IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC TUESDAY, THE 22ND NOVEMBER 2011 / 1ST AGRAHAYANA 1933 WP(C).No. 35642 of 2010(E) -------------------------- PETITIONER(S): ------------------------ M/S.APPOLLO TYRES LIMITED,PERAMBRA, CHALAKUDY,REP.BY ITS DIVISIONAL HEAD (COMMERCIAL & ACCOUNTS) MR.A.N.LAKSHMANAN. BY ADV. SRI.JOSEPH KODIANTHARA, SENIOR ADVOCATE SRI.V.ABRAHAM MARKOS SRI.MATHEWS K.UTHUPPACHAN SRI.BINU MATHEW SRI.TERRY V.JAMES SRI.B.J.JOHN PRAKASH SRI.TOM THOMAS (KAKKUZHIYIL) RESPONDENT(S): ------------------------- 1. THE DEPUTY COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX,THRISSUR DIVISION, S.T.NAGAR, THRISSUR 680 001. 2. THE SUPERINTENDENT OF CENTRAL EXCISE,PERAMBRA RANGE,CHALAKUDY 680 307,THRISSUR. ADV. SRI.JOHN VARGHESE,SC,CEN.BOARD OF EXCISE THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 4/11/2011, THE COURT ON 22/11/2011 DELIVERED THE FOLLOWING: WPC NO.35642/10 APPENDIX PETITIONER'S EXHIBITS EXT.P1: TRUE COPY OF ORDER DT 11.9.08 OF CESTAT, BANGALORE IN APPEAL E/904/2006. EXT.P2: TRUE COPY OF LETTER DATED 6.7.09 OF THE 1ST RESPODENT TO THE PETITIONER. EXT.P3: TRUE COPY OF LETTER DT 20.1.2010 OF THE 1ST RESPONDENT TO THE PETITIONER. EXT.P4: TRUE COPY OF LETTER DT 12.3.2010OF THE 1ST RESPONDENT TO THE PETITIONER. EXT.P5: TRUE COPY OF REPLY DATED 23.3.2010 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. EXT.P6: TRUE COPY OF LETTER DTD 27.9.2010 OF THE 1ST RESPONDENT TO THE PETITIONER. EXT.P6(a): TRUE COPY OF LETTER DATED 4.11.2010 OF THE 1ST RESPODENT TO THE PETITIONER. EXT.P7: TRUECOPY OF THE LETTER DATED 15.11.2010 OF THE PETITIONER TO THE 1ST RESPODNENT. EXT.P8: TRUE COPY OF LETTER DT 19.11.2010 OF THE 1ST RESPONDENT TO THE PETITIONER. RESPONDENTS' EXHIBITS ANNEXURE A1: TRUE COPY OF THE LETTER DT 30.11.2010 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER. //TRUE COPY// P.A. TO JUDGE Rp ANTONY DOMINIC, J. ================ W.P.(C) NO. 35642 OF 2010 ===================== Dated this the 22nd day of November, 2011 J U D G M E N T Issue raised in the writ petition is the legality of interest demanded under Section 11AA of the Central Excise and Salt Act 1944, without adjudication under Section 11A of the said Act. 2. Petitioner is a public limited company incorporated under the provisions of the Companies Act 1956 and is engaged in the manufacture of automobile tyres. One of the raw materials purchased by the petitioner is Nylon Tyre Cord Fabric (NTCF). NTCF is further processed by the petitioner and the resultant product is Dipped Nylon Tyre Cord Fabric (DNTCF), which is captively consumed in the manufacture of tyres. 3. For the period 16.03.1995 to 30.11.1997, respondents had demanded AED on Dipped NTCF and pursuant to the show cause notices issued, adjudication was held and Order-in-Original No.72/98, dated 10.05.1998 was issued confirming the demand. The CESTAT by its Order No.1059/2008 dated 13.09.2008 remanded the matter for re-computing the AED. During the personal hearing granted, it was reported by the petitioner that WPC No. 35642/10 :2 : the AED has already been paid by them by debit entry dated 19.03.2008. Accordingly, Order-in-Original No.9/2009, dated 28.05.2009 was issued by the respondents. 4. Similarly, for the period during January 1996 to November 1997, respondent had raised demand for AED on Dipped NTCF and pursuant to 4 show cause notices, after adjudication, Order-in-Original No.75/98, dated 13.05.1998 was issued confirming the demand. This order was the subject matter of Appeal No.E/904/2006 filed by the petitioner before the CESTAT, Bangalore. During the pendency of the appeal, on 19.03.2008, the petitioner paid the entire amount demanded by utilizing the AED credit available in its Credit Register. Accordingly, the CESTAT disposed of the appeal recording the payment already made and confirming the demand for AED and Ext.P1 is the order passed. 5. Subsequently, Exts.P2 to P4 notices were issued to the petitioner calling upon them to pay interest under Section 11AA of the Act on belated payment of AED on Dipped NTCF. Petitioner filed reply, a copy of which is Ext.P5, contending inter-alia that WPC No. 35642/10 :3 : unless the liability is adjudicated under Section 11A of the Act, interest cannot be demanded. 