2009 (10) TMI 257 - HC - Central Excise

Court clarifies interest payment date under Central Excise Act; initial order date not considered

BLUE STAR LIMITED Versus UNION OF INDIA

The court ruled that the relevant date for the payment of interest under Section 11AA of the Central Excise Act is the date when the duty is finally ... Interest-Relevant date- delay in payment of duty- Adjudication order in its first round passed on 14.6.1993. sub-section (2) of section 11AA inserted in Central Excise Act, w.e.f. 11.5.2001. De novo order after remand passed on 22.3.2002. Demand for interest arises only from final order of determination. Legislative intent that when duty is increased then increased duty payable from date of increase and not from original date while for reduction, first date to be taken. Once order set-aside and matter remanded, no duty payable. Duty determined/ascertained in the present case on 22.3.2002 and the same paid on 17.7.2002. Interest not demandable under sub-section(1) of section 11AA. effect of setting aside of original order and remanding matter for de novo consideration. Setting aside an order means there is no order and party relegated for fresh adjudication. Stage of adjudication cannot be said to be determination. An adjudication will culminate in an order and such order would be determination and/or ascertainment of duty. original order if set aside, no duty is payable and consequently no interest payable. ascertained amount of duty necessary for interest liability. If there isno ascertained duty there is no question of compensating the state by interest. Issues Involved:1. Relevant date for payment of interest under Section 11AA of the Central Excise Act when an order is set aside and remanded.2. Whether interest under Section 11AA is payable when duty becomes payable after 11th May 2001.3. Limitation on the demand for interest.Detailed Analysis:1. Relevant Date for Payment of Interest under Section 11AA of the Central Excise Act:The core issue was determining the relevant date for payment of interest under Section 11AA when an order is set aside and remanded. The court examined the language of Section 11AA, which mandates interest on delayed payment of duty from the date immediately after the expiry of three months from the date of determination until the date of payment of such duty. The court noted that the first order demanding duty was passed on 14th June 1993, set aside on 14th July 2000, and a fresh order was passed on 22nd March 2002. The court concluded that setting aside an order means there is no order, and a party is relegated to fresh adjudication. Thus, the relevant date for commencement of interest would be from the date the duty is determined if not paid within three months. Consequently, the duty was ascertained on 22nd March 2002, and no interest could be demanded under Section 11AA(1) due to Section 11AA(2) as inserted on 11th May 2001.2. Whether Interest under Section 11AA is Payable When Duty Becomes Payable After 11th May 2001:The petitioners argued that under Section 11AA(2), if duty becomes payable after 11th May 2001, no interest can be demanded under Section 11AA(1). The court agreed, noting that Section 11AA(2) was introduced by Act 14 of 2001 with effect from 11th May 2001, stating that the provisions of sub-section (1) shall not apply to cases where duty becomes payable on or after the date on which the Finance Bill, 2001 receives the assent of the President. Since the final order of assessment was passed on 22nd March 2002, the duty became payable after 11th May 2001, and thus, no interest could be demanded under Section 11AA(1).3. Limitation on the Demand for Interest:The petitioners contended that the demand for interest was made in June 2008, more than six years after the order determining the duty, and was thus barred by limitation. However, the court did not decide on this issue, as the primary contention regarding the relevant date for the payment of interest had already been resolved in favor of the petitioners.Conclusion:The court ruled that the relevant date for the payment of interest under Section 11AA is the date when the duty is finally determined on remand, not the date of the initial order that was set aside. Since the duty was determined on 22nd March 2002, and the provisions of Section 11AA(2) applied, no interest could be demanded under Section 11AA(1). The petition was allowed, and the rule was made absolute in terms of prayer clauses (a) and (b), with no order as to costs.