Provisional Assessment - Interest

CCE, Aurangabad Vs M/s Garware Polyesters Ltd (Dated: December 8, 2008) Finalisation of Provisional assessment - LB decision in Cadbury [ 2008-TIOL-1986-CESTAT-MUM-LB ] helps Revenue get back refunds of 'interest' granted by the Assistant Commissioner relying on MSEB Pole Factory [ 2005-TIOL-1643-CESTAT-MUM ] decision - Tribunal directs respondent to pay back the refund amounts within ten days of receipt of order. Interest is required to be paid even when the differential amount is paid before the finalization of the assessment and that the none of the decisions viz. MSEB Pole Factory etc. had considered the language of Rule 7(4) ie. the words "succeeding the month for which such amount is determined" inasmuch as all the decisions had proceed on an unreasoned basis that the interest is payable 'from the month in which the amount is determined /assessment is finalized'. Interest was correctly paid by the respondent and they are not entitled to the refunds - The refund amounts of Rs.57,513/- and Rs.1,12,254/- paid to respondent were recoverable - Bench directs the respondent to pay back these amounts within ten days of the receipt of the order. Revenue appeals allowed.: MUMBAI CESTAT ; Finalisation of Provisional assessment - LB decision in Cadbury helps Revenue get back refunds of 'interest' granted by AC relying on MSEB Pole Factory decision – Tribunal directs respondent to pay back refund amounts within 10 days of order THESE are Revenue appeals against the order of the Commissioner(A) who upheld the Assistant Commissioner’s order sanctioning the refund claims of “interest” filed by the respondents. Refund claims came to be filed by the respondent of the ‘interest’ paid by them consequent upon finalization of assessment, which interest according to the respondent was not payable. The reasoning offered by the assessee was that the interest under Rule 7(4) of the Central Excise Rules, 2002 would commence ONLY after the expiry of one month from the date on which the amount was determined by order of finalization. However, since the duty was paid by them prior to the order of finalization, interest paid was actually not payable. Obviously, the Tribunal decision in MSEB Pole Factory [2005-TIOL-1643-CESTAT-MUM] was the guiding factor. It was held therein that – “2….It is clear from the above rule that interest provision would be applicable after the expiry of the period of one month from the date when the amount is determined. In the present case, the amount of duty was determined against the appellant on 31-1-2003 and entire differential duty stands paid by 24-2-2003. In these circumstances, there is no question of confirmation of interest against the appellants or imposition of penalty upon them. Accordingly, the appeal is allowed with consequential relief to the appellant.” Anyways, when the refund claims were filed, the Tribunal decision in MSEB Pole Factory [2005-TIOL-1643-CESTAT-MUM] continued to hold sway and, therefore, the Assistant Commissioner sanctioned the claims following the said decision but not before noting that although the Revenue had challenged the Tribunal decision before the Aurangabad Bench of the Bombay High Court, the same was pending decision. Revenue was disappointed with such an order which according to them was “premature” and hence took the matter to the Commissioner(A) who rejected the appeals of the Revenue by reminding them of the principle of judicial discipline laid down by the Apex Court in the case of Kamlakshi Finance Co. [2002-TIOL-484-SC-CX-LB]. A dejected Revenue then took the matter to the Tribunal in the year 2007. When the matter came up before the Bench recently, the representative of the Revenue merrily waved the Larger Bench decision of the Tribunal in the case of Cadbury India Ltd. vs. CCE, Pune-I [2008-TIOL-1986-CESTAT-MUM-LB] and said that the Larger Bench had come to the conclusion that Interest is required to be paid even when the differential amount is paid before the finalization of the assessment and that the none of the decisions viz. MSEB Pole Factory etc. had considered the language of Rule 7(4) ie. the words “succeeding the month for which such amount is determined” inasmuch as all the decisions had proceed on an unreasoned basis that the interest is payable ‘from the month in which the amount is determined /assessment is finalized’. It was, therefore, contended that since the decision in MSEB Pole Factory was no longer a good law, the reliance placed