OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE

CHENNAI - II COMMISSIONERATE, CHENNAI - 600035.

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TRADE NOTICE NO. 52/2002.                                             Dated:   10 -10-2002.

                  SUB: Retrospective Application of Section 11AB of the

                           Central Excise Act, 1944 - Regarding.

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                 It has been brought to the notice of the Board that doubts have been raised as to whether provisions of Section 11AB of the Central Excise Act 1944, will apply to past clearances or not.

2.              The Board had clarified that it would apply even to past cases where duty under Section 11A(2) is determined on or after 28-09-1996.

3.              Further, on the matter being referred to the Solicitor General of India (SG), in his detailed opinion dated 03-01-2000, he had opined that Section 11AB would apply to all ADJUDICATIONS ORDERS    passed on or after 28-09-1996 irrespective of the fact whether it relates to clearances made before 28-09-1996 or after.   

4.               However, in CEGAT Order No. 1375/97 dated 22-04-1997 in the case of M/s. M.P. Tapes Vs.  CCE, Coimbatore, it has, inter alia, been held that provisions of Section 11AB, inserted with effect from 28-09-1996, are in the nature of penal interest and would apply only to those cases where clearances were affected after 28-09-1996.   

5.               The matter has been examined in the Board.  It is seen that Section 11AB(2), when it was introduced on 28-09-1996, inter alia stated that the provisions of Section 11AB(1)- i.e. for charging interest - would not apply to cases where duty become payable before the Finance Bill, 1996, received the assent of the President (which was on 28-09-1996).  A view was taken by the Department in its Circular dt. 06-01-1997 and by the SG in his opinion dt. 03-01-2000, that duty becomes ' payable ' only after adjudication and therefore Section 11AB (2) would apply to all cases where adjudications are done on and from 28-09-1996, irrespective of the fact whether it relates to clearances of an earlier period.  The Apex Court has, however, confirmed a contrary view in the case of M/s. M.P. Tapes.

6.           Section 11AB (2)   as well as Section 11AB (1)    has been substituted with effect from 11-05-2001 by the Finance Act, 2001, making it now very clear that Section 11AB will apply only to cases where duty had become payable or ought to have been paid  after

11-05-2001.   Further, proviso to Section 11AB (1), as inserted with effect from 11-05-2001, makes it quite clear that duty becomes 'payable' on the basis of instructions or directions of the Board also and not necessarily because of adjudication of a case.                        

7.           Thus, the net effect of the judgement in the case of M.P.Tapes and the amendment made to Section 11AB with effect from 11-05-2001 is that the said section can be invoked only in respect of clearances affected after 28-09-1996, irrespective of the date of passing of the adjudication order.

               (AUTHORITY: Board's Circular No. 655/46/2002-CX issued in

                                   F.No.4/01/2002-CX 1 dated 26-08-2002)

                (Issued from File C.No. IV/16/186/2002-TECH).       

                                                                                                                                    Sd/-

                                                                                       (V.MANIVAANNAN)

                                                 ADDL.COMMISSIONER (TECH).