Interest on differential excise duty not payable where assessee paid the differential before finalisation of provisional assessment.

Rule 7(4) of the Central Excise Rules prescribes interest on amounts determined on final assessment from the month following determination until payment. The central question is whether that interest attaches where the assessee paid the differential duty before finalisation of a provisional assessment. Applying binding precedent, including the principle that prepayment of the correct differential discharges the liability that interest would otherwise seek to enforce, the analysis concludes that interest is not payable in such circumstances and the order confirming interest is set aside with consequential relief to the assessee.

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Issues: Whether interest is payable on differential duty where the differential duty was paid by the assessee prior to finalization of provisional assessment.

Analysis: Rule 7(4) of the Central Excise Rules, 2002 (as amended by Notification No.4/2002-C.E. (N.T.) dated 01.03.2002) prescribes liability to pay interest on amounts payable to the Central Government consequent to final assessment, from the first day of the month succeeding the month for which such amount is determined until payment. The question is whether that provision attracts where the assessee has already paid the differential duty prior to finalization. Relevant binding precedent holds that where the differential duty is correctly paid before finalization of assessment, recovery of interest is not justified. The Tribunal's prior decision in the appellant's own case applying the Supreme Court decision in Commissioner v. CEAT Limited affirmed that interest is not payable in such circumstances.

Conclusion: Interest is not payable on differential duty paid before finalization of the provisional assessment; impugned order confirming interest is set aside and the appeal is allowed with consequential relief, if any.

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