TaxTMI 
TaxTMI 
2013 (11) TMI 1023
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....urisdictional Superintendent of Central Excise wrote letters to the appellant on 28.7.2009 and 10.8.2009. On this being pointed out, the appellant replied that they were liable to pay only Rs.220/- towards interest on the negative balance which had arisen in the month of May 2008 to the extent of Rs.77, 293/- and this was debited by them. However, the appellant also debited Rs.25 lakh which was transferred from CESS account to BED account on 27.8.2009. Treating this reversal of Rs.25 lakhs from the BED account as belated discharge of duty liability, interest of Rs.5,12,877/- was demanded from the appellant by way of issue of show-cause notice. Proposal was also made to allow deduction of interest amount of Rs.220/- already paid by them. Besides this, penalty was also proposed under Rule 15(1) of CENVAT Credit Rules, 2004 which has culminated in the impugned order whereby the demand for interest has been confirmed and penalty of Rs.5, 000/- has been imposed. 2. The matter came up for hearing on 15.10.2013 and the learned advocate for the appellants vehemently argued that in this case the demand itself is not at all sustainable. This is because there is no determination of duty am....
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....east in four months during the relevant period. 4. The question that arises is whether there was a need for determination of duty under Section 11A (2) before demanding interest. In this case, the appellant was informed in July 2009 about the irregular transfer of credit and after the information also, the appellant contended that they were liable to pay interest on the negative closing balance in the month of May 2008 and paid an amount of Rs.220/-. However, subsequently they reversed the entire amount of Rs.25 lakhs wrongly transferred from Cess account to the BED account and thereafter proceedings were initiated only for interest. Under these circumstances, the question that arises is whether the claim of the learned counsel that in this case without determination of duty under Section 11A(2) of Central Excise Act, 1944 there could not have been demand of interest is correct or not. 5. The provisions of Section 11A of Central Excise Act, 1944, are reproduced below: SECTION 11A: Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. - (1) Where any duty of excise has not been levied or paid or has been short-levied or short-pa....
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.... has been short-levied or short-paid or erroneously refunded, within a period of six months,from the date of service of the notice on the person under sub-section (1). (2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid: Provided that the Central Excise Officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this Section, and the period of one year referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation1. - Nothing contained in this sub-section sh....
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.... the amount paid by the appellant, if the Central Excise officer finds that there was short-payment of duty, he can issue show-cause notice within one year. As can been seen in the explanation, it has been provided that interest under Section 11AB shall be payable on the amount paid by the person under this subsection and also on the account of short-payment of duty, if any, determination by the Central Excise officer. In my opinion, when a short-payment is determined, the interest if it is not paid, it also become a short-payment and it can be demanded within one year as provided in the first proviso to subsection (2B) of Section 11A. This is because in the explanation, it has been declared that interest shall be payable as provided under Section 11AB on the amount paid by the person. Once the same Section provides for payment of interest also along with the duty, if duty alone is paid, the Central Excise officer will be free to determine the interest liability and demand it within one year by invoking the provisions of Section 11A(2) and issue a show-cause notice. Under these circumstances, the claim of the learned counsel that in the absence of determination under Section 11A (2....
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....to agree with the submissions made by the learned counsel. On this ground, various decisions cited by the counsel and argued extensively to submit that unless there is a determination of duty under Section 11A(2) of Central Excise Act, 1944 there cannot be demand for interest is also not acceptable. 10. At this stage, when it was pointed out to the counsel that the case is clearly covered by Section 11A (2B) and therefore the demand is sustainable, the learned advocate sought time for making fresh submissions. Accordingly the matter was treated as 'part heard' and adjourned for hearing today. 11. When the matter was called out, the learned counsel submitted points for arguments which are reproduced below: * Credit of Education Cess and SHE Cess has been rightly availed under Rule 3 of the CCR, 2004. * In terms of Rule 3(7) (b) of the CCR, 2004, there is no prohibition for transfer of credit either to BED account or any other account. * However, the prohibition is only for utilizing the credit of one stream for payment of respective output duties, except for ....
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....y payment made by the appellants cannot be treated as payment under Section 11A(2B) unless it is specifically sought for. 12. The learned AR contradicted the submissions and argued that the show-cause notice has been issued properly. 13. The first submission is that in terms of Rule 3(7)(b) of the CENVAT Credit Rules, 2004, there is no prohibition for transfer of credit not only to BED account but also to any other account. This submission is totally contrary to the provisions of law. 14. According to Rule 3(7)(b) CENVAT credit in respect of various duties and cesses specified thereunder can be utilized only for payment of the same duty or cess. This is emerging from the word 'respectively' used in the sub-rule. It also provides that such utilization can be for payment of the same type of duty or cess on any final product manufactured by the manufacturer or payment of said duty on inputs themselves, if such inputs are removed as such and after being partially processed or any output service. Rule 3 as a whole provides for circumstances under which, credit is allowed; how the credit has to be taken; and how it has to be utilized. There cannot be any method of utilization ot....
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....he Honble Supreme Court took the view that even though credit has been taken but not utilized, interest is payable. In this case, appellants have not only taken the credit but also utilized the same as already pointed out while commenting on the submissions made and result of verification of records. That being the position, the claim that the department should have treated the issue differently has no validity. In any case, what has to be examined is whether the approach adopted by the department is legally sustainable or not, which in my opinion is sustainable and relevant provisions of law have already been considered and discussed above. 16. The next submission is that department having accepted the BED on final products (paid from Education Cess account) and having not initiated action under Section 11A cannot claim that the utilization of Education Cess for BED as irregular. The appellant seems to have failed to take note of the correct procedure for payment of Central Excise duty. The present system is self-assessment. The assessee is required to assess the goods themselves and collect the tax and pay the same to the government. There is no question of acceptance of paym....