TMI Blog2015 (2) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... t on any amount payable to Central Government consequent to order for final assessment is not a situation to be found in the present case. It is not the argument of the Revenue that what was paid by the Assessee as differential duty and prior to finalizing of the assessment, is not correct, accurate or proper computation of the liability. Having found that the final assessment resulted in nothing due and payable to the Government, we do not find any justification then to recover interest. If the interest was to be recovered and was indeed payable on the date on which the Assessee made payment of differential duty and prior to finalization of the assessment, then, the Rule would have specifically said so. In the absence of any such stipulation in the Rules the dictum in the decision of the Hon'ble Supreme Court in J.K. Industries Ltd. [2011 (3) TMI 373 - KARNATAKA HIGH COURT] would apply. If that principle can be applied, then, there was no liability to pay interest. If the liability to pay interest between the time or the period of provisional assessment and payment of differential duty until the final assessment has to be read in the Rule, that is not possible. The interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the aforesaid manufactured goods on payment of central excise duty as per the value determined in terms of section 4(1)(a) and section 4(1)(b) of the Central Excise Act. Thus, the Assessee paid the duty on the transaction value/normal transaction value as the case may be. The Assessee has set out the details, the mode of computation and the tax amount and stated that in cases of clearance of their goods to depot/distribution centres/C F Agencies for sale in the replacement market, the normal transaction value, namely, the price actually to be realized was not known. This was because the Assessee claimed certain deductions and permissible in terms of this statute. Since these deductions could not be quantified they were determined ad hoc. In the light of the above, it was not possible for the Assessee to do the self-assessment at the time of clearance. Therefore, the Appellants cleared the manufactured goods on provisional assessment basis under Rule 7 of the Central Excise Rules, then, prevailing. 6] The Appellants pointed out to the Revenue as to how at the end of each financial year, they obtained a cost accountant certificate and in relation to the quantification of disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich assessments were finalized. In the instant case, they have paid the differential duty before the finalization of the assessments. Therefore, no interest is liable to be paid. Reliance was placed on decision of the Appellate Tribunal in case of MSEB Pole Factor V/s. CCE - 2005 (187) ELT 209(T). 9] The Assessee placed reliance upon the decisions of the Tribunal and the order passed by this Court in the case of Tata Motors V/s. Commissioner of Central Excise reported in 2011 (269) ELT 415 (T) and in the case of Ispat Industries V/s. Commissioner of Central Excise reported in 2007 (209) E.L.T. 280. 10] The grievance of the Appellant was that none of these contentions and issues were considered by the Additional Commissioner of Central Excise and he confirmed the demand by his order dated 27th December, 2012 termed as Order in Original. 11] An Appeal was preferred to the Commissioner (Appeals) Central Excise and Customs, Nasik. That Commissioner (Appeals) dismissed the Appeal of the Assessees on 29th May, 2013. Aggrieved by the aforesaid orders, the Appellant approached the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), by the impugned order and that Appeal al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments. Mr. Sridharan, therefore, submits that the view taken by this Court as also the Tribunal in the case of M/s. Ispat Industries (supra), Tata Motors (supra) accords with this principle. Following them, we must allow this Appeal. 15] On the other hand, Mr. Jetly would submit that this Appeal does not raises any substantial questions of law. The Tribunal s view is fair, just and proper. The Tribunal has applied the principle that if there is a liability to pay interest and which relates back to the the date of determination, then, any process or method by which such tax, which is due and legitimately recoverable, is paid belatedly, the interest on the same must be charged. The interest is, therefore, payable in the present case and merely bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bond in the form prescribed by notification by the Board with such surety or security in such amount as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, deem fit, binding the assessee for payment of difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed. (3) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall pass order for final assessment, as soon as may be, after the relevant information, as may be required for finalizing the assessment, is available, but within a period not exceeding six months from the date of the communication of the order issued under subrule( 1) : Provided that the period specified in this subrule may, on sufficient cause being shown and the reasons to be recorded in writing, be extended by the Commissioner of Central Excise for a further period not exceeding six months and by the Chief Commissioner of Central Excise for such further period as he may deem fit. (4) The assessee shall be liable to pay interest on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed and the amount of duty provisionally assessed. Then, comes subrule (3) where a period is prescribed for finalizing the assessment. Then, comes subrule (4) by which a liability to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub rule (3), at