Denial of provisional assessment permission justified under CBEC Manual requiring specific grants not general permissions

CESTAT Allahabad held that denial of permission for provisional assessment from January 2017 to June 2017 was based on CBEC Manual provisions requiring issue-specific and party-specific permissions rather than general grants. The tribunal found that provisional assessment serves as a revenue facility to keep assessments alive when correct values cannot be determined at clearance. Since the appellant had already determined final values and paid differential duty with interest following SC precedent in Bharat Heavy Electricals Ltd. case, the issue became inconsequential. The appeal was deemed in-fructuous but allowed for statistical purposes as no further action was required against the appellant.

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Issues Involved:
1. Denial of permission for provisional assessment under Rule 7 of the Central Excise Rules, 2002.
2. The requirement and implications of monthly basis provisional assessment.
3. Historical context and continuous practice of provisional assessment by the appellant.
4. Legal precedents and their applicability to the present case.
5. Finalization of value and payment of differential duty along with interest.

Issue 1: Denial of Permission for Provisional Assessment

This appeal is directed against Order-in-Appeal No.58/CE/Appeal/Audit/LKO/2018 dated 23/02/2018 passed by Commissioner (Audit) Customs, Central Excise & Service Tax, Lucknow. By the impugned order Commissioner (Appeals) has held that the denial of permission to make assessment provisional for the period from January, 2017 to June, 2017.

Issue 2: Requirement and Implications of Monthly Basis Provisional Assessment

The main ground for denying the permission is that the permission for provisional assessment under Rule 7 (i) of the Central Excise Rules 2002 is to be applied for & granted on monthly basis. The main reason for denial is para 2.2 Chapter 3 Part IV of CBEC Manual which provides "the permission is issue based and party based and therefore permission cannot be granted on general basis for provisional assessment".

Issue 3: Historical Context and Continuous Practice of Provisional Assessment by the Appellant

Appellant is a public sector unit located in Jhansi. For the various reasons the value of the goods could not have been determined at the time of clearance. All the contracts which were entered into for supply of Large Thermal/ Hydro power and Transmission Project & with Indian Railways were having a price variation clause. The prices were finalized subsequently after three to four years for the finalization on the prices by Ministry of Heavy Industries & Ministry of Railways. Differential duty was paid on finalization of the assessment on the value so determined finally.

Appellants were constantly working under the scheme of provisional assessment from 1990 onwards and even after introduction of Central Excise Rules, 2002 the permission was granted and everything was proceeding smoothly till December, 2016.

In December, 2016 the jurisdictional Assistant Commissioner observed that provisional assessment permission could not be applied on monthly basis and be granted every month for the assessment of that month. This order has been upheld by the impugned order. Hence, this appeal.

Issue 4: Legal Precedents and Their Applicability to the Present Case

In the case of Exel Rubber Ltd [2012 (284) E.L.T. 399 (Tri. - Bang.)] held as follows:

"...final assessments are required to be made monthwise. Rule 8 which deals with the manner of payment of duty provides that the duty on the goods removed from the factory/warehouse during a month shall be paid by the fifth day of the following month. Rule 12 requires every assessee to submit a monthly return of production and removal of goods. From these provisions, it is eloquently clear that an assessee has to file return and pay duty monthwise and the assessing authority is also required to finalize the assessee's provisional assessment monthwise..."

In case of Steel Authority of India Limited [2019 (366) ELT 769 (SC)] a three judges bench of Hon'ble Supreme Court has observed as follows:

"...The scheme of the rules further is that assessment is to be done by the assessee itself by way of self-assessment and the duty paid by the due date (see Rule 6). What is to happen when the assessee is confronted with a situation when it is unable to determine the value of the goods or find the rate of duty. Rule 7 provides the solution. The assessee can thereunder apply giving reasons and seeking permission to make a provisional assessment. The officer may, grant such permission. Thereupon, duty is payable on a provisional basis. The value or the rate would be indicated by the officer in the order permitting such provisional assessment. This is however made subject to the assessee executing a bond binding the assessee to pay the difference between the duty as payable under the final assessment and the provisional assessment..."

This decision was followed by the Hon'ble Apex Court in the case of Appellant i.e. Bharat Heavy Electricals Limited [2022 (382) E.L.T. 161 (S.C.)] holdings as follows:

"...Interest would be payable from the due date of payment of provisional duty for the purpose of removal of the goods in question till the date of payment of the balance/differential duty upon final assessment..."

Issue 5: Finalization of Value and Payment of Differential Duty Along with Interest

We find in the present case that the period of dispute is January to June, 2017 and the entire assessment was for the period even if provisional during that period would have been finalized by 2021 as submitted by the Counsel, whatsoever differential duty was payable has been paid that being so the entire proceedings whether the assessment were provisional could have been made provisional or not become the theoretical exercise without having any implementation by the revenue.

We note that the issue involved in the present case has become inconsequential. The counsel for the appellant submits that they have from the date of clearance in 2017, in all the cases, the case, determined the final value and paid the differential duty along with the interest as has been held by the Hon'ble Apex Court. On payment of differential duty along with interest on finalization of value subsequent to the clearance of goods, no further action is due against the appellant except in case where the duty has been short paid, for any reason in pursuance of the impugned order which otherwise by the lapse of time has become inconsequential.

Conclusion

The appeal filed by the appellant is in-fructuous but for the statistical purposes the appeal is allowed.

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