2015 (4) TMI 488 - AT - Central Excise

Demand of differential duty - Finalization of provisional assessment - whether, the appellants are liable to pay interest on the differential duty in a case, where the duty is paid prior to passing of order finalizing provisional assessment - Held that - Ruling in the case of Premier Ltd. vs. Union of India (2014 (10) TMI 445 - BOMBAY HIGH COURT), is not applicable in facts of this appeal. It is a case of demand for interest, which does not arise purely from the statute but from a negotiated demand for instalments, pursuant to the final order of the Hon'ble Supreme Court fixing liability to pay the principal amount. Further, I find from the plain reading of Rule 7 (4) that the liability to pay interest arises consequent to determination of amount payable on finalisation of provisional assessment. In the present case, the appellant has admittedly paid the differential duty prior to finalisation of provisional assessment. Further, I find that the issue is entirely covered by the ruling of Hon'ble Bombay High Court in the case of Ispat Industries Ltd. (2010 (10) TMI 178 - BOMBAY HIGH COURT ). - Decided in favour of assessee.

Summary

Issues involved:
1. Liability to pay interest on differential duty in a case where duty is paid before finalization of provisional assessment.

Analysis:

Issue 1: Liability to pay interest on differential duty
The judgment revolves around the question of whether the appellant is liable to pay interest on the differential duty when the duty is paid before the finalization of provisional assessment. The Assistant Commissioner had held the appellant liable to pay interest despite the duty being paid before finalization. The crux of the matter lies in Rule 7 (4) of the Central Excise Rules, which stipulates that interest is payable on any amount due to the Central Government from the first day of the month succeeding the month for which the amount is determined. The appellant argued that interest is payable only after the determination of the amount, as per the ruling of the Hon'ble Bombay High Court in a similar case. The Tribunal had previously ruled in a similar case that if the duty is paid before final assessment, no interest is payable. The appellant relied on this precedent to support their argument.

The learned Assistant Commissioner contended that since duty liability is monthly and payable at the month-end, interest was collected on a monthly basis for the short-paid tax. They also cited a ruling by the Hon'ble Bombay High Court in another case to support their stance. However, the presiding Member found that the ruling cited by the Assistant Commissioner was not directly applicable to the current appeal. The Member emphasized that the liability to pay interest arises only after the determination of the payable amount upon finalization of provisional assessment. In this case, the appellant had indeed paid the differential duty before finalization. The Member concluded that the issue was squarely covered by the previous ruling of the Hon'ble Bombay High Court in a similar matter. Consequently, the appeal was allowed in favor of the appellant, the impugned order was set aside, and the appellant was entitled to any consequential benefits.

In conclusion, the judgment clarifies the application of Rule 7 (4) of the Central Excise Rules regarding the liability to pay interest on differential duty when the duty is paid before finalization of provisional assessment. The ruling reaffirms the principle that interest becomes payable only after the determination of the amount due, as established by relevant legal provisions and precedents set by higher courts.