the rate specified by the Central Government by notification issued under the relevant statutory provision. The interest is payable from the date specified in the later part of subrule( 4). What the Tribunal found in this case is that the Assessee had before finalizing of the assessment remitted or paid the differential duty. Thus, the assessment provisionally made resulted in payment of that sum and specified in the provisional assessment order. Further, the Assessee volunteered on its own to determine the liability of duty and the amount in that behalf came to be paid. That was before the finalization of the assessment. There resulted nothing consequent to finalizing of assessment. The amount as received earlier, namely, on provisional assessment and the later voluntary exercise of the Assessee was the sum payable and recoverable. It is in these circumstances that the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as laid great emphasis on the Rule 7(4) of the Central Excise Rules, 2002 which states that an assessee shall be liable to pay interest on any amount payable to the Central Government, consequent to an order for final assessment under subrule( 3), which means that question of paying interest would arise only if on final assessment when Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise comes to a conclusion that amount is due and payable by the assessee towards duty. If no dues are payable by the assessee upon finalization, inasmuch as the entire amount has been paid before the finalization, then the provisions of Rule 7(4) will not come into picture. In support of this argument, he referred to the provisions of section 18(3) of the Customs Act, 1962, which deal with the identical situation and say that the importer/exporter shall be liable to pay interest on any amount payable to the Central Government, consequent to an order for final assessment under subsection 2, at the rate fixed by the Central Government under section 28AB from the first day of the month in which duty is provisionally assessed till the date of payment thereof. It was pleaded tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this, we are of the view that interest is required to be paid even when the differential amount is paid before the finalization of assessment. 21] Thus, the Tribunal concluded that interest is required to be paid even when the differential duty is remitted before the finalization of the assessment. The Tribunal has, in arriving at this conclusion relied upon the judgments delivered and from time to time in case of interest. 22] Mr. Jetly has relied upon several Supreme Court decisions for interpreting Rule 7(4). With his assistance, we would refer to the judgment in case of Commissioner of Central Excise, Pune V/s. SKF India Ltd. (supra). There the Assessee was engaged in the manufacture and sale of ballbearings and textile machine parts. It sold goods manufactured by it on certain prices on payment of excise duty leviable on price on which the goods were sold. Later on, there was a revision of prices with retrospective effect. Following the revision the Assessee demanded from its customers the balance of the higher prices and issued to them supplementary invoices. At that time it also paid the differential duty on the goods sold earlier. The Revenue took the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch person and, thereafter, he may proceed to recover it. The explanations take care of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or for the rules made thereunder with intent to evade payment of duty. Explanation 2 declares that the interest under section 11AB shall be payable on the amount paid by the person under this subsection and also on the amount of short payment of duty, if any, as may be determined by the Central Excise Officer, but for this subsection. Subsection( 1) of section 11A enables the Central Excise Officer to serve a notice within one year from the relevant date on the person chargeable with the duty which has not been levied or paid or which has been short levied or short paid or to whom the refund has been erroneously made, requiring him to show cause why he should not pay the amount specified in the notice. 24] When such was the legal position and emerging from the reading of the Act itself that the Hon'ble Supreme Court in the case of SKF India Ltd. (supra) concluded that if the object of the law is to state clearly and unambiguously the obligations of the person whom the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under subsection (2B) of Section 11A, shall, in addition to the duty, be liable to pay interest. ....It is thus to be seen that unlike penalty that, is attracted to the category of cases in which the nonpayment or short payment etc. of duty is by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or Rules made thereunder with intent to evade payment of duty , under the scheme of the four Sections (11A, 11AA, 11AB and 11AC) interest is leviable on delayed or deferred payment of duty for whatever reasons. 11. The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of subsection (2B) of Section 11A of the Act. 12. The Bombay High Court, Aurangabad Bench, in its decision in The Commissioner of Central Excise, Aurangabad v. M/s. