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2012 (3) TMI 327 - HC - Central ExciseInterest u/s 11AA - Appellants have not raised the issue of provisional assessment before the lower authorities - Held that interest liability under rule 7(4) of the 2001 Rules would arise only if the provisional assessments were made after 1/7/2001 and in the present case, the provisional assessment, if any, being prior to 1/7/2001, the interest liability would not apply - Decided in favor of the assessee
Issues Involved:
1. Whether interest is payable under Section 11AA. 2. Whether the Appellate Tribunal was correct in confirming the interest demand due to the appellant not raising the issue of provisional assessment before lower authorities. Detailed Analysis: Issue 1: Interest Payable Under Section 11AA Facts and Arguments: - The appellant-assessee, engaged in manufacturing soft ferrite components, initially classified their goods under Chapter Heading 8548.00 with a lower duty rate. However, the Superintendent of Central Excise directed reclassification under Chapter Heading 8505.00 with a higher duty rate. - Show cause notices were issued for differential duty recovery, and the classification list was eventually approved under Chapter Heading 8505.00. - The duty demand was confirmed, and the assessee paid the differential duty after their appeals were dismissed. - A subsequent show cause notice demanded interest on the differential duty under Section 11AA for the period from 26/8/1995 to 22/7/1998. - The assessee contended that the goods were cleared under provisional assessment under Rule 9B, not under Section 11A, and thus, interest under Section 11AA was not applicable. Judgment: - The court noted that Section 11AA applies to duty determined under Section 11A(2). If the duty was determined under Rule 9B, Section 11AA would not apply. - The court examined the appellant's inconsistent claims regarding provisional assessment. Initially, the assessee denied provisional assessment, later claimed it should be deemed provisional, and finally asserted it was indeed provisional. - The court found the assessee's claims contradictory and decided to remand the matter to the Tribunal to ascertain the truth regarding provisional assessment. - If the Tribunal finds that the clearances were under Rule 9B, the interest demand under Section 11AA cannot be sustained. If the clearances were not under Rule 9B, appropriate proceedings against the assessee may be initiated. Issue 2: Tribunal's Confirmation of Interest Demand Facts and Arguments: - The Tribunal confirmed the interest demand, stating that the assessee did not raise the issue of provisional assessment before lower authorities. - The Tribunal also held that even if the goods were cleared under provisional assessment, an order under Section 11A could still be passed, making the interest under Section 11AA applicable. Judgment: - The court acknowledged that the assessee did not raise the provisional assessment issue before the adjudicating authority or Commissioner (Appeals) and only brought it up before the Tribunal. - The court directed the Tribunal to reconsider the matter afresh, specifically to determine if the clearances were under Rule 9B. - The Tribunal is to record findings on whether the clearances were indeed provisional and if the interest demand under Section 11AA is applicable. Conclusion: - The appeal was allowed, and the Tribunal's order was set aside, subject to the appellant paying costs of Rs. 25,000 to the respondent within four weeks. - The Tribunal is to investigate and record findings on the provisional assessment issue and reconsider the matter on merits. - If the appellant fails to pay the costs within the stipulated period, the appeal will be dismissed. If the costs are paid, the Tribunal will proceed as directed.
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