2024 (8) TMI 1049 - AT - Central Excise

Levy of interest on the duty calculated to be short-paid and appropriated against their payment - finalisation of provisional assessment - Rule 7(4) of the CER, 2002 - HELD THAT - The principle laid down in in Steel Authority of India Ltd. 2019 (5) TMI 657 - SUPREME COURT is loud and clear that on finalization of provisional assessment, the interest is to be calculated of the duty short-paid from the succeeding month on which the said duty was payable. This principle has been subsequently endorsed by the Hon ble Supreme Court in Bharat Heavy Electricals Ltd. s case. The judgment cited by the learned advocate for the appellant in the appellant s own case is in a different context and set of facts. In the present case the Appellant has voluntarily discharged the differential duty short paid and chose not to claim refund of the excess duty paid indue course of clearance to their other related interconnected undertaking, obviously for the reason that the said Unit has already availed credit on the excess amount paid. Therefore, to ascertain the interest payable on the differential short paid on finalization of the provisional assessment for the Financial years 2008-09 2009-10, in the light of the judgments of Hon ble Supreme Court in Steel Authority of India Ltd., the matter needs to be remanded to the adjudicating authority for calculation of interest. The impugned orders are modified and the appeals are disposed of by way of remand to the adjudicating authority.

Issues Involved:
1. Levy of interest under Rule 7(4) of Central Excise Rules, 2002 on finalization of provisional assessment.
2. Inclusion of royalty value in the cost of production under CAS-4 method.
3. Adjustment of excess provisional duty paid against the differential duty short-paid.

Issue-wise Detailed Analysis:

1. Levy of Interest under Rule 7(4) of Central Excise Rules, 2002 on Finalization of Provisional Assessment:

The primary issue in both appeals is whether the appellants are required to discharge interest on the finalization of the provisional assessment under Rule 7(4) of the Central Excise Rules, 2002. The appellants argued that the interest should only be on the net differential duty after adjusting the excess provisional duty paid. They cited the Karnataka High Court decision in their own case for the period 2007-08, which held that interest under Rule 7(4) is payable only on the net difference after adjusting excess payments.

The Revenue, however, contended that the interest is automatically attracted on the duty short-paid from the succeeding month of the clearance of goods assessed provisionally, as per Rule 7(4). They supported their argument with the Supreme Court judgment in Steel Authority of India Ltd. v. CCE, Raipur, which emphasized that the interest liability dates back to the month of removal of goods.

2. Inclusion of Royalty Value in the Cost of Production under CAS-4 Method:

The appellant had requested provisional assessment for the goods cleared to their related undertaking, as the assessable value was determined as 110% of the cost of production. The Department objected to the non-inclusion of the value of royalty paid to Toyota Motor Corporation, Japan, in computing the cost of production under the CAS-4 method. The adjudicating authority added the royalty payments to the cost and finalized the assessment, which was upheld by the Commissioner (Appeals).

3. Adjustment of Excess Provisional Duty Paid Against Differential Duty Short-paid:

The appellants argued that upon finalization of the provisional assessment, the excess duty paid should be adjusted against the duty short-paid, resulting in no interest liability. They referred to the Karnataka High Court's decision in their own case, which supported this view. However, the Revenue distinguished this judgment, arguing that in the present case, the appellant had voluntarily paid the differential duty and chose not to claim a refund for the excess duty paid. The Supreme Court's judgment in Steel Authority of India Ltd. and Bharat Heavy Electricals Ltd. was cited to support the view that interest is payable from the month succeeding the removal of goods, irrespective of any excess duty paid.

Conclusion:

The Tribunal concluded that the principle laid down by the Supreme Court in Steel Authority of India Ltd. is clear: interest on the duty short-paid is to be calculated from the succeeding month of the provisional assessment. The appellant's reliance on the Karnataka High Court's decision was found to be inapplicable due to different facts and context. The matter was remanded to the adjudicating authority for recalculating the interest payable on the differential duty short-paid, with a reasonable opportunity for the appellant to present their case.

Order:

The impugned orders were modified, and the appeals were disposed of by remanding the matter to the adjudicating authority for recalculating the interest on the differential duty short-paid, following the principles laid down by the Supreme Court.

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