rebate can be adjusted towards the amount of interest to be paid by the assessee for delay in payment of arrears of duty under section 11-AA

PJ/Case Laws/2010-11/1179

Case: -COMMISSIONER OF CENTRAL EXCISE, BANGALOREv/sSTELLA RUBBER WORKS (UNIT-II)

Citation:- 2011-TIOL-325-HC-KAR-CX

Issue:-Whether the rebate can be adjusted towards the amount of interest to be paid by the assessee for delay in payment of arrears of duty under section 11-AA of the Central Excise Act?

Brief Facts:- Respondent-assessee was engaged in the business of manufacture of tread rubber. On meeting intellect that Respondent was suppressing the value of their clearances by fraudulent means with the intention to avoid Excise duty, the Excise officers visited the premises and seized the related documents and records of the assessee. Department issued show cause notice to the appellant demanding differential amount of duty payable by the assessee for the period from 1982-83 to 1984-85. The request of the Respondent to pay the aforesaid amount in instalment was rejected by the department. The assessee paid the amount in two instalments. While rejecting there request for payment of amount in instalments they were informed that the delay in payment would result in interest liability under Section 11-AA of the Central Excise Act. But the Respondent did not paid the amount of interest.

Respondent-assessee had another unit for which rebate was claimed. The rebate was sanctioned but the sanctioned amount of the rebate was appropriated towards the amount of interest which was due from the assessee. Aggrieved by the said action, the assessee preferred an appeal to the Tribunal.

The Tribunal held that the rebate could not be adjusted against the interest amount due of the assessee. Hence, Revenue is in appeal before the Tribunal.

Appellant’s Contention:- Respondentcontended that by virtue of Section 11 of the Central Excise Act 1994, the Revenue was empowered to adjust the amounts due to the revenue by the way of interest against the amount due by the department to the assessee by means of rebate. Therefore, Section 11 would deal with the recovery of the sums due to the government by the assessee.

Reasoning of Judgment: - The High Court held that provision of Section 11 provided that if any if any duty or sums due to the Central Government under the Act and recovery of certain amounts, if any person owing money to the assessee, the revenue may proceed against such person and recover the duty and other sums due to the government. It was held that it is in the nature of garnishee proceedings. The said provision does not contemplate adjustment of monies due to the assessee towards the amount due to the revenue. Therefore, reliance placed on the said provision is of no help to the Revenue. Apart from this provision there were no provision pointed out which provided that such adjustment of dues can be done by the Revenue to adjust the amounts due to them as against the amounts due by them to the assessee.

The High Court held that the Tribunal was justified that the adjustment of the amounts due to the revenue by the way of interest against the amount due by the department to the assessee by means of rebate was not based on any statutory provision. When once the adjudicating authority had held that the assessee was entitled to refund of the amount which they had paid to the department in absence of a specific provision authorising the revenue adjusting the amount of interest towards due to them, it was improper to them to make such adjustment. As without any authority of the law they could not adjust the amounts which were due to the assessee. Further they committed no legality in setting off the said amounts.

Decision: - Appeal dismissed.

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PJ/Case Laws/2010-11/1179

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