2014 (9) TMI 771 - AT - Central Excise

Finalization of provisional assessment Finalization of assessment done without adjustment of excess payments against short payments on the ground that the former needed to be claimed as refund Commissioner held that Adjudicating Authority has erred in not adjusting the amount of excess paid duty against the amount of duty short paid during finalization of the provisional assessment - held that - Commissioner (Appeals) has been passed in respect of Department s review appeal against order-in-original dated 11/03/05 and by this order, the Commissioner (Appeals) has held that the finalization of the assessment-should have been done invoice wise and no adjustment of excess duty paid during a month against short payment during the same month should have been allowed. Against the same order dated 11/03/05 of the Deputy Commissioner by which he had disallowed the adjustment of excess payment of duty of ₹ 3,54,467/- during certain period of provisional assessment against the short payment during, the period of ₹ 14,60,053/-, the assessee had filed an appeal before the Commissioner (Appeals) and in respect of that appeal, the Commissioner (Appeals) vide order-in-appeal dated 05/08/05 had reversed the part of the Deputy Commissioner s order refusing the adjustment of excess payment against the short payment and, as such, had allowed the adjustment of excess payment against the duty demand during finalizing the provisional assessment. Once the Commissioner (Appeals) passed this order in respect of appeal against the order-in-original dated 11/03/05 of the Deputy Commissioner, in accordance with the law laid down by the Apex Court in the case of Kunhayamed vs. State of Kerala (2000 (7) TMI 67 - SUPREME Court), the Deputy Commissioner s order dated 11/03/05 cease to exist and merges with the Commissioner (Appeals) s order dt 5/8/05 and what remains is the Commissioner (Appeals) s order dated 05/08/05. While finalizing a provisional assessment, the excess payment of duty can be adjusted against the short payment. This judgment is with regard to the provisions of Rule 7 of the Central Excise Rules, 2002. - Decided against Revenue.

Summary

Issues:
1. Adjustment of excess duty payment against short payment during finalization of provisional assessment.
2. Validity of Commissioner (Appeals) order in relation to Deputy Commissioner's order.
3. Contrary views by different tribunals on the adjustment of excess duty payment against short payment during provisional assessment.

Issue 1: Adjustment of Excess Duty Payment
The case involved M/s BSL Ltd., engaged in manufacturing various fabrics chargeable to Central Excise duty. The appellant sent grey fabrics to job workers for processing, leading to provisional assessment of duty. The Deputy Commissioner finalized the provisional assessment, determining short paid duty and excess payment of duty. The Commissioner (Appeals) allowed the adjustment of excess payment against short payment, but the Revenue challenged this decision. The Revenue argued that excess payment cannot be adjusted as per the principles of unjust enrichment. The Tribunal noted the conflicting views, with a Larger Bench decision supporting the Revenue's stance, but a High Court judgment allowing the adjustment. Ultimately, the Tribunal held that the High Court judgment was binding, dismissing the Revenue's appeal.

Issue 2: Validity of Commissioner (Appeals) Order
The Jurisdictional Commissioner directed an appeal against the Deputy Commissioner's order finalizing the provisional assessment, disagreeing with the adjustment of excess duty payment against short payment. The Commissioner (Appeals) allowed the review appeal, holding an amount recoverable from the appellant. However, the appellant argued that the subsequent appeal against the Deputy Commissioner's order was invalid post the Commissioner (Appeals)'s decision in their favor. Citing legal precedent, the Tribunal agreed, deeming the subsequent order invalid and unsustainable.

Issue 3: Contrary Tribunal Views
The case highlighted the conflicting views of different tribunals on adjusting excess duty payment against short payment during provisional assessment. While a Larger Bench decision supported the Revenue's position, a High Court judgment favored the adjustment. The Tribunal, following the binding nature of the High Court judgment, dismissed the Revenue's appeal and disposed of the cross objection.

In conclusion, the judgment addressed the complexities of adjusting excess duty payments against short payments during provisional assessments, emphasizing the impact of conflicting tribunal decisions and the binding nature of High Court judgments. The Tribunal's analysis provided clarity on the legal principles governing such adjustments and upheld the Commissioner (Appeals)'s decision in favor of the appellant.