Whether interest under Section 11AA can be recovered from assessee in case entire duty is paid within 3 months from Apex Court’s Order?

PJ/CASE LAW/2016-17/3134

Case:-M/s SAIL VERSUS COMMISSIONER OF CENTRAL EXCISE, BOLPUR

Citation:-2016-TIOL-1144-CESTAT-KOL

Brief Facts:-This appeal has been filed by appellant M/s. Durgapur Steel Plant, Durgapur, W.B. (A unit of SAIL) against OIO No.7/Commr/BoL/06 dt. 24.04.2006, passed by the Commissioner of Central Excise, Bolpur as Adjudicating Authority. Under this OIO dt. 24.04.2006 Adjudicating Authority has confirmed a demand of Rs.1,15,45,576/- against the appellant as interest payable u/s 11 AA of the Central Excise Act, 1944.

Appellant Contentions:-Dr. S.Chakraborty (Advocate) appearing on behalf of the appellant during hearing, as well as through written submissions, argued that AC in charge of the appellant's unit vide adjudication Orders dt.11.03.1988 and 19.05.1988 decided the classification of appellant's product 'Pitch Creosote Mixture' under CETA 2708.11 instead of CETA 2706.00 claimed by the appellant. That duty of Rs.84,82,950/- was demanded from the appellant under 8 periodical show cause notices for the period September, 1985 to December, 9187. That the entire duty was deposited by the respondent under protest during 25.09.1987 to 22.06.1989. That by Orders dt.02.12.1997 & 21.05.1998 CESTAT allowed the appeals of the Appellant by setting aside orders passed by Commissioner (Appeals) which upheld the adjudication Orders passed by the Assistant Commissioner (AC) as Adjudicating Authority. That Revenue preferred Civil Appeal No.3169-3173/1998 in Supreme Court against CESTAT's Order on 01.09.1998. That four years after the orders of CESTAT, revenue sanctioned refunds of Rs.84,82,950/- to the appellant during the period 04.10.2002 to 07.10.2002. That by an order dt. 28.01.2004 Apex Court reversed the orders, passed by CESTAT in favour of the appellant and held that the benefit of Notification No.121/62-CE dt.13.06.1961 and Notification No.75/84-CE dt.01.03.1984 to be admissible to the appellant only for the period from 01.09.1985 to 28.02.1986. That on receipt of Supreme Court's decision appellant paid duty of Rs.67,85,100 (out of total disputed duty of Rs.84,82,950/-) on 04.03.2004 and an intimation to that effect was also given to Range Superintendent on 25.03.2014. Learned Advocate further argued as follows:-

(i) That Section 11AA of the Central Excise Act, 1944 was inserted with effect from 26.05.1995 and interest was required to be paid only after 3 months from the date of determination of duty, under Section 11A. That in the case of the appellant the duty has been confirmed under Rule 9(2) of the Central Excise Rules, 1944 and no such determination has been done under Section 11A of the Central Excise Act, 1944. He made the Bench go through the relevant show cause notices and adjudication orders. That the findings of the Adjudicating authority that demands were earlier confirmed under Section 11A(2) of the Central Excise Act, 1944 is thus ex-facie incorrect and contrary to the records of the case. He also relied upon the following case laws:-

(a) CCE v. Eicher Demm [2010 (252) ELT 519 (HP)]

(b) Caprihans India Ltd. v. CCE [2011 (267) ELT 238 (T)] = 2011-TIOL-584-CESTAT-MUM

(c) Kitply Industries Ltd. v. CCE [2003 (152) ELT 208 (T-Kol)

(ii) That the case law of CCE v. Woodcraft Products Ltd.[2002 (143) ELT 247(SC)] = 2002-TIOL-825-SC-CX-LB relied upon by Revenue is not applicable to the present facts in view of Apex Court's decision in the case of Sandur Manganese and Iron Ores Ltd. v. State of Karnataka[2010(13)SCC 1] - Para-83.

