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M/s. Madras Fertilizers Ltd. Versus Commissioner of Central Excise, Chennai

2018 (2) TMI 918 - CESTAT CHENNAI

Demand of interest - scope of SCN - neither the SCN nor the Order-in-Original dated 7.1.1977 makes any whisper about liability to pay interest - whether the appellant is liable to pay the interest demand of ₹ 4,99,48,695/-? - Held that: - there is no proposal for duty demand in the SCN and there is no determination of duty in the Order-in-Original dated 7.1.1977 which are the genesis of this litigation. The SCN as well as the order-in-original dealt only with the issue of classification an .....

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nths till the date of payment of such duty. Thus, when the duty is determined under sub-section (2) of section 11A, the assessee is liable to pay interest at the specified rate on the date which remained unpaid after three months of determination till actual payment. Determination of duty means the duty ascertained after adjudication as per sub-section (2) of Section 11A. For the interest to be payable, there must be an ascertained amount of duty - In the present case, there has been no such det .....

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ainable - appeal allowed - decided in favor of appellant. - Appeal No. E/378/2011 - Final Order No. 40388 / 2018 - Dated:- 13-2-2018 - Ms. Sulekha Beevi C.S., Member (Judicial) And Shri B. Ravichandran, Member (Technical) Ms. Minchu Mariam Punnoose, Advocate for the Appellant Shri A.Cletus, Addl. Commissioner (AR) for the Respondent ORDER Per Ms. Sulekha Beevi The appellants are aggrieved by the demand of interest. This appeal has a chequered history. 2. The appellant is a Public Sector Undertak .....

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more fertilizers on all of which the appropriate amount of the duty of excise or countervailing duty as the case may be is already paid. Appellants filed classification list No.1/76 dated 3.3.1976 claiming exemption under Notification No. 25/70. On5.3.1976, the Assistant Collector approved the classification and allowed the availment of exemption subject to condition thereon. While so, a show cause notice dated 7.6.1976 was issued to the appellant proposing to withdraw the approval given for av .....

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s Ltd., Manali, Madras, is not eligible for the exemption contemplated in the Notification No. 25/70-CE dated 1.3.70 I, therefore, order that the exemption granted to M/s Madras Fertilizers Ltd., Madras, is withdrawn and they should pay duty on the above product removed from their factory from 5.3.76 onwards within 10 days of receipt of this order. They should also file a revised classification list and price list in proper form for the product in question, forthwith. 4. At this juncture, it is .....

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Revenue. Though appellants filed civil appeal before the Hon ble Supreme Court, vide judgment dated 20.1.1994 [reported in 1994 (69) ELT 625 (SC)] the Apex Court held that appellants are not eligible for the benefit of notification No. 25/70. The issue regarding eligibility of notification thus attained finality. 5. Based on the decision of Apex Court, department issued letters to the appellant to pay duty. On 31.12.1996, a letter was issued from the Ministry of Finance calling upon the appellan .....

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e the Commissioner (Appeals) and vide Order-in-Appeal No. 5/2011 dated 8.4.2011 which is impugned herein, the Commissioner (Appeals) held that appellant is liable to pay interest of ₹ 4,99,48,695/-. The appellants are thus before the Tribunal. 6. On behalf of the appellant, ld. counsel Ms. Minchu Mariam Punnoose made submissions which can be summarized as under:- 6.1 There was no demand of interest in the show cause notice issued to the appellant dated 7.6.1976. So also in the Order-in-Ori .....

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terest. The findings in the impugned order is that the appellant is liable to pay interest as per section 11AA of Central Excise Act, 1944 for the delayed payment of duty. The provision of section 11AA will not be applicable as the duty liability pertains to a period much prior to the introduction of the said provision. Section 11AA was introduced with effect from 26.5.1995 and the amendment under section 11AB in regard to levy of interest was brought forth with effect from 28.9.1996. When there .....

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er Article 265 of the Constitution of India, no tax shall be levied or collected without any authority of law. That Article 265 contemplates two stages; one is levy of tax and the other is collection of tax. Levy of tax includes declaration of liability and assessment, namely, quantification of the liabilities. After quantification of liability, follows the collection of tax and it should be only by an authority of law. The authority of law should be only by a legislative fiat but not by an exec .....