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) similar situation of price difference arising on the date of removal and the enhanced price at which the goods were ultimately sold, the Department issued a show cause notice proposing to levy interest on the differential duty, paid by the Assessee, under section 11AB of the Central Excise Act, 1944. Following the view taken in SKF Ltd. (supra) the Appeal of the Revenue also came to be allowed in International Auto Ltd. 27] The High Court of Karnataka at Bangalore dealt with the situation where J. K. Industries Limited had two plants. They requested for provisional assessment in respect of clearances effected to their depots for effecting further sales from 1st July, 2000 onwards. Based on the request of the respondents, provisional assessment orders were passed by the Department in respect of the financial year 200203 in respect of both the plants. At the time of ordering the provisional assessment, various abatements that are covered under the provisional assessment, the mode of computation of value were not enumerated. Hence, certain particulars were called for from the Assessee. The Assessee furnished these particulars. Consequent to the order of provisional assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month from the date of final assessment order is erroneous. This is what the High Court held. In the aforementioned circumstances, when the larger Bench decision in Cadbury India Ltd. relied upon the aforesaid view of the High Court of Karnataka, it lost sight of the fact that the High Court of Karnataka was considering a somewhat different situation. There was nothing therein which would enable the larger Bench to hold that the interest which is contemplated by Rule 7(4) is payable in all cases and, therefore, even if the Assessee makes payment of the differential duty prior to finalization of assessment, interest would still be leviable, payable and recoverable in terms of Rule 7(4). For that the Tribunal took assistance of section 11AA and section 11BB. 29] We do not find this conclusion of the Tribunal to be correct. As has been rightly urged before us that when a statute levying and imposing tax makes specific provision for recovery of interest on delayed payment only, then, such interest and the liability to pay the same arises. In that regard, the Constitution Bench judgment in the case of J. K. Synthetics Limited V/s. Commercial Taxes Officer (supra) referred to the Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case, that if the Revenue's contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the Legislature. 17. Let us look at the question from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than 15 days. The requirement of section 7(1) is undoubtedly a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided under Rule 7(4) of the Central Excise Rules, 2002. The Revenue filed the Appeal against this order of the Adjudicating Authority to the Commissioner (Appeals). The Commissioner (Appeals) proceeded to pass an order in favour of the Revenue. That is how the Assessee approached the Tribunal and the Assessee's Appeal was allowed on the same reasoning as is to be found in the case of Ispat Industries Ltd. The Revenue approached this Court by filing Central Excise Appeal No.54 of 2011 against the view of the Tribunal in M/s. Tata Motors Ltd. and another but on 1st February, 2012 the Revenue's Appeal was dismissed. 33] We find from a reading of this judgment that the conclusion in the larger Bench decision of the Tribunal cannot be applied to cases which are expressly noted in M/s. Ispat Industries Ltd. and Tata Motors Ltd. Rule 7 and its subrules if read together would denote as to how the Revenue secures itself against any provisional assessment. If on a provisional assessment, certain amount of duty is paid, but it is not accurate and correct, then, the final assessment is contemplated on a finalization of the assessment. Upon finalizing, it is possible that the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). Therefore, that subsection together with the proviso and explanation making specific provision for recovery of interest and enabling the Revenue to recover it, that the Hon'ble Supreme Court reached a conclusion that on price revision the Assessee was liable to pay interest on the differential duty. That was because he not only recovered the revised price but passed on the burden of the differential duty paid on the customer. It was not his later act but his prior act of raising supplementary invoices and, then, paying the differential duty which enabled the Revenue to recover interest and relying on the substantive provisions. That is how both the judgments should have been read. If the Tribunal's conclusion is upheld, the Revenue would face proceedings for recovery of interest on the entitlement to refund in cases covered by Rule 7(5) of the Rules. If the differential duty paid and prior to finalization of Assessment exceeds the duty leviable in law, then, on final assessment the Assessee is entitled to refund. He may interest on the sum refunded from the date of payment. However, Rule (6) cannot be construed in that manner. Hence, the words such amount is deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding the High Court, to accept loyally the decisions of the higher tiers.' It is inevitable in a hierarchical system of Courts that there are decisions of the Supreme appellate Tribunal which do not attract the unamimous approval of all members of the judiciary But the judicial system only works if someone is allowed to have the last word and that last word, once spoken, is loyally accepted. The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system. 10. In Cassel V. Broome, commenting on the Court of Appeal's comment that Rookes V. Barnard - (1964) A.C. 1129 was rendered per incuriam, Lord Diplock observed, The Court of Appeal found themselves able to disregard the decision of this House in Rookes V. Barnard by applying to it the label per incuriam. That label is relevant only to the right of an appellate Court to decline to follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate Court or to the right of a judge of the High Court to disregard a decision of the Court of Appeal. 36] We would expect the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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