In the case of M/s Volpak Systems Pvt. Ltd. -v- CCE Ahmedabad Dt. 27.01.10
Tribunal held that issue is squarely covered by the decision of this Tribunal in
case of
M/s
U.B. Engineering Ltd. Vs. CCE Rajkot as reported in 2009 (17 STJ 291 (CESTAT
Ahmd.). In that case also, there was a delay in payment of service tax as
well as in filing the returns in the year 2006. In that case, relying upon Board
s circular as well as provisions of Section 73(3) of Finance Act, 1994, it was
held that imposition of penalties under Sections 76 and 77 of Finance Act, 1994
was not warranted. The learned Chartered Accountant on behalf of the
appellant submits that in this case, once the appellant paid the service tax
with interest, as per provisions of Section 73(3), no show cause notice should
have been issued at all. Further, he submits that this is an isolated incident
and the appellants have paid the tax regularly. He also relies on the CBE&C
Circular in support of his contention that no show cause notice should have been
issued.
The facts of the case was that the appellants were engaged in providing the
erection, commissioning and installation services, maintenance and repair
services, business auxiliary services etc. The appellants filed ST-3 return late
for the period April 2006 to September 2006 and further between the period from
June 2006 to September 2006. There was delayed payment of service tax also. The
service tax was paid with interest and thereafter, a show cause notice was
issued which culminated into an impugned order, whereby the penalties imposed
under Sections, 76, 77 of Finance Act, 1994 have been confirmed both relating to
the delayed payment of service tax as also late filing of return.
When the principal itself was not liable to be paid, the question of
collection of interest thereon does not arise
In another interesting case of CCE Vapi -v- M/s Subray Catal Chemical
P. Ltd. Dt. 27.01.10, the court has categorically stated that when the principal
itself was not liable to be paid, the question of collection of interest thereon
does not arise. The decision of Hon ble Supreme Court in the case of M/s SKF
India Ltd. is not applicable to the facts of this case in view of the fact that
in this case as observed by Commissioner (Appeals), the differential duty itself
was not payable. The facts that case is that on being pointed out by the audit
party, during the audit of Central Excise records maintained by the respondent,
the respondents had paid an amount of Rs.4,01,859/- accepting the department s
contention that the value for the purpose of determination of Central Excise
duty should have been arrived at as per Rule 9 read with Rule 8 of Central
Excise (Valuation Rules), 2000. However, the respondents had not paid the
interest. On an appeal filed by the respondents, the Commissioner (Appeals) held
that since the respondents had paid the duty correctly as per the provisions,
the payment of differential duty was not required t o be made by them at all.
The fact that they paid such differential duty which was not required to be
paid, does not make them liable to pay interest. Against this order, Revenue was
in appeal.
As per the revenue the provisions of Section 11AB of Central Excise Act,
1944 clearly provides for liability of interest whenever differential duty has
been paid. The reason for such payment is not relevant. He relies upon the
decision of Hon ble Supreme Court in the case of M/s SKF India Ltd. as reported
in 2009-TIOL-82-SC-CX in support of this contention. Hon ble Supreme Court in
that case observed that whatever be the reason for delayed or deferred payment
of duty, interest is leviable.
Tribunal held that the Commissioner (Appeals) had taken a right view that
provisions of Rule 8 of Central Excise Valuation Rules are attracted only where
the excisable goods are not sold by the assessee but are used for consumption by
him or on his behalf in the production or manufacture of other articles and the
value shall be 110% of the cost of production or manufacture of such goods.
Therefore, once there are sales to independent buyers, provisions of Rule 8 will
not apply. He has also rightly relied upon the Larger Bench decision in case of
M/s Ispat Industries Ltd Vs. CCE Raigad 2007 (209) ELT 185 (Tri-LB). In that
case, it was held that in such cases, the value has to be determined as per
provisions of Rule 4 of Central Excise Valuation Rules.
No interest is payable on duty which arose as a result of provisional
assessment.
In the case of CC (Preventive) Jamnagar -v- M/s Arya Ship Breaking Co.Ltd.
decided on 01.02.10 revenue was in appeal against the decision of the
Commissioner (Appeals) wherein he had held that the respondents are liable to
pay interest on the duty arrived at on the basis of finalization of provisional
assessment prior to 13.07.06. On 13.07.06, Section 18(3) of Customs Act, 1962,
provides that the recovery of interest on finalization of provisional
assessment. He has relied upon the decision of the Tribunal in case of M/s
Sterlite Industries (India) Ltd. 2008 (223) ELT (Tri-Chennai). Further in case
of M/s Kamdar Associates & Others had also held that no interest is payable on
duty which arose as a result of provisional assessment. Hence the Tribunal held
that the issue as covered by the precedent decisions of the Tribunal
.
