Central Excise – CAG wants time limit for payment of interest and interest on interest thereafter
IN his latest report to Parliament the CAG laments - No time limit for payment of interest
The Audit report cites the case of BHEL Bhopal, engaged in the manufacture of various excisable goods had paid differential duty in the month of March 2007 on account of price revisions for the supplies made between the years 2002-03 to 2006-07. It was, therefore, liable to pay interest on differential duty payment, which worked out to Rs. 4.24 crore as per provisions of the sections 11A(2B) and 11AB of the Central Excise Act. The department, however, did not take any action for recovery of interest.
On the matter being pointed out (February 2008), the department stated (May 2008) that the assessment was pending.
The reply is not tenable (to CAG) as the differential duty was paid in the month of March 2007 and non-payment of interest of Rs. 4.24 crore on the grounds that the assessment was provisional, has resulted in further financial accommodation to the assessee of Rs. 1.38 crore by way of interest from April 2007 to September 2009, as interest beyond the date of payment of duty (in this case March 2007) is not leviable under the existing Act.
CAG's Recommendation: There is no time limit in the Act for recovery of interest on duty from the assessees. Audit recommends that appropriate provision may be included prescribing a time limit for payment of interest and for charging of interest beyond this prescribed time limit, till the interest amount is finally paid.