Customs, Excise and Gold Tribunal - Tamil Nadu
Kanaga Durga Clothers (P) Ltd. vs Cce. on 10 April, 2007
Equivalent citations: 2007(118)ECC326, 2007ECR326(TRI.-CHENNAI), 2007(215)ELT313(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. The appellants had delayed paying duty for certain fortnights between 1.12.2002 and 31.3.2003. Interest on such amounts of duty was paid for a period upto 31.3.2003. The jurisdictional Superintendent of Central Excise, Thirunagar Range, issued a letter dated 4.9.2004 to the appellants demanding interest on the said amounts of duty from 1.4.2003 under Rule 8(3) of the Central Excise Rules, 2002, amounting to Rs. 3,66,360/-. Against this demand the party preferred an appeal to the Commissioner (Appeals) and the latter rejected the appeal, for which the following reasons were stated:
(a) The intimation sent by the Range Officer vide letter O.C. No. 909/2004 dated 4.9.2004 is not an appealable order; and
(b) The relief sought for by the appellants with respect to applicability of the amended provisions for determination of interest amount is premature.
2. In the present appeal filed against the decision of the appellate Commissioner, reliance has been placed on the Tribunal's decision Shree Baidyanath Ayurved Bhawan Ltd. v. Commissioner , wherein a communication sent by a Superintendent of Central Excise demanding duty from the assessee was set aside on the ground that the demand was not preceded by issue of show-cause notice. The appellants have raised other grounds also against the impugned order. Learned Counsel for the appellants has produced a copy of the Superintendent's letter No. 476/2007 dated 3.4.2007 which was received by the appellants on 4.4.2007. This letter reads as under:
Please refer to your letter dated 31.3.2007 on the above subject.
You were only required to pay the interest amount @ 13% as per Section 11AB of the Central Excise Act and not at the rate of 2% per month or Rs. 1,000/- per day. The Commissioner (Appeals) vide his order in Appeal No. 135/04 (Order-in-Appeal No. 2/2005) dated 20.1.2005 has declined to grant relief as requested by you regarding interest and also held that the intimation sent by the Superintendent is not an appealable order. The Hon'ble Tribunal has also not granted any stay in this regard. Also, the CESTAT vide its Misc. Order No. 1061-61/2006-Ex. dated 11.12.2006 in the case of M/s. Pinkline Exim (P) Ltd. v. CCE Jaipur dated 11.12.2006 has held that stay order stands vacated if appeal is not disposed off within the period specified (180 days) in view of first proviso to Section 35(2A) of Central Excise Act, 1944. A copy of order A. No. E/224/2005 as referred in your letter may please be sent to this office.
Hence you are called upon to pay the interest immediately on intimation to this office.
Yours faithfully, Sd/-
(K. Natarajan) Superintendent Learned Counsel submitted that Sub-rule (3) of Rule 8 had been partly struck down by the Rajasthan High Court in the case of Lucid Colloids Ltd. v. Union of India and therefore the proposal to levy interest from the appellants in terms of the said sub-rule was liable to be set aside. Learned Counsel also relied on judicial authorities with regard to appealable nature of the Superintendent's communications. The following decisions were cited:
(a) Hyderabad Industries Ltd. v. Commissioner , wherein a Superintendent's letter requesting the assessee to pay duty short-levied without following the procedure for such recovery of duty under Section 11A of the Central Excise Act was held to be an appealable order and the same was set aside.
(b) Metal Forgings v. Union of India (SC), wherein show-cause notice was held to be a mandatory requirement for raising demands.
(c) Choudhary Minerals & Chemicals v. Commissioner , wherein recovery of interest on duty was stayed by the High Court after noting that no show-cause notice had been issued to the assessee for recovering interest.
3. Learned SDR reiterated the findings recorded in the impugned order.
4. After considering the submissions, I accept the appellant's contention that the Superintendent's letter dated 4.9.2004 demanding interest on duty from 1.4.2003 under Rule 8(3) was appealable. The relevant part of Sub-rule (3) of Rule 8 of the Central Excise Rules, 2002, as amended under Notification No. 12/2003-CE (NT) dated 1.3.2003 effective from 1.4.2003, is reproduced below:
If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with an interest at the rate of two per cent, per month or rupees one thousand per day, whichever is higher, for the period starting with the first day after due date till the date of actual payment of the outstanding amount:
Provided that the total amount of interest payable in terms of this sub-rule shall not exceed the amount of duty which has not been paid by date:
Provided further that....
It was in terms of the First proviso to the sub-rule that the Superintendent, in his letter dated 4.9.2004, demanded interest from the appellants. In his recent letter [O.C. No. 476/07 dated 3.4.07] addressed to the appellants, the Superintendent says that the amount of interest demanded in his first letter had been worked out @ 13% as per Section 11AB of the Central Excise Act and not @ 2% per month or Rs. 1,000/- per day. The fact remains that the assessee was not put to notice of the proposal for levy of interest from 1.4.2003 as quantified in the Superintendent's letter dated 4.9.2004. It is explicit from the said letter that the amount of interest [Rs. 3,66,360/-] was quantified in terms of Rule 8. However, in his letter dated 3.4.2007, the Superintendent seems to have given the go-by to Rule 8 and to have directly invoked Section 11AB. The law does not permit the department to dilly-dally like this to the detriment of an assessee. Both the letters of the Superintendent are of appealable nature. In any case, his letter dated 4.9.2004 demanding interest with effect from 1.4.2003 under Rule 8(3) (as amended), without prior notice to the party, requires to be set aside on the ground of violation of natural justice. On merits also, such a demand is untenable after the Rajasthan High Court's ruling in Lucid Colloids' case. The view taken by the lower appellate authority that the Superintendent's letter is not appealable is patently erroneous.
5. In the result, I set aside the impugned order as well as the demand of interest raised against the appellants in the Superintendent's letters dated 4.9.2004 and 3.4.2007. The case is remanded to the jurisdictional Assistant Commissioner/Deputy Commissioner for correct quantification of interest which is liable to be paid by the appellants from 1.4.2003. While doing so, the Assistant Commissioner/Deputy Commissioner shall have due regard to the Rajasthan High Court's ruling in Lucid Colloids' case. In other words, the adjudicating authority must proceed on the premise that the provision struck down by the Hon'ble High Court did not exist during the material period. Needless to say that the appellants shall be given a reasonable opportunity of being heard as to the law applicable to the case.
6. The appeal stands allowed by way of remand.
(Dictated and pronounced in open court)