Refund is admissible in the case of deemed exports.
In the caseof Commissioner, C. Excise Ahmedabad -v- M/s. Rangdhara Polymers
decided on 25.01.2010 revenue contended that deemed exports
cannot be equated with the exports and Rule 5 of Cenvat Credit Rules provides
for refund of accumulated credit only and in the case of exports and not in the
case of deemed exports. But in Inox Air Product case, the decision was
rendered relying upon the decision in the case of Blue Star Limited vs.
Commissioner 2003 (155)ELT. 322 (Tribunal) and SV Business Pvt. Ltd. case. The
decision in the case of S.V. Business Pvt. Limited was rendered on the ground
that Tribunal had taken a view in the case of Blue Star Limited that goods sent
to 100% EOU are one step away from completion of exports and this by itself
cannot conclude export. On this basis it was held that claim that goods sent to
100 EOU can be equated with the exports cannot be upheld. They are deemed export
but such fiction of law is created only for a specific purpose and cannot be
equated with exports in a blanket manner. On the other hand, the learned
Chartered Accountant on behalf of the appellants relied upon the decision in the
case of Sanghi Textiles Limited reported in 2006 (07)LCX0213. This decision of
the Banglore Bench of this Tribunal took note of the decision in the case of S.V.
Business Pvt. Ltd. also and came to the conclusion that even in the case of
deemed exports, refund is admissible. However, difference between the decisions
in the case of Sanghi Textiles and other decisions is that, in the case of
Sanghi Textiles, the Tribunal has considered the relevant rules and
notifications and came to the conclusion that refund of cenvat credit is
available even in the case of deemed exports. In that case, the Tribunal was
considering the admissibility of refund in respect of deemed credit. Further,
the same Division Bench which rendered the decision in the case of Inox Air
Products Pvt. Limited, considered this issue in the case of Shilpa Copper Wire
Industries 2008 (2) LCX0061 and came to a conclusion that refund is admissible
in the case of deemed exports. In view of the above discussions, I find that on
merits, Revenue has no case and on the basis of decision of the Tribunal in the
case of Sanghi Textiles and Shilpa Copper Wire Industries cited above, the
appeal filed by Revenue is required to be rejected.
The fact that amount has been deducted from the refund claim would not change
the nature of the recovery which remains that interest is liable under Section
11AB of Central Excise Act, 1944.
In an interesting judgment in the case of M/s. Genus Electrotech Limited -v-
Commissioner, C. Excise Rajkot decided 25.01.2010 , Tribunal had held that
once there is no exemption from paying duty and the same is not paid within due
date, provisions relating to pay the duty is attracted. Agreeing to Rule 8 of
Central Excise Rules, 2002, manufacturer are required to discharge his liability
to duty on or before the 5th day of next month and failure to discharge such
duty renders him liable for consequences and one of which is payment of
interest. The same Rule also provides for confiscation of goods etc. and in this
case we are not concerned with the same. In any case, the appellant submitted
that the fact that refund is to be granted after duty liability has been
discharged shows that it is nothing but exemption. But since duty is required to
be paid for claiming exemption, appellant can not escape from statutory
obligation relating to payment. Therefore liability to interest is attracted
when the appellant did not pay duty within the time limit specified in the rules
for payment of duty. Therefore, whether they get refund or not, interest has to
be deposited. The fact that amount has been deducted from the refund claim would
not change the nature of the recovery which remains that interest is liable
under Section 11AB of Central Excise Act, 1944. In this case because of request
of the appellant that Original Adjudicating Authority deducted the interest from
refund amount and otherwise the proper procedure required the appellants to pay
the interest. In such a case the demand would have been issued and after proper
proceedings interest would have been demanded. In any case, for demand of
interest under Section 11AB, there is no time limit and it is a statutory
obligation which is required to be discharged.
Links for the complete case law :-
2010-ITS-147-CESTAT-M/s Volpak Systems Pvt. Ltd. -Vs- CCE Ahmedabad , Date of
Hearing/Decision:27.01.10
2010-ITS-149-CESTAT-CCE Vapi -Vs- M/s Subray Catal Chemical P. Ltd. , Date of
Hearing/Decision:27.01.10
2010-ITS-155-CESTAT-CC (Preventive) Jamnagar -Vs- M/s Arya Ship Breaking Co.Ltd.
, Date of Hearing/Decision:01.02.10
2010-ITS-133-CESTAT-Commissioner, C. Excise Ahmedabad M/s. Rangdhara Polymers
-Vs- M/s. Rangdhara Polymers Commissioner, C. Excise Ahmedabad , Date of
Decision : 25.01.2010
2010-ITS-134-CESTAT-M/s. Genus Electrotech Limited -Vs- Commissioner, C. Excise
Rajkot , Date of Decision : 25.01.2010
