By TIOL News Service

MUMBAI, MAR 25, 2014: THE appellants are manufacturers of Tyres, Tubes & Flaps and these are transferred to various distribution centers, sales depots and C & F agencies to be sold in the replacement market. At the time of clearance from the factory, appellants are not able to precisely determine the value of the goods as they grant various discounts, abatements etc. Therefore, they are clearing the goods on provisional assessment basis under Rule 7 of the Central Excise Rules, 2002. After completion of the financial year they get their accounts audited and they are submitting certificate from CA/Cost Accountant giving the details of the sales value, various discounts given etc. Along with these details, they also calculate the value (and hence differential duty amount) on which they are required to pay the excise duty. They submit these details to the Divisional Dy./Assistant Commissioner for finalization of the provisional assessment for the previous year. While furnishing these details to the Deputy/Assistant Commissioner they also pay the differential duty without waiting for formal order of Deputy/Assistant Commissioner. Order of finalization of the assessment is issued by the Deputy/Assistant Commissioner after few weeks/months (which is after payment of differential duty).

The issue in dispute is whether they are liable to pay interest on the differential duty that would commence from the month succeeding the date on which the duty was due and payable in relation to the goods cleared till the date of payment of differential duty.

Since the lower authorities have held against the assessee, they are in appeal before the CESTAT.

Reliance is placed on the decisions in Ispat industries Ltd. 2006-TIOL-1994-CESTAT-MUM (upheld by the Bombay High Court); Tata Motors Ltd. - 2011-TIOL-721-CESTAT-MUM (Revenue appeal dismissed) to submit that no interest is payable on differential duty paid before finalization of provisional assessment.

The Revenue representative adverted to rule 7(4) of the CER and the decisions in Cadbury India Ltd. Vs. 2008-TIOL-1986-CESTAT-MUM-LB, J.K. Industries Ltd. 2011-TIOL-798-HC-KAR-CX, SKF India Ltd. 2009-TIOL-82-SC-CX, International Auto Ltd. 2010-TIOL-05-SC-CX and submitted that the judgments cited by the appellant have to be considered as per incuriam and cannot be applied in general and, therefore, the appeals are required to be dismissed.

The Bench extracted the contents of rule 8 & 7(4) of the CER, 2002 and also section 11AB of the CEA, 1944 and observed -

"7. …Under new Central Excise Rules, 2002 Rule 6 provides for self-assessment by assessee. Provisional assessment is also resorted to at the request of assessee when it is not possible for him to self-assess the duty liability at the time of clearance. It is also seen in these cases the provisional assessment was ordered at the request of the appellants and it was made clear that appellants would be required to pay the interest from the due date to the date of payment. Rule 8 of the Central Excise Rules details the manner of payment of duty…. A combine and harmonious reading of the Sub-Rule (1) and (3) of Rule 8 and Sub-Rule (4) of Rule 7 indicate that the underlying principle is that for the goods cleared in a particular month, duty is required to be paid by 5 th / 6 th of the succeeding month. For delay in payment of duty (part or full) for whatsoever reason, interest is required to be paid from the first day of the month succeeding the month for which such duty is determined to the date of payment of duty. This view also get supported by provisions of Section 11AB."

After extensively reproducing passages from the decisions cited by the Revenue representative, the Bench concluded thus -

"13. In view of the above mentioned decisions of the Hon'ble Supreme Court, Hon'ble High Court of Karnataka and the Larger Bench decision in the case of Cadbury India Ltd. as also decision of this Tribunal in the case of Bharat Heavy Electricals Ltd. (supra), as also harmonious reading of Rule 7(4), 8(1) and 8(3) of Central Excise Rules, 2002, we are of the considered view that appellants are required to pay the interest. The fact that they have paid the duty before formal finalization order issued by the Deputy/Assistant Commissioner will not make any difference to the said position. We also note that the judgments of this Tribunal in the case of Ispat Industries Ltd. and Tata Motors Ltd. which were upheld by Hon'ble Bombay High Court are per incuriam as the details of various Rules as also the judgment of the Hon'ble Supreme Court, Hon'ble High Court of Karnataka and other judgements of this Tribunal were not brought to the notice of the Tribunal or the Hon'ble Bombay High Court. We also note some of these judgments are subsequent to the judgment in the case of Ispat Industries Ltd. and Tata Motors Ltd."

In fine, all the appeals were dismissed.

In passing: Also see CEAT Ltd. 2013-TIOL-310-CESTAT-MUM.

(See 2014-TIOL-447-CESTAT-MUM)