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(281) ELT 677 (Guj.) was relied by the counsel to contend that to invoke section 11AB, as it stood prior to its amendment on 11.5.2001, the allegations of fraud, mis-statement collusion etc. has to be established. These words were deleted vide amendment dated 11.5.2001. That there is no allegation of fraud, collusion or mis-representation in the show cause notice issued by the department and therefore the demand upheld under section 11AB by Commissioner (Appeals) is erroneous. 6.5 The decision i .....

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She submitted that the demand of interest has been made by the department with much delay after expiry of several years and therefore not sustainable. She argued that the provisions of limitation under section 11A of Central Excise Act, 1944 would equally apply to the demand of interest. She relied on the decisions in the cases of Collector Vs. TVS Whirlpool Ltd. 1996 (86) ELT 144 and Hindustan Insecticides ltd. Vs. Commissioner of Central Excise 2013 (297) ELT 332 (Del.). 7. The ld. AR shri A. .....

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issioner of Central Excise Vs. International Auto - 2010 (250) ELT 3 (SC) c. Commissioner of Central Excise, Pune Vs. SKF India Ltd. - 2009 (239) ELT 385 (SC) 7. Heard both sides. 8.1 The issue is whether the appellant is liable to pay the interest demand of ₹ 4,99,48,695/-. As noticed in the narration of facts, neither the show cause notice nor the Order-in-Original dated 7.1.1977 makes any whisper about liability to pay interest. In fact, there is no proposal for duty demand in the show .....

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ayments also. According to the appellant, during the period (5.3.1976 to 29.7.1977) when the appellant cleared the goods availing exemption under Notification, they had paid duty of ₹ 3.10 crores being duty on Urea (1.59 crores) and credit forgone on CVD on Murate of Potash (1.51 crores). That though department issued several letters demanding duty on various dates, the appellant had paid more than 12 crores towards duty including the invocation and adjustment of Bank Guarantee. However, w .....

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uphold the demand of interest. 8.3 During the relevant period, there was no provision in the Central Excise law for levy of interest. The duty liability pertains to a period when there was no provision for levy of interest in the statute. The Hon ble High Court of Andhra Pradesh in the case of Delta Paper Mills Ltd. (supra) had occasion to analyse a similar issue. The facts show that the period involved is prior to the introduction of section 11AA in the statute. Before the introduction of stat .....

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no tax shall be levied or collected without an authority of law and that Article 265 contemplates two stages - one is levy of tax and other is collection of tax and that levy of tax includes declaration of liability and assessment, namely, quantification of the liabilities. After the quantification of the liability follows the collection of tax and it should be only by an authority of law. The authority of law should be only by a legislative fiat but not by an executive fiat. Levying of interes .....

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are not debts in the ordinary sense of contractual obligations and, therefore, not within the meaning of the general interest clause; that as impositions by governmental authorities, they do not bear interest except by the express provision of statute and once the assessment has become final all that remains to be done is to collect the tax assessed and when the stage of collection is reached the manner of collection must be authorised by law and the State is prohibited from adopting illegal or .....

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pocket of the citizen. And, what Article 265 enjoins is that every stage in this entire process must be authorised by the law. The term levy includes assessment but not collection. The taxing power of the State will also comprehend within it the power to provide for quantification of the liability of persons made liable to pay the tax. It also comprehends within it the power to provide for collection of tax including prescribing the methods of recovery of the amount of tax due if the person liab .....

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ime and provisions in that behalf form part of the recovery machinery provided in a taxing statute. Interest be ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of actual amount of tax withheld and extent of delay in paying it and that such interest is compensatory in character and not penal. The payment of interest in case of default in payment of tax is a means of compelling an assessee to pay .....

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e what is most efficacious for this purpose, and the defaulter has no moral right to make any grievance in this behalf. The provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be recovered under law and it cannot be recovered by way of damages for wrongful detention of the amount. Any provision made in a statute for .....

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he delayed payment of tax. 8.4 Further, in para 42 of the said decision, the Court held that the contentions of the Standing counsel for the Revenue that appellant having taken advantage of the payment of duty to be made in installments cannot go back and deny the liability to pay interest. This argument was not accepted by the Court observing that there cannot be any estoppel against a statute. The Court held as under:- The contention of the learned Standing Counsel for the respondents that hav .....

