2016 (11) TMI 149 - AT - Central Excise

Demand of duty with interest - Captive consumption - Rule 7 of Central Excise Rules, 2001 - Rule 8 of the Valuation Rules - Held that - the issue is no more res integra as the Hon ble High Court of Bombay in the case of CEAT Ltd. vs. CCE, Nashik 2015 (2) TMI 794 - BOMBAY HIGH COURT , upheld the Tribunal s order that interest liability does not arise when the assessments are finalized and there is no demand of differential duty. The said judgment of the Hon ble High Court of Bombay was carried in appeal by the Revenue to the Hon ble Supreme Court and the apex court by an order dated 14.12.2015, after condoning the delay, dismissed the special leave petition filed by the Revenue. It would mean that the apex court has settled the law that the interest liability does not arise when the amount is paid before the finalization of the provisional assessment on its own by an assessee - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of interest liability under Rule 7 of Central Excise Rules, 2001 when the appellant voluntarily pays the differential duty before finalization of assessment.

Analysis:
The judgment by the Appellate Tribunal CESTAT Mumbai pertains to two appeals challenging an order-in-appeal dated 13.1.2005. The core issue in both appeals revolves around the appellant's manufacturing activities, where they transfer goods for captive consumption at their units, paying duty on a provisional basis. The appellant voluntarily calculated and paid the differential duty before final assessment. However, the adjudicating authority imposed interest on the differential duty, which the appellant contested in the appeals.

The appellant argued that interest under Rule 7 of the Central Excise Rules, 2001 is applicable only when the final assessment confirms a duty liability, not when the appellant proactively pays before finalization. The lower authorities relied on circular No. 354/81/2000-TRU and Rule 8 of the Valuation Rules to justify the interest liability. However, citing a precedent, the Tribunal highlighted a judgment by the Hon'ble High Court of Bombay in CEAT Ltd. vs. CCE, Nashik, which upheld that interest liability does not arise if the duty is paid before final assessment without any demand for differential duty.

The Tribunal noted that the Hon'ble Supreme Court dismissed the Revenue's appeal against the Bombay High Court's decision, thereby establishing the legal principle that interest liability does not arise when an assessee pays the differential duty before finalization of provisional assessment. Consequently, the Tribunal set aside the impugned order and allowed the appeals, providing consequential relief if necessary.