By TIOL News Service

MUMBAI, NOV 25, 2016: THE O-in-O dated June 1997 was upheld by the Tribunal in July 2003.

The jurisdictional authority issued a letter demanding interest, which was contested without success.

The appeal filed also did not find any favour and, therefore, the assessee is before the CESTAT.

It is submitted that the Tribunal in its order of July 2003 had clearly held that interest liability u/s 11AB does not arise. Moreover, the SCN which was issued demanding duty for clearances made between September 1991 to August 1996 did not invoke the provisions of Section 11AA for the demand of interest but invoked s.11AB. Pleading that the doctrine of merger would apply and interest liability would not arise, the appellant sought for dropping of the proceedings.

The AR while reiterating the findings of the Commissioner (Appeals) submitted that the demand for the interest for the duty payment need not be invoked in the show-cause notice as it automatically follows the confirmed demand. So, also, section 11AA came into force from 26.8.1995, the AR submitted. In support, reliance is placed on the decision in Swan Mills Ltd. - 2015-TIOL-2097-HC-MUM-CX.

After considering the submissions, the Bench observed -

6. …I find that the demand for the interest liability under the provisions of Section 11AA by the letter dated 24.10.2005 and 18.11.2005 to me seems not in consonance with the law, inasmuch as the lower authorities have never invoked the provisions of Section 11AA of the Central Excise Act, 1944 in the show-cause notice issued to the appellant, which demanded the duty liability by invoking the extended period. The said show-cause notice was adjudicated and the demands were confirmed along with interest. Matter was carried to Tribunal and the Bench issued a final order dated 27.3.2003, were in paragraph 7 specifically recorded that the interest demand which has been made in the show-cause notice under Section 11AB is set aside, as section was inserted from 28.9.1996, the period in dispute was 1.8.1991 to 28.8.1996. Having set aside the demand by an order dated 27.3.2003, Revenue authorities have no business to issue letter on 24.10.2005, 2.11.2005 and 18.11.2008 directing the appellant to pay the interest in terms of Section 11AA of the Central Excise Act, 1944. It is a settled law that if demand is to be made for the interest liability, it was for the department to invoke such provisions in the show-cause notice. In the absence of any invocation of the provisions of Section 11AA in the show-cause notice, I find that the impugned order is not sustainable and liable to be set aside.”

The demand of interest was set aside and the appeal was allowed.

(See 2016-TIOL-3053-CESTAT-MUM)