2015 (8) TMI 1055 - HC - Central Excise

Demand of interest on differential duty - Whether the appellant is liable to pay interest on differential duty even though the differential duty, if any, was paid, prior to the date of the passing of the final assessment order - Held that - The provision of law comprised there-under nowhere specifies such Rules shall restrict the levy of interest for the period consequent to the finalisation of the assessment, rather it specifies that the Rules may provide for interest on the differential amount of duty becoming payable consequent upon the finalisation of assessment. The expression becoming payable would obviously relate to the date on which the duty was required to be paid. Considering the provisions of Section 4 of the said Act, the duty becomes payable at the time of the removal of the goods consequent to the manufacture thereof. The expression becomes payable under Section 37(2)(ibb) would relate to the date on which the duty was payable i.e. at the time of clearance of the goods in terms of the said Act. Merely because the differential amount of duty is ascertained consequent to the finalisation of assessment, the due date for payment of such amount never changes nor is extended. It would always relate to the date of removal of the goods thereof. It is only the quantification of the differential amount of duty is ascertained consequent to the finalisation of assessment, and that too merely because the assessee was not able to ascertain the exact quantum of duty in the absence of sufficient material to finalize the valuation of the goods at the time of clearance of goods. The due date for payment of duty is statutorily fixed being the date of removal of the goods consequent to the manufacture thereof and the same cannot be changed. Further, Rule 7(4) clearly provides that the assessee shall be liable to pay interest on any amount payable to the Central Government consequent to an order being passed for finalisation of assessment under sub-rule (3) at the rate specified by the Central Government by a Notification issued under Section 11AA or Section 11AB of the said Act from the first day of the month succeeding the month for which such amount is determined till the date of payment thereof. The provisions therefore, specifically states that the interest liability will commence from the month succeeding the month for which such amount is determined. The expression for refers to the month for which the amount is determined pursuant to finalisation of assessment. Apparently, it discloses that the interest liability would commence from the month succeeding the day on which the duty was due and payable in relation to the goods cleared. - interest is leviable even where differential duty was paid prior to the finalisation of the assessment in view of Rule 7(4) of the Rules of 2002. With great respect, we disagree with the decisions of the Bombay High Court in the case of Ispat Industries Ltd. (2010 (10) TMI 178 - BOMBAY HIGH COURT) and in the case of CEAT Ltd. (2015 (2) TMI 794 - BOMBAY HIGH COURT). - Decided against assessee.

Issues Involved:
1. Liability to pay interest on differential duty.
2. Interpretation of "levied" and "collected" under Section 3 of the Central Excise Act, 1944.
3. Applicability of Rule 7(4) of the Central Excise Rules, 2002.
4. Relevance of Supreme Court and High Court precedents.

Detailed Analysis:

1. Liability to Pay Interest on Differential Duty:
The core issue was whether the appellant is liable to pay interest on the differential duty even though the differential duty was paid prior to the final assessment order. The appellant argued that duty is only payable when it is levied, which happens at the time of the final assessment. Since the differential duty was already paid before the final assessment, they contended that no interest should be imposed. They cited that interest is compensatory and is levied when the assessed duty is not paid within the stipulated period.

2. Interpretation of "Levied" and "Collected" under Section 3 of the Central Excise Act, 1944:
The appellant's counsel argued that the terms "levied" and "collected" under Section 3 of the Act are crucial. They contended that duty becomes payable only when there is a final assessment, and if the duty is paid before this final assessment, no interest should be charged. They referenced the Supreme Court decision in Assistant Collector of Central Excise, Calcutta Vs. National Tobacco Company of India Ltd., which distinguished between levy and collection, and Commissioner of Central Excise and Customs, Mumbai Vs. I.T.C. Ltd., which emphasized that duty becomes payable when levied.

3. Applicability of Rule 7(4) of the Central Excise Rules, 2002:
The respondent's counsel argued that interest is levied in terms of Rule 7(4) of the Rules, which mandates interest on any amount payable to the Central Government consequent to the final assessment order. They cited the Supreme Court decisions in Commissioner of Central Excise, Pune Vs. SKF India Ltd. and Commissioner of Central Excise Vs. International Auto, which upheld the levy of interest on differential duty paid after the date of clearance, indicating short payment at the time of removal.

4. Relevance of Supreme Court and High Court Precedents:
The appellant's counsel relied on various precedents, including Commissioner of Central Excise, Nagpur Vs. Ispat Industries Ltd. and CEAT Limited Vs. Commissioner of Central Excise and Customs, Nashik, where it was held that interest is not payable if the differential duty is paid before the final assessment. The respondent countered with Bharat Heavy Electricals Limited Vs. Commissioner of Central Excise, Bhopal and Alstom T & D India Ltd. Vs. CESTAT, Chennai, which supported the imposition of interest even if the differential duty was paid before the final assessment.

Judgment:
The court held that interest is compensatory and is imposed on the assessed amount withheld. The term "levied" encompasses the entire process of taxation, including charge, quantification, and recovery. The court referred to Section 37(1)(ibb) of the Act and Rule 7 of the Rules, which provide for charging interest on the differential amount of duty upon finalization of provisional assessments. The court concluded that the due date for payment of duty is the date of removal of goods, and interest liability commences from the month succeeding the month for which the amount is determined, regardless of when the differential duty is paid.

The appeal was dismissed, and it was held that interest is leviable on the differential duty even if paid before the final assessment, in accordance with Rule 7(4) of the Rules of 2002. The court disagreed with the decisions of the Bombay High Court in Ispat Industries Ltd. and CEAT Ltd..

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