Tribunal overturns interest liability for late payment of duty under Central Excise Act.

The Tribunal set aside the interest liability under section 11AA of the Central Excise Act, 1944, for belated payment of duty for the period 2008-09 to 2010-11. The demand for interest was found to be time-barred as the show cause notice was issued beyond the five-year limitation period. The Tribunal held that section 11AA, introduced in 2011, was not applicable to the disputed period. The impugned order was partly allowed, setting aside the demand for interest while affirming the duty payment made by the appellant.

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Issues:
Applicability of interest demand under section 11AA of Central Excise Act, 1944 for belated payment of duty.

Analysis:
The case involved the appellants, engaged in the manufacture of oil seeds, who took physical stock verification of finished and semi-finished goods periodically. Any shortages noticed during verification were written off as expenditure in the books of accounts and the excise duty involved was discharged. A show cause notice was issued to the appellants for belatedly discharging excise duty for the period 2008-09 to 2010-11 and demanding interest under section 11AA of the Central Excise Act, 1944. The original authority and Commissioner (Appeals) confirmed the interest demand.

On appeal, the appellant's counsel argued that the demand of interest was time-barred as the show cause notice was issued beyond the five-year period. It was contended that section 11AA, invoked for demanding interest, was not applicable to the disputed period as it came into force only in 2011. The appellant had paid the duty in 2012 along with interest, and there was no suppression of facts regarding the write-off of goods in their accounts.

The Assistant Commissioner, representing the respondent, supported the findings of the impugned order and emphasized the liability of the appellant to pay interest for belated duty payment under section 11AA.

The Tribunal noted that the appellants had paid the duty in 2012, and the show cause notice was issued in 2015 for the period 2008-09 to 2010-11, exceeding the limitation period of five years under section 11A of the Act. The demand for interest was based on section 11AA, which was introduced in 2011 and not applicable to the disputed period. Referring to a judgment of the Delhi High Court, it was observed that the limitation period should apply mutatis mutandis for the demand of interest. Consequently, the Tribunal set aside the interest liability, modifying the impugned order.

In conclusion, the impugned order was partly allowed by setting aside the demand for interest while upholding the appropriation of the duty amount paid by the appellant. The decision was pronounced in open court on 25.10.2017.

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