2024 (6) TMI 1001 - AT - Central Excise

Differential duty payment under Rule 9B(5) exempts interest under Section 11AB Central Excise Act

CESTAT Kolkata allowed the appeal regarding differential duty liability and interest under Section 11AB of Central Excise Act, 1944. The tribunal held ... Liability of differential duty on account of finalisation of provisional assessment - liability of interest under Section 11AB of the Central Excise Act, 1944 - requirement to issue SCN when the differential duty has already been paid in terms of Rule 9B(5) - HELD THAT:- Admittedly, the differential Excise Duty payments arose under provisions of Rule 9B(5) of CEA, 1944 during the period under consideration. As can be observed from the extracts of Rule 9B(5), there are no provision for recovery of interest when the differential duty is paid. In case of SERAI KELLA GLASS WORKS PVT. LTD. VERSUS COLLECTOR OF C. EXCISE, PATNA [1997 (4) TMI 74 - SUPREME COURT], which has been relied upon by the lower authority, in fact supports the case of the Appellant. It has been held therein that after final assessment, there is no need to give any further notice under Section 11A for recovery of differential duty amount. Precisely for this reason, the Commissioner (Appeals) has held that the OIO passed is not proper. Necessity to issue SCN - HELD THAT:- There was no necessity to issue any Show Cause Notice under Section 11A as has been rightly held by the Commissioner (Appeals). It is also noted that no further Appeal has been filed by the Revenue against this OIA. Therefore, the issue has reached finality. In such a case, the Commissioner (Appeals) is in error in confirming the interest alone under Section 11AA/11AB when the provisions have come into effect from 11/5/2001 and the provisional Assessment was finalized in terms of Rule 9B(5) of CER, 1944. It is on record that the final assessment has been done in terms of Rule 9B(5) of CEA, 1944. Further, the Department has not come out with any evidence that the belated finalization of assessment in 2008 was due to any delay from the appellant side - there are no merits in the impugned order and the same is set aside - appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether interest for delayed payment is chargeable where differential duty arises on finalisation of provisional assessments under Rule 9B(5) of the Central Excise Rules, 1944. 2. Whether a Show Cause Notice under Section 11A and consequent demand under Section 11AA/11AB is necessary or proper once duty has been determined and adjusted under Rule 9B(5). 3. Whether interest provisions introduced with effect from 11/5/2001 (Sections 11AA/11AB) apply to differential duty finally assessed in 2008 for periods 1991-1994, particularly where delay in finalisation is not attributable to the assessee. 4. Whether absence of allegation or evidence of delaying tactics by the assessee precludes levy of interest under Sections 11AA/11AB for the period before introduction of those provisions or for the period of belated finalisation. ISSUE-WISE DETAILED ANALYSIS Issue 1: Liability to interest where differential duty arises on finalisation under Rule 9B(5) Legal framework: Rule 9B(5) of the Central Excise Rules, 1944 provides that duty provisionally assessed shall be adjusted against duty finally assessed and that the assessee shall pay any deficiency or be entitled to a refund. Interest provisions are contained in Sections 11AA/11AB of the Central Excise Act, 1944 which impose interest when duty is not paid as determined under Section 11A(2). Precedent treatment: Tribunal precedents (as discussed in the judgment) have held that interest under Section 11AA is chargeable only when duty is determined under Section 11A(2); where duty becomes payable on finalisation of provisional assessments under Rule 9B(5), interest for past periods was held not leviable (Kitply Industries decision followed). Supreme Court authority (Serai Kella Glass Works) supports that no further notice under Section 11A is required after final assessment and thus does not support independent recovery by Section 11A/11AA where Rule 9B(5) applies. Interpretation and reasoning: The Tribunal interprets Rule 9B(5) as a self-contained mechanism for adjustment of provisional and final duty without an express provision for recovery of interest on the differential resulting from finalisation. Since Sections 11AA/11AB contemplate interest following a determination under Section 11A(2), and the present duty arose on finalisation under Rule 9B(5) rather than by a Section 11A determination, interest cannot be imposed for the period prior to any effective triggering event contemplated by the interest sections. Ratio vs. Obiter: Ratio - where duty is finalized under Rule 9B(5), interest under Sections 11AA/11AB is not leviable for the past period absent a Section 11A(2) determination; Obiter - discussion of instalment treatment and interest from specific later dates (as in cited precedents) may be context-specific. Conclusion: No interest is leviable for the past period on differential duty that became payable on finalisation under Rule 9B(5), insofar as the charge is not based on a Section 11A determination. Issue 2: Necessity and propriety of issuing a Show Cause Notice under Section 11A after Rule 9B(5) finalisation Legal