2017 (2) TMI 1038 - AT - Central Excise

Appellants Liable for 36% Interest on Lapsed Credit Balance

Dabur India Ltd. Versus C.C.E. Chandigarh-I

The Tribunal ruled that the appellants were liable to pay interest on the lapsed credit balance of Rs. 2.50 lacs, as per the amended Rule 57F(17) of the ... Interest - whether the appellants are liable to pay interest from 07.09.1998 to 10.10.2000 on the amount of ₹ 2.50 lacs deposited by them pursuant to the amendment in Rule 57 F(17) in the Finance Act, 1999? Held that: - Clause 132 (2) (C) of the Finance Act, 1999 clearly says that in the event of non-payment of such Cenvat Credit within a period of thirty days of the receipt of assent of the President to the Finance Act, 1999, interest at a rate of 36% would be payable. Since the law is clear about the date of application of the interest as well as the rate of interest, charging the interest with effect from 07.09.1998 is contrary to the provisions of the Finance Act, 1999. The interest would be payable from 11.06.1999 to 10.10.2000 at the rate of 36% per annum. The appellants plea that the interest should be at the rate of 18% is not tenable because interest is being charged under clause 132 (2) (C) of Finance Act, 1999 read with Section 11AB of the Central Excise Act, 1944. Appeal disposed of - decided partly in favor of appellants. Issues:1. Recovery of interest on credit balance.2. Applicability of Rule 57F(17) of the Finance Act, 1999.3. Calculation and payment of interest.Analysis:1. Recovery of interest on credit balance:The appellants were served a show cause notice for the recovery of interest on a credit balance of Rs. 2.50 lacs in RG 23A Part II of Chapter 29. The credit accrued from products manufactured and exported under bond but remained unutilized. The Assistant Commissioner permitted the transfer of credit to RG23A Part-II under a specific heading. However, during an audit, it was discovered that the permission was wrongly granted as per Rule 57F(17)(b), which stated that any unutilized credit with manufacturers of bulk drugs under Chapter 28 or 29 would lapse. The Rule was retrospectively amended in the Finance Act, 1999, leading to the lapse of the credit. The appellants deposited the lapsed credit on 10.10.2000, but no interest was paid initially.2. Applicability of Rule 57F(17) of the Finance Act, 1999:The issue revolved around whether the appellants were liable to pay interest from 07.09.1998 to 10.10.2000 on the deposited amount of Rs. 2.50 lacs post the amendment in Rule 57 F(17) of the Finance Act, 1999. The Ld. Commissioner (Appeals) upheld the adjudication order, determining the interest to be paid based on the appellant's utilization of the credit during the period. However, the Finance Act, 1999 clearly outlined the provisions for lapsing of Cenvat Credit and the payment of interest at a specified rate in case of non-payment within a stipulated time frame.3. Calculation and payment of interest:The Finance Act, 1999 mandated interest payment at a rate of 36% if the Cenvat Credit was not paid within thirty days of the President's assent to the Act. The appellants contended that interest should be calculated from 30 days after the assent date until the payment date. The Tribunal agreed, holding that interest would be payable from 11.06.1999 to 10.10.2000 at the rate of 36% per annum. The plea for a lower interest rate was dismissed as the applicable rate was governed by the Finance Act, 1999 and the Central Excise Act, 1944.In conclusion, the Tribunal disposed of the appeal by clarifying the period and rate of interest payable by the appellants, aligning with the provisions of the Finance Act, 1999.