Appellate tribunal rules interest demand on excise duty without duty determination is legally improper.

The appellate tribunal found in favor of the appellant, ruling that the demand for interest for delayed payment of central excise duty was unsustainable as there was no determination of duty in the show cause notice. The tribunal held that interest should not be demanded without a duty determination and that the department's calculation of interest without demanding duty was legally improper. The show cause notice was deemed time-barred as the appellant's default was considered a bonafide mistake without evidence of suppression, willful misstatement, or fraud, leading to the appeal being allowed with consequential reliefs.

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Issues:
1. Delay in payment of central excise duty.
2. Calculation and demand of interest for delayed payment.
3. Application of Rule 8(3A) of Central Excise Rules, 2002.
4. Extended period of limitation for issuing show cause notice.

Analysis:

Issue 1: Delay in payment of central excise duty
The appellant, engaged in manufacturing edible refined Palm Oil, defaulted in paying central excise duty amounting to Rs. 23,97,580/- for the month of August 2010. The appellant attributed the delay to a mistake in the cheque amount, which was not cleared by the bank due to non-rounding off decimals. The appellant paid the duty on 23-10-2010 and interest of Rs. 41,843/- on 31-03-2012. The department issued a show cause notice proposing interest demand and penalty without determining or demanding the duty amount.

Issue 2: Calculation and demand of interest for delayed payment
The appellant argued that the demand for interest was unsustainable as there was no determination of duty in the show cause notice. The department calculated interest from October 2010 to March 2012 on the assumption that duty was not paid consignment-wise. However, the appellant contended that they paid the duty correctly each month, and interest should not be demanded without a duty determination. The department's demand of interest without demanding duty was deemed legally improper.

Issue 3: Application of Rule 8(3A) of Central Excise Rules, 2002
Rule 8(3A) mandates payment of duty for each consignment at the time of removal beyond 30 days from the due date. The department demanded interest on the duty already paid by the appellant each month, considering a default in payment. However, the legal fiction of Rule 8(3A) was not invoked correctly in the show cause notice, leading to an unsustainable claim of interest alone without a duty determination.

Issue 4: Extended period of limitation for issuing show cause notice
The show cause notice was issued invoking the extended period of limitation. The appellant's default in August 2010 was deemed a bonafide mistake, and the department failed to provide evidence of suppression, willful misstatement, or fraud. Consequently, the show cause notice was considered time-barred, and the demand was deemed unsustainable.

In conclusion, the appellate tribunal held that the demand was time-barred and set aside the impugned order, allowing the appeal with consequential reliefs. The judgment emphasized the importance of proper application of legal provisions and the necessity of duty determination before demanding interest.

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