By TIOL News Service

MUMBAI, MAY 04, 2016: THE appellant was manufacturing pile fabrics falling under Chapter 58 of CETA, 1985, which was chargeable to Cenvat duty and the Additional Duty of Excise (GSI). For the manufacture of pile fabrics, they were using as input, the yarn falling under Chapter 54 & 55 on which Cenvat duty and Additional Duty of Excise (T& TA) was leviable. The final products manufactured by the appellant was not charged with Additional duty of Excise (T& TA).

The appellant, however, utilised the said credit of AED(T&TA) towards payment of Additional duty of Excise (GSI).

Upon the department pointing out that it was not permissible to use AED (T&TA) for payment of AED (GSI), the appellant paid the amount from their regular Cenvat credit account but did not discharge the liability of interest.

A show-cause notice was issued for recovery of interest.

Adjudicating authority imposed interest and penalty, which order was upheld by Commissioner (A).

They are before the CESTAT.

It is submitted that no interest can be demanded unless there is a demand of duty. Reference is made to section 11AB(1) of the CEA, 1944 in support.

The Bench extracted Section 11 AB (1) which reads:

Section 11AB: Interest on delayed payment of duty.

(1) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2), or has paid the duty under sub-section (2B), of section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below[ ten per cent.]and not exceeding thirty six per cent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of section 11A till the date of payment of such duty:

Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid

The Tribunal observed -

"It is clear from the said section that the proviso to the said sub-section becomes operational only when duty become payable, consequent to issue of an order/instruction or direction by the payment under Section 37B. In the instant case, there is no such 37B order and therefore, the proviso to said sub-section cannot be invoked. The said sub-section provides that interest can be demanded even when the duty has been paid."

Holding that there is no merit in the arguments of the appellant, the appeal was dismissed.

(See 2016-TIOL-1061-CESTAT-MUM)