2015 (7) TMI 1078 - HC - Central Excise

Interest Under Section 11 AB - Procedures laid down in rule 7 of the Central Excise Rules, 2002 - Whether interest under Sub-Rule 4 of the Rule 7 of the Central Excise Rule, 2002 is leviable, even if such assessment is deemed provisional? - Whether, subsequent payment of differential duty on account of retrospective price escalation of excisable goods shall be deemed to be a case of short assessment and short levy of such goods cleared earlier and, as such interest shall be demandable in terms of Section 11A and 11AB of the Central Excise Act, 1944? - Held that - Whenever any application for classification of goods is pending before the respondent authority and if the goods are being removed in such cases also there is no presumption for provisional assessment. There is bound to be an application preferred by such manufacture also otherwise, he will be liable to pay the interest upon delayed payment of duty and the penalty. Thus, in the facts of the present case CESTAT, Kolkata cannot presume that earlier assessment was provisional in nature in absence of any application preferred by the respondent under Rule 7 (1) of Rule, 2002. In view of the aforesaid it has been held by the Hon ble Supreme Court in the case of Commissioner of Central Excise Vs. International Auto Limited reported in (2010 (1) TMI 151 - SUPREME COURT OF INDIA ) that whenever there is a delayed payment of duty and there is no order for provisional assessment the assessee manufacturer is liable to make payment of the interest upon delayed payment of the duty. In view of aforesaid observations substantial questions of law have been answered accordingly that earlier assessment was never provisional in nature and it cannot be deemed to be provisional in nature as decided by the CESTAT, Kolkata, especially, in absence of any provision in the Central Excise Act 1944. In the Rule 2002 there is bound to be an application for provisional assessment by the manufacturer under Rule 7 (3) and there is bound to be an order passed by the Central Excise for provisional assessment which is not present in the facts of the present case. Respondent is bound to make payment of interest under Rule 7 (4) even if the earlier assessment is provisional in nature. Differential duty has been paid at much later stage after removal of the goods and, therefore, the respondent is liable to make payment of interest as demanded under Section 11 AB of the Central Excise Act, 1944.

Issues Involved:
1. Whether the assessment made without observing the procedures laid down in Rule 7 of the Central Excise Rules, 2002, can be considered as provisional.
2. Whether interest under Sub-Rule 4 of Rule 7 of the Central Excise Rules, 2002, is leviable, even if such assessment is deemed provisional.
3. Whether subsequent payment of differential duty on account of retrospective price escalation of excisable goods shall be deemed a case of short assessment and short levy, thereby making interest demandable under Section 11A and 11AB of the Central Excise Act, 1944.

Detailed Analysis:

1. Provisional Assessment:
The court examined whether the assessment made without following the procedures in Rule 7 of the Central Excise Rules, 2002, could be considered provisional. The respondent-assessee did not apply for provisional assessment nor disclosed the Price Escalation Clause in their contract with the Railway. The CESTAT, Kolkata, had presumed the assessment to be provisional, which the court found unwarranted and unsupported by any deeming provision in the Central Excise Act or Rules. The court cited the Supreme Court's decisions in Metal Forgings Vs. Union of India and Commissioner of Central Excise, Pune Vs. SKF India Limited, emphasizing that provisional assessment requires an application under Rule 7(1) and an order by the Central Excise authority. The court concluded that the earlier assessment was not provisional in nature.

2. Interest Under Rule 7(4):
The court analyzed whether interest under Rule 7(4) of the Central Excise Rules, 2002, is leviable even if the assessment is deemed provisional. It held that Rule 7(4) mandates the payment of interest on any amount payable to the Central Government due to final assessment under Rule 7(3), from the first day of the month succeeding the month for which the amount is determined until the date of payment. The court reiterated that even if the assessment were provisional, the respondent would still be liable to pay interest on delayed payments under Rule 7(4).

3. Short Assessment and Interest Demand:
The court addressed whether the subsequent payment of differential duty due to retrospective price escalation constitutes short assessment and short levy, thereby attracting interest under Section 11A and 11AB of the Central Excise Act, 1944. The court held that the differential duty paid later indicates a short payment of duty at the time of removal of goods. Citing the Supreme Court's decision in Commissioner of Central Excise Vs. SKF India Limited, the court concluded that the payment of differential duty falls under Section 11A(2-B) and attracts interest under Section 11AB. The court emphasized that interest is leviable on delayed payment of duty for any reason, including retrospective price escalation.

Conclusion:
The court answered the substantial questions of law as follows:
1. The earlier assessment was not provisional in nature and cannot be deemed provisional without an application under Rule 7(1) and an order for provisional assessment.
2. Interest under Rule 7(4) is leviable even if the assessment is deemed provisional.
3. The differential duty paid later due to retrospective price escalation constitutes short assessment and short levy, thereby attracting interest under Section 11AB.

The court allowed the appeal, quashing and setting aside the CESTAT, Kolkata's order in Appeal No. ESM 391 of 2005.

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