Interest on differential duty not payable on non issuance of SCN?

PJ/Case Laws/2011-12/1235

Case: Commissioner of Central Excise & Service Tax versus M/s Karnataka Soaps Detergents Ltd.

Citation: 2011 (267) E.L.T. 593 (Kar.)

Issue:- Whether interest is not payable on differential duty when SCN in this regard was not issued?

Brief Facts:-The assessee did not pay the duty at the time of clearing the goods but when the Department pointed out the same and even before the issue of notice, the assessee paid not only the duty but also the interest on the differential duty.

Thereafter an application is filed for refund of the interest paid on the ground that they were not liable to pay interest at all as the differential duty was paid even before the issue of Show Cause Notice.

The Assessing Authority rejected the said request.

Aggrieved by the same, the assessee preferred an appeal. The Appellate Authority allowed the appeal and ordered for refund which was confirmed by the Tribunal.

Against that order of the Tribunal, Revenue filed this appeal.

Reasoning of the Judgment: The cumulative effect of this Section 11A and 11AB is that when the duty has to be paid on the relevant date an opportunity is given to the assessee to pay the duty and differential duty before the commencements of the proceedings under Sub-Section (1) of Section 11A of the Act.

However, even in cases where initiated under Sub-Section (1) of Section 11A of the Act, the interest for the delayed payment has to be paid. In other words, once there is a delay in payment of duty, interest follows subsequent to the aforesaid amendments.

The duty was not paid at the time of clearing the goods. However, before the initiation of the proceedings under Sub-Section (1) of Section 11A of the Act, not only the differential duty but also the interest thereon was paid but after making such payment, an attempt was made to claim back the interest paid as refund on the ground that they were not liable to pay interest.

The Appellate Authority and the Tribunal relying on various judgments have taken a view that the differential duty has been paid before the issue of Show Cause Notice under Sub-Section (1) of Section 11A of the Act and therefore, the order passed by the Appellate Authority and the Tribunal is illegal and cannot be sustained.

Decision: Appeal is allowed and order of Assessing Authority was restored.

Comments:- In the settled position of law, interest is to be paid on delayed payment of duty. Even if duty is paid before issue of SCN, interest has to be paid. Even the Apex Court has held in case of Ind- swift that the interest is to paid on wrong taking of cenvat credit. It is immaterial whether the credit is utilized or not. Moreover, Apex court has held that penalty under Section 11AC is also applicable even if the duty is paid before issue of show cause notice.

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PJ/Case Laws/2011-12/1235

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