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2015 (2) TMI 794 - HC - Central ExciseProvisional Assessment - Demand of interest on payment of differential duty before formal finalization of assessment - Held that - Rule 7 and its subrules if read together would denote as to how the Revenue secures itself against any provisional assessment. If on a provisional assessment, certain amount of duty is paid, but it is not accurate and correct, then, the final assessment is contemplated on a finalization of the assessment. Upon finalizing, it is possible that the Revenue will determine the duty liability and to that of something more that has been recovered in the provisional assessment. When that exercise is finalized and consequent thereon that the Assessee shall be liable to pay interest on any amount payable to the Central Government. The liability to pay interest arises on any amount payable to Central Government and consequent to order for final assessment under Rule 7 subrule (3). We are in agreement with the Assessee in the present case that the later part of subrule (4) is not attracted. The liability to pay interest on any amount payable to Central Government consequent to order for final assessment is not a situation to be found in the present case. It is not the argument of the Revenue that what was paid by the Assessee as differential duty and prior to finalizing of the assessment, is not correct, accurate or proper computation of the liability. Having found that the final assessment resulted in nothing due and payable to the Government, we do not find any justification then to recover interest. If the interest was to be recovered and was indeed payable on the date on which the Assessee made payment of differential duty and prior to finalization of the assessment, then, the Rule would have specifically said so. In the absence of any such stipulation in the Rules the dictum in the decision of the Hon ble Supreme Court in J.K. Industries Ltd. 2011 (3) TMI 373 - KARNATAKA HIGH COURT would apply. If that principle can be applied, then, there was no liability to pay interest. If the liability to pay interest between the time or the period of provisional assessment and payment of differential duty until the final assessment has to be read in the Rule, that is not possible. The interest in this case is not payable merely on equitable considerations. Such being the position, we do not find that the Tribunal was justified in dismissing the Assessee s Appeal. It is unfortunate that the Tribunal ignores and brushes aside even orders of this Court. Had the Tribunal noted the facts in Ispat Industries Ltd. 2010 (10) TMI 178 - BOMBAY HIGH COURT and Tata Motors Ltd. 2011 (3) TMI 531 - CESTAT, MUMBAI it would have possibly concluded that those orders would bind it in this case. Decided in favor of appellant.
Issues Involved:
1. Whether interest is payable on differential duty arising on the finalization of provisional assessment under Rule 7 of Central Excise Rules, 2002. 2. Whether the Appellate Tribunal erred by not following binding precedents set by the High Court in the cases of Ispat Industries and Tata Motors. Detailed Analysis: 1. Interest Payable on Differential Duty: The primary issue revolves around the interpretation of Rule 7(4) of the Central Excise Rules, 2002, which mandates the payment of interest on any amount payable to the Central Government consequent to the final assessment order. The Assessee argued that interest liability arises only after the final assessment order is passed and since they had paid the differential duty before the final assessment, no interest is due. They relied on precedents like CCE vs. Dhariwal Tobacco Products and MSEB Pole Factor vs. CCE, which supported their contention that interest is chargeable only post-final assessment. The Revenue, on the other hand, argued that interest is payable from the first day of the month succeeding the month for which such amount is determined until the date of payment, regardless of whether the differential duty was paid before the final assessment. The Revenue cited the Supreme Court judgments in Commissioner of Central Excise, Pune vs. SKF India Ltd. and Commissioner of Central Excise vs. International Auto Ltd., which supported the view that interest is payable on any delayed payment of duty. The High Court analyzed Rule 7, particularly sub-rules (1) to (4), and concluded that the liability to pay interest under Rule 7(4) arises only if there is an amount payable to the Central Government consequent to the final assessment. Since the Assessee had already paid the differential duty before the final assessment, no additional amount was payable, and thus, no interest was due. The court emphasized that the rule does not explicitly state that interest is payable on amounts paid before the final assessment, and such an interpretation would be contrary to the principles laid down in the Constitution Bench judgment in J.K. Synthetics Ltd. vs. Commercial Taxes Officer. 2. Binding Precedents: The Assessee contended that the Tribunal failed to follow binding precedents set by the High Court in the cases of Ispat Industries and Tata Motors, where it was held that interest is not payable if the differential duty is paid before the final assessment. The High Court noted that in Ispat Industries, the differential duty was paid prior to the final assessment, and the Tribunal had rightly held that no interest was payable. This decision was upheld by the High Court and the Supreme Court dismissed the Revenue's appeal. Similarly, in Tata Motors, the Tribunal followed the Ispat Industries precedent and allowed the Assessee's appeal, which was also upheld by the High Court. The High Court criticized the Tribunal for disregarding these binding precedents and labeling them as per incuriam, emphasizing that lower courts must loyally accept decisions of higher courts. Conclusion: The High Court allowed the Assessee's appeals, holding that: 1. Interest under Rule 7(4) of the Central Excise Rules, 2002, is not payable if the differential duty is paid before the final assessment. 2. The Tribunal erred in not following the binding precedents set by the High Court in Ispat Industries and Tata Motors. The appeals were thus decided in favor of the Assessee, with no orders as to costs.
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