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M/s Bharat Heavy Electricals Ltd. Versus Commissioner C & C Excise, Kanpur

2015 (8) TMI 1055 - ALLAHABAD HIGH COURT

Demand of interest on differential duty - Whether the appellant is liable to pay interest on differential duty even though the differential duty, if any, was paid, prior to the date of the passing of the final assessment order - Held that:- The provision of law comprised there-under nowhere specifies such Rules shall restrict the levy of interest for the period consequent to the finalisation of the assessment, rather it specifies that the Rules may provide for interest on the differential amount .....

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ds in terms of the said Act. Merely because the differential amount of duty is ascertained consequent to the finalisation of assessment, the due date for payment of such amount never changes nor is extended. It would always relate to the date of removal of the goods thereof. It is only the quantification of the differential amount of duty is ascertained consequent to the finalisation of assessment, and that too merely because the assessee was not able to ascertain the exact quantum of duty in th .....

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at the rate specified by the Central Government by a Notification issued under Section 11AA or Section 11AB of the said Act from the first day of the month succeeding the month for which such amount is determined till the date of payment thereof. The provisions therefore, specifically states that the interest liability will commence from the month succeeding the month "for" which such amount is determined. The expression "for" refers to the month for which the amount is determined pursuant to f .....

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) and in the case of CEAT Ltd. (2015 (2) TMI 794 - BOMBAY HIGH COURT). - Decided against assessee. - Central Excise Appeal No. 26 of 2015 - Dated:- 21-8-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. ORDER (Per: Tarun Agarwala, J.) The appellant is a Government of India public sector undertaking incorporated under the Companies Act, 1956 and is engaged in design, manufacture and supply of power and instrument transformers, bus ducts and AC/DC Loco to the Indian Ra .....

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onally paid in accordance with the provisional assessment order under Rule 7 of the Central Excise Rules, 2002 (hereinafter referred to as the Rules) issued by the Assistant Commissioner, Central Excise. It is contended that immediately on the approval of the final price, adjustment bills on differential duty, if any, is raised and paid or a refund claim is lodged depending on the price which is fixed. The final assessment is passed thereafter by the excise authorities. For the period 2007-08 an .....

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as payable but held that the appellant was liable to pay interest on the differential duty under Section 11AB of the Central Excise Act, 1944 (hereinafter referred to as the Act). The appellant, being aggrieved filed an appeal, which was dismissed against which further appeal was filed before the Tribunal. The Tribunal after considering the matter dismissed the appeal. The appellant, still aggrieved, has filed the present appeal. We have heard Sri Z.U. Alvi along with Sri A.P. Mathur and Sri Abh .....

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the time when a final assessment order is passed and, prior to the date of finalisation of the assessment order, the differential duty, if any, had already been cleared and paid by the appellant. The learned counsel contended that there was no differential duty payable at the time when the final assessment order was passed and, consequently, imposition of interest on differential duty was bad in law. In support of his contention, the learned counsel submitted that levy of interest is compensator .....

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duty at the time of removal of goods did not arise. The learned counsel, consequently, contended that Section 4 of the Act will not override the provision of Section 3 of the Act. Sri Alvi, the learned counsel contended that the charge of interest would be attracted where the amount of duty is either not paid or short paid as on the date on which such payment was legally due. According to him, the crucial test for levy of interest would be the point of time the revenue was entitled legally to co .....

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not seem to extend collection. The Supreme Court further held that Article 265 of the Constitution makes a distinction between levy of collection. The learned counsel relied upon the observation made in paragraph 21 to indicate that the process of assessment really determines whether the levy is short and complete, consequently, contended that duty becomes payable only when there is a final assessment and if duty has already been paid on or before the date of final assessment, the question of pa .....

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ly recoverable. It was contended that the amount becomes payable only in the event, the assessee does not deposit the amount levied as per the order of assessment. In the light of the aforesaid decision, the learned counsel contended that the power under Section 11A of the Act could be invoked only when a duty is not levied or paid or has been short levied or short paid and that such proceedings could be initiated within six months from the relevant date in terms of sub-section 3(3)(iib) of Sect .....

