TaxTMI 
TaxTMI 
2003 (6) TMI 423
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.... Notifications 217/85, 69/86 and 326/86. These notifications granted exemptions respectively to bearings used in the manufacture of internal combustion engines, power driven pumps, and power trailers subject to fulfilment of the conditions contained in Chapter X of the rules. The assessee also availed of exemption under Notification 217/86, which exempts from duty goods manufactured in a factory and utilised in the factory for manufacture of further dutiable goods. The notice issued to it alleged that the exemption contained in Notification 217/86 would not be available to the parts that were utilised to make the bearings which were cleared without payment of duty in terms of any of the three notifications that have been referred above, poi....
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....ect to payment of duty; hence except to the extent of Rs. 7,91,293/- the difference between the Modvat credit availed and that reversed on the final product interest is payable. If it is payable, it is payable only on this amount. In any event, interest is not payable for two reasons - firstly, the notice itself does not demand payment of interest, and, secondly, the provisions of Section 11AA will not apply prior to its enactment on 26-5-1995. 3. The departmental representative contends that the act of the assessee in reversing Modvat credit did not constitute payment of duty due on the parts of the ball bearings, which were not entitled to the exemption contained in Notification 217/86. What it did was to reverse the credit that it ....
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.... The fact that, in the reply to the notice, it took the stand that the benefit of Notification 217/86 would be available, supports this view. It is therefore not possible for us to conclude that the reversal of Modvat credit is to be equated with payment of duty on the parts. 5. Section 11AA reads as follows : Section 11AA Interest on Delayed Payment of Duty. [(1) Subject to the provisions contained in section 11AB, where a person, chargeable with duty determined under sub-section (2) of section 11A, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest [at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum, as is for the time be....
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.... which the duty is so further increased.] 6. A reading of these provisions makes it clear that the provision of Section 11AB will apply in cases where duty confirmed under Section 11A(2) is in pursuance of a notice in which the extended period of limitation has been invoked. Section 11AA will apply "subject to the provisions contained in Section 11AB." The provisions of Section 11AB are quite different in character. The rate of interest that applies under it will not be less than 10% and may go up to 30% per annum. The interest accrues from the first day of the month succeeding the month in which duty has not been paid. The provisions of Section 11AA apply in other cases. In our view, the provisions of sub-section (2) of Section 11AB ....
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....e, solely for the purposes of demand of duty, the amount that has been reversed shall be taken into account. The interest is payable on the amount that is left after deduction of this amount until 12-5-2001 and 15% from then onwards until payment, unless the interest has been altered in the meantime. 9. The Counsel for the assessee at this stage brings to our notice a Trade Notice 214/88 issued by the Additional Collector of the Central Excise, Pune. This trade notice says that the exemption contained in Notification 217/85 would apply to "parts which go into the manufacture of component parts that are in turn used in the manufacture of diesel operated I.C. engines." He contends that the trade notice is binding on the department and c....