2008 (2) TMI 219 - AT - Central Excise

Tribunal Upholds Decision on Interest Levy in Central Excise Case

The Tribunal dismissed the Department's appeal against the Commissioner (Appeals) decision upholding the non-levy of interest under Rule 7(4) of the ... “Price Escalation” Clause - Apart from the confirmation of duty, interest was demanded on finalization of provisional assessment – held that as per Rule 7(4), interest would start only after finalization of the provisional assessment - assessee can not be burdened with interest, when there is no fault of theirs – there is no merit in the Department’s appeal and the same is rejected Issues:- Appeal against Order-in-Appeal No. 59/2006-C.E. dated 27-10-2006- Challenge to levy of interest under Rule 7(4) of the Central Excise Rules, 2002 read with Section 11AB of the Central Excise Act, 1944Analysis:1. The Respondents, manufacturers of electric transformers, resorted to provisional assessment based on a 'Price Escalation' Clause in the contract with buyers. They voluntarily discharged duty liability before finalization of provisional assessment. Subsequently, the Revenue confirmed the differential duty and demanded interest under Rule 7(4) of the Central Excise Rules, 2002 and Section 11AB of the Central Excise Act, 1944. The Respondents challenged the interest levy based on a previous Tribunal decision in their favor (Final Order No. 1422/2006).2. The Department argued that interest liability begins from the first day of the month following duty determination, even if provisional assessment is finalized later. The duty should have been paid at clearance, and interest is due from the month after duty determination. The Commissioner (Appeals) upheld this view, leading to the Revenue's appeal against his decision.3. The Respondents' Advocate cited the Commissioner (Appeals) correctly following the Tribunal's decision in Final Order No. 1422/2006. Reference was made to CBEC's Central Excise Manual allowing early duty payment by the assessee to avoid interest on delayed assessment communication. Legal precedents were presented, such as H.V. Axler Ltd. and Ispat Industries Ltd., supporting non-payment of interest in certain scenarios.4. The Tribunal analyzed the issue, affirming its previous decision (Final Order No. 1422/2006) and the interpretation of Rule 7(4) in MSEB Pole Factory v. CCE (A), Aurangabad. It emphasized that interest starts post finalization of provisional assessment to prevent undue burden on the assessee due to delayed Department actions. As the Commissioner (Appeals) followed the Tribunal's ruling and no contrary decisions were presented, the Department's appeal was dismissed.This detailed analysis of the judgment highlights the key arguments, legal interpretations, and precedents considered, leading to the Tribunal's decision to reject the Department's appeal.