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eds to be stated that though facts are identical, the said decision did not discuss the application of section 11AA as the decision was rendered on 27.1.1995 before the introduction of section 11AA. The demand of interest is made by issuing a letter to the appellant. The facts are identical to the case before us and applicable. 8.6 According to the ld. AR, after introduction of section 11AA, the appellant is liable to pay interest for any delayed payment of duty. The relevant provisions of secti .....

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ation in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty: Provided that where a person chargeable with duty determined under sub-section (2) of section 11A before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately a .....

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, National Tax Tribunal or, as the case may be, the court, the date of such determination shall be, - (a) for the amount of duty first determined to be payable, the date on which the duty is so determined; (b) for the amount of increased duty, the date of order by which the increased amount of duty is first determined to be payable; (c) for the amount of further increase of duty, the date of order on which the duty is so further increased. Introduced with effect from 11.5.2001 (2) The provisions .....

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30% per annum as may be fixed by the Central Government on such date from the date immediately after expiry of said three months till the date of payment of such duty. Thus, when the duty is determined under sub-section (2) of section 11A, the assessee is liable to pay interest at the specified rate on the date which remained unpaid after three months of determination till actual payment. Determination of duty means the duty ascertained after adjudication as per sub-section (2) of Section 11A. F .....

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the Original Order being set aside by the First Appellate Authority, by the Tribunal, by the High Court or by the Supreme Court. Section 11AA provides for interest in case a person is charged with duty under sub-section (2) of Section 11A and fails to pay such duty. In other words there must be duty which is ascertained which 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 e .....

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e for interest from that date. That situation is covered by the explanations to the Section. 8.8 In the case before us, there has been no such determination of duty. The Order-in-Original dated 7.1.1977 does not make any determination of duty. It merely decides the classification dispute and the eligibility of exemption notification. After such order, the Revenue ought to have issued a show cause notice demanding duty for the period 5.3.1976 to 29.7.1977. No such show cause notice was issued. Th .....

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interest during the period pertaining to duty demand. The ld. AR contends that interest liability is automatic and therefore there is no requirement to issue show cause notice demanding interest. Whenever there is demand to pay duty, the failure to pay makes the liability to pay interest automatic. He has relied upon the decision in the case of Dodsal Engineering and Construction P. Ltd. (supra). The facts of the said case reveal that show cause notices were adjudicated and Order-in-Original da .....

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ommissioner issued notice seeking demand of interest under section 11AA on the differential duty confirmed vide order dated 30.12.2001 as well as under section 11AB on the duty confirmed vide order dated 29.12.2003 and 24.2.2003. There upon Order-in-Originals were passed confirming the interest liability and also adjusting the CENVAT credit. Consequently, rejecting the request for refund of interest which according to assessee was paid wrongly. The assessee challenged the liability to pay intere .....

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irdly, separate show cause notice was issued raising the demand of interest. Fourthly, the period pertaining to the duty liability is from 1.4.2000 to 6.1.2003 which is after the introduction of section 11AA and section 11AB as well as the amendments to these sections in 2001. The case therefore is purely distinguishable on facts and will be of no assistance to the Revenue. It needs to be mentioned that in para 13.10 of the said decision, the Tribunal has observed that the decision in the case o .....

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was paid by the assessee due to revision of prices retrospectively. The facts in the judgment of International Auto Ltd. (supra), though not forthcoming, facts in SKF India Ltd. reveals that the assessee was issued show cause notice dated 4.4.2006 demanding interest on delayed payment of duty under section 11AB. The ratio laid in this case is not applicable to the case before us, the facts being entirely different. Further, the decisions in both these cases was disapproved by the Apex Court in S .....

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). The assessee initially filed writ petition challenging levy of additional duty of excise on fabrics under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 claiming eligibility for exemption under Notification No. 78/82dated 28.2.1982. Eventually, the writ petition was dismissed on 25.5.1995. The Range Superintendent issued communication dated 16.10.1995 calling upon them to pay duty. The petitioners paid duty and intimated the particulars of payment on 7.11.1995. Therea .....

