2011 (3) TMI 373 - HC - Central Excise

Payment of Interest - Provisional assessment - he duty which was payable by the assessee under Rule 8 on the 6th date of the following month if the duty is paid subsequently through internet banking and on the 5th day of the following month in any other case - Therefore the adjustment is to be made on the date it was actually liable to be paid - Thus the date of provisional assessment and the date of final assessment have no relevance in deciding the payment of interest - If the duty determined to be paid under the final assessment is not paid on the due date if it is short paid not only the assessee has to pay the balance in duty he is also liable to pay interest on such short payment of duty from the due date. The only advantage is he will get the benefit of one month from the said due date as is clear from Rule 7(4) - Therefore the order passed by the Tribunal holding that interest is payable from one month from the date of final assessment order is erroneous and is liable to be set aside - Decided in favour of assessee.

Summary

Issues:
Challenging Tribunal's order on interest appropriation and differential duty calculation.

Analysis:
The case involved two appeals by the revenue challenging the Tribunal's order on interest appropriation of Rs. 24,415 in one case and on differential duty of Rs. 48,72,582 in another. The respondent, M/s. J.K. Industries Limited, had two plants and requested provisional assessment for clearances to their depots for further sales. The provisional assessment orders were passed without enumerating the mode of computation of value, leading to subsequent issues regarding abatement claims and non-compliance with bond and security requirements. Final assessment orders held the respondent liable for interest payments under Central Excise Rules.

The assessee appealed to the Commissioner of Appeals, who upheld the assessing authority's order. Subsequently, the assessee appealed to the Tribunal, which set aside the interest provision based on a previous judgment. The Tribunal's order did not consider the abatement claim, prompting an application for rectification, which was rejected due to procedural reasons. The matter was remitted to the Tribunal for reconsideration of the rectification application.

The High Court admitted the appeals to consider substantial questions of law regarding the interpretation of interest provisions under Rule 7(4) of Central Excise Rules, 2002. The revenue contended that interest calculation should start from the first day of the month succeeding the month for which the duty amount is determined, not from the final assessment order date as held by the Tribunal. The assessee argued that interest is payable after the date of the final assessment order based on Section 11A(3)(ii) defining the "relevant date."

The Court analyzed the relevant provisions of the Act and Rules, highlighting Section 11A for duty recovery and Rule 8 for duty payment timelines. It emphasized Rule 7 for provisional assessment and interest calculation on short paid duty under Section 11AB. The Court disagreed with the Tribunal's interpretation, stating that interest is payable from the due date of duty adjustment, not the final assessment order date. It clarified that interest is due on short paid duty from the duty's due date, irrespective of the final assessment order date.

The Court emphasized that interest liability arises from short payment of duty based on due dates, not the final assessment order date. It noted that excess duty payment or pre-payment of differential duty should be considered by the Assessing Authority to determine interest liability. Consequently, the Court allowed the appeal, setting aside the Tribunal's order and ruling in favor of the revenue on the substantial question of law.

In conclusion, the High Court's judgment clarified the correct interpretation of interest provisions under Central Excise Rules, emphasizing duty due dates for interest calculation and liability determination.