Extended period limitation cannot be invoked for interest demand on differential duty without suppression of facts

CESTAT Chandigarh allowed the appeal by remand, holding that extended period of limitation cannot be invoked for interest demand on differential duty. The appellant deposited duty on supplementary invoices when issued and paid disputed interest under protest. The Tribunal found no suppression of facts or intent to evade duty, citing divergent views on interest liability during the relevant period. Following precedents in Super Threading India and KEC International cases, the Tribunal set aside the extended period demand and remanded the matter to original authority for re-quantification within normal limitation period, directing refund of excess amounts deposited.

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Issues involved:
The judgment involves the demand of interest on differential duty paid by the appellant, the violation of principles of natural justice in passing the impugned order, and the invocation of the extended period of limitation for demanding interest on supplementary invoices.

Demand of Interest on Differential Duty:
The appellant, engaged in manufacturing auto parts, raised supplementary invoices due to price revisions, leading to the payment of excise duty on the differential amount. Two show cause notices were issued, demanding interest for specific periods. The adjudicating authority confirmed a total interest demand of Rs. 38,89,078 under relevant sections of the Central Excise Act, 1944. The appellant, feeling aggrieved, appealed to the Commissioner (Appeals), who upheld the original order.

Violation of Principles of Natural Justice:
The appellant's counsel argued that the impugned order lacked sustainability in law due to a failure to appreciate facts and law properly, along with alleged violations of natural justice principles. It was contended that the appellant was not given a hearing opportunity and was unaware of the hearing date. The counsel emphasized that the only issue was the demand of interest on differential duty, highlighting the historical uncertainty regarding interest liability on supplementary invoices under the Central Excise Act, 1944.

Invocation of Extended Period of Limitation:
The appellant's counsel argued against the invocation of the extended period of limitation for demanding interest on supplementary invoices, citing conflicting views on the issue during the relevant period. Reference was made to the Supreme Court's decision in Steel Authority of India Ltd. vs. CCE, Raipur, which referred the matter to a Larger Bench and was finally settled in 2019. The counsel also relied on relevant case laws and a decision of the Punjab and Haryana High Court to support the argument that interest cannot be demanded beyond the normal limitation period of one year without fraud or collusion.

Decision:
After considering submissions and the legal landscape, the Tribunal found that the demand of interest on supplementary invoices by invoking the extended period of limitation was not justified. It was noted that the appellant had paid the duty promptly, deposited interest under protest, and the issue of interest liability on supplementary invoices was historically uncertain. Relying on the precedent of the Punjab and Haryana High Court, the Tribunal set aside the demand, remanding the matter for re-quantification within the normal limitation period. Any excess amount paid beyond one year was to be returned to the appellant. The judgment was pronounced on 27.10.2023.

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