinate Bench of the Tribunal in the matter of Excel Tyre Rubber Products vs. CCE, Mangalore 2016 (8) TMI 1070 - CESTAT BANGALORE after going through various decisions cited by the revenue in support of their submission for charging interest, including the decision of Prabhat Zarda Factory Ltd. 2002 (2) TMI 228 - CEGAT, NEW DELHI , has held that interest cannot be demanded from the appellant therein which was never resorted to either in the show cause notice or in the Order-in- Original - the views taken therein agreed upon. The department cannot deduct and adjust or charge any interest which was neither proposed in the show cause notice nor imposed in the Order-in-Original by the Adjudicating Authority - the impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Liability to pay interest under Section 11AA of the Central Excise Act, 1994 when not proposed in show cause notice or adjudication order.

Analysis:
The appellant, engaged in manufacturing sugar confectionery, challenged an Order-in-Appeal rejecting their appeal and confirming a demand for Central Excise duty without proposing interest under Section 11AA in the show cause notice or Order-in-Original. The subsequent refund claim was partially allowed, deducting penalties and interest from the refund amount. The appellant contested the interest deduction, leading to appeals and judicial proceedings.

The main issue revolved around the legality of charging interest under Section 11AA when not mentioned in the show cause notice or the Order-in-Original. The Tribunal analyzed the statutory provision inserted w.e.f. 26.5.1995, emphasizing that recovery without a legal basis is impermissible. The Tribunal highlighted a case law precedent from the Hon'ble Madhya Pradesh High Court cited by the appellant, criticizing the Adjudicating Authority's dismissal of its applicability based on the court's jurisdiction.

Furthermore, a co-ordinate Bench precedent was cited, asserting that interest cannot be demanded if not specified in the show cause notice or Order-in-Original. The Tribunal concurred with this stance, emphasizing that interest cannot be charged without proper authorization. Consequently, the impugned order was set aside, and the appeal was allowed, granting any consequential relief as per law.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the necessity of a legal basis for charging interest under Section 11AA and disallowing recovery without explicit mention in the relevant documents. The judgment highlighted the importance of adherence to legal provisions and precedents in tax matters, ensuring fair treatment and due process for taxpayers.