2011 (6) TMI 396 - AT - Central Excise

Interest on the delayed payment of duty - Assessee contended that amount which becomes payable after finalisation of assessment cannot be said to be one which was due and payable prior to such finalisation of assessment and as such, classifying the same as short-levy or short-payment cannot arise - since the occasion to pay differential duty arises after finalization of the assessment, question of imposition of interest on such amount cannot arise - Held that -The provision of law nowhere specifies such Rules shall restrict the levy of interest for the period consequent to finalization of the assessement. Rather it specifies that the Rules may provide for interest on the differential amount of duty becoming payable consequent upon the finalization of assessment. The expression becoming payable would obviously relate to the date on which the duty was required to be paid. Merely because the differential amount of duty is ascertained consequent to the finalization of assessment, the due date for payment of such amount never stands changed or extended. It would always relate to the date of removal of the goods thereof. Interest liability would commence from the month succeeding the day on which the duty was due and payable in relation to the goods cleared - Decided against the Revenue.

Issues Involved:
1. Liability to pay interest on delayed payment of duty.
2. Compliance with principles of natural justice in finalizing assessments.
3. Applicability of Supreme Court's decision in SKF India Ltd. case.
4. Interpretation of Rule 7(4) of the Central Excise Rules, 2002.

Detailed Analysis:

1. Liability to Pay Interest on Delayed Payment of Duty:
The appellants challenged the liability to pay interest on delayed payment of duty amounting to Rs. 13,49,08,554/-. They argued that the final assessment itself was flawed due to the absence of a show cause notice, which violated the principles of natural justice. The Tribunal, however, upheld the interest liability, stating that Rule 7(4) mandates charging interest on the differential amount of duty payable from the first day of the month succeeding the month for which such amount is determined until the date of payment. The Tribunal emphasized that the due date for payment of duty is the date of removal of goods, and the provisional assessment does not alter this due date.

2. Compliance with Principles of Natural Justice in Finalizing Assessments:
The appellants contended that the final assessment violated the principles of natural justice as no show cause notice was issued. The Tribunal clarified that Rule 7(3) of the Central Excise Rules, 2002, does not require a show cause notice before finalizing the assessment. The Tribunal further explained that the principles of natural justice do not necessarily mandate a show cause notice in every case. In this instance, the materials used for finalizing the assessment were provided by the appellants themselves, making the issuance of a show cause notice redundant.

3. Applicability of Supreme Court's Decision in SKF India Ltd. Case:
The appellants argued that the SKF India Ltd. ruling only applies to cases of short-payment of duty recoverable under Section 11A and not to differential duty under Rule 7(3). The Tribunal disagreed, stating that the SKF India Ltd. decision covers situations where duty is paid at a later date due to price revisions. The Tribunal noted that the provisional assessment in the present case was due to uncertainty about the price at the time of removal of goods. Consequently, the Tribunal held that the SKF India Ltd. ruling applies, and interest is chargeable on the differential duty from the date it was initially due.

4. Interpretation of Rule 7(4) of the Central Excise Rules, 2002:
The appellants contended that Rule 7(4) should be interpreted to mean that interest is only chargeable on amounts determined after the finalization of the assessment. The Tribunal rejected this interpretation, stating that the rule clearly provides for interest from the first day of the month succeeding the month for which the duty is determined. The Tribunal emphasized that the due date for payment of duty remains the date of removal of goods, and the finalization of assessment merely quantifies the differential amount of duty.

Conclusion:
The Tribunal dismissed the appeal, upholding the interest liability on the delayed payment of duty. The Tribunal found no violation of principles of natural justice in the finalization of the assessment and held that the SKF India Ltd. ruling applies to the present case. The Tribunal also clarified the interpretation of Rule 7(4), stating that interest is chargeable from the date the duty was initially due.

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