CE - Provisional Assessment Finalisation - Interest Liability? Poor Law Drafting costs Revenue Dear
18 02 2015
Wednesday
IF the exact amount of excise duty payable at the time of clearance is not known, the assessee can opt for provisional assessment under Rule 7 of the Central Excise Rules. The Assistant Commissioner is supposed to pass the order of final assessment and if there is any differential duty payable, the assessee is required to pay that.
Rule 7(4) reads as:
(4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under subrule (3), at the rate specified by the Central Government by notification issued under section 11AA or section 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.
So, the assessee is liable to pay interest on any amount payable consequent to the order for final assessment. What happens if the assessee pays the differential duty before the order for final assessment and there is no payment required consequent to the final assessment order?
In Ispat Industries vs Commissioner - 2006-TIOL-1994-CESTAT-MUM, the Tribunal held, looking to the provisions of Rule 7(4) it is clear that the appellant could not be held liable to pay the interest if the differential duty and the duty amount have been paid prior to the final assessment.
This order of the Tribunal was confirmed by the Bombay High Court.
In Tata Motors vs CCE - 2011-TIOL-721-CESTAT-MUM, the Tribunal observed that the view of the Tribunal was confirmed by the High Court in the Ispat case. The Tribunal specifically asked the DR if the department has challenged the High Court order in Ispat. The DR submitted that they have made a proposal to file the appeal before the apex court but he is not aware of the status whether the appeal has been filed or not. (The SLP was indeed filed and the Supreme Court dismissed it on 4.7.2011.)
The Tribunal held that in the case of provisional assessment, no interest is payable on finalization of the assessment if the differential duty has been paid before the finalization of assessment.
The Revenue appeal against this case was dismissed by the Bombay High Court on 1.2.2012. The Commissioner's SLP against the High Court order was dismissed by the Supreme Court on 30.7.2012.
The issue was again before the Bombay Tribunal in CEAT Ltd vs Commissioner - 2014-TIOL-447-CESTAT-MUM . This time around, the Tribunal refused to follow the above two decisions observing, 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.
CEAT took the matter to the High Court.
The High Court was not impressed with the Tribunal's finding that the earlier orders were per incuriam.
The High Court observed,
It is unfortunate that the Tribunal ignores and brushes aside even orders of this Court…..
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.
We would expect the Tribunal to be more careful and guarded hereafter. We say nothing more.
The High Court once again emphatically held that no interest is payable if the differential duty is paid before the order of finalization of assessment.
The High Court observed, 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.
And since the Rule did not say so, no interest is payable - even if the differential duty is paid a day before the date of final assessment?
This is the problem with loose and careless drafting of rules. If they wanted interest from Day One, they should have said so in the rules.
Incidentally, the Supplementary Manual in Chapter 3, Part-IV, paragraph 2.7 mentions the following - "If the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case he will not have to incur interest on account of time taken by the Department to finalize the assessment and communicate the amount."
Well, as with all other issues, this is not the last word.
While dismissing the Revenue SLPs in both Ispat Industries and Tata Motors cases, the Supreme Court ordered - "Special leave petitions are dismissed. Question of law is kept open."
Maybe Revenue is eagerly waiting for this opportunity. Yet another case to test the question of Law!
Can't they forget the past and amend the Rule in this budget?
We bring you the High Court order today. Please see Breaking News.
Litigation - State has responsibility towards the citizen, who should not be treated as opposite party or rival
IN an interesting order delivered yesterday, the Central Information Commission made some interesting and pertinent observations.
