2015 (10) TMI 1032 - AT - Central Excise

Short payment of duty - whether an adjustment is possible against the short payment of duty vis-a-vis excess payment made by the assessee during the relevant period when the assessments were provisional and subsequently finalized - Held that - Appellant had sought provisional assessment during the material period; on finalization, there is an excess and short payment and the adjudicating authority has ordered for adjustment of the excess payment towards the short payment and also ordered for refund of the amount which is excess. - provisions of Rule 7 of Central Excise Rules, 2002 covers the situation like the one in hand before me. The very same provisions were considered by the Hon ble High Court of Karnataka in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. (2011 (10) TMI 201 - KARNATAKA HIGH COURT). Though the Lordships were considering as to whether any interest is liable to be paid to the assessee therein for delayed payment, the substantial question of law which was considered by the Lordships and addressed very clearly indicates that there has to be harmonious reading of the provisions of Rule 7 of the Central Excise Rules, 2002. - law as laid down by the Larger Bench of this Tribunal which specifically lays down that excess payment can be adjusted against any dues of an assessee is the ratio which has been correctly followed by the adjudicating authority in the case in hand. Be that as it may, the reliance placed by the learned D.R. on the Larger Bench decision may not carry the revenue s case any further as the decision of the Hon ble High Court of Karnataka will prevail over the decisions of the Tribunal which is a settled law. - following the ratio as laid down by the Hon ble High Court of Karnataka in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. (supra) which are applicable in the facts and circumstances of this case, I find that the impugned orders are liable to be set aside - Decided against assessee.

Issues:
1. Adjustment of excess payment of duty against short payment of duty.
2. Premature refund claim based on the rejection of the refund claim.

Issue 1: Adjustment of excess payment of duty against short payment of duty
The case involved two appeals directed against Orders-in-Appeal dated 06.03.2007 and 20.11.2008, interconnected and arising from the same appellant. The first appeal (E/1703/07) concerned the adjustment of excess payment of duty against short payment of duty, following provisional assessment for the period April 2002 to March 2003. The adjudicating authority initially allowed the adjustment and ordered a refund, which was reversed by the first appellate authority. The second appeal (E/194/09) involved a refund claim rejected as premature due to the first appellate authority's decision favoring the Revenue. The appellant argued that Rule 7 of Central Excise Rules, 2002 allowed for such adjustments, citing relevant case law.

The Tribunal considered the issue of adjustment against short payment of duty vis-a-vis excess payment made during provisional assessments. It analyzed the provisions of Rule 7 of Central Excise Rules, 2002, referencing the decision of the Hon'ble High Court of Karnataka in a similar case. The Court emphasized the need for a harmonious reading of the rule and clarified the process of duty payment, interest, and refunds after final assessment. The Tribunal also referred to a previous case involving the same issue and highlighted the binding nature of the High Court's judgment on the Tribunal. It distinguished other Tribunal decisions cited by the Revenue, emphasizing the applicability of the principle of unjust enrichment in such cases.

Ultimately, the Tribunal relied on the High Court's decision and the provisions of Rule 7 to allow the appeals, setting aside the impugned orders and granting consequential relief. The judgment emphasized the precedence of the High Court's decision over Tribunal rulings and upheld the appellant's right to adjust excess payment against shortfalls, in line with legal provisions and established case law.

Issue 2: Premature refund claim
The second issue revolved around a refund claim deemed premature due to the first appellate authority's decision and the pending CESTAT appeal. The Tribunal noted the rejection of the refund claim based on prematurity and the subsequent appeal filed by the appellant. However, the Tribunal's decision on the primary issue of adjustment against short payment of duty rendered the discussion on the premature refund claim moot. The judgment did not delve further into this issue, as the resolution of the main issue led to the allowance of the appeals and consequential relief for the appellant.

In conclusion, the Tribunal's detailed analysis of the adjustment of excess payment against shortfalls, guided by legal provisions and relevant case law, resulted in setting aside the impugned orders and allowing the appeals. The judgment underscored the importance of following established legal principles and High Court decisions in resolving complex excise duty matters.

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