The Settlement Commission has the power to grant immunity from interest payment under Section 32K of the Act.

M.M.Kumar, J.

1. This petition filed under Article 226 of the Constitution prays for partial quashing of order dated 8-2-2005 (Annexure P.3) passed by the Custom and Central Excise Settlement Commission- respondent no. 2 (for brevity #24;the Settlement Commission#25;) granting immunity to the assessee-respondent no. 1 from payment of interest amounting to Rs. 7,16,775/-. Further prayer has been made for setting aside order dated 22-6- 2005 (Annexure P.5). dismissing the miscellaneous application seeking rectification of the order dated 8-2-2005.

2. Brief facts may first be noticed. The assesee-respondent no.1 is engaged in the manufacturing of Air Handling Units, Chillers and parts thereof falling under tariff heading 84 (84.15) of the 1st schedule to the Central Excise Tariff Act, 1985 (for brevity #24;the 1985 Act#25;) and is also registered with the Central Excise Department. It has been availing modvat/cenvat credit on various inputs and discharging the obligation of Excise duty on the final products cleared from the factory. On 11-2-2003, the officers of the Director General Central Excise Intelligence visited the factory premises of the assessee- respondent no. 1 and found that the Cenvat credit of Rs. 27,26,092/- was availed by the assessee-respondent no. 1 on the inputs which infact were written off on 31-12-2001. Thereafter, the assessee-respondent no. 1 on its own volition reversed the aforesaid, Cenvat credit vide PLA Entry No. 11 dated 15-7-2003. It paid interest amounting to Rs. 7,16,775/- at the stage of investigation.

3. The assessee-respondent no. 1 was issued a show cause notice on 20-1-2004 raising demand of Central Excise duty of Rs. 27,26,092/- in the Cenvat credit availed on inputs on 31-12-2002. It was proposed to impose penalty under Section 11AC of the Act read with Rule 25 of the Central Excise Rules, 2001 (for brevity #24;the 2001 Rules#25;). The show cause notice also raised the demand of interest under Section 11AB of the Act read with Rule 12 of Cenvat Credit Rules, 2001 (for brevity #24;the Cenvat Rules#25;). According to the show cause notice the assessee- respondent no. 1 was to show as to why the aforementioned amount be not appropriated to Cenvat credit/interest.

4. The assessee-respondent no. 1 filed an application under Section 32 of the Act before the Settlement Commission- respondent no. 2. The application was disposed of by a final order dated 8-2-2005 (Annexure P. 3). According to the final order, the Settlement Commission found that the assessee-respondent had already paid a sum of Rs. 34,42,867/- against the demand duty amounting to Rs. 27,26,092/- in respect of the demand relating to appropriation of interest. The Settlement Commission noticed letter dated 24-1-2005 sent by the Additional Commissioner of Central Excise, Delhi stating that there was inadvertent error and para 2 of the order appropriating interest of Rs. 7,16,775/- in fact stood deleted. The Settlement Commission had also found that the assessee- respondent had fully cooperated by making true and full disclosure of their duty liability, accepted and agreed to adjust the entire amount of duty out of the amount paid before issuance of show cause notice. Accordingly, the whole matter was settled in terms of Section 32F of the Act by observing as under :

#28;Duty of Central Excise - As the entire amount of Rs. 27,26,092/- has already been directed to be adjusted from the amount deposited by the main applicant against demand of duty equal amount, under Admission Order No. A- 270-/CES/2004 SC (P.B.) dt. 27-10-2004, the case is settled at this amount and no further duty liability rests at the applicant#25;s end. Interest - The applicants are granted immunity from payment of any interest in consideration of merit of the case as well as in view of the decision of the Hon#25;ble Supreme Court cited by the applicants. Fine and penalty - The Commission extends immunity from payment of fine and penalty to all the applicants