TMI Blog2009 (10) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... is payable and consequently no interest payable. ascertained amount of duty necessary for interest liability. If there isno ascertained duty there is no question of compensating the state by interest. - 7202 of 2009 - - - Dated:- 15-10-2009 - F.I. Rebello and D.G. Karnik, JJ. Shri R. Ravindran, for the Petitioner. S/Shri R.V. Desai, Sr. Advocate with Rohit B. Pardeshi, for the Respondent. [Judgment per: <?xml:namespace prefix = st2 /> Ferdino I. Rebello, J. (Oral)]. - Rule: Heard forthwith. 2. In a case where an order is set aside and remanded to the Assessing Officer for deciding the matter de novo, what is the relevant date for payment of interest under Section 11AA of the Central Excise Act. That is the question for consideration. Section 11AA of the Central Excise Act reads as under:- "11AA. Interest on delayed payment of duty.- (1) Subject to the provisions contained in Section 11AB, where a person chargeable with duty determined under sub-section (2) of Section 11A, fails to pay such duty within three months from the date of determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Rules, 1944 and why duty should not be demanded from them at the rate as applicable to the slab of air-conditioners having capacity over 7.5 tonnes and why penalty should not be imposed under Rule 173Q and/or Rules 209A, 52A and 226. There was a further show cause in the matter of confiscation with which we are really not concerned. The Respondents filed their reply and contended that Section 11AA(1) cannot be invoked in their case and also that the show cause notice was time-barred. Allegations of contraventions under the Act were denied. After considering the material on record the A.O., was pleased to confirm the demand and also passed an order of confiscation and also imposed penalty, however, observed that they do not propose to confiscate the land and buildings and the plant and machinery as the order passed meets the ends of justice. 4. The petitioners aggrieved, preferred an appeal before the Customs, Excise and Gold Control Appellate Tribunal, CEGAT to impugn the order dated 20th May, 1993. By the order dated 14th July, 2000 [2001 (136) E.L.T. 61 (Tri.-Del.)] the learned Tribunal was pleased to set aside the order and remanded the matter. We may gainfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding detention of goods and adopting coercive methods. The present petition is directed against the said order. 9. Reply has been filed on behalf of the respondent No. 1. It is set out that demand of interest against reduced amount was payable from the date of first determination of the duty by the Adjudicating Commissioner and that the order of the Assistant Commissioner directing the petitioners to pay Rs.51,44,252/- for the period from 26th August, 1995 to 16th July, 2002 is correct, judicious and as per law. The interest paid from 26th August, 1995, it is set out, is in accordance with the statutory provisions of Section 11AA of the Act. Reliance is placed on Section 11AA of the Act. Reliance is also placed in the judgment in the case of Commissioner of Trade Tax v. M/s. Kanhai Ram Thekedar, 2005 (185) E.L.T. 3 (S.C.) which according to the respondents has taken the view that interest liability accrues automatically. It is pointed out that interest is by way of compensation. In the case of a contract compensation is payable by one of the contracting party to the other for any loss or injury caused to the latter by the former by some conduct in breach of the terms of the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from 11th May, 2001. That sub-section says that the provisions of sub-section (1) shall not apply to cases where duty becomes payable or on or after the date on which the Finance Bill, 2001 receives the assent of the President. The Finance Bill, 2001 received the assent of the President on 11th May, 2001. The first order demanding duty was passed on 14th June, 1993 which was set aside on 14th July, 2000 and fresh order came to be passed on 22nd March, 2002. The question for consideration is what is the date when duty was assessed. Is it the first determination which was set aside or the date when the duty was assessed on remand, which has not been disputed by the petitioners. 13. In Kanhai Ram Thekedar (supra) the Supreme Court has taken a view that interest does not become due on notice being served. The Court took the view that interest is automatic and no separate notice of demand is required to be served in that respect. In support of that view the Court relied on several of its earlier judgments. A Division Bench of the Allahabad High Court in the case of Swadeshi Polytex Ltd. v. Assistant Collector of Central Excise, Division III, Ghaziabad and ors., 1986 (26) E.L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice an order of adjudication came to be passed. In an appeal against the order of First Appellate Authority the Tribunal set aside the demand for duty for part of the period of dispute and directed the original authority for re-quantification of the duty to be recovered from the assessee. In appeal before the Supreme Court the order of the Original Authority was restored and pursuant to that the party paid the entire amount by instalments. The Department thereafter asked the party to pay interest under Section 11AA. The Tribunal noted that the order passed by the Tribunal setting aside the appellate Commissioner's order was set aside by the Supreme Court and thus upheld the original order. A finding was recorded that duty determined was paid beyond the period of 3 months from the date (26th May, 1995) on which the Finance Act, 1995 received the President's assent. Our attention was also invited to the judgment in Aeon's Construction Products Ltd. v. Commissioner of C. Ex., Chennai, 2007 (215) E.L.T. 464 (Tri.-Chennai) to contend that the requantification of duty on remand is determination of duty and that would be the relevant date. The issue there was the demand for interest. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has to be payable. If the Original Order is set aside then there is no duty which is ascertained which is payable and consequently no interest would be payable. As noted earlier interest is compensatory. It is to recompensate a party. In the instant case the State for not recovering its monies (duties) on time. At the point of time interest becomes due the interest there must be an ascertained amount of duty which a party needs to pay. If there is no ascertained duty, there is no question of compensating the State by way of interest. The fact that duty subsequently has been ascertained and becomes payable from the date when it was due, does not make a party liable for interest from that date. That situation is covered by the explanations to the Section. 17. Section 11AA has two explanations. By virtue of the first explanation, if duty payable is reduced, then the date of determination of reduction shall be date on which the amount of duty is first determined to be payable. In other words interest would be payable on the duty as reduced not from the date of such reduction of duty but from the date of the first order. That is because even if the duty is reduced there is still ..... X X X X Extracts X X X X X X X X Extracts X X X X
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