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the sums. It was argued that none of the ingredients under section 11AA are attracted. The Hon ble High Court thus held the issue in favour of the assessee. The decision is very much applicable to the case on hand and relevant portion of the order is as under:- 10. A bare perusal of this Section denotes that the interest that is payable thereunder is on the sum which is determined. The amount of interest is payable on duty not levied or not paid or short paid or erroneously refunded. Section 11 .....

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is served, the Central Excise Officer can determine the amount of duty of excise due from such person to whom notice is issued and thereupon, he shall pay the amount so determined. It is that amount, which is determined but not paid within three months from the date of such determination, which attracts interest under Section 11AA. In the present case, the petitioners had challenged the duty, namely, the additional duty of excise on the goods of special importance contemplated by the Act, namely .....

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a stay operating in favour of the petitioners. Hence, we are not concerned with the period during which the writ petition was pending before the Delhi High Court. After it was disposed of, a demand has been made for payment of duty. That duty was paid, may be in instalments, as recorded in the order dated 4th September, 1997 but it was paid. Once we are only concerned with the order passed on 4th September, 1997 that may be determining the sum due and payable, but it records that the sum has alr .....

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e. Such is not the case from the facts and records before us. Rather, this is a case where duty came to be determined even when there was a legal proceeding pending in the Delhi High Court with an interim order in favour of the petitioners. After the dismissal of that writ petition before Delhi High Court, the demand was made, but straightaway of interest. We are not concerned with that amount because for recovery of that amount of interest Section 11AA was not invoked and rightly. Section 11AA .....

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ion 11AA could not have been pressed into service, the interest which was claimed and on the figure of the duty which was remitted in instalments could have been collected and recovered in accordance with general law. As per the general law and prevailing then, the proceedings for recovery of interest for wrongful withholding of the sum is independent of the action under the Central Excise Act, 1944. There is no provision in the Central Excise Act, 1944 and then prevailing, enabling recovery of .....

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the case of Commissioner of Central Excise Vs. Lucas TVS - 2016 (333) ELT 259 (Mad.) which would assist the contentions of the appellant. The facts are that there was a classification dispute pursuant to which Order-in-Original No. 7/95 dated 9.1.1995 was passed directing the assessee to pay duty for the different periods 1.1.1994 to 31.1.1994; 1.2.1994 to 30.6.1994 and 1.7.1994 to 30.12.1994. This order was appealed before Commissioner (Appeals) who held the issue in favour of assessee. The de .....

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9.1.1995. On appeal, Commissioner (Appeals) set aside the Order-in-Original dated 29.11.2001 which confirmed the demand of interest. This was upheld by the Tribunal following the decision in the case of Blue Star Ltd. (supra) as there was no show cause notice issued for demand of interest. The view of the Tribunal was maintained by the Hon ble jurisdictional High Court. The relevant portion of the judgment is reproduced as under:- 8. So far as this case is concerned, the contention of the learne .....

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has been paid by the assessee, the question of payment of interest does not arise. 9. We find no reason to differ with the contention of the learned counsel for the assessee. 10. The contention of the Revenue is that the order determining the liability, once passed drags the liability back to the date of actual liability and therefore, interest is payable from 9-1-1995. 10.1 The demand made for interest for the period from 26-8-1995 to 31-3-2001 has been rightly rejected by the Commissioner (App .....

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001. The facts relevant are narrated in para 4 to 9 of the judgment, which is as under:- 4. By show cause notices Bearing Nos. 541/98, 1092/98, 216/98, 273/99, 685/99 and 1094/99 respectively dated 2-4-1998, 1-7-1998, 18-11-1998, 1-4-1999, 30-7-1999 and 1-12-1999 relating to various periods namely 9/97 to 12/97, 1/98 to 4/98, 5/98 to 8/98, 9/98 to 12/98, 1/99 to 4/99 and 5/99 to 8/99, the appellant/assessee was called upon to show cause as to why a demand for additional duty of excise to the tot .....

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s Bearing Nos. 335 and 387/2000 respectively dated 5-4-2000 and 25-4-2000 relating to the period September, 1999 and 10/99 to 12/99 were issued demanding duty. These two show cause notices resulted in an Order-in-Original Bearing No. 54/2000, dated 30-10-2000, confirming the demand to the tune of ₹ 3,87,446/-. This order was also confirmed by the same Order-in-Appeal No. 178/2003. 7. Yet another show cause notice Bearing No. 481/2001, dated 11-5-2001 relating to the period 5/2000 to 6/2000 .....

