CX - Provisional Assessment - Rule 7 of CER, 2002 - Interest is leviable even where differential duty was paid prior to finalisation of assessment - Bombay HC decisions in CEAT & Ispat Industries disagreed: Allahabad HC
By TIOL News Service
ALLAHABAD, AUG 25, 2015: AT the time of despatch of the goods, CE duty is provisionally paid by the appellant u/r 7 of CER, 2002. Immediately, on the approval of the final price, adjustment bills of differential duty, if any, is raised and paid or a refund claim is lodged depending on the price which is fixed. The final assessment order is, thereafter,passed by the excise authorities.
The jurisdictional authority demanded interest on the differential duty u/s 11AB of the CEA, 1944.
Being aggrieved, the assessee filed appeals and since unsuccessful at all levels, they are before the High Court.
The appellant contended that in the instant case, all duties have been paid prior to the date of the final assessment and, therefore, no interest could be chargeable. In support of this submission, reliance is placed on the Bombay High Court decision in Ispat Industries Ltd. - 2010-TIOL-923-HC-MUM-CX wherein the High Court held that interest is payable on the differential duty but where the differential duty was paid prior to the final assessment, no interest was payable on such differential duty and also the decision in CEAT Limited - 2015-TIOL-397-HC-MUM-CX wherein the Bombay High Court held that the liability to pay interest does not arise unless the finalisation of the assessment results in any additional or differential liability.
The counsel for the Revenue submitted that interest has been levied in terms of Rule 7(4) of the Rules framed in exercise of the powers conferred under Section 37 of the Act. Support is derived from the apex court decision in SKF India Ltd. - 2009-TIOL-82-SC-CX & International Auto - 2010-TIOL-05-SC-CX, wherein it is held that the differential duty paid after the date of clearance indicates short payment/short levy on the date of removal, hence interest, which is for the loss of revenue, becomes leviable.
The High Court observed -
+ There is no doubt that interest is compensatory in nature and is imposed on an assessed amount who has withheld any tax as and when it was due and payable. Levy of interest is on actual amount of tax withheld and the extent of the delay in paying the tax on the due date as held by the Supreme Court in Pratibha Processors Vs. Union of India, - 2002-TIOL-273-SC-CUS
+ Section 37(2)(ibb) of the Act clearly provides that the Central Government may make rules including rules conferring powers to provide for charging of interest on the differential amount of duty, which becomes payable or refundable upon finalisation of all or any class of provisional assessment. The provision of law comprised thereunder 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.
+ 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 provisions (of Rule 7(4)) specifically state 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.
+ The expression "for" as provided under Rule 7(4) of the Rules of 2002 refers to the month for which the amount is determined pursuant to the finalisation of assessment and hence, interest liability would commence from the month succeeding the month for which the duty was due and payable in relation to the goods cleared.
After citing the ratio of the apex court decision in the case of SKF India Ltd. & International Auto and mentioning that it disagreed with the decisions of the Bombay High Court in the cases of Ispat Industries Ltd. & CEAT Ltd., the High Court held - 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.
The appeal was dismissed.
(See 2015-TIOL-1949-HC-ALL-CX)
