M/S Kachchh Steels Pvt Ltd vs Commissioner Of Central Excise-Rajkot

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial)

Date of Hearing / Decision : 16/2/2015

ORDER No. A/10501 / 2015 dtd 16/2/2015

Per : Mr.P.K. Das,

The relevant facts of the case, in brief, are that the appellants are engaged in the manufacture of TMT Bars classifiable under Chapter 72 of the Central Excise Tariff Act 1985. They had wrongly taken cenvat credit during the period August 2004 to June 2006 and reversed the credit in the cenvat account during the period May 2005  2006. The appellant in their monthly return ER1 mentioned the reversal of credit. The Central Excise audit party during the scrutiny of the record noticed the reversal of credit wrongly availed. A show cause notice dated 8.8.2011was issued proposing the demand of interest amounting to Rs 78,702/-on wrongly availed/utilised cenvat credit under Section 11AB of Central Excise Act 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 and also to impose penalty under Section 11AC of the Central Excise Act, 1944 read with Rules 15 of the Rules 2004. The Adjudicating Authority confirmed the demand of interest of Rs 78,702/- under Section 11AB of the Central Excise Tariff Act 1944 and the penal provision was dropped. By the impugned order, the Commissioner (Appeals) upheld the adjudication order.

2. The Ld Advocate on behalf of the appellant submits that the appellant reversed the credit voluntarily in 2005-2006 and the show cause notice issued on 8.8.2011 is barred by limitation. He relied upon the decision of the Tribunal in the case of :

a) Collector of Customs, Madras vs TVS Whirpool Ltd  1996(86)ELT.144 (Tri.) upheld by the Honble Supreme Court as reported in 2000(119)ELT A-177 (SC)

b) Gujarat State Fertilizers & Chem Ltd vs CCE, Vadodara  2013(289)ELT.489 (Tri. Admd).

3. The Ld Advocate also submits that they have not utilised the credit and therefore the payment of interest would not arise. It is further submitted that the Adjudicating authority had categorically observed that there is no suppression of fact with intent to evade payment of duty and penalty under Section 11AC was dropped.

4. On the other, the Ld Authorised Representative on behalf of the Revenue reiterate the findings of the Commissioner (Appeals). He submits that the payment of interest is automatic on delayed payment of duty. He submits that no limitation would apply in respect of payment of interest. It is submitted that the limitation would apply in respect of demand of duty under Section 11A of the Act.

5. After hearing both the sides and on perusal of records, I find that Section 11AB of the said Act, 1994 (as it stood) provides where any duty of excise has not been paid/levied etc., the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of Section 11A, shall, in addition to the duty, be liable to pay interest. Section 11A(2) states that the Central Excise Officer, shall after considering the representation, determine the amount of duty of excise due from such person, and thereupon such person shall pay the amount so determined. Proviso to sub Section (2B) of Section 11A states that if such person has paid the duty in full together with interest and penalty under sub-section (2B), the proceedings in respect of such person to be deemed to be conclusive. Sub section 2, 2(B) of Section 11A states that when any duty of excise has not been levied or paid or has been short levied or short levied etc., the person chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty, and inform the Central Excise Officer of such payment in writing, who in receipt of such information shall not serve any notice under Section 11A (1). Proviso to Section 11A (2B) of the said Act provides the Central Excise Officer in his opinion that the duty has not been paid by such person, then he shall proceed to recover such amount in the manner specified in this section, and the period of one year referred to sub section 1 shall be counted from the date of receipt of such information of payment. On plain reading of section 11 AB of the said Act, it is clear the interest of delayed payment of duty is arising on liability to pay the duty as determined under Sub Section (2) or has paid the duty under Section 11A. The Section 11A, (2B) provides the limitation to issue the notice within one year from the date of receipt of information of payment of duty.

6. In the present case, it is seen from the show cause notice that the appellant reversed the credit in the monthly ER1 return which was audited by the Central Excise audit party during the period 2004-2006. The Central Excise audit party after examining the ER1 return, detected the non-payment of interest. Show cause notice was issued on 8.8.2011 after more than 4= years. The Adjudicating Authority had given a clear finding that there is no suppression of fact with intent to evade payment of duty and dropped the penalty under Section 11AC of the Act.

7. In my considered view, the liability of the payment of interest under Section 11AB linked with sub section (2) or (2B) of Section 11A where the limitation is prescribed. In the present case, the demand notice was issued beyond the period of limitation as prescribed under Section 11A (2B) of the said Act and therefore the demand of interest could be not sustained.

8. The Tribunal in the case of TVS Whirlpool Ltd (supra) held that no prescribed time limit for such demand/recovery of interest, time limit of 6 months or 5 years, as the case may be, under Section 28 of the Customs Act would be applicable. The Honble Supreme court upheld the said order with the observation that the period of limitations that applies claim for the principal amount should also apply for the claim of interest thereon. The Tribunal in the case of Gujarat State Fertiliser Co Ltd (supra) on the identical situation set aside the demand of interest as time barred.

9. In view of the above discussion, the impugned order to the extent of demand of interest is set aside. The appeal is allowed with consequential relief.

(Dictated and pronounced in the Court)

(P.K. Das) Member (Judicial)

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