2011 (10) TMI 162 - AT - Central Excise

Duty liability was discharged on provisional basis - assessee on their own discharged the differential duty liability on the basis of data which they have supplied to the department for finalization of the assessment-The department is of the view that apart from duty respondents liable to pay interest on the delayed payment of duty under section 11AB - Commissioner (Appeals) set aside the order of the adjudicating authority demanding interest in terms of Rule 8(3) of the Central Excise Rules 2002 with consequential relief.Held that - In view of Commissioner of Central Excise Mumbai vs. ITC Ld. where the assessee pays the differential duty before finalization of assessment on their own it is only a pre-deposit of duty and not payment of duty which can be done only after the determination of the duty liability by a proper officer. Such a pre-deposit does not in any way exhaust the interest liability on the assessee from the date on which the duty was required to be paid originally i.e at the time of clearance of the goods from the place of removal and the date on which the duty liability was ultimately discharged. Accordingly the matter was placed before divisional bench for consideration.

Summary

Issues:
- Whether interest is payable under Rule 8(3) of the Central Excise Rules, 2002 after finalization of assessment done under Rule 7?
- Does revenue neutrality apply when duty paid by the appellant is available as CENVAT Credit at the recipient unit?
- Can interest be levied under Rule 7(4) in a case of provisional assessment where the differential duty was discharged before finalization of assessment?

Analysis:

Issue 1:
The appeals were against Orders-in-Appeal regarding the liability to pay interest on delayed duty payment after finalization of accounts. The department contended that interest was payable under sub-rule (4) of Rule 7 of the Central Excise Rules, 2002, even if the differential duty was paid before finalization. The Tribunal noted conflicting decisions by different High Courts and referred the matter to a Division Bench for resolution.

Issue 2:
The question of revenue neutrality arose concerning whether interest should be levied when duty paid is available as CENVAT Credit at the recipient unit. The Tribunal considered the impact of delayed duty payment on the appellant's benefit and the department's contention of undue hardship if interest is not levied. This issue was intertwined with the main issue of interest liability under Rule 7(4).

Issue 3:
The fundamental issue revolved around whether interest could be levied under Rule 7(4) in a case where the differential duty was discharged before finalization of assessment. The Tribunal referenced conflicting views by different High Courts and the precedent set by the Supreme Court, emphasizing that self-assessment and payment of duty before finalization do not absolve the liability to pay interest. The Tribunal directed the matter to a Division Bench for further consideration due to the significant legal question involved.

In conclusion, the judgment highlighted the complexities surrounding interest liability in cases of provisional assessment and emphasized the need for clarity on the legal interpretation of relevant rules. The Tribunal's decision to refer the matter to a Division Bench reflected the importance of resolving the conflicting views and addressing the significant legal issues raised in the case.