2016 (3) TMI 133 - AT - Central Excise

Tribunal rules interest not payable if full differential duty paid pre-assessment order

The Tribunal ruled in favor of the respondent assessees in a case concerning the liability of interest on differential duty under provisional assessment. ... Interest on differential duty demanded - Held that:- From the reading of the Rule 7 (4) of CENTRAL EXCISE RULES, 2002 it is seen that interest is payable only when any amount is payable consequent to the order for final assessment. When no amount is to be paid consequent to the order of final assessment, sub-rule 4 is not attracted at all. As decided in J.K. Synthetics Ltd. Vs. CTO [1944 (5) TMI 21 - SUPREME COURT OF INDIA] so long as the assessee pays the tax which according to him is due on the basis of information supplied in the return filed by him, there would be no default on his part to meet his statutory obligation under Section 7 of the Act and, therefore, it would be difficult to hold that the “tax payable” by him ‘is not paid’ to visit him with the liability to pay interest under Clause (a) of Section 11 B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible. - Decided against revenue Issues:1. Liability of interest on differential duty under provisional assessment.2. Interpretation of Rule 7(4) of Central Excise Rules, 2002.3. Applicability of judicial precedents on interest payment.Issue 1: Liability of interest on differential duty under provisional assessmentIn the case at hand, the respondent assessees, engaged in the manufacture of steel strips and steel tubes, opted for provisional assessment due to fluctuation in raw material costs. The dispute arose regarding the payment of interest on the differential duty amount. The Revenue contended that interest is payable on the differential duty from the date it is due, as per Rule 7(4) of Central Excise Rules, 2002. However, the respondent argued that interest is only payable if the differential duty is paid after the finalization of the provisional assessment order. The Ld. Commissioner (Appeals) held in favor of the assessees, stating they are eligible for a refund of the interest paid, as the entire differential duty was paid before finalization. The Tribunal examined the issue and relied on relevant case laws to determine that interest is not payable when the differential duty is paid before the finalization of assessment. The judgment emphasized that Rule 7(4) mandates interest payment only when an amount is payable consequent to the final assessment order.Issue 2: Interpretation of Rule 7(4) of Central Excise Rules, 2002The Tribunal delved into the interpretation of Rule 7(4) of the Central Excise Rules, 2002, which specifies the liability of the assessee to pay interest on short duty payable. The rule states that interest is payable from the first day of the month succeeding the month for which the amount is determined, till the date of payment thereof. The Tribunal analyzed the rule in conjunction with the facts of the case to ascertain the applicability of interest payment. It was concluded that when no amount is to be paid following the final assessment order, the provision of Rule 7(4) does not come into play, thereby absolving the assessees from the obligation to pay interest in the given scenario.Issue 3: Applicability of judicial precedents on interest paymentThe Tribunal considered various judicial precedents cited by both parties to support their arguments regarding interest payment on differential duty under provisional assessment. The Revenue relied on decisions highlighting the liability of interest from the due date of the duty amount. Conversely, the respondent assessees referenced judgments, including those from the Hon'ble Bombay High Court, to assert that interest is not payable if the differential duty is paid before the finalization of assessment. The Tribunal aligned with the interpretation provided by the Bombay High Court and upheld the decisions in favor of the assessees, emphasizing that interest is not exigible when the entire differential duty is settled before the final assessment order. The judgment reiterated the significance of legal precedents in guiding the resolution of disputes concerning interest payment under provisional assessments.This comprehensive analysis of the judgment highlights the intricate legal considerations surrounding the liability of interest on differential duty under provisional assessment, the interpretation of relevant rules, and the pivotal role of judicial precedents in adjudicating such disputes.