Commissioner of Central Excise vs Araco Automotive India Pvt. Ltd.

N. Kumar, J—The Revenue has preferred this appeal challenging the order passed by the Tribunal holding that in the absence of provision of law to raise interest, the provisions pertaining to failure to pay fortnightly payment in terms of Rule 170G(1)(d) cannot be invoked in the case of the assessee. The assessee is the manufacturer of seats, parts and accessories of Motor Vehicles, car mats and carpets falling under Chapters 87.08, 94.01 and 57.03 of the Schedule to the Central Excise Tariff Act, 1985. The assessee had discharged the Central Excise duty payable in terms of Rule 9 read with Rule 173G1(a) of the Central Excise Rules, 1944. Due to escalation of price of the goods, the assessee discharged duty of Rs. 3,64,458/- on the escalation charges. But they failed to pay the interest due thereof to the tune of Rs. 9,368/-. They also paid differential duty of Rs. 22,75,109/- by reclassifying the car mats and carpets from Chapters 87.08 and 57.03 for the period June, 1999 to 8th December, 2000, but failed to pay the interest of Rs. 2,12,584/-. Similarly, even in respect of other items, they had paid the differential duty but they have failed to pay the interest thereof. A show cause notice came to be issued to the assessee determining the interest for the period from the date of clearance to the date of discharging differential duty. The assessee replied to the show cause notice by submitting that the supplementary invoices have been issued in terms of existing provisions and the assessee has cleared the goods at the appropriate rate as applicable on the date of clearance and their duty of escalation charges has been paid on the date of raising supplementary invoice. They contended that the provisions of Rule 173G would arise when the assessee does not pay the duty payable by the due date and that interest would be payable from the due date till the date of actual payment of outstanding amount. The due date in the present case would be the date of supplementary invoice and not clearance of goods. The assessing authority held that the assessee has not discharged appropriate duty at the time of clearance and therefore, interest would be chargeable and accordingly, he levied interest.

Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Central Excise (Appeals). The appellate authority set aside the order passed by the assessing authority. He partly allowed the appeal insofar as the interest payable on account of variation of price due to escalation clause and upheld the demand of interest on differential duty paid due to wrong classification of car mats/carpets and clearance of seat assemblies to shop floor.

The assessee preferred an appeal against the said order before the Tribunal. The Tribunal held that Rule 173G refers to payment of duty in cases of fortnightly basis approved by the Commissioner under Rule 47. The failure to deposit duty in terms of Rule 173G(1) will entail payment of interest as laid down in Rule 173G(1)(d) and of the Rules. The reference to the ''due date'' as referred to in the above said clause is with regard to the payment determined and approved by the Commissioner under Rule 47 with regard to fortnightly payments. The Tribunal further held that there is no provision in Rule 173G with regard to payment of interest in circumstances as enumerated in the appeals where the differential duty has been paid by supplementary invoices and on revision of duty rates on reclassification of the goods. In the absence of provision of law to raise interest in these circumstances, the provisions pertaining to failure to pay fortnightly payment in terms of Rule 173G(1)(d) cannot be invoked. Therefore, appeal was allowed. Levy of interest was set aside.

Aggrieved by the said order, the Revenue is in appeal.

We have heard the learned counsel appearing for both the parties. The Parliament, after taking note of this loophole has amended the law by inserting Section 11AA in the Central Excise Act, where it is provided that notwithstanding anything contained in the judgment, decree or order or directions of the Appellate Tribunal or any Court or in any other provisions of this Act or the Rules made thereunder, the person, who is liable to pay duty shall in addition to the duty be liable to pay interest at the rate specified in sub-section (2) where such payment is made voluntarily or after determination of the amount of duty under Section 11AA of the Act. Therefore, this provision is prospective in nature. It has no application to the period prior to 8-4-2011. The period which is the subject matter of this appeal is anterior to the amendment. During the said period, as rightly pointed out by the Tribunal, there was no provision of levying of interest on duty paid after determination of the dispute. In that view of the matter, we do not see any error committed by the Tribunal in passing the impugned order. Hence, there is no merit in this appeal. Appeal is dismissed.