(iii) That without prejudice to the above stand, interest under Section 11AA read with Explanation-I, was only payable after 3 months from the date of determination which will be the date of Apex Court's order in the case of appellant and differential duty was paid within 3 months of the date of determination. Learned Advocate relied upon Chhatisgarh High Court's decision in the case of Raipur Bright Steel & Wire Weld Industries Ltd. v. UOI [2014 (305) ELT 369(Chhatisgarh)].

(iv) That in any case there cannot be any demand for interest from the appellant, for the period 26.08.1995 to October 04.07.2002, when the duty amount was lying with the Revenue before being refunded to the appellant.

Respondent Contention:Shri A.Roy, Supdt.(AR) appearing on behalf of the Revenue argued that the duty amount will be deemed to have been confirmed under Section 11A(2) of the Central Excise Act, 1944 when the matter was decided by Supreme Court. Learned AR relied upon the case law of Apex Court in CCE v. Woodcraft Products Ltd. [2002 (143) ELT 247(SC)] = 2002-TIOL-825-SC-CX-LB to argue that no time limit is applicable in case of restitution of a sum refunded to an assessee. It was also his case that as per case law CCE v. Orissa Concrete Products (India) Pvt.Ltd. [2001 (133) ELT 787 (Tri.Kolkata)] interest under Section 11AA is payable after 3 months from 26.05.1995 when Section 11AA was introduced. Learned AR thus strongly defended the order passed by the Adjudicating authority.

Reasoning of Judgment:Heard both sides and perused the case records. Issue involved in the present proceedings is whether interest under Section 11AA of the Central Excise Act, 1944 can be recovered from the appellant, with respect to a demand on Pitch Creosote Mixture (PCM) for the period 01.03.86 to 31.12.87 paid by the appellant on 04.03.2004, after the issue was partly decided against them as per Apex Court's order reported as CCE, Bolpur v. Steel Authority of India Ltd. [2004 (164) ELT 387 (SC)].

Section 11AA of the Central Excise Act, 1944 was introduced with effect from 26.05.1995 and is reproduced below:-

"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 determination, he shall pay, in addition to the duty, interest at such rate not below ten percent and not exceeding thirty-six percent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty:

Provided that where a person chargeable with duty determined under sub-section (2) of section 11A before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty.

Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal or, as the case may be, the Court, the date of such determination shall be the date on which an amount of duty is first determined to be payable.

Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner(Appeals), Appellate Tribunal or, as the case may be, the Court, the date of such determination shall be, -

(a) for the amount of duty first determined to be payable, the date on which the duty is so determined;

(b) for the amount of increased duty, the date of order by which the increased amount of duty is first determined to be payable;

(c) for the amount of further increase of duty, the date of order on which the duty is so further increased.

(2) The provisions of sub-section (1) shall not apply to cases where the duty becomes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President."

One of the arguments of the appellant is that demands in the current proceedings by the show cause notices and earlier confirmed orders were not made under Section 11A(2) of the Central Excise Act, 1944. Therefore, adjudicating authority under Order-in-Original No.7/COMMR/BOL/06 dated 24.04.2006 has wrongly stated that demands were confirmed under Section 11A(2) of the Central Excise Act, 1944. It is observed that in all the show cause notices duty on Pitch Creosote Mixture was demanded under Rule 9, Rule 173 & Rule 53 of the Central Excise Rules, 1944. Original Order-in-Original No.16-17/Pitch Creosote Mixture/DSD/88 dated 11.03.88 also does not specify that duty has been confirmed under Section 11A(2) of the Central Excise Act, 1944. Section 11AA(1) of the Central Excise Act, 1944 clearly stipulates that interest is chargeable with respect to duty determined under Section 11A(2) of the Central Excise Act, 1944. No evidence/judicial precedent has been brought to Tribunal’s notice that any duty demanded/confirmed against an assessee under Central Excise law should be deemed to have been determined under Section 11A(2) of the Central Excise Act, 1944. On the contrary appellant has relied upon Himachal Pradesh High Court's ruling in the case of CCE, Chandigarh vs. Eicher Demm (supra). In para 5, 7 & 8 of this case law Hon'ble High Court made following observation:-

