2005 (5) TMI 90 - AT - Central Excise

Interest on overdue interest under the Central Excise Act not permissible; Tribunal's reliance on past judgments incorrect. Appeal dismissed.

Interest on delayed payment of interest under the Central Excise Act is impermissible. The Tribunal's reliance on prior judgments was incorrect, as the ... Interest - Appellate Tribunal's power - Whether interest on delayed payment of interest is permissible under the provisions of Central Excise Act or not - HELD THAT:- It has not been disputed before us that Section 214 of the Income Tax Act relates to the payment of advance tax by an assessee and when the tax so paid had been found to be excess at the time of final assessment that has to be refunded by the department with interest. But no such provision regarding payment of duty in advance by the assessee, exists in the Central Excise Act. Rather duty is payable by an assessee at the time of clearance of the goods from the factory. The Central Excise Act only speaks of provisional assessment under Rule 9B which can be claimed by the assessee or adopted by the deptt., when there is dispute regarding classification of the goods, and the correct Tariff rate of duty leviable on these goods or, where the clearance of the goods has to be made by an assessee under an agreement containing price variation clause. It is only on finalisation of that provisional assessment, the excess found duty, if any is required to be refunded to the assessees by the department and even for that refund period of three months has been allowed to the revenue u/s 11BB of the Act. On the basis of the above referred two judgments of the Gujarat High Court in Chimanlal S. Patel v. CIT [1993 (10) TMI 20 - GUJARAT HIGH COURT], D.J. Works v. Deputy CIT [1991 (10) TMI 33 - GUJARAT HIGH COURT] and Narendra Doshi [2001 (7) TMI 10 - SUPREME COURT], which are under different Tax statute, interest on delayed payment of interest, cannot be held to be permissible under the Central Excise Act and the Rules made thereunder, for want of any specific provision in the Act or the Rules. Therefore, the Tribunal has no power to award such a interest to the assessee. The law laid down in Hindustan Motors v. CCE [2003 (3) TMI 166 - CEGAT, KOLKATA], to the contrary, being not a good law, stands overruled. The reference stands accordingly answered. With the consent of both the sides, we dispose of the appeal itself as no other issue is involved therein. Thus, the appeal raising claim for interest on interest paid late, filed by the appellants, has no merit and is dismissed. Issues:1. Permissibility of interest on delayed payment of interest under Central Excise Act.Analysis:1. The issue referred to the Larger Bench was whether interest on delayed payment of interest is permissible under the Central Excise Act. This arose due to judgments in C.E., Hyderabad v. ITC Ltd. and Hindustan Motors v. CCE, Calcutta. The appellant did not appear, but the ld. Counsel assisted. The Apex Court in the ITC Ltd. case allowed interest on delayed refund, but reduced it to 12%. The issue of interest on interest was not addressed. In Hindustan Motors case, interest on interest was allowed but was challenged by the Revenue in the Calcutta High Court. The Tribunal's reliance on certain judgments was deemed incorrect for cases under the Central Excise Act.2. The Gujarat High Court allowed interest on interest under the Income Tax Act, but the Bombay High Court disagreed, stating that without an express provision, interest on interest cannot be awarded. The Apex Court emphasized that interest can only be levied if the statute provides for it. The Bombay High Court noted that interest is compensatory but must be granted as per statute. Section 214 of the Income Tax Act allows interest on excess advance tax, unlike the Central Excise Act, which lacks provisions for advance duty payment.3. The Tribunal cannot legislate by awarding interest on interest under the Central Excise Act. The introduction of Section 11BB did not include provisions for interest on interest, and the Tribunal lacked inherent power to grant interest before this section. The Allahabad High Court ruled that without statutory provisions, interest cannot be awarded. Consequently, interest on delayed payment of interest is not permissible under the Central Excise Act. The law in Hindustan Motors case was overruled, and the appeal for interest on late-paid interest was dismissed.