CX - Rule 7 - Provisional assessment - If interest was to be recovered & was indeed payable on date on which Assessee made payment of differential duty & prior to finalization of assessment, then, Rule would have specifically said so: HC
By TIOL News Service
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MUMBAI, FEB 18, 2015: 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 CER, 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 is whether the appellants 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.
The lower authorities held against the assessee and, therefore, the matter reached the Tribunal.
Before the CESTAT the appellant placed reliance 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 by High Court) 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, 2002 and the decisions in Cadbury India Ltd. - 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 CESTAT extracted the contents of rule 8 & 7(4) of the CER, 2002 and also section 11AB of the CEA, 1944 and after extensively reproducing passages from the decisions cited by the AR 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."
Suffice to say that the appeals of the assessee were dismissed. We reported this order as 2014-TIOL-447-CESTAT-MUM.
While carrying this decision we had also referred to another decision passed by the Single Member Bench of the CESTAT, WZB in the case of the very same assessee 2013-TIOL-310-CESTAT-MUM wherein on an identical issue it was held as under -
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CE - No interest is payable on finalization of provisional assessment under Rule 7(4) of the CER, 2002 if the differential duty has been paid before finalization of assessment - issue settled by Bombay High Court in case of Ispat Industries Ltd. and which has been followed in case of Tata Motors Ltd. - Appeal allowed with consequential relief: CESTAT [para 4]
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Be that as it may, in view of the dismissal of their appeals, the appellant filed appeals before the Bombay High Court.
These Appeals were admitted on the following substantial questions of law:-
(i) Whether in the facts and circumstances of the case, the Appellate Tribunal is correct in holding that interest is payable on differential duty arising on finalization of provisional assessment under Rule 7 of Central Excise Rules, 2002?
(ii) Whether the Appellate Tribunal is correct in not following two binding precedents of this Court reported at Ispat Industries - 2010 (259) ELT 662 (Bom.) & Tata Motors - Order dated 1.2.2012 in Central Excise Appeal No.54 of 2011?"
After considering the lengthy arguments made by both sides, the High Court extensively extracted passages from the decisions cited and after elucidating the facts involved in each case and the conclusions arrived thereunder viewed that the conclusion arrived at by the Larger Bench in the case of Cadbury India Ltd. Vs. 2008-TIOL-1986-CESTAT-MUM-LB cannot be applied to cases which are expressly noted in M/s. Ispat Industries Ltd. and Tata Motors Ltd.
The High Court further observed -
++ Rule 7 and its sub-rules if read together would denote as to how the Revenue secures itself against any provisional assessment. If on a provisional assessment, certain amount of duty is paid, but it is not accurate and correct, then, the final assessment is contemplated on a finalization of the assessment.
++ Upon finalizing, it is possible that the Revenue will determine the duty liability and to that of something more that has been recovered in the provisional assessment. When that exercise is finalized and consequent thereon that the Assessee shall be liable to pay interest on any amount payable to the Central Government. Thus, the liability to pay interest arises on any amount payable to Central Government and consequent to order for final assessment under Rule 7 sub-rule (3).
++ We are in agreement with the Assessee in the present case that the later part of sub-rule (4) is not attracted. The liability to pay interest on any amount payable to Central Government consequent to order for final assessment is not a situation to be found in the present case. It is not the argument of the Revenue that what was paid by the Assessee as differential duty and prior to finalizing of the assessment, is not correct, accurate or proper computation of the liability.
++ Having found that the final assessment resulted in nothing due and payable to the Government, we do not find any justification then to recover interest. If the interest was to be recovered and was indeed payable on the date on which the Assessee made payment of differential duty and prior to finalization of the assessment, then, the Rule would have specifically said so.
++ In the absence of any such stipulation in the Rules the dictum in the decision of the Hon'ble Supreme Court in J.K. Industries Ltd. would apply. If that principle can be applied, then, there was no liability to pay interest. If the liability to pay interest between the time or the period of provisional assessment and payment of differential duty until the final assessment has to be read in the Rule, that is not possible.
++ The interest in this case is not payable merely on equitable considerations. Such being the position, we do not find that the Tribunal was justified in dismissing the Assessee's Appeal. The Tribunal was also not justified in placing reliance upon its larger Bench decision.
The High Court also came down heavily on the CESTAT for its conclusion wherein it had termed the decisions in Ispat Industries & Tata Motors as per incuriam.
The High Court remarked -
"35. It is unfortunate that the Tribunal ignores and brushes aside even orders of this Court. Had the Tribunal noted the facts in Ispat Industries Ltd. and Tata Motors Ltd. it would have possibly concluded that those orders would bind it in this case. Possibly because it was inclined to follow its larger Bench decision, the facts in Cadbury were more or less identical, yet, it should not have held that this Court's orders are per incuriam. Per Incuriam is a Rule or a principle applicable only when a judgment brushes aside a statutory provision or a binding precedent. The coordinate bench cannot disregard or ignore a binding precedent unless it is found to be contrary to an express statutory provision or refuses to follow a binding decision of the Hon'ble Supreme Court of India or the jurisdictional High Court. In this regard, we would invite the attention of the Tribunal to the following paragraphs in the case of Assistant Collector of Central Excise, West Bengal V/s. Dunlop India Ltd. and Others reported in - 2002-TIOL-156-SC-CX-LB, …"
And a word of caution -
| "36. We would expect the Tribunal to be more careful and guarded hereafter. We say nothing more." |
In fine, the questions of law were answered in favour of the Assessee and against the Revenue.
The appeals were allowed.
(See 2015-TIOL-397-HC-MUM-CX )
