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TMI Blog2008 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... , near Pune. 2. The interim products manufactured and captively consumed by them were provisionally assessed for the period 1-1-2000 and 31-12-2000, 1-1-2001 to 31-12-2001, 1-1-2002 to 31-12-2002 and 1-1-2003 to 31-12-2003. The assessments were finalized by the Assistant Commissioner by four orders dated 24th, 26th, 27th and 28th March, 2007. Prior to the final assessment, the appellants calculated and paid the entire differential duty on their own accord. No further duty was payable on final assessment. However, the Assistant Commissioner, while finalizing the assessment, directed the Range Superintendent to charge interest as applicable and the same was to be charged from the first day of the month succeeding the month for which month such amount was determined. 3 . The Appellants preferred appeals against the aforesaid orders. The Commissioner (Appeals), by his order dated 26th July, 2007, held that in terms of Rule 7(4) of the Central Excise Rules, 2002, interest was payable. from the first day of the month succeeding the month for which month such amount was determined. 4 . For illustration, duty for the month of July, 2000 was provisionally assessed, the entire duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, deem fit, binding the assessee for payment of difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed. (3) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall pass order for final assessment, as soon as may be, after the relevant information, as may be required for finalizing the assessment, is available, but within a period not exceeding six months from the date of the communication of the order issued under sub-rule (1): Provided that the period specified in this sub-rule may, on sufficient cause being shown and the reasons to be recorded in writing, be extended by the Commissioner of Central Excise for the further period not exceeding six months and by the Chief Commissioner of Central Excise for such further period as he may deem fit. (4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub- rule (3), at the rate specified by the Central Government by notification iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(T) while differing with the view taken as cited at para (9) above, referred the issue to a Larger Bench. 12. Ld. Senior Counsel for the Appellants argued as under. (a) Rule 7(3) states that the Assistant Commissioner or the Deputy Commissioner has to pass an order of final assessment. Rule 7(4) states that an assessee shall be liable to pay interest on any amount payable to Central Government consequent to an order for final assessment under sub-rule (3). (b) The plain reading of Rule 7(3) and (4) ex facie shows that the question of paying interest would arise only and only if on final assessment the Assistant Commissioner or Deputy Commissioner comes to a conclusion that an amount is due and payable by the assessee towards duly. If there is no amount due and payable by the assessee upon finalization, the provisions of Rule 7(4) do not come into picture. This is a plain grammatical reading of the Rule. (c) The Department is taking contradictory stand on the two limbs of Rule 7(4). On the one Hand, the Department wants to take a literal construction of the phrase "From the first day of the month succeeding the month for which such amount is determined", but on the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where duty of excise is paid provisionally under this Act or the rules made thereunder, the date of adjustment of duty after the final assessment thereof;". (c) Hence, the Statute makes a conscious distinction between 'final assessment' and 'adjustment of duty'. Provisional assessments have to be finalized i.e. determination of the total duty payable during each period of assessment as prescribed by the Rules, and after such finalization, the duty provisionally assessed and paid is adjusted against the duty finally assessed. (d) The reference in Rule 7(4), to "any amount payable to Central Government, consequent to order of final assessment", is to the amount prior to adjustment of duty provisionally assessed against the duty finally assessed. (e) The following decisions are cited in support of this proposition: (i ) A. Infrastructure Ltd. v. C.C.E. - 2000 (117) E.L.T. 583 (T- Larger Bench) (Para 12 to 17). (ii) C.C.E. v. ITC - 2006 (203) E.L.T. 532 (S.C.) (Para 21 to 24). (iii) Sarda Plywood Ind. v. UOI - 2006 (203) E.L.T, 381(Gau) (Para 11). (iv) Gujarat Alkalies and Chemicals v. CC - 2006 (204) E.L.T. 237 (Bom.) (P 28 to 35). (f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual payment of the outstanding amount. It is clear that while finally assessing a case in which provisional assessment was done, the differential duty was required to be worked out, and short payments were required to be taken into account for working out the interest payable thereon on the basis of the due dates on which the payments ought to have been made, even when monthly returns were required to be filed since provisional assessment was under taken initially. At the time of finalizing the assessment, the assessing