2011 (10) TMI 201 - HC - Central Excise

Provisional Assessment - Assessee dealing in two categories of goods -With respect to certain items, the provisional value adopted was less than the final value arrived and resulted in short payment of duty of Rs.10,63,41 however in respect of other item provisional value has resulted in excess payment of Rs 1,77,20,157 thus net excess of 1,66,56,740. Department demanded interest of Rs 1,34,634 on short payment of Rs.10,63,41 - Held that - In the entire scheme of Rule 7, there is no indication that when an assessee is permitted to pay duty in pursuance of a provisional assessment order, if he is dealing with more than one goods, they have to be treated separately. Even though the duty payable under the Act is to be calculated under each head of each case ultimately it is the total duty payable for all the goods which are the subject matter of the provisional assessment and final assessment which is to be taken into consideration.Therefore demand of revenue is unjustified.

Summary

Issues:
Challenge to levy of interest on the assessee based on final assessment after provisional assessment.

Analysis:
The case involved the assessee, a manufacturer of motor vehicle parts, challenging the levy of interest by the Tribunal based on the final assessment after a provisional assessment. The assessee and the major buyer were interconnected undertakings. The assessee requested provisional assessment for the financial year 2007-08, which was finalized based on the Cost Accountant's certificate. The final assessment resulted in a short payment of duty for certain items, leading to a demand for interest under Rule 7 of the Central Excise Rules, 2002. The assessee contended that they had actually paid an excess duty, not a short payment, and thus interest should not be levied. Despite the contention, the Commissioner of Appeals and the Tribunal upheld the interest levy, prompting the assessee to appeal to the High Court.

The High Court analyzed Rule 7 of the Central Excise Rules, which allows for provisional assessment when the value of goods or duty rate is uncertain. The rule outlines the process for final assessment and the consequences of short payment or excess payment of duty. The Court emphasized that interest is payable only if there is a short payment after final assessment. In this case, the Adjudicating Authority found a short payment for certain items but failed to account for the excess payment made by the assessee for other items. The Court criticized this approach, stating that interest should not be imposed when the assessee has already paid an excess duty that is refundable. The Court deemed the authorities' actions as erroneous, contrary to the Act's scheme, and lacking statutory support. Consequently, the High Court allowed the appeal, setting aside the orders of all authorities and ruling in favor of the assessee, concluding that interest should not be levied.