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the duties are not paid within the specified period, the excise authorities was empowered to initiate proceedings under Section 11A within the period of limitation. The learned counsel contended that in the instant case, all duties has been paid prior to the date of the final assessment and, therefore, no interest could be chargeable. In support of his submission, the learned counsel has also placed reliance in Commissioner of Central Excise, Nagpur Vs. Ispat Industries Ltd., 2010 (259) ELT 662, .....

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s in any additional or differential liability. The Bombay High Court held that once the assessment is finalised interest becomes leviable but where differential duty was paid prior to the finalisation of the assessment then no interest is payable. On the other hand, Sri Amit Mahajan, the learned counsel for the appellant submitted that interest has been levied in terms of Rule 7(4) of the Rules, which has been framed in exercise of the powers conferred under Section 37 of the Act. In support of .....

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re cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act." The learned counsel also relied upon .....

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dicates short payment/ short levy on the date of removal hence interest, which is for the loss of revenue, becomes leviable. The learned counsel placed reliance upon a decision in the appellant's own case in Bharat Heavy Electricals Limited Vs. Commissioner of Central Excise, Bhopal, 2012 (275) ELT 614, wherein the Tribunal held that even if the differential rate of duty was cleared before the finalisation of the provisional assessment, nonetheless, interest was liable to be paid on the diff .....

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ise, etc. There is no doubt that interest is compensatory in nature and is imposed on an assessed amount who has with held any tax as and when it was due and payable. Levy of interest is on actual amount of tax withheld and the extent of the delay in paying the tax on the due date as held by the Supreme Court in Pratibha Processors Vs. Union of India, 1996 (88) ELT 12. We find that Section 3(1) of the Act is the charging section, which uses the words "levied and collected". These are t .....

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ion of India, 1988 (38) ELT 535 held that the word "levied" means charged as well as assessed. The Supreme Court in Commissioner of Central Excise, Pondichery Vs. Acer India Ltd., 2004 (172) ELT 289 further held that Section 4 of the Central Excise Act, which relates to chargeable of duty at the point of removal of goods cannot override the charging provision, namely, Section 3 of the Act. In our view, there is no quarrel with the aforesaid proposition of law. We however, have to refer .....

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ndable upon finalisation of all or any class of provisional assessments." The aforesaid provision clearly provides that the Central Government may make rules including rules conferring powers to provide for charging of interest on the differential amount of duty, which becomes payable or refundable upon finalisation of all or any class of provisional assessment. The provision of law comprised there-under nowhere specifies such Rules shall restrict the levy of interest for the period consequ .....

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"becomes payable" under Section 37(2)(ibb) would relate to the date on which the duty was payable i.e. at the time of clearance of the goods in terms of the said Act. Merely because the differential amount of duty is ascertained consequent to the finalisation of assessment, the due date for payment of such amount never changes nor is extended. It would always relate to the date of removal of the goods thereof. It is only the quantification of the differential amount of duty is ascerta .....

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rest on any amount payable to the Central Government consequent to an order being passed for finalisation of assessment under sub-rule (3) at the rate specified by the Central Government by a Notification issued under Section 11AA or Section 11AB of the said Act from the first day of the month succeeding the month for which such amount is determined till the date of payment thereof. The provisions therefore, specifically states that the interest liability will commence from the month succeeding .....

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sessed the duty payable on any excisable goods. Rule 7 of the Rules provided that where the assessee was unable to determine the value excisable goods he may request the Assistant Commissioner or Deputy Commissioner as the case may be for payment of duty on a provisional basis. Provisional assessment order would be passed under sub-Rule (2 )of Rule 7 of the Rules and, thereafter, a final assessment order would be passed under sub-Rule (3). Sub-Rule (4) provides for payment of interest consequent .....

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ral Excise, as the case may be, in writing giving reasons for payment of duty on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, may order allowing payment of duty on provisional basis at such rate or on such value as may be specified by him. (2) The payment of duty on provisional basis may be allowed, if the assessee executes a bond in the form prescribed by notification by the Board with such surety or securit .....

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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 sub-rule (1) : Provided that the period specified in this sub-rule 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. ( .....

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), subject to sub-rule (6), there shall be paid an interest on such refund at the rate specified by the Central Government by notification issued under section 11BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund. (6) Any amount of refund determined under sub-rule (3) shall be credited to the Fund : Provided that the amount of refund, instead of being credited to the Fund, be paid to the applicant, if such amount is rel .....

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