Whether adjudication was called for before raising demand of interest under Section 11AA of the Central Excise Act and also under Section 75 of the Finance Act, 1994?

PJ/Case Laws/2012-13/1157

Case: DEPUTY COMMR. OF C. EX., THRISSUR-I V/S APOLLO TYRES LTD.

Citation: 2012(281) E.L.T. 370 (Ker.)

Issue:- 1. Whether adjudication was called for before raising demand of interest under Section 11AA of the Central Excise Act and also under Section 75 of the Finance Act, 1994?

2. Whether the interest provision on default applies to a situation of payment of duty through belated adjustment of credit available at the time of raising the demand.

Brief Facts: - Two writ petitions were filed. One was filed by the assessee and the other bythe Revenue.The two learned Judges, who decided the matter, took apparently conflicting views, which led to filing of Writ Appeal by both sides. While one learned Single Judge took the view that interest for default is automatic, the other learned Single Judge took the view that before demanding interest adjudication is called for.

Reasoning of Judgment: - The High Court held that the liability for interest on default is automatic under Section 11AA as well as under Section 75 referred to above and that way the Sections are only declaration of law. Heis of the view that the interest liability is declared on the default amount and that too for the period of default. It is further stated in the Sections that in the event of modification of demand by way of reduction or enhancement interest payable is only for the period of default reckoned with reference to first demand. Controversy in this case cropped up because demand of AED was not paid as such but was set off by adjustment from duty credit (AED) available on input purchase by the assessee. In other words, duty liability remained as a notional demand, which was fully paid through adjustment from duty credit available from the very beginning of the date of demand. At least in this case, adjudication is called for because in the first place assessee has not conceded default. Even if the assessee's contention is accepted in principle by the adjudicating officer, then the question will arise as to whether duty credit was available during the whole period of default to offset the entire demand because otherwise interest will be payable for the differential amount, that is the amount of demarid over credit available.
Further it is held that if duty is paid against demand with delay other than through adjustment of credit available, interest is automatic and it is a matter of voluntary payment of interest by the assessee or payment on demand by the adjudicating officer which does not require any adjudication except the arithmetical calculation for which no adjudication is called for.
Accordingly they allowed W.A. No. 1966/2011 filed by the assessee by directing the adjudicating authority to treat Annexure A dated 30-11-2010 as a show cause notice, give an opportunity to the assessee to file objections, give a hearing to them and decide the matter through proper adjudication. The adjudicating officer will address on all the issues raised uninfluenced by observations made in both the judgments. Consequently, W.A. No. 1922/2011 filed by the Revenue will stand dismissed.

Decision: - The appeal was dismissed.

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