CE - Provisional Assessment Finalisation - Interest Liability? Poor Law Drafting costs Revenue dear
IF the exact amount of excise duty payable at the time of clearance is not known, the assessee can opt for provisional assessment under Rule 7 of the Central Excise Rules. The Assistant Commissioner is supposed to pass the order of final assessment and if there is any differential duty payable, the assessee is required to pay that.
Rule 7(4) reads as:
(4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under subrule (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, the assessee is liable to pay interest on any amount payable consequent to the order for final assessment. What happens if the assessee pays the differential duty before the order for final assessment and there is no payment required consequent to the final assessment order?
In Ispat Industries vs Commissioner - , the Tribunal held, looking to the provisions of Rule 7(4) it is clear that the appellant could not be held liable to pay the interest if the differential duty and the duty amount have been paid prior to the final assessment.
This order of the Tribunal was confirmed by the Bombay High Court.
In Tata Motors vs CCE - , the Tribunal observed that the view of the Tribunal was confirmed by the High Court in the Ispat case. The Tribunal specifically asked the DR if the department has challenged the High Court order in Ispat. The DR submitted that they have made a proposal to file the appeal before the apex court but he is not aware of the status whether the appeal has been filed or not. (The SLP was indeed filed and the Supreme Court dismissed it on 4.7.2011.)
The Tribunal held that in the case of provisional assessment, no interest is payable on finalization of the assessment if the differential duty has been paid before the finalization of assessment.
The Revenue appeal against this case was dismissed by the Bombay High Court on 1.2.2012. The Commissioner's SLP against the High Court order was dismissed by the Supreme Court on 30.7.2012.
The issue was again before the Bombay Tribunal in CEAT Ltd vs Commissioner - . This time around, the Tribunal refused to follow the above two decisions observing, the judgments of this Tribunal in the case of Ispat Industries Ltd. and Tata Motors Ltd. which were upheld by Hon'ble Bombay High Court are per incuriam as the details of various Rules as also the judgment of the Hon'ble Supreme Court, Hon'ble High Court of Karnataka and other judgements of this Tribunal were not brought to the notice of the Tribunal or the Hon'ble Bombay High Court.
CEAT took the matter to the High Court.
The High Court was not impressed with the Tribunal's finding that the earlier orders were per incuriam.
The High Court observed,
It is unfortunate that the Tribunal ignores and brushes aside even orders of this Court…..
The coordinate bench cannot disregard or ignore a binding precedent unless it is found to be contrary to an express statutory provision or refuses to follow a binding decision of the Hon'ble Supreme Court of India or the jurisdictional High Court.
We would expect the Tribunal to be more careful and guarded hereafter. We say nothing more.
The High Court once again emphatically held that no interest is payable if the differential duty is paid before the order of finalization of assessment.
The High Court observed, If the interest was to be recovered and was indeed payable on the date on which the Assessee made payment of differential duty and prior to finalization of the assessment, then, the Rule would have specifically said so.
And since the Rule did not say so, no interest is payable - even if the differential duty is paid a day before the date of final assessment?
This is the problem with loose and careless drafting of rules. If they wanted interest from Day One, they should have said so in the rules.
Incidentally, the Supplementary Manual in Chapter 3, Part-IV, paragraph 2.7 mentions the following - "If the assessee is in a position to ascertain the duty himself, he may pay the duty on his own at the earliest and in that case he will not have to incur interest on account of time taken by the Department to finalize the assessment and communicate the amount."
Well, as with all other issues, this is not the last word.
While dismissing the Revenue SLPs in both Ispat Industries and Tata Motors cases, the Supreme Court ordered - "Special leave petitions are dismissed. Question of law is kept open."
Maybe Revenue is eagerly waiting for this opportunity. Yet another case to test the question of Law!
Can't they forget the past and amend the Rule in this budget?
We bring you the High Court order today. Please see Breaking News.