authority was required to calculate the differential duty amounts as well as the interest due, on account of the delayed payments, if any, and also take into account the amounts deposited by the assessee…….. By its very nature sub-rule (4) of Rule 7 will apply to the liability to pay interest under the final assessment order which interest would become due from the first day of the month succeeding the month for which the amount is determined. For the period covered by the final assessment order, the assessing authority would be working out the liability to pay differential duty as also the liability to pay interest, on account of short payments, if any, during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect position in law when it reads Rule 8 into Rule 7. (d) Supplementary Instructions of the Department cannot impose a liability to interest upon the assessee. (e) Provisional assessments are resorted to only because the correct elements of cost are not known at the time the goods are cleared. These elements would be known only at the end of the financial year. If the assessee knew. the actual details, they would not seek provisional assessment. Hence, imposition of interest, in the manner sought by the Department, would only penalize the assessee, which could never be the legislative intent. 15. We have carefully considered the rival submissions. 16. We find that none of the decisions cited at Para 9 above have considered the language of Rule 7(4) i.e. the words "succeeding the month for which such amount is determined". All these decisions proceed on an unreasoned basis that the interest is payable 'from the month in which the amount is determined /assessment is finalised'. On a query from the Bench, ld. Senior Counsel has fairly agreed that this is the case. 17. We find no reason to substitute the words as has been done in the said decisions. Rather, we are per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first day of the month succeeding the month "for which" assessment is made the amount of duty is determined. The expression "consequent to order for final assessment" in the rule, in my opinion, is suggestive of something which is too obvious. The liability to pay interest arises only when assessment is made but is does not mean that for the period prior to the date of assessment, interest will not be charged. At the stage of final assessment (in cases of provisional assessment) the assessee may be held entitled to refund or liable to pay the difference between the amount paid on provisional assessment and the amount finally determined as duty payable. In either case, the interest will be paid to the assessee or charged from him as the case may be-from the first day of the month succeeding the month for which such refund or duty is determined. This is the result of a combined reading of sub-rules (4) (5) of Rule 7. Whether the assessee is liable to pay any differential amount or is entitled to refund can be found only when the final assessment is made. But it does not mean that interest is to be charged from the first day of the succeeding month when the amount is determined i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of which the duty provisionally assessed shall be adjusted against the duty finally assessed and in the event, the duty provisionally assessed falls short of or is in excess of the duty finally assessed, the assessee will pay the deficiency or will be entitled to a refund, as the case may be. Ultimately, thus, the liability of the assessee would depend upon the undertaking of exercises by the assessing officer to complete the assessment proceeding as contemplated. 23.On a plain reading of the provisions of the Act the Rules framed thereunder, we have no doubt in our mind that the Tribunal was correct in its finding that the impugned show cause notices were illegal. 24. The question came up for consideration before this court in Serai Kella Glass Works Pvt. Ltd. v. Collector of Central Excise, Patna [1997 (91) E.L.T. 497 = (1997) 4SCC 641] wherein this court clearly opined: "Section 11A deals with recovery of duty not levied or not paid or short-levied or short-paid or erroneously refunded, Proceedings under Section 11A have to be commenced with a show cause notice issued within 6 months from the "relevant date''. "relevant date" has been defined under sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding the receipt of actual price from the buyer, in accordance with the terms of the contract/purchase order and only thereafter the proper officer after getting the necessary details, will pass order regarding the final assessment of the assessee under Rule 173-I. The duty provisionally assessed and debited by the assessee shall be then adjusted against the duty finally assessed. If the duty provisionally assessed and debited in the account current by the assessee, falls short of or is in the excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be. 13. How and in what manner, the refund of excess duly paid by the assessee, can be claimed, is embodied in Chapter VII-B. The sole Rule 173-S of this Chapter which had been inserted in the statute w.e.f. 20-9-1991, reads as under:- "Rule 173-S. Application for refund of duty - (1) Any person