Payment of Interest - Central Excise Practice Manual (OLD) - Central Excise

PAYMENT OF INTEREST Interest is chargeable in the following cases - 1. On delayed payment of duty [interest payable as per section 11AB] - According to Section 11AB, where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay duty as determined under section 11A, shall in addition to the duty liability, is liable to pay interest as follows: - · In the normal cases, interest will be chargeable for the period of delay after 3 months from the date of determination of duty liability till the date of payment of duty. · In cases where duty is not paid on account of fraud, suppression etc., the interest will be chargeable from the 1 st date of the month following the month in which the duty was not paid. Other points to be noted regarding section 11AB - · Such rate cannot be less than 10% and not more than 36% per annum and as fixed by the government from time to time. The rate has been fixed at 13% w.e.f. 12-9-2003. · The provisions of section 11AB as amended w.e.f. 11-5-2001 by the Finance Act will apply only to the cases, where the amount of duty had become payable or ought to have been on or after 11-5-2001. · Sometimes, Board issues orders, instructions or directions under section 37B for the uniformity of duties of excise. If the assessee pays such duty in full, without reserving any rights of appeal or payment under protest, within 45 days from the date of issue of such order, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid. This relaxation does not apply if assessee pays duty on receipt of a show cause notice or even otherwise pays duty on his own. · Where the duty determined to be payable is increased or decreased by the Commissioner (Appeals), the Appellate Tribunal or, by the court, the interest shall be payable on such increased or reduced amount of duty. Note: Section 11AA applies where, duty has become payable before 11-5-2001. Under this section interest was chargeable on delayed payment of duty after 3 months from the date of determination of duty liability by the under section 11A(2). After 11-5-2001 interest on delayed payment of duty will be payable as per Rule 8(3). Rule 8(3): as per this rule, where assessee fails to pay the duty by the due date, he shall be liable to pay the outstanding amount along with interest, for the period starting with the 1 st day after due date till the date of actual payment of the duty. This rule is applicable when the assessee himself assess the duty at the time of clearance and is require to pay duty by the following month. 2. On Cenvat credit taken or utilized wrongly [interest payable as per section 11A and 11AB] - If the Cenvat credit has been taken or utilized wrongly, the same shall be payable along with interest as per provisions of section 11A and 11AB of CEA. If the 'amount' which is payable under Rule 6 of Cenvat credit rules is not paid, the same can also be recovered along with interest. Penalty is also leviable in case of wrongful utilization of Cenvat credit on inputs, capital goods and input services . For details regarding penalty on wrongful utilization of Cenvat credit refer Cenvat credit section. 3. On the amounts collected in excess of the duty [interest payable as per section 11DD] - As per section 11DD, where an amount has been collected in excess of the duty assessed or determined or paid on any excisable goods from the buyer of such goods, the person who is liable to pay duty as determined under section 11D(3), shall in addition to the duty liability, be liable to pay interest. · The interest will be chargeable from the 1 st date of the month following the month in which the amount ought to have been paid. · Such rate cannot be less than 10% and not more than 36% per annum and as fixed by the government from time to time. The rate has been fixed at 13% w.e.f. 12-9-2003. · Sometimes, Board issues orders, instructions or directions under section 37B for the uniformity of duties of excise. If the assessee pays such duty in full, without reserving any rights of appeal or payment under protest, within 45 days from the date of issue of such order, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid. This relaxation does not apply if assessee pays duty on receipt of a show cause notice or even otherwise pays duty on his own. · Where the duty determined to be payable is increased or decreased by the Commissioner (Appeals), the Appellate Tribunal or, by the court, the interest shall be payable on such increased or reduced amount of duty. Interest payable by the Excise Department on delayed refund of duty [interest is payable by the department as per section 11BB] - As per section 11BB, if any duty is ordered to be refunded as per section 11B to any applicant is not refunded within 3 months from the date of receipt of application under section 11B(1), the Department, shall, in addition to the amount to be refunded as determined under section 11B, be liable to pay interest. · Interest shall be payable for the period of delay after the expiry of 3 months, from the date of receipt of application of refund till the date of refund of duty. · Such interest will not be less than 5% and not more than 30% per annum and as fixed by the government from time to time. The rate has been fixed at 6%. · Other points to be noted w.r.t. interest - · No interest is payable in respect of fines and penalties. · In case assessee loses in appeal, interest will be payable right from the original demand and not from the date when the appeal is decided. · No interest on interest payment, if payment of interest is delayed. However, it will be regarded as offence.