Appellant entitled to Rs.1.15 crore interest refund on excess duty paid during provisional assessment period

CESTAT Bangalore held that appellant was entitled to interest of Rs.1,15,84,553/- on excess duty paid during provisional assessment period 2002-03 to 2009-10. The interest calculation method was disputed and pending before Karnataka HC. After HC settled the computation formula, appellant requested adjustment of interest due to government against interest payable to appellant. Lower authorities rejected the claim stating final duty computation order was not challenged. CESTAT found no valid reason to deny refund since appellant had already paid government interest without demand notice. Impugned order set aside, appeal allowed.

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Issues:
Entitlement to interest on excess duty paid during provisional assessment period.

Analysis:
The appeal was filed against an order passed by the Commissioner of Central Excise(Appeals), Mangalore, rejecting the claim for interest on excess duty paid. The appellant, engaged in tyre manufacturing, opted for provisional assessment due to valuation challenges. The issue arose when the interest on excess duty paid was not calculated and refunded pending resolution of the relevant date for interest calculation by the High Court. The appellant sought interest of Rs.1,15,84,533/- on the excess duty paid. The adjudicating authority and Commissioner(Appeals) rejected the claim, leading to the present appeal.

The appellant's advocate argued that interest should be calculated from the first day of the month when duty is determined, not from the finalization of assessment, citing a judgment by the Larger Bench of the Tribunal and a subsequent High Court decision. The appellant requested adjustment of interest due to the Government against the interest payable to them. Despite paying Rs.63,71,217/- as interest to the Government, the appellant claimed Rs.1,15,84,533/- as interest due on the excess duty paid. The Revenue did not dispute the facts but supported the Commissioner(Appeals) findings.

The Tribunal found that the interest calculation method was in dispute pending High Court resolution, resulting in non-calculation of interest on excess duty paid. The High Court clarified that interest is payable from the due date of duty payment, not from the final assessment date. Therefore, the appellant was entitled to interest on excess duty paid. The Tribunal held that the authorities' rejection of the claim based on unchallenged duty computation orders was unfounded, as the interest calculation was pending due to the unresolved issue. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the appellant's entitlement to interest on excess duty paid during the provisional assessment period was upheld by the Tribunal based on the High Court's clarification on the relevant date for interest calculation. The Tribunal emphasized that the interest should be calculated from the due date of duty payment, not the final assessment date, leading to the allowance of the appeal and the refund of the interest amount to the appellant.

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