| The state itself became the biggest litigant, either fighting a citizen or its own department or taking every case into appeal instead of performing the duty of addressing development and welfare of the people, who challenged its actions. |
| While it is ideal that every litigant should be responsible, state is also expected to be a 'Responsible litigant', which means, "that litigation will not be resorted to for the sake of litigating, that false pleas and technical points will not be taken and shall be discouraged, ensuring that the correct facts and all relevant documents will be placed before the court, and that nothing will be suppressed from the court and there will be no attempt to mislead any court or Tribunal. |
| The state has a responsibility towards the citizen, who should not be treated as opposite party or rival. |
| It is not proper to take every case in appeal up to apex court mechanically, simply because there is a provision in Civil Procedure Code. |
| It has to introspect and answer whether it was behaving like a 'responsible litigant' with the citizen. |
| As pointed out by Hon'ble Justice TS Thakur, Judge of Supreme Court, there is no mechanism to scrutinize the cases which need to be contested and which not to be. It is rightly said that that large number of cases against state "cannot be a good sign of good governance" |
| Commission would like to quote Justice Thakur who said: "Every case filed irrespective of merits is burdening the judiciary, costing the exchequer and increasing the pendency of case. This is deficit in governance. Governance is not just army, police, road, building etc but governance also is adjudicating rights of a citizen which is legitimately due to him." |
The CIC Order
FTP - Cancellation of validity of Multiple IECs against single PAN
DGFT has amended para 2.9(b) of HBP(Vol.I) (2009-14) to stipulate that:
"Only one IEC shall be issued against a single PAN. Multiple IECs issued against a single PAN will be deactivated suo-moto after 31.03.2015."
Accordingly, all Importers/exporters having multiple IECs against a single PAN have the option of retaining any one IEC and surrender all other IECs to the concerned RAs by 31.03.2015 for cancellation.
DGFT Public Notice No. 87 (RE-2013)/2009-2014, Dated: February 17, 2015
Inviting Comments On Policy Framework For Finance SEZs
NATIONAL Institute of Public Finance and Policy (NIPFP) has submitted a Concept Note to Ministry of Finance on February 6, 2015 detailing objectives and policy framework for setting up Finance SEZs in India. The concept note also highlights steps and short-term actions that may be adopted to start off a Finance SEZ.
The Finance Ministry invites Views/comments on the proposed policy framework. The Concept Note highlights -
Finance is one of the world's biggest industries. The bulk of global financial services production takes place in a few international financial centres: New York, London, Singapore, Hong Kong and Tokyo. Finance production in these cities creates high wage jobs and wealth. In addition, high quality financial services supports high GDP growth in the hinterland. As an example, the presence of Hong Kong as an international financial centre assists Chinese companies.
India is a large user of financial services, by virtue of a large and growing GDP and a high rate of investment and savings. At present, India is consuming financial services produced onshore as well as offshore. India requires sophisticated financial services to fuel growth in the future. The financial system determines the allocative efficiency of the use of capital; a sophisticated financial system improves the GDP growth obtained out of a given flow of investment.
At present, global fund managers sit in Singapore or London, and invest in India. Indian companies go to London or New York to raise money. This inevitably favours the biggest and most famous companies who are well known in the eyes of foreign investors.
There is strong evidence of such `home bias' by global investors against investing in most Indian companies. While large firms are well known to fund managers in Singapore or New York, thousands of other Indian companies do not get noticed. To the extent that India-related fund management takes place from Finance SEZs which are physically located in India, this will reduce home bias: The teams which work in these fund management organisations will be more likely to know hundreds of Indian companies.
Export processing zones were first done in 1965 in Kandla and 1973 at SEEPZ. At the time, India was not ready for removing trade restrictions; customs duties were very high and import of many things was banned. SEZs like SEEPZ had free trade with the world. This was a valuable learning ground where Indian firms learned how to do production in a globalized setting. Kandla and SEEPZ helped the policy community in India get used to the idea of trade openness. With a lag, these policies were applied on an all-India scale.
In similar fashion, in the long run, India will have full capital account convertibility and India will have the Indian Financial Code (IFC). This is the inevitable direction of economic reforms in India. Finance SEZs are a controlled environment in which these reforms can be implemented first, and thus increase the familiarity with these reforms in the eyes of financial firms, government agencies, global investors, etc.
Until Tomorrow with more DDT
Have a nice day.
Mail your comments to vijaywrite@tiol.in
