2008 (2) TMI 121 - AT - Central Excise

Interest accrues from provisional assessment, not finalization: Rule 7(4) Central Excise Rules

TATA MOTORS LTD. Versus COMMISSIONER OF C. EX., PUNE-I

The Member held that interest accrues from the month of provisional assessment, not finalization, as per Rule 7(4) of the Central Excise Rules, 2002. The ... Whether interest is imposable if appellant had already paid differential duty, before the order of finalization of the provisional assessment - Rule 7(4) CER clearly indicate that the interest is chargeable 'succeeding the month for which the such amount is determined' – hence demand of interest is not justified - question of referring the matter the Larger Bench does not arise, because Division Bench & other Co-ordinate Benches have already given their decision regarding this matter Issues: Interpretation of Rule 7(4) of the Central Excise Rules, 2002 regarding the charging of interest after finalization of provisional assessment.Analysis:1. The appeals were against the Order-in-Appeal where the Ld. Commissioner set aside the orders-in-original for not imposing interest on the appellant post finalization of provisional assessment. The appellant had obtained permission for provisional assessment for clearances to sister units, which were later finalized by the adjudicating authority. The issue revolved around the interpretation of Rule 7(4) of the Central Excise Rules, 2002, which states that interest is payable from the 'month for which' the amount is determined until the date of payment.2. The Ld. Commissioner analyzed the expression 'month for which' in Rule 7(4) and emphasized its significance in determining the accrual of interest. The Ld. Commissioner referred to various case laws to support the interpretation, highlighting the distinction between 'month for which' and 'month in which.' The Ld. Commissioner disagreed with previous judgments for not considering this crucial distinction, asserting that interest accrual starts from the month of provisional assessment, not the finalization date.3. The appellant cited previous Tribunal decisions to argue that the issue of interest after finalization of provisional assessment is settled law. However, the Ld. JDR contended that the Ld. Commissioner's interpretation was correct and that the matter should be referred to a Larger Bench if necessary. The Ld. JDR stressed that interest accrues from the month of provisional assessment, as indicated by the wording of Rule 7(4).4. Upon reviewing the submissions, the Member found the Ld. Commissioner's rejection of previous Tribunal judgments based on the distinction between 'month for which' and 'month in which' to be improper. The Member noted that the Tribunal had already addressed the provisions of Rule 7(4) in previous decisions, including a Division bench ruling. Therefore, there was no need to refer the matter to a Larger Bench. The Member upheld the appellant's argument that since the duty was paid before finalization, interest should not be charged post-finalization.5. It was undisputed that the appellant had paid the differential duty before finalization, aligning with previous Tribunal decisions. Consequently, the Member concluded that the impugned order directing the appellant to pay interest post-finalization was incorrect. The appeals were allowed, and any consequential relief was granted accordingly.