2008 (11) TMI 62 - AT - Central Excise

Relevant date to pay interest in case of finalization of provisional assessment interest contended as not payable if no dues payable on finalization - In the case of provisional assessment under the Central Excise Rules, 2002 interest is required to be paid from the first day of the month succeeding the month for which such amount is determined - Interest is required to be paid even if the differential amount is paid before the finalization order, under the Rule 7(3) of the said Rules

Summary

Issues Involved:

1. Whether interest is required to be paid from the first day of the month 'for which' such amount is determined or from the first day of the month succeeding the month 'in which' the assessment is finalized.
2. Whether any interest is required to be paid if the differential amount is paid before the order finalizing the assessment is issued.

Issue-wise Detailed Analysis:

1. Interest Payment Timeline in Provisional Assessment:
The core issue was to determine when interest should be paid in cases of provisional assessment under the Central Excise Rules, 2002. The Tribunal examined the language of Rule 7(4), which states that interest is payable "from the first day of the month succeeding the month for which such amount is determined." The Tribunal found that previous decisions did not consider the precise language of Rule 7(4) and erroneously concluded that interest was payable from the month in which the assessment was finalized.

The Tribunal referred to the case of C.C.E. v. Vindhya Telelinks Ltd., which reasoned that interest liability arises from the first day of the month succeeding the month for which the amount is determined, not from the month in which the assessment is finalized. The Tribunal emphasized that the determination of the amount merely quantifies the liability but does not affect the period for which interest is to be calculated.

2. Interest on Differential Amount Paid Before Finalization:
The Tribunal also addressed whether interest is payable if the differential amount is paid before the final assessment order is issued. The Appellants argued that interest should not be payable if the differential duty is paid before the final assessment, based on a plain reading of Rule 7(4). They contended that interest liability arises only if an amount is due and payable upon finalization.

The Department, however, argued that interest is due from the first day of the month succeeding the month for which the duty is determined, regardless of whether the differential amount was paid before the final assessment order. The Tribunal agreed with the Department's interpretation, supported by the reasoning in C.C.E. v. ITC Ltd. and A. Infrastructure Ltd. v. C.C.E., which clarified that interest liability arises from the date the duty was due, not from the date of final assessment.

Conclusion:
The Tribunal concluded that:
(a) Interest is required to be paid from the first day of the month succeeding the month for which such amount is determined.
(b) Interest is required to be paid even if the differential amount is paid before the order finalizing the assessment is issued.

The Tribunal's decision clarified the interpretation of Rule 7(4) of the Central Excise Rules, 2002, ensuring that interest is calculated from the appropriate period, thereby providing a consistent approach to handling provisional assessments.