Penal Interest, Central Excise

[deepak kalambate]

Dear Sir,

Please let me know whether penal interest as per the provision of Rule 8 (3A) of Central Excise Rules, 2002 is applicable when Central Excise duty voluntary paid as per CAS-4 Certificate along with interest @ 18% p.a.

Thanks & Regards

Deepak R Kalambate

Posts / Replies

[surya narayana]

Dear Friend

Your query is not clear.

In what way Rule 8(3) relates to payment of duty under CAS4 with interest.

To my mind, you might be talking about your initially paying duty on the earlier CAS4 figures on provisional basis and after finalization of the cost audit, you might paid the differential duty with interest on the captive clearances without opting for provisional assessment.

Unless you clearly indicate your query in a detailed manner, it would be difficult to provide the views.

Regards

Suryanarayana

[deepak kalambate]

Dear Sir,

We are manufacturer and clearing goods on payment of C.Ex. duty on local market.

Further, we have related parties (i.e. our sister concern) to whom also we are selling goods on payment of duty.

We have obtained CAS4 Certificate from cost accountant for the year 2014-2015 and on the basis of the same differential excise duty has been calculated (i.e. difference between cost of production PLUS 10% AND Invoiced Value) and paid the same along with interest @ 18% p.a.

Now CEX Official are asking us to pay interest @ 30% p.a. as per Provision in Rule 8 (3A) of Central Excise Rule 2002

Please advice

Regards

Deepak R Kalamabte

[surya narayana]

Dear Friend,

The allegation of the Department is not sustainable in the legal battle.

However, while adopting this procedure, you might have intimated the department about your paying the duty on the basis of previous year finalized costing + 10% and in case if the cost for the current year is increased then we will pay the differential duty with interest. If not, try to submit a reply to the objection raised by the Department explaining this fine point while stating that this is a revenue neutral transaction .

If the department is not agree with your view, better opt for provisional assessment under CE Rules for the future transactions while fighting for the present allegation.

Best Regards

Suryanarayana

[KASTURI SETHI]

Sh.Deepak Kalambate Ji,

I endorse the views of Sh. Surya Narayana, Sir. Rule 8 (3A) does not come into play in the case of provisional assessment. No penal interest. However, you should have intimated the department about adopting the route of provisional assessment along with the reasons thereof. You are filing monthly ER-I return and you must have shown about provisional assessment in the return.If so, this can be treated as intimation to the department. If you have got something in writing from the department, you must fight legally on merits. Pl. note penal action or penal interest is always imposed if you have committed any offence. Resorting to provisional assessment is not an offence. If you have not intimated about this, it is a procedural lapse. For this penalty is imposable under Rule 27.

[deepak kalambate]

Dear Sir,

Thanks for your views

In our case, every year we are obtaining CAS4 Certificate and paying differential duty if any and interest @ 18% p.a.

In every EA 2000 Audit also department officials asks us to pay differential duty as per CAS4 (for transactions made to related parties where COP is more than Invoice Value) accordingly we pay differential duty along with interest @ 18% p.a..

Logically, penalty or penal interest is applicable in case when there is evasion of duty or intention to evade duty.

In our case, we are clearing goods on payment of duty and at the end of the year we are obtaining CAS4 Certificate AND pay differential duty.

Please let me know whether any circular, notification, instruction, clarification is available to clear above matter as there is no evasion or default of payment

Please advice.

[surya narayana]

There is no circular or clarification on this aspect. The question that is to be decided before come to a conclusion is that

whether the practice adopted by you that paying first on the previous year cost and in case of increase in the final costing for the current year paying differential duty with interest (which is in the knowledge of the Department) accepted by the Department or not.

If it is accepted , then there is no question of paying penalty.

Otherwise, you have no option to opt for provisional assessment.

I want to share with you a situation where the assessee first opted for provisional assessment for all his units and paying regularly the differential duty with interest wherever there is increase in the final cost. Having observed that this is a revenue neutral situation, the Department issued us a letter to simply pay the differential duty with interest in case of increase in the cost without continuing under provisional assessment. And the said assessee is still continuing the same practice

In view of this you may have to take a call accordingly.

Best Regards

Suryanarayana