2024 (6) TMI 179 - AT - Central Excise

Recovery of short paid duty - Jurisdictional Authority's Power to Issue Provisional Assessment Orders Suo Motu - revision for ascertainment of additional duty liability - Compliance with Rule 7 of Central Excise Rules, 2002 - HELD THAT - The impugned order has set out the issue in dispute correctly but has gone on to find that the lack of exercise of option by an assessee in such situations enables the jurisdictional central excise authorities to do so in the interests of revenue. This is not a sustainable proposition as rule 7 of Central Excise Rules, 2002 is unambiguous in vesting the option only in the assessee to decide upon the finality of assessment which is relevant only for the purposes of filing of monthly returns - in reporting discharge of duty liability for each month - Non-exercise of the option implies that the assessment is final and any duty not paid or short-paid is liable to be recovered by recourse to section 11A of Central Excise Act, 1944. The Tribunal, in FINOLEX CABLES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE I 2023 (12) TMI 169 - CESTAT MUMBAI of Commissioner of Central Excise (Appeals), Pune I for the immediately preceding period, has held that ' in the absence of exercise of option by the assessee for provisional assessment , it is not open to central excise authorities to deem the clearances to have been provisional and to proceed with final assessment for each year.' The impugned order flies in the face of the law and is set aside to allow the appeal of M/s Finolex Cables Ltd. For the same reason the appeal of Commissioner of Central Excise, Pune I is dismissed.

Issues Involved:
1. Provisional Assessment of Goods
2. Authority to Order Provisional Assessment
3. Compliance with Rule 7 of Central Excise Rules, 2002
4. Determination of Assessable Value
5. Consistency in Appellate Decisions
6. Recovery of Differential Duty

Detailed Analysis:

1. Provisional Assessment of Goods:
The appellant, M/s Finolex Cables Ltd, challenged the Assistant Commissioner of Central Excise's directive to assess goods cleared from their Pimpri factory to other undertakings on a 'provisional' basis for the year 2012-13. The appellant contended that the provisional assessment was unwarranted as they had been following a practice of revising the assessable value based on the cost of production at the end of each year and paying any additional duty along with interest.

2. Authority to Order Provisional Assessment:
The appellant argued that the provisional assessment cannot be ordered suo motu by the Assistant Commissioner in the absence of a request from the assessee. The first appellate authority initially upheld the Assistant Commissioner's order, stating that the competent authority could decide on provisional assessment in the interest of revenue if the assessee failed to opt for it.

However, in a similar case involving 'polyvinyl chloride compound' cleared from their Chinchwad unit, the first appellate authority took a contrary view, stating that Rule 7 does not provide for the Department to issue directions for provisional assessment suo motu. Instead, the Department should call for necessary records for issuing a demand for differential duty.

3. Compliance with Rule 7 of Central Excise Rules, 2002:
Rule 7 of the Central Excise Rules, 2002, clearly states that the option for provisional assessment is vested only in the assessee. The Tribunal found that the impugned order incorrectly interpreted the rule by suggesting that the jurisdictional central excise authorities could unilaterally decide on provisional assessment. The rule requires the assessee to request provisional assessment in writing, and the Assistant Commissioner may then allow it based on the provided reasons.

4. Determination of Assessable Value:
The appellant had been determining the assessable value of goods cleared to their other units based on the cost of production at the end of each year. This practice was consistent with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Tribunal noted that non-exercise of the option for provisional assessment implies that the assessment is final, and any short-payment of duty should be recovered under Section 11A of the Central Excise Act, 1944.

5. Consistency in Appellate Decisions:
The Tribunal highlighted that in similar disputes for earlier periods, the first appellate authority had set aside orders for provisional assessment, and such decisions were upheld by the Tribunal. The Tribunal referred to its previous decisions, emphasizing that the Department cannot resort to provisional assessment suo motu and must follow the procedure laid out in Rule 7.

6. Recovery of Differential Duty:
The Tribunal concluded that the jurisdictional authority's only available option was to determine any short-payment of duty and proceed with recovery under Section 11A of the Central Excise Act, 1944. Since there was no allegation of resort to recovery on record, the submission of the Learned Authorized Representative regarding the appellant's resistance to Rule 7 was deemed irrelevant.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal of M/s Finolex Cables Ltd. It held that the central excise authorities cannot deem clearances to be provisional without the assessee's request, and any short-payment of duty should be addressed through recovery procedures. The appeal of the Commissioner of Central Excise, Pune-I, was dismissed.

(Order pronounced in the open court on 03/06/2024)

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