by the lower authorities below on the said decision in sanctioning the refunds of interest was not legal and proper. The respondent’s representative countered this submission by stating that since there was no challenge in ‘Grounds of Appeal’ filed by Revenue on merits of the case, the orders of the lower authorities were required to be upheld. For this submission, he placed reliance on the Supreme Court decision in CCE, Aurangabad vs. Balakrishna Industries [2006-TIOL-117-SC-CX-LB]. The Bench after considering the rival submissions viewed that it was not inclined to agree with the contention of the respondents on account of the following – · The Revenue has all along contended in their ‘Grounds of Appeal’, both before the Commissioner(Appeals) and the Tribunal, that they have not accepted the Tribunal decision in the case of MSEB Pole Factory [2005-TIOL-1643-CESTAT-MUM] and have preferred an appeal before the Hon’ble High Court, Bench Aurangabad. · The stand of the Revenue is consistent and this is also reflected in the show cause notice. · Simply because, it has not been repeated in the ‘Ground of Appeal’ ad nauseam, it does not imply that the Revenue has not contested the issue of merits. · The challenge is very much there on merits against the impugned orders of the Commissioner(A) and the Assistant Commissioner. Hence, the ratio of the case laws cited (CCE, Aurangabad vs. Balakrishna Industries [2006-TIOL-117-SC-CX-LB] cannot be applied to the facts of the present case. Noting that the Larger Bench of the Tribunal in the case of M/s Cadbury India Ltd had over-ruled the decision of the Tribunal in the case of M/s MSEB Pole Factory, it was held that interest was correctly paid by the respondent and they were not entitled to the refunds. Holding that the refund amounts of Rs.57,513/- and Rs.1,12,254/- paid to them were recoverable, the Bench directed the respondent to pay back these amounts within ten days of the receipt of the order. Accordingly, the appeals filed by the Revenue were allowed by setting aside the orders of the Commissioner(Appeals). Interesting interest: Long ago, when the CER, 1944 were in vogue, Rule 173I(2) read thus – “173-I. Assessment by proper Officer. – (1) x x x. (2) The duty determined and paid by assessee under Rule 173F shall be adjusted against the duty assessed by the proper Officer under sub-rule (1) and where the duty so assessed is more than the duty determined and paid by the assessee, the assessee shall pay the deficiency by making a debit in the account-current within ten days of receipt of copy of the return from the proper officer and where such duty is less, the assessee shall take credit in the account-current for the excess on receipt of the assessment order in the copy of the return duly counter-signed by a Superintendent of Central Excise." The Board could not overlook certain judgments of the Tribunal on the captioned matter and had to come out with the following Circular No. 228/62/96-CX, dated 8-7-1996 clarifying that – “2….In all the above judgments, it has been held that demand raised on RT-12 without issue of show cause notice is not maintainable in the eye of law. 3. I am directed to say that Board is examining the matter in consultation with the Ministry of Law. Keeping in view the decisions taken by the Hon’ble CEGAT, especially the latest decision, dated 6-3-1996, supra, it has been decided that till the issue is resolved, necessary steps to safeguard the revenue should be taken by immediately raising the Demand-cum-Show- Cause-Notice and making endorsement of the Show Cause Notice number & date on the Assessment Memorandum of the RT-12 returns in which short levy/short payment is found on assessment.” As for “erroneously granted” refunds, here is what the Tribunal had to say in the case of Nestle India Ltd. vs. CCE, Goa [2008-TIOL-1791-CESTAT-MUM] – · Recovery of Erroneously granted refund – there are no optional routes available for Revenue – Mere succeeding in appeal before Commissioner(A) cannot get back erroneously granted refund – Demand a must – Tribunal. · Erroneous refund – Recovery - Provisions of Section 11A specifically cover the situation; clearly mention that a show cause notice has to be issued for recovery of erroneous refunds. Apex Court decision in Re-rolling Mills and Tribunal decision in Morarjee Goculdas Spg. & Wvgsquarely cover the issue in favour of the appellant - Order of the Commissioner(A) held to be incorrect and set aside. So, where do we go from here?