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Issues: (i) whether interest under Section 11AA of the Central Excise Act, 1944 could be demanded on duty determined on finalisation of provisional assessment under Rule 9B of the Central Excise Rules, 1944; (ii) whether the plea that the clearances were under provisional assessment could be examined for the first time in appeal and whether the matter required fresh factual determination.
Issue (i): Whether interest under Section 11AA of the Central Excise Act, 1944 could be demanded on duty determined on finalisation of provisional assessment under Rule 9B of the Central Excise Rules, 1944.
Analysis: Section 11AA applies where duty is determined under Section 11A(2) and remains unpaid beyond the prescribed period. If the duty is instead determined on finalisation of provisional assessment, the liability is governed by the provisional assessment framework and not by Section 11AA. The applicability of interest therefore turns on whether the clearances in question were in fact made under provisional assessment.
Conclusion: The levy of interest under Section 11AA could not be sustained if the clearances were under Rule 9B, but that factual issue required verification.
Issue (ii): Whether the plea that the clearances were under provisional assessment could be examined for the first time in appeal and whether the matter required fresh factual determination.
Analysis: The assessee had taken inconsistent stands before the adjudicating authority, the Tribunal, and the Court on the existence of provisional assessment. Because the factual foundation for the plea was disputed and not conclusively established, the correctness of the plea had to be examined afresh on evidence. The matter was therefore sent back for a finding on whether the clearances during the relevant period were actually made under Rule 9B.
Conclusion: The matter was remitted to the Tribunal for fresh determination on the provisional assessment issue.
Final Conclusion: The impugned order was set aside and the controversy was reopened only for the limited purpose of deciding whether the clearances were under provisional assessment, upon which the interest demand would stand or fall.
Ratio Decidendi: Interest under Section 11AA of the Central Excise Act, 1944 is attracted only to duty determined under Section 11A(2), and not to duty determined on finalisation of provisional assessment under Rule 9B of the Central Excise Rules, 1944.
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