Provisional assessment and finalization – what is the rate of interest to be paid?
A distinguished Netizen sent us this:-
The Larger Bench decision in the case of Cadbury India Ltd. [] has held that in case of provisional assessment under 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 and that interest is required to be paid even if the differential amount is paid before the order under Rule 7(3) of the said rules is issued finalizing assessment.
Rule 7(4) of CER, 2002 reads –
“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 issued under section 11AA or section 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof.”
So, if one wishes to pay the interest, at what rate should he pay?
This is because the rate of interest u/s 11AB in vogue is 13% as prescribed by notification 66/2003-CE(N.T), dated 12.09.2003 and the rate of interest under Section 11AA prevalent today is 15% as prescribed by notification 18/2002-CE(N.T) dated 13.05.2002.
Incidentally, when the CER, 2002 came into being on 01.03.2002, the rates of interest u/s 11AB and u/s 11 AA of the CEA'44 was the same viz. 24%. The rate of interest under both the sections were simultaneously changed to 15% by notifications 18/2002- CE(N.T) and 19/2002-CE(N.T), both dated 13.05.2002. There was no conflict in the language of the said rule 7(4) of the CER , 2002 even then. But things changed with the entry of Notification 66/2003- CE(N.T) dated 12.09.2003 which reduced the rate of interest u/s 11AB from 15 % to 13%. Unfortunately, the rates of interest u/s 11AA remained unchanged.
If this be so, shouldn't the Rule 7(4) be amended immediately before it brings tears? After all, 2% is not a small amount.
Please also see the case we are reporting on Monday.