2008 (7) TMI 68 - AT - Central Excise

As per Rule 7(4) whether the differential amount of duty is paid prior to the date of finalization of provisional assessment or subsequent to that date, interest will have to be paid on that amount of duty for the period from the first day of the month succeeding the month for which the duty is determined, till the date of payment of differential duty - this view is in conflict with decision of coordinate Bench in Karnataka Vidyuth Karkhane Ltd. matter referred to larger bench

Summary

Issues:
1. Liability of interest on the differential amount of duty paid by the assessee under Rule 7(4) of the Central Excise Rules, 2002.

Analysis:

1. Liability of Interest on Differential Duty Paid:
The case involved M/s. Bimetal Bearings Ltd. (BBL) and M/s. Ennore Foundries Ltd. (EFL) appealing against the demand for interest on the differential amount of duty paid by them before finalization of provisional assessments. BBL's Chennai unit cleared goods to the Coimbatore unit without sale, invoking Rule 8 for valuation. EFL's clearances involved sale but had price variation clauses. Both assessees calculated final duty and paid it before final assessments. The main contention was whether interest was payable under Rule 7(4). BBL argued the CBEC's instruction exempted interest if the assessee self-determined duty. The Revenue contended Rule 7(4) mandated interest. The Tribunal noted the conflict with Karnataka Vidyuth Karkhane Ltd. case and referred the matter to a Larger Bench for resolution.

2. Interpretation of Rule 7(4):
The Tribunal analyzed Rule 7(4) which mandates interest payment on the differential duty amount from the month succeeding the determination until payment. The assessees paid duty before final assessments, arguing it wasn't "consequent to order for final assessment," thus no interest was due. The CBEC's instruction allowed self-payment without interest until final assessment. The Tribunal opined that interest was payable regardless of the timing of duty payment, emphasizing the legislative intent behind Rule 7(4) and the CBEC instruction. The conflicting view in Karnataka Vidyuth Karkhane Ltd. case necessitated a Larger Bench to resolve the discrepancy.

3. Revenue-Neutrality Argument:
The assessees raised the revenue-neutrality argument, asserting the Revenue faced no gain or loss as the Coimbatore unit could claim credit for duty paid by the Chennai unit. This argument was contested, and the Tribunal noted a reference to a Larger Bench in another case for clarification. However, the Tribunal did not delve deeper into this aspect, suggesting that such references should ideally come from a coordinate Bench for consistency.

In conclusion, the judgment delved into the interpretation of Rule 7(4) concerning interest on the differential duty amount paid by assessees before final assessments. The Tribunal referred the matter to a Larger Bench due to conflicting views, emphasizing the legislative intent behind the rule and the CBEC instruction. The revenue-neutrality argument was briefly discussed, with a suggestion for a consistent approach in such references for clarity and coherence in legal interpretations.