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CX - interest liability arises under provisions of Section 11AB of Central Excise Act, 1944, and even prior to 11.05.2001: CESTAT Larger Bench

By TIOL News Service

AHMEDABAD, SEPT 27, 2013: THE issue referred to the Larger Bench in these cases is:

"whether interest on duty/ cenvat credit demanded by applying proviso to Section 11A or Section 11AA with Cenvat Credit Rules or under Rule 57(I), is payable under Section 11AB prior to 11.05.01."

The Department's AR submitted that the issue is directly covered by the judgement of the Gujarat High Court in the case of Exotic Associates Vs. CCE - (2010-TIOL-59-HC- AHM -CX).

The Larger observed that the High Court of Gujarat after considering all the submissions and considering provisions of Section 11AB prior to 11.05.01 and post 11.05.01, laid down a ratio at paragraph No.18 as follows.

"18. So far as the appeal filed by the revenue is concerned, the Tribunal has deleted the interest only on the ground that the demand relates to the period of 1997 to 2000 and on that count, it was held that no interest is leviable in respect of demand prior to 11-5-2001. It is, however, contended before us that while taking the said view, the Tribunal has only considered the provisions of sub-section (2) of Section 11AB brought on the Statute Book by the Act 14 of 2001 with effect from 11-5-2001. Prior to the said provision, Section 11AB was inserted by Section 76 of Finance (No.2) Act of 1996 with effect from 28-9-1996. It appears that the Tribunal relied on the non-applicable provisions, namely, amended Section 11AB . This amended Section 11AB would not apply to the cases where Section 11AB was inserted by Section 76 of Finance ( No.2 ) Act, 1996, effective from 28-9-2006 and demand related to a period subsequent thereto, i.e. between the period from 28-9-1996 and 11-5-2001. Sub-section (2) of Section 11AB specifically states that the provision of Sub-section (1) of Section 11AB shall not apply to cases where the duty had become payable on the date on which Finance Act, 2001 received the assent of the President. It was, therefore, open and permissible to levy interest under Section 11AB for the period subsequent to 28-9-1996 under the unamended provision of Section 11AB of the Act."

The Larger Bench found that the issue as referred to the Larger Bench, is now squarely decided by the High Court of Gujarat. Accordingly reference to the several precedents by the counsel for the assessee, would be only of academic interest, since the judgment of the High Court of Gujarat in the case of Exotic Associates was considering the very same point which is referred to this Larger Bench.

Held: interest liability arises on the appellants under the provisions of Section 11AB of Central Excise Act, 1944, and even prior to 11.05.2001.

(See 2013-TIOL-1429-CESTAT-AHM-LB)


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