2012 (1) TMI 88 - HC - Central Excise

One-year limitation applies equally to duty and interest; delayed interest demands barred absent fraud, concealment or misstatement

Kwality Ice Cream Co. and Anr. Versus UOI and Anr.

HC quashed the default notices and demand letters seeking interest on a previously paid duty, holding the limitation period for interest follows that for ... Seeking to quash the default notices of demand and the demand letters - Whether the demand for payment of interest would be barred on account of delay and laches – duty imposed vide order dated 12.09.2001 paid by assessee - no direction for payment of interest in order-in-original or in the appellate order - letter dated 10.11.2004 demanding differential duty issued - another letter dated 19.10.2005 demanding interest on differential duty issued - Held that:- The Supreme Court in CCE VERSUS TVS WHIRLPOOL LTD. [1999 (10) TMI 701 - SC ORDER] held as under:- 'It is only reasonable that the period of limitation that applies to a claim for the principal amount should also apply to the claim for interest thereon. We find no merit in the appeals and they are dismissed with costs.' It is, therefore, clear that the principle adopted by the Supreme Court was that the period of limitation, unless otherwise stipulated by the statute, which applies to a claim for the principal amount should also apply to the claim for interest thereon. Period of limitation prescribed for demand of duty u/s 11A is normally one year and, in exceptional circumstance of a case falling under the proviso to Section 11A(1), the period of limitation is five years. But that would be applicable only in case of misstatement, fraud, concealment etc., which is not the case here. As such, in the present case, the period of limitation for the demand for duty would be one year. Thus, the period of limitation for demand of interest thereon would be one year - Decided in favor of assessee. Issues:Quashing of default notices of demand and demand letters for interest on central excise duty, consideration of delay and laches in the demand for interest, applicability of the period of limitation for the claim of interest, relevance of Supreme Court decision on limitation for interest claims, examination of the duty payment necessity, finality of Commissioner's order, and the ultimate decision on the writ petition.Analysis:The petitioners sought the quashing of default notices and demand letters for interest on central excise duty. The original demand of duty was reduced by the Commissioner (Appeals) to Rs.75,16,661/-, with no direction for interest. The petitioners paid the reduced duty amount under the understanding that the matter would be closed. However, after a lapse of three years, a demand for interest of Rs.24,05,332/- was raised, leading to this writ petition challenging the demand for interest.The key issue for consideration was whether the demand for interest was barred due to delay and laches. The petitioner argued that the demand for interest made in 2005, three years after the payment of duty, was highly belated. Citing a Tribunal decision, the petitioner contended that the demand for interest beyond a specified period should be barred by limitation, similar to the period for demanding duty. The Supreme Court precedent highlighted that the period of limitation for interest claims should align with that of the principal amount, emphasizing the relevance of the limitation period in this case.The Court applied the Supreme Court's principle that the limitation period for interest claims should mirror that of duty demands. As the demand for interest was made beyond the one-year limitation period, it was deemed barred by the principle of limitation. The Court did not delve into the petitioner's argument regarding the duty payment necessity due to the clear limitation issue. The finality of the Commissioner's order was acknowledged, and the Court solely based its decision on the limitation aspect, quashing the demands for interest on central excise duty. The writ petition was allowed, with no costs imposed.In conclusion, the judgment focused on the applicability of the limitation period for interest claims, aligning it with duty demands based on the Supreme Court precedent. The Court's decision to quash the demands for interest was grounded in the principle of limitation, emphasizing the importance of adhering to the prescribed timelines for such claims.