2017 (7) TMI 755 - AT - Central Excise

Deletion of interest and penalty - demand of interest was on the ground that the assessments were provisional - The first appellate authority on an appeal set aside demand recording that there was no formal assessment procedure followed as per provision 7(i) of the Central Excise Rules, 2002 - Held that - Though the appellant were declaring that the goods were being cleared to their sister concern was on provisional basis, there was no formal order from the Department that the assessment was being done on a provisional basis and with the procedure set forth under Rule 7 of CER 02 not being followed, the orders passed by the adjudicating authority demanding interest and penalty has no validity. The Tribunal in the case of TATA MOTORS LTD. Versus COMMISSIONER OF C. EX., PUNE-I 2008 (2) TMI 121 - CESTAT, MUMBAI , took a consistent view that prior to 01.03.2016, provisions of Rule 7(4) will be applicable only if there is any order of final assessment i.e. to say that the interest liability on an assessee will arise only if there is order of finalization of provisional assessment. The order of first appellate authority are in consonance with the provisions of Rule 7 of Central Excise Rules, 2002 - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against dropping of interest and penalty - Provisional assessments from 2004-05 to 2007-08 - Formal assessment procedure under Rule 7 of Central Excise Rules, 2002 - Finalization of assessments without formal orders - Liability to pay interest on differential duty - Applicability of Rule 7(4) pre-01.03.2016.

Analysis:
The appeal before the Appellate Tribunal CESTAT Hyderabad involved a dispute where the Revenue challenged the dropping of interest and penalty by the first appellate authority. The Revenue contended that the respondent had executed provisional assessments for the period 2004-05 to 2007-08, clearing final products to sister concerns on a provisional basis and later paying differential duty. The adjudicating authority demanded interest and imposed penalties based on these provisional assessments. However, the first appellate authority set aside the order, noting the absence of a formal assessment procedure under Rule 7 of the Central Excise Rules, 2002.

Upon careful consideration, the Tribunal observed that the department had directed the appellants to pay differential duty based on presumed finalization of provisional assessments. However, it was revealed that the orders on which the department relied were contested by the appellants and subsequently decided in their favor. The Tribunal highlighted that there was no formal order declaring the assessments as provisional, and the prescribed procedure under Rule 7 of CER 02 was not followed. Citing precedents, the Tribunal emphasized that interest liability arises only upon finalization of provisional assessments, which was not the case here.

The Tribunal upheld the findings of the first appellate authority, emphasizing the importance of following the formal assessment procedure and the requirement of a final assessment order for imposing interest liability. It noted that prior to 01.03.2016, Rule 7(4) would apply only upon final assessment orders. The Tribunal's decision aligned with previous rulings and established principles regarding the demand for interest and penalty in cases of provisional assessments. Consequently, the impugned order dropping the interest and penalty was upheld, and the appeal by the Revenue was rejected.

In conclusion, the Tribunal's detailed analysis focused on the procedural irregularities in the provisional assessments conducted by the department, emphasizing the necessity of formal orders and adherence to Rule 7 of the Central Excise Rules, 2002. The judgment clarified the conditions under which interest liability arises and underscored the significance of following prescribed procedures in finalizing assessments to ensure the validity of demands for interest and penalties.