Tamilnadu Asbestos (Pipes) vs Commissioner Of Central Excise

[Arising out of Order-in-Appeal No.16/2008 dated 24.9.2008 passed by the Commissioner of Central Excise (Appeals), Trichy]

Tamilnadu Asbestos (Pipes)

Appellant

Versus

Commissioner of Central Excise, Tirichirapalli Respondent

Appearance:

Shri S. Murugappan, Advocate For the Appellant Shri M. Rammohan Rao, DC (AR) For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing : 17.3.2015 Date of Pronouncement : 26.06.2015

FINAL ORDER No._40677/2015

1. In the present case, the Hon'ble High Court, Madras in C.M.A.No.2072 of 2013 in M.P.No.1 of 2013 dt. 25.7.2013 set aside the Tribunal's Final Order No.1877/2009 dt. 4.12.2009 wherein the appeal was dismissed for want of COD clearance as the appellant in a PSU. The Hon'ble High Court in the above order allowed the appellant's appeal and directed the Tribunal to hear the appeal on merits. Accordingly, the appeal is taken up for deciding the case on merits.

2. The appellant preferred this appeal against the Commissioner (Appeals) order dt. 24.9.2008 and the issue relates to only demand of interest under Section 11AA of the Central Excise Act.

3. The brief facts of the case are that appellants availed modvat credit on the inputs as well as on the capital goods during the year 1995 and 1999. Adjudicating authority disallowed the credit of Rs.3,72,877 and confirmed the demand. The said was order was upheld both by Commissioner (Appeals) and this Tribunal vide Final Order No.854 to 858/2005 dt. 17.6.2005 and the appellants have paid the entire demand amount. The Department issued fresh SCN dt. 8.5.2007 demanding interest on the amount already paid by the appellant and proposed to recover the interest under Section 11AA of Central Excise Act. The adjudicating authority confirmed the interest of Rs.5,68,890/-. The same was upheld by Commissioner (Appeals) vide impugned order. Hence the present appeal.

4. Ld. Advocate for the appellants submits that the demand relates to denial of cenvat credit under CCR and the relevant provisions applicable for reversal of cenvat credit is provided under Rule 57I of CCR. When the recovery of irregular credit made under CCR, the interest cannot be demanded under Section 11AA as it is not a demand made under Section 11A of Central Excise Act. He further submits that Commissioner (Appeals) has gone beyond the scope of SCN and also submits that allegations made in the show cause notice in paras 2 & 5 of the SCN are contrary. He further submits that reversal of credit was confirmed in the year 1999 to 2000 and if at all any interest is to be demanded, it should be made within one year. Limitation of time is applicable to demand of interest under Section 11AA and he relied on the following citations :-

(i) Hindustan Insecticides Ltd. Vs CCE LTU 2013 (297) ELT 332 (Del.)

(ii) Kwality Ice Cream Company Vs UOI 2012 (281) ELT 507 (Del.)

5. On the other hand, Ld. A.R. reiterated the findings. He submits that the reversal of cenvat credit has been made under Rule 57I, when the authority disallowed credit, it is deemd to be treated as duty not paid. Evenafter the Tribunal's order assessee has not paid entire amount in one lump sum but paid in various challans. Therefore, it is a case of non-payment of duty. Therefore, Section 11AA is rightly invoked for demanding interest and there is no time limit for recovery of interest which is automatic.

6. After hearing both sides I find that the short issue relates to whether demand of interest under Section 11AA is sustainable or otherwise. On perusal of records, the case relates to wrong availment of cenvat credit on inputs and capital goods availed during the year 1995-99 and the adjudicating authority confirmed the demand in the year 1998 and 2000. Their appeal was dismissed by Commissioner (Appeals) and this Tribunal. The appellant thereafter paid the amount but not paid the interest amount. The appellant's main contention that the demand of reversal of irregular credit availed on inputs and capital goods and cleared and demand confirmed under erstwhile Rule 57I & 57U of CER, Section 11AA cannot be made applicable for demand of interest. Their above plea is not justified for the reason that Sub-Rule (3) of Rule 57I and Sub-Rule (8) of Rule 57U of CER clearly stipulates the recovery of interest where the appellant ails to pay amount determined within 3 months from the date of order the interest shall be payable as per Section 11AA of CEA. By virtue of the above provision of Rule 57(I) and Rule 57(U), Section 11AA is made applicable for demand of interest in recovery of modvat cases.

7. Further, I find that once the demand is confirmed and the same is upheld by the higher Appellate Forum the interest is automatic. The appellants having availed and utilized the credit for payment of excise duty which is due to the govt. interest is leviable for which no notice is required.

8. Further, it is relevant to state that the wordings used in Rule 57 I (3) and 57U (8) of CER is very clear and unambiguous. Sub-Rule (3) of Rule 57I is reproduced as under :-

"(3) Where a manufacturer or an assessee fails to pay the amount determined under sub-rule (1) or sub-rule (2) within three months from the date of receipt of demand notice, he shall pay, in addition to the amount so determined, interest at such rate, as may be fixed, by the Central Board of Excise and Customs under section 11AA of the Act, from the date immediately after the expiry of the said period of three months till the date of payment."

The word "shall" used in the above sub-rule confirms that there is no option to the appellant/assessee and interest shall be payable after expiry of 3 months from the date of receipt of confirmation of the demand.

9. The Hon'ble High Court of Bombay in the case of CCE & C Aurangabad Vs Padmashri V.V.Patil S.S.K. Ltd. - 2007 (215) ELT 83 (Bom.) clearly held in favour of the Revenue and interest is a civil liability of assessee who has retained the amount of government dues and interest is compulsory. The relevant portion of the order is reproduced as under :-

"7.?Considering the scheme together, it is evident that interest chargeable u/s. 11AB is a sort of civil liability of the assessee, who has failed to pay the duty or who has short paid the duty. This is irrespective of the fact whether such non-payment/short payment is innocent or mala fide. ...........

10. So far as? interest u/s. 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the Official Gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable u/s. 11AB are declared.

The second aspect would be whether there is any discretion not to charge the interest u/s. 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied/short paid/non-levied/unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of sub-section (1) of Section 11, which runs thus :

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 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 at such rate ........ The terminal part in the quotation above, which is couched with the words shall and be liable clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier. Upon reading Section 11AB together with Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional."

The Hon'ble High Court order is equally applicable to the present case where interest demand is under Section 11AA. Further, it is pertinent to state that it is not the case where the appellant has not voluntarily paid the amount but paid the dues only after they lost their appeal before this Tribunal and accepted the Tribunal order. It is evident that the appellants have availed the credit and also utilized the same for payment of excise and enjoyed the amount which is due to the Govt. By virtue of wordings used in Rule 57I (3) and Rule 57U(8) the interest is automatic and shall be payable even if no notice issued.

10. In view of foregoing discussions, and by respectfully following the Hon'ble High Court above decision(supra), I hold that the interest is payable on the amount already confirmed and upheld by the Tribunal which was belatedly paid only after the Tribunal's order. Accordingly, the impugned order is upheld and the appeal is rejected.

(Pronounced in open court on 26.06.2015)

(R. PERIASAMI) TECHNICAL MEMBER

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