2016 (5) TMI 1043 - AT - Central Excise

Recovery of interest and imposition of penalty - Rule 25 and Section 11B respectively - Differential duty has already paid - Assessee have not followed the procedure of provisional assessment as laid down under Rule 7 of the Central Excise Rules, 2002 - No malafide intention as the assessee was discharging duty under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules 2000. Held that - the assessable value of their goods is to be determined under Rule 8 of the Central Excise Valuation Rules, 2000, according to which the valuation has to be done on the basis of 110% of the cost of production and the cost of production can be derived on the basis of CAS4. The CAS4 can be made only after completion of the financial year when the Balance Sheet is finalized. In such a situation, it cannot be expected from the assessee to deposit the correct duty at the time of clearance of the goods. There is no dispute that the assessee have been clearing the goods on payment of duty and they were supposed to pay the differential duty on the basis of the CAS4. The assessee have without contesting the duty liability, paid the duty which has been confirmed and appropriated in the adjudication order. The duty was confirmed under Section 11A of the Act. As per Section 11AB when the duty is determined under Section 11A interest is required to be paid consequently under Section 11AB. Therefore in the present case also the assessee is liable to pay the interest. As regards penalty, this is not the case of clandestine removal or intentional avoidance of payment of duty. The differential duty arises only for the reason that as per the valuation under Rule 8 of the Rule the final value of the goods cannot be determined at the time of clearance. Therefore, the lower authority has rightly dropped the penalty and the same is maintained. - Appeals dismissed

Summary

Issues:
1. Demand of interest on revenue-neutral case.
2. Imposition of penalty for non-compliance with provisional assessment rules.

Issue 1: Demand of interest on revenue-neutral case

The case involved appeals by both the party and the Revenue against an impugned order demanding interest on differential duty paid by M/s. Vidyut Metallics Pvt. Ltd. The assessee argued for interest waiver due to the revenue-neutral nature of the case and the extended period of demand. The Revenue sought imposition of penalty citing non-compliance with provisional assessment rules. The key contention was whether interest under Section 11AB was recoverable on the assessee.

The Tribunal noted that the assessable value was determined under Rule 8 of the Central Excise Valuation Rules, 2000, based on 110% of the cost of production. The correct duty amount could only be known after finalizing the Balance Sheet post-financial year closure. The assessee had paid the differential duty without contest, confirmed under Section 11A, leading to interest liability under Section 11AB. The Tribunal referenced a previous case involving the appellant to support the interest payment requirement. The Tribunal concluded that interest was indeed payable under Section 11AB, as the demand was confirmed under Section 11A, and upheld the interest liability.

Issue 2: Imposition of penalty for non-compliance with provisional assessment rules

Regarding the Revenue's appeal for penalty imposition due to non-compliance with Rule 7 of the Central Excise Rules for provisional assessment, the Tribunal found no mala fide intention in the assessee's actions. The differential duty arose from the valuation process under Rule 8, where final value determination was post-clearance. Given the circumstances, the Tribunal held that it was not a case of intentional avoidance of duty payment or clandestine removal. Consequently, the lower authority's decision to drop the penalty was deemed appropriate and upheld. As a result, all appeals by both the Revenue and the assessee were dismissed.

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