claiming refund of any duty of excise shall make an application in duplicate, to refund of such duty in the proper from to the Assistant Collector of Central Excise having jurisdiction over the factory of manufacture. (2) An application for refund shall be made in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y making debit entry in the account-current maintained by him under Rule 173G. The debit entry made by him in that account would not be a mere adjustment entry but an effective payment, in the view of the observations made by the Apex Court in Samrat International Pvt. Ltd. v. CCE - 1992 (58) E.L.T. 561 wherein it has been ruled by the Apex Court that the date of payment of duty under Section 11B, Explanation (B), clause (f) shall be the date of the debit entry in the personal ledger account and not the date of assessment of RT 12 Return. 17. In the latter case, the relevant date would be the date on which the final assessment has be got made by the assessee on furnishing the necessary details regarding the actual price charged by him under the contract or purchase order containing Variation/escalation clause, from the buyer and the provisionally paid duty by him at the time of removal of the goods, is adjusted. The adjustment of the provisional duty would amount to effective payment by him in view of the observations made by the Apex Court in the case of Samrat International P. Ltd.(supra)". 20. Though the above two decisions are in relation to the erstwhile Rule 9B of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel has emphatically argued that punctuation cannot control the plain meaning of the language while interpreting the law. (b) He has also brought to our notice that while Rule 7(4), dealing with interest on demand, uses the disjunctive before and after the above said phrase. Rule 7(5), which deals with the interest on refund, does not use the disjunctive comma before the said phrase. Yet, the Departmental Manual of Supplementary Instructions treats both sub-rules alike. Hence, it is not the intention of the Rule making authority to charge interest on the amounts already paid before order of final assessment. 27. (a) We have verified the provisions of the two sub-rules and find that the learned Senior Counsel has correctly pointed out the difference between sub-rules (4) (5) of Rule 7. (b) However, this does not in anyway help the appellants. The learned SDR has relied upon the decision of the Larger Bench, of this Tribunal in the case of ETA Engineering Ltd. v. C.C.E . - 2004 (174) E.L.T. 19 (Tri - L.B.). which says at para 6 as under: "On careful consideration, we find that there are orders passed by the Tribunal on this issue where conflicting options have been e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 76 of the Finance Act, 1994 and the presence of a disjunctive comma in Section 77, thereof made the intention of the legislature clear to impose a mandatory penalty under Section 76. (d) If the same reasoning is applied to the provisions of sub-rule (4) (5) of Rule 7 of the Central Excise Rules, 2002, it only buttresses the case of the Department that the disjunctive comma is important in controlling the interpretation of Rule 7(4). 28. The learned Counsel of the appellants has laid great emphasis on the Rule 7(4) of the Central Excise Rules, 2002 which states that an assessee shall be liable to pay interest on any amount payable to the Central Government, consequent to an order for final assessment under sub-rule (3), which means that question of paying interest would arise only and only if on final assessment when Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise comes to a conclusion that amount is due and payable by the assessee towards duty. If no dues are payable by the assessee upon finalization, inasmuch as the entire amount has been paid before the finalization, then the provisions of Rule 7(4) will not come into picture. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the clearance of the goods. 29. We further note that in the scheme of the Central Excise, the Returns are filed on monthly/quarterly basis and the assessments are made on monthly or quarterly basis. Therefore, the provisional assessment has to be finalized for every month separately and it is for this reason that Rule 7(4) refers to the month for which the assessment is finalized. As assessment is to be finalized for each and every month separately, the words used in Rule 7(4) are for the month as the differential duty is to be paid for every month. 30. In view of this, we are of the view that interest is required to be paid even when the differential amount is paid before the finalization of assessment. 31. Hence, we answer the reference as under: (a) In the case of provisional assessment under the Central Excise Rules, 2002 interest is required to be paid from the first day of the month succeeding the month for which such amount is determined. (b) Interest is required to be paid even if the differential amount is paid before the order, under the Rule 7(3) of the said Rules, is issued finalizing the assessment. (Pronounced in the Court on 11-11-2008) - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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