2011 (6) TMI 619 - AT - Central Excise

Demand for interest - demand for interest relates to the month of June 2007 show cause notice was issued on 5-8-2009 and it did not invoke extended period of limitation as such Held that - in the absence of any limitation being prescribed under the statute it is not for the Courts or the Tribunal to invent a limitation for such action. Prescribing period of limitation is essentially a legislative function and therefore it cannot be encroached upon by the judicial authorities. action having been taken within a period of five years for recovery it cannot be said that the action is even beyond the reasonable period for enforcing the recovery of interest. appeal fails and is hereby dismissed

Issues Involved:

1. Demand for Interest
2. Applicability of Limitation Period
3. Interpretation of Section 11A and Section 11AB of the Central Excise Act, 1944
4. Jurisprudence on Interest Recovery

Detailed Analysis:

1. Demand for Interest:

The appeal arises from an order dated 15-12-2009 by the Commissioner, Faridabad, confirming a demand for interest amounting to Rs. 6,40,218/-. The appellants conceded that the case on merits is covered by the decision in Commissioner of Central Excise, Pune v. SKF India Ltd., 2009 (239) E.L.T. 385 (S.C.), which mandates the liability to pay interest on delayed payments.

2. Applicability of Limitation Period:

The appellants argued that the show cause notice issued on 5-8-2009 for interest relating to June 2007 was barred by the normal limitation period of one year prescribed under Section 11A of the Central Excise Act, 1944. They contended that no allegation of suppression of facts was made to justify invoking an extended period of limitation. The respondent, however, argued that no limitation period applies to the recovery of interest, citing the law laid down by the Apex Court in C.C.E., Jaipur v. Raghuvar (India) Ltd., 2000 (118) E.L.T. 311 (S.C.) and the decision of the Bombay High Court in CCE & C, Aurangabad v. Padmashri V.V. Patil S.S.K. Ltd., 2007 (215) E.L.T. 23 (Bom.).

3. Interpretation of Section 11A and Section 11AB of the Central Excise Act, 1944:

The Apex Court in SKF India case clarified that interest is leviable on delayed payment of duty for any reason, distinguishing it from penalties which require intentional default. Section 11A deals with the recovery of duty and allows for different treatments of cases based on whether the non-payment was intentional or not. Section 11AB mandates interest on unpaid duty, emphasizing that even if the duty is paid before a show cause notice is issued, interest remains payable.

4. Jurisprudence on Interest Recovery:

The Tribunal in T.V.S. Whirlpool Ltd. case held that in the absence of a prescribed limitation period, a reasonable period would apply, which was interpreted as six months or five years depending on the presence of fraudulent intent. The Apex Court in Raghuvar (India) Ltd. case emphasized that limitation periods must be specifically enacted and cannot be implied by the courts. The Bombay High Court in Padmashri V.V. Patil S.S.K. Ltd. case reiterated that interest under Section 11AB is mandatory and not discretionary, and that payment of duty before the issuance of a show cause notice does not exempt the assessee from interest liability.

Conclusion:

The Tribunal concluded that the demand for interest, even if initiated after more than one year, is not barred by limitation as no specific period is prescribed for interest recovery under the Central Excise Act. The action taken within five years was deemed reasonable. Consequently, the appeal was dismissed, affirming the demand for interest.

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