2025 (1) TMI 475 - AT - Central Excise

Liability of interest if differential duty is paid before finalization of provisional assessment in terms of Rule 7(4) of Central Excise Rules, 2002 - HELD THAT - The issue regarding demand of interest on the goods which were cleared provisionally was considered by the Hon ble High Court of Allahabad in the matter of M/s Bharat Heavy Electricals Ltd 2015 (8) TMI 1055 - ALLAHABAD HIGH COURT , wherein it is held that ' There is no doubt that interest is compensatory in nature and is imposed on an assessed amount who has withheld any tax as and when it was due and payable. Levy of interest is on actual amount of tax withheld and the extent of the delay in paying the tax on the due date'. Conclusion - Interest on differential duty is a statutory liability that arises from the date of removal of goods, irrespective of when the differential duty is paid. The interest serves as compensation for the delay in payment of the duty due. Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issue in this case is whether interest is liable to be paid if the differential duty is paid before the finalization of provisional assessment under Rule 7(4) of the Central Excise Rules, 2002.

2. ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents:

The legal framework revolves around Rule 7(4) of the Central Excise Rules, 2002, and Section 11AB of the Central Excise Act, 1944. The rule mandates the payment of interest on differential duty arising from the finalization of provisional assessments. Precedents considered include various tribunal decisions and judgments from higher courts, including the Supreme Court, which have interpreted these provisions.

Court's Interpretation and Reasoning:

The Tribunal interpreted that the liability for interest on differential duty is statutory and arises from the date of removal of goods, irrespective of whether the differential duty is paid before the finalization of the provisional assessment. The Tribunal relied on the principle that interest is compensatory and is imposed for the delay in payment of duty due.

Key Evidence and Findings:

The Tribunal considered the appellant's payment records, which showed that the differential duty was paid before the finalization of the provisional assessment. However, the Tribunal found that this did not absolve the appellant from the liability to pay interest, as the interest is calculated from the date the duty was originally due.

Application of Law to Facts:

The Tribunal applied Rule 7(4) and Section 11AB to the facts, concluding that the appellant was liable to pay interest on the differential duty amounting to Rs. 68,07,274/-, despite having paid the duty before the assessment's finalization. The Tribunal emphasized that the statutory obligation to pay interest is not negated by the timing of the differential duty payment.

Treatment of Competing Arguments:

The appellant argued that interest should not be charged as the differential duty was paid before the finalization of the assessment. They cited various tribunal decisions supporting this view. However, the Tribunal rejected these arguments, emphasizing the statutory nature of the interest liability and referencing the Supreme Court's decision in Bharat Heavy Electricals Ltd., which upheld the interest liability regardless of the timing of the differential duty payment.

Conclusions:

The Tribunal concluded that the appellant was liable to pay interest on the differential duty under Section 11AB, affirming the adjudication authority's decision. The appeal was dismissed based on the interpretation that interest is due from the date of removal of goods, not the finalization of the assessment.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal quoted the Supreme Court's reasoning that "interest is compensatory in nature and is imposed on an assessed amount who has withheld any tax as and when it was due and payable."

Core Principles Established:

The judgment reinforced the principle that interest on differential duty is a statutory liability that arises from the date of removal of goods, irrespective of when the differential duty is paid. The interest serves as compensation for the delay in payment of the duty due.

Final Determinations on Each Issue:

The Tribunal determined that the appellant was liable to pay interest on the differential duty amounting to Rs. 68,07,274/-, affirming the lower authorities' decisions. The appeal was dismissed, and the statutory nature of the interest liability was upheld.

This judgment highlights the importance of understanding the statutory obligations under the Central Excise Act and Rules, particularly concerning the payment of interest on differential duties. It also underscores the judiciary's role in interpreting these provisions consistently with established precedents.

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