2026 (2) TMI 730 - AT - Central Excise

Adjustment of duty short-paid against excess duty paid is permissible after finalisation, with remand for precise computation.

Clarifies that where provisional assessments are finalised, amounts of duty found short-paid may be adjusted against duty paid in excess for the same ... Adjustment of duty - provisional assessment under Rule 7 of the Central Excise Rules, 2002 - finalisation of provisional assessment - refund mechanism vis-a -vis adjustment of excess duty - principles of natural justice - HELD THAT:- Since there was excess paid duty in some of the cases and short-paid in other cases, the appellant had adjusted the short-paid duty from the excess paid duty. Such modus operandi adopted by the appellant was objected to by the Department on the ground that in respect of excess paid duty, they are only eligible for grant of refund by taking recourse of the provisions contained in the Central Excise statute. With regard to short-paid duty, it was held by the authorities below, that under Rule 7 of the Central Excise Rules, 2002, the appellant is required to pay the differential duty along with interest and there is no provision prescribed under the statute for adjustment of the short-paid duty against the excess paid duty during the course of provisional assessment. Though the refund provisions contained in the Central Excise statute are applicable for claiming the excess duty paid as refund, but the provision regarding adjustment of the excess paid duty vis-à-vis the short-paid duty, there is no restriction in statute to opt for such adjustment mechanism. Since the final assessment order was passed on 24.12.2014 and immediately thereafter the appellant had made the adjustment of the short-paid duty against the excess paid duty, such adjustment, in our considered view, can be termed as proper and justified. Since the arithmetical accuracy about the computation was raised for the first time by the appellant at this juncture, we are of view that such aspect is required to be considered by the original authority. Therefore, the appeal, to the limited extent of computation of correct duty, is remanded to the original authority for passing of a fresh order. Thus, the impugned order to the extent it has held that short-paid duty cannot be adjusted against the excess paid duty, is set aside and appeal to that extent is allowed in favour of the appellant. With regard to the limited purpose for computation of the short-paid duty amount as per the above referred work-sheet, the matter is remanded to the original authority for de novo adjudication. The principles of natural justice should be adhered to by the original authority while passing the order afresh. Issues: Whether duty short-paid in provisional assessments can be adjusted against excess duty paid for the same period.Analysis: The issue arises from provisional assessments finalized under Rule 7 of the Central Excise Rules, 2002 and determination of assessable value under Section 4 of the Central Excise Act, 1944 for products in Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985. The Tribunal examined whether the statute permits adjustment of amounts of duty short-paid against amounts of duty paid in excess for the same assessment period. Earlier orders of the Tribunal and an order of the Commissioner (Appeals) in identical factual matrices were considered, including a precedent where short-paid duty was held adjustable against excess paid duty. The Tribunal noted that the provisional assessments were finalized and the appellant promptly adjusted short-paid duty against excess duty; there is no statutory prohibition to such adjustment in the context of finalized provisional assessments. A separate arithmetic dispute about the correct quantum of short-paid duty was raised for the first time on appeal; the Tribunal found that arithmetical accuracy should be determined by the original authority and remanded that limited computation issue for fresh adjudication with observance of natural justice.Conclusion: The Tribunal allows the appeal to the extent that adjustment of short-paid duty against excess paid duty is permissible and remands the limited question of correct computation of the short-paid duty to the original authority for de novo adjudication. The decision is in favour of the assessee.