5. On perusal of Section 11-AA, which relates to payment of interest on delayed payment of duty, it is obvious that this section would become applicable only after a determination of duty under sub-section (2) of Section 11-A has been made. Similarly, in case of imposition of penalty, Section 11-AC comes into play only when duty is determined under sub-section 2 of Section 11. However, as far as Section 11-AB is concerned, it relates to non-payment or short payment of duty or erroneous refund of duty after determination of sub-section 2 of Section 11-A. But this section also deals with payment of duty under sub-section (2-B) of Section 11-A which relates to voluntary payment of duty before service of notice under Section 11-A(1). Admittedly, in the present case no notice was issued under Section 11-A till the time when the amount was deposited by the assessee. This notice was issued after three years.

7. In our considered opinion it is the first proviso which applies in the present case. The order, instruction or direction by the board can be issued in any manner. In the present case, the assessee deposited the amount after the respondent informed him that his method of paying excise was not correct. The assessee did not reserve any right to appeal. It is not the case of the Department that the assessee did not deposit this amount within 45 days. The proviso makes it clear that if the assessee deposits the amount of duty within 45 days of being informed about the short deposit no interest shall be payable.

8. In view of this proviso, we are of the considered view that no penalty or interest could be levied on the assessee, firstly, because there is no order passed under Section 11-A and secondly, there is nothing on record to show that the assessee did not deposit the amount within 45 days of being informed of his liability. In fact, it is not the case of the Department that the assessee did not deposit the amount within 45 days.

In the present proceedings appellant paid the entire duty within three months after being determined by Supreme Court, as required under Section 11AA of the Central Excise Act, 1944.

In view of the above observations and the settled proposition of law, order dated 24.04.2006 of the Adjudicating authority is based on a wrong premises that duty was determined against the appellant under Section 11A(2) of the Central Excise Act, 1944.

Reliance placed by the Revenue on the case law CCE, Shillong vs. Woodcraft Products Ltd.(supra) is not applicable to the present factual matrix. This relied upon case decided by Apex Court was with respect to recovery of refund granted to an assessee. It is evident from para 5 of this case law that assessee in that case gave an undertaking to the Revenue that amounts refunded would be repaid within seven days in the event of Supreme Court decision against that assessee. Further the demands for recovering erroneous refund in that case was issued under Section 11A of the Central Excise Act, 1944. It was under these facts Apex Court held that assessee was bound to restitute the demands of such refund to the Revenue, with interest. In the present appeal before Tribunal, neither the duty is determined under Section 11A(2) of the Central Excise act, 1944 nor appellant has given any such undertaking. Inspite of that appellant deposited the entire disputed duty decided by Supreme Court within three months from the case was decided by Apex Court. Even if it is presumed that duty was determined under Section 11A(2), which is factually incorrect, still the revised duty determined by Supreme Court stands paid within three months of such determination as per the provisions of Section 11AA(1) of the Central Excise Act, 1944, read with Explanation-I to this Section. In view of the above observations appeal filed by the appellant is required to be allowed.

Decision:Appeal allowed.

Comment:The gist of this case is that no penalty or interest could be levied on the assessee, firstly, because there is no order passed under Section 11-A and secondly, there is nothing on record to show that the assessee did not deposit the amount within 45 days of being informed of his liability. Further, reliance placed by the Revenue on the case law CCE, Shillong vs. Woodcraft Products Ltd. is not applicable to the present factual matrix.

Prepared by: Hushen Ganodwala

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PJ/CASE LAW/2016-17/3134

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