2008 (9) TMI 332 - AT - Central Excise

Finalization of provisional assessment - . Despite the knowledge that duty was being paid on provisional basis no attempt was made by the department to pass a provisional assessment order or insist on furnishing of bond/bank guarantee as required. - Apex Court in the case of Metal Forgings v. UOI and CCE v. Hindustan National Glass & Indus. Ltd. have clearly held that there has to be an order of provisional assessment under Rule 9B, only then the department can finalize the assessment and demand excess duty - In any case, the assessee had themselves calculated the excess amount required to be paid on finalization of accounts and had paid the same - Therefore, the question of treating the clearances as provisional assessment does not arise in the present cases demand of differential duty is not sustainable.

Issues:
1. Validity of finalization order in absence of provisional assessment order.
2. Correctness of impugned order regarding determination of costs.
3. Jurisdiction of adjudicating authority in passing finalization order demanding differential duty and interest.
4. Applicability of Supreme Court judgments in similar cases.
5. Provisional assessment request by the assessee and its implications.

Issue 1: Validity of finalization order in absence of provisional assessment order
The judgment addresses the dispute over differential duty and interest liabilities during the finalization of provisional assessment for the period 1-7-2000 to 31-3-2004. The appellants had paid duty provisionally without a formal provisional assessment order under Rule 9B/Rule 7, which the department was aware of but did not act upon. The adjudicating authority passed an order finalizing assessment without a provisional assessment order, leading to a question of jurisdiction. The judgment emphasizes that in the absence of a provisional assessment order, the authority cannot demand differential duty and interest, rendering the finalization order invalid. The appellants' provisional duty payment did not confer jurisdiction for finalization without a proper order.

Issue 2: Correctness of impugned order regarding determination of costs
Apart from the jurisdictional issue, the judgment highlights several errors and infirmities in the impugned order related to the determination of costs. The adjudicating authority had calculated costs by averaging production costs for multiple products instead of item-wise costing, contrary to feasibility. Additionally, the inclusion of return on investment and objections to cost calculations for various elements were raised. The judgment underscores that these errors in cost determination resulted in an inflated figure for differential duty, making the confirmed duty unsustainable. The appellants provided detailed documentation supporting their claims, which the authority failed to consider, emphasizing the necessity of a thorough and accurate cost calculation process.

Issue 3: Jurisdiction of adjudicating authority in passing finalization order demanding differential duty and interest
The judgment evaluates the jurisdiction of the adjudicating authority in passing a finalization order demanding differential duty and interest without a formal provisional assessment order. It reiterates that without a specific provisional assessment order under Rule 9B/Rule 7, the authority lacks jurisdiction to demand differential duty and interest once the appellants have paid the duty provisionally. The judgment emphasizes that the department's failure to follow the required procedure for provisional assessment and the absence of a demand notice for short payment of duty or interest within the stipulated period render the finalization order invalid. The appellants' self-assessment for the years 2000-2004 is deemed final in the absence of a valid provisional assessment order.

Issue 4: Applicability of Supreme Court judgments in similar cases
The judgment extensively references decisions of the Hon'ble Supreme Court and Tribunals in cases such as M/s. Metal Forgings, M/s. Hindustan National Glass & Industries Ltd., M/s. Paro Food Products, M/s. Rajasthan Cylinders & Containers Ltd., and M/s. Itron Ltd. to support its findings. It highlights that the department's reliance on certain judgments could have been valid if finalization orders were issued promptly after differential duty payment by the appellants. However, passing the order after several years without a proper provisional assessment undermines the department's position. The judgment underscores the importance of adhering to procedural requirements and timely assessments to avoid circumventing limitations through provisional assessments.

Issue 5: Provisional assessment request by the assessee and its implications
The judgment addresses the assessee's request for provisional assessment in terms of Rule 9B of Central Excise Rules, highlighting the importance of formal orders for provisional assessments. The department's acceptance of duty payments without issuing a provisional assessment order does not align with the procedural requirements. The judgment emphasizes that the absence of a formal provisional assessment order renders the proceedings non-provisional, leading to the rejection of the Show Cause Notice demanding revision of prices and duty. The Supreme Court rulings cited underscore the necessity of following Rule 9B procedures for clearances to be considered provisional assessments, emphasizing the significance of formal orders in such processes.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Bangalore underscores the critical issues surrounding the validity of finalization orders, correctness of cost determinations, jurisdiction of the adjudicating authority, applicability of legal precedents, and the implications of provisional assessment requests by the assessee.

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