framework: Section 11A empowers the authority to determine duty and issue notices; Rule 9B(5) effects final adjustment on provisional assessment. Procedural overlap arises when revenue issues a Section 11A show cause after duty has been finalised under Rule 9B(5). Precedent treatment: The Supreme Court decision cited (Serai Kella Glass Works) and Tribunal authorities hold that once final assessment under Rule 9B(5) is completed, there is no need for a fresh Section 11A notice to recover the differential duty and issuance of such notice is improper. Interpretation and reasoning: The Tribunal reasons that Rule 9B(5) effectuates finality as to duty payable for the period covered and that a subsequent Section 11A show cause to recover the same differential amounts duplicates or improperly circumvents the rule-based finalisation. The Commissioner (Appeals) correctly set aside the order-in-original premised on a Section 11A show cause as not proper. Ratio vs. Obiter: Ratio - issuance of a Section 11A show cause for recovery of duty already finalised under Rule 9B(5) is not necessary and is improper; Obiter - none significant beyond reliance on precedent. Conclusion: A Show Cause Notice under Section 11A is not proper to recover differential duty already determined and adjusted pursuant to Rule 9B(5). Issue 3: Temporal applicability of Sections 11AA/11AB (introduced 11/5/2001) to duties finalised in 2008 for periods 1991-1994 Legal framework: Interest provisions (Sections 11AA/11AB) took effect from 11/5/2001 and impose interest on delayed payment of duty determined under Section 11A(2) or as otherwise provided; the question is whether they can be applied to duties that became payable upon Rule 9B(5) finalisation in 2008 for pre-2001 periods. Precedent treatment: Tribunal decisions cited indicate that interest under the post-2001 provisions cannot be pressed where there has been no determination under Section 11A and where the duty liability flow arises from Rule 9B(5); further, where the finalisation delay is not attributable to assessee, the imposition of interest is disfavoured. Interpretation and reasoning: The Tribunal reasons that since the duty became payable on finalisation under Rule 9B(5) and not by a Section 11A determination, the interest provisions (which came into effect in 2001) cannot be applied to create retrospective interest liability for periods prior to or independent of their statutory trigger. Additionally, absent evidence that delay in finalisation was due to the assessee, equity and precedent indicate interest should not be levied for the earlier period of delayed finalisation. Ratio vs. Obiter: Ratio - Sections 11AA/11AB, effective 11/5/2001, do not justify charging retrospective interest where duty liability arises from Rule 9B(5) finalisation and no Section 11A determination exists; Obiter - remarks on departmental failure to appeal and finality of Commissioner (Appeals) order illustrate procedural estoppel but are contextual. Conclusion: The interest provisions introduced on 11/5/2001 are not applicable to impose past-period interest on differential duty that arose on Rule 9B(5) finalisation in 2008, especially where delay in finalisation is not shown to be the assessee's fault. Issue 4: Effect of absence of allegation/evidence of delaying tactics by assessee on leviability of interest Legal framework: Levy of interest under Sections 11AA/11AB presupposes a statutory determination and often involves consideration of culpability or responsibility for delay as part of equitable assessment of interest. Precedent treatment: Authorities cited in the judgment treat lack of evidence of delaying tactics as a material factor militating against imposition of interest for the relevant past period where the revenue delayed finalisation. Interpretation and reasoning: The Tribunal emphasizes that the Department produced no evidence that belated finalisation in 2008 was caused by the assessee. Given Rule 9B(5)'s mechanism and absence of Section 11A determination, imputing interest where the assessee was not responsible for delay is inconsistent with principles underlying the interest provisions and with cited precedents. Ratio vs. Obiter: Ratio - absence of evidence that the assessee caused or contributed to delayed finalisation is a valid ground to deny interest on the differential duty for the prior period; Obiter - none beyond reinforcement of fairness principle. Conclusion: Where the revenue cannot demonstrate that the assessee's conduct caused delay in finalisation, interest for the past period should not be imposed on duty that arose on Rule 9B(5) finalisation. Overall Conclusion and Disposition The Tribunal holds that differential duty arising on finalisation under Rule 9B(5) does not attract interest under Sections 11AA/11AB for the past period because no determination under Section 11A(2) was made; issuance of a Section 11A show cause after Rule 9B(5) finalisation was improper; the interest provisions effective 11/5/2001 cannot be employed to levy retrospective interest in these circumstances; and the absence of evidence that the assessee caused the belated finalisation reinforces denial of past-period interest. Accordingly, the impugned order confirming interest is set aside and the appeal is allowed with consequential relief as per law.