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arising out of four different Orders-in-Original Bearing Nos. 18/2000, 54/2000, 43/2001 and 42/2001, the assessee filed four appeals in E/462 to 465/2004. These appeals were dismissed by the Customs, Excise and Service Tax Appellate Tribunal by a final order dated 9-7-2013 [2014 (301) E.L.T. 403 (Tri.-Chen.)]. As against the said common order passed in four appeals, the assessee has come up with C.M.A. Nos. 1949 to 1952 of 2015. 8.14 The distinction between the two provisions of law and liabilit .....

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h 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 exceeding thirty six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty : Prov .....

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eals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the date of such determination shall be the date on which an amount of duty is first determined to be payable. Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the date of such determination shall be, - (a) for the amount of duty first determined to be payable, the .....

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: (1) Notwithstanding anything contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision 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), whether such payment is made voluntarily or after determination of the amount of duty under Section 11A. (2) Interest, at such rate not below ten per cent. and not exce .....

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, instruction or direction by the Board under Section 37B; and (b) such amount of duty is voluntarily paid in full, within forty-five days from the date of issue of such order, instruction or direction, without reserving any right to appeal against the said payment at any subsequent stage of such payment. 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 by reason of fraud, collusion .....

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from the first day of the month succeeding the month in which the duty ought to have been paid under this Act or the Rules made thereunder or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2) of Section 11A, till the date of payment of such duty. (2) For the removal of the doubts, it is hereby declared that the provisions of sub-section (1) shall not apply to cases where the duty became payable before the date on which the Finance (N .....

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or further increased amount of duty. 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 b .....

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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. (2) The provisions of sub-section (1) shall not apply to cases where the du .....

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e Appellate Tribunal (National Tax Tribunal) or, as the case may be, the Court, the interest shall be payable on such increased or further increased amount of duty. 22. A careful look at the tabulation above would show that the distinction between the two categories of cases that was maintained upto 11-5-2001 disappeared to some extent by the amendment inserted from 11-5-2001. Though a small distinction was still retained, the liability to pay interest became common for both categories of cases .....

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ies of cases was diluted. 23. After amendment with effect from 8-4-2011, Section 11AA itself is removed. Therefore, all types of cases where there is a determination under Section 11A(2) are treated alike irrespective of the presence or absence of fraud, collusion, etc. 24. Having seen the manner, in which, the amendments were brought forth in 2001 and 2011, if we get back to the cases on hand, it could be seen that the periods, in respect of which, the show cause notices were issued, were all f .....

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came into force. In respect of the remaining two cases, they cannot be covered by the amendment introduced with effect from 11-5-2001. Insofar as the cases where show cause notices were issued before 11-5-2001, it is seen from all the show cause notices, the Orders-in-Original and the orders of the Appellate Authority that there was no allegation of fraud, collusion, misrepresentation, etc. Even the communication of the Superintendent dated 12-11-2013 does not categorise the case of the assesse .....

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ion to the interest claim, should be answered in favour of the assessee. 8.15 At the cost of repetition, it needs to be mentioned that in the case before us, there has been no order-in-original determining duty liability or proposal for demand of interest in the show cause notice. The Hon ble High Court of Madhya Pradesh at Jabalpur in Commissioner of Central Excise, Bhopal Vs. Tirupathi Steel Industries 2005 (182) ELT 149 (MP) held that in the absence of proposal for levy of interest in show ca .....

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for demanding differential duties referred to any interest liability. We have perused the demand notices. The appellant is correct in this regard. In fact, the Board vide master circular dated 10.3.2017 (para 3.8) also states that the interest needs to be demanded and recovered following due process of demand and adjudication. As such interest liability without due notice and adjudication is not sustainable . 8.16 The ld. counsel for appellant has also argued that the interest demand is barred .....

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ction (15) wherein it is provided that sub-section (1) to (14) shall apply mutatis mutandis to the recovery of interest. Thus, the provisions of limitation are made applicable to the demand of interest by later amendments. These cases, in our view, do come to the rescue of the appellant. 9. In the case before us, there is no determination of duty under sub-section (2) of section 11A and therefore the ingredients of Section 11AA are not attracted. Further, there is no show cause notice issued for .....

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