2016 (9) TMI 481 - AT - Central Excise

Job-work - Whether excess paid duty can be adjusted against the short paid duty, essentially when the assessment is provisional - appellant during the disputed period have short paid ₹ 38,36,604/- and also excess paid duty to the tune of ₹ 30,44,912/- with regard to the same product, namely, unprocessed man maid fabrics. Thus, in effect short paid duty is only to the tune of ₹ 7,91,692/-, against which the appellant claimed that they have already deposited ₹ 7,93,582/-. Held that - by respectfully following the decision of Larger Bench of this Tribunal in the case of Hindustan Zinc Ltd. vs CCE Jaipur-II 2015 (11) TMI 953 - CESTAT NEW DELHI (LB) which was relied on the judgment of Hon ble Karnataka High Court in the case of Toyota Kirloskar Auto Parts India Pvt. Ltd. vs CCE 2011 (10) TMI 201 - KARNATAKA HIGH COURT held that adjustment is possible and after adjustment if any further amount is payable, on that amount the interest liability is required to be discharge. Therefore, the adjustment of excess duty against short fall in the duty liability is permissible under the law. However, in the present case since after adjusting the duty liability from the excess paid duty further amount is payable by the appellant, which was subsequently, we are of the view that the interest liability is required to be discharged for short payment of such duty. So far as computation of the interest and liability is concerned, we find that the Hon ble Allahabad High Court in the case of Bharat Heavy Electricals vs CCE Kanpur 2015 (8) TMI 1055 - ALLAHABAD HIGH COURT has held that wherever there is short payment of duty the interest liability shall be payable for the period when the duty was short paid. Thus, in this case wherever the duty liability for the respected month has been short paid by the appellant, interest liability is required to be discharged. Since the interest liability has not been properly computed by the adjudicating authority, we are of the view that the matter shall be remanded to the original authority for quantifying the interest liability. - Appeal disposed of

Summary

Issues Involved:
Adjustment of excess paid duty against short paid duty in provisional assessment.

Analysis:
The appellant, engaged in manufacturing yarn and unprocessed man-made fabrics, cleared the unprocessed fabric for further processing on a job work basis. The appellant resorted to provisional assessment under Section 7 of the Central Excise Rules, 2002, as it couldn't ascertain the correct assessable value. The jurisdictional authorities demanded duty on grounds of short payment attributable to captive consumption. The appellant claimed to have discharged excess duty on the sale of finished products, exceeding the short paid amount. The adjudication order confirmed a duty amount as payable by the appellant, which was upheld by the Ld. Commissioner (Appeals), leading to the present appeal before the Tribunal.

The Tribunal considered whether excess paid duty could be adjusted against short paid duty in a provisional assessment. The appellant had short paid a certain amount and also paid excess duty on the same product during the disputed period. Referring to a Larger Bench decision in Hindustan Zinc Ltd. vs CCE Jaipur-II, the Tribunal held that adjustment of excess duty against short fall in duty liability was permissible under the law. However, any further amount payable after adjustment would attract interest liability. The Tribunal cited a judgment by the Hon’ble Karnataka High Court and emphasized that interest liability must be discharged for any short payment of duty, as per the decision of the Hon’ble Allahabad High Court in Bharat Heavy Electricals vs CCE Kanpur.

The Tribunal set aside the impugned order and remanded the matter to the adjudicating authority for the proper computation of interest liability based on the principles established in Bharat Heavy Electricals. The appeal was allowed in favor of the appellant, with the impugned order being set aside. The Tribunal disposed of the appeal accordingly, highlighting the importance of correctly quantifying interest liability for any short payment of duty.