6. According to the petitioner, from March 1995, in addition to Basic Excise Duty (BED), Additional Excise Duty (AED) under the Goods of Special Importance Act was leviable on NTCF. Though the petitioner had taken credit of AED paid on NTCF, till the CENVAT Credit Rules were amended by Finance Act of 2003, credit of AED could be utilized only for payment of AED on any final product. However, since the final product manufactured by the petitioner, viz., automobile tyre, was not exigible to AED, the petitioner could not utilise the credit of AED. 7. However, with the changes that were brought about by the Finance Act of 2003, the accumulated credit of AED could be utilized for payment of BED. Accordingly, the entire accumulated credit of AED available in the petitioner’s CENVAT Credit Register was utilized for payment of BED on tyres during the period from March 2003 to July 2003. While so, Finance Act of 2004, effected a retrospective amendment and the utilization of credit of AED, as per the Finance Act of 2003 was restricted to such AED paid on or after 1st April 2000. In other words, utilisation of AED credit paid WPC No. 35642/10 :4 : prior to 01.04.2000 towards payment of BED was not permissible and thus the credit already utilized for the said period had to be refunded. By the Finance Act 2005, assessees were afforded a facility to refund the aforesaid BED in 36 installments with interest. Accordingly the BED paid utilizing the AED credit was paid back in 36 installments from July 2005 to June 2008 and consequently, the AED credit was restored in the petitioner’s CENVAT Credit Registers and it was utilizing this accumulated credit, the AED on Dipped NTCF was paid. 8. These contentions were rejected by the department as per Exts.P6 to P8. It is in these circumstances, this writ petition has been filed seeking to quash Exts.P2 to P4 and P6 to P8. On behalf of the petitioner, the only contention that was reiterated is also that, unless the liability is adjudicated and fixed, interest cannot be demanded. 9. From the aforesaid facts, it can be seen that the liability for payment of AED on Dipped NTCF was determined by the Department as per Order in Original No.75/98, dated 13.05.1998 and the demand was confirmed by the Tribunal as per Ext.P1 Order No.1059/2008, dated 11.05.2008 and also as per Order in WPC No. 35642/10 :5 : Original No. 72/1998, dated 10.05.1998, which was confirmed vide Order in Original No.9/2009, dated 28.05.2009 passed by the Assistant Commissioner, Trichur Division in de-novo proceedings ordered by the Tribunal for re-computing the duty liability. The amounts due under these orders were paid only on 19.03.2008. Thus, the liability that was discharged by the petitioner on 19.03.2008 was the liability that was determined as per the aforesaid orders which were issued on 13.05.1998 and 10.05.1998 and amount due was for the period January 1996 – November 1997 and 16.03.1995 – 30.11.1997 respectively. 10. Section 11AA of the Act provides thus: “Interest on delayed payment of duty. – 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 such determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent and not exceeding thirty per cent per annum as is for the time being fixed by the Board, on such duty from the date of 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 WPC No. 35642/10 :6 : immediately after three months from such date, till the date of payment of such duty. Explanation 1.— Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate 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 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”. It is the settled position of law that in view of the aforesaid provision of the Central Excise Act, liability to pay interest on delayed payment of duty, is statutory and automatic. If that be so, in view of the admitted factual position that the duty determined in 1998 was paid by the petitioner only in 2008, liability to pay interest is automatically attracted and the statute does not provide for any show cause notice or adjudication under Section 11A of the Act for realizing the interest. WPC No. 35642/10 :7 : 11. However, the learned Sr. Counsel for the petitioner contended that the duty liability was determined only by Ext.P1 order of the Tribunal and therefore there could not have been a liability for any interest prior period. A reading of Ext.P1 order itself show that the Tribunal only confirmed the duty that was already determined by the Department as early as in 1998. Therefore, the Tribunal’s order does not amount to determination of duty nor does it absolve the petitioner from its liability to pay interest. Petitioner then contended that AED credit was available in their CENVAT Credit Register and it being only a question of book adjustment, the petitioner could not have been a defaulter to be saddled with liability for interest. This contention also does not appeal to me for the reason that even if credit was available in the Register, unless the credit is utilized and duty liability is discharged, an assessee cannot claim that it has discharged the liability to pay duty. In this case, admittedly, duty on Dipped NTCF was determined in 1998, and the liability was discharged only in 2008. Until the liability was discharged, petitioner was a defaulter and in view of Section 11AA of the Act, it is statutorily liable to pay interest. Therefore these two contentions are absolutely WPC No. 35642/10 :8 : untenable. The writ petition is only to be dismissed and I do so. ANTONY DOMINIC, JUDGE Rp