Custom, Excise & Service Tax Tribunal
M/S Bimetal Bearings Limited vs Cce, Chennai on 9 September, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL,
(South Zonal Bench) Chennai
Excise Appeal Nos. 83, 777, 02, 209 & 210 of 2007
[Arising out of Order-in-Appeal No. 89/2006(M-II) dated 24.11.2006, 156/2007 (M-II) dated 28.9.2007, 183/2007 (M-II) dated 29.11.2007, 07/2007(M-I) dated 11.01.2007 and 87/2006(M-I) dated 24.11.2006 passed by the Commissioner of Central Excise (Appeals), Chennai]
Date of Hearing: 09.09.2008
Date of decision: 2008
For approval and signature:
Hon'ble Mr. Justice S.N. Jha, President
Hon'ble Mr. P.G. Chacko, Member (Judicial)
Honble Mr. M. Veeraiyan, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982.
2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3 Whether Their Lordships wish to see the fair copy of the Order?
4 Whether Order is to be circulated to the Departmental authorities?
,,,,,,,,,M/s Bimetal Bearings Limited Appellant
M/s Ennore Foundries Limited
Vs.
CCE, Chennai Respondent
Appearance:
M/s. V. Balasubramaniam and M. Kannan, Advocates for the Appellant
Mr. N.J. Kumaresh, Departmental Representative (DR) for the Respondent
CORAM: Mr. Justice S.N. Jha, President
Mr. P.G. Chacko, Member (Judicial)
Mr. M. Veeraiyan, Member (Technical)
O R D E R
Per Justice S.N. Jha:
These two sets of appeal by ,,,,,,,,,M/s Bimetal Bearings Limited and M/s Ennore Foundries Limited have come up for hearing before the Larger Bench on reference. The dispute relates to liability of the manufacturers to pay interest on the differential duty of excise in the case of provisional assessment under rule 7 of the Central Excise Rules, 2002 where the duty is paid suo motu before finalization of assessment. It appears from the referral order that at the time of hearing of these appeals before the Division Bench, reliance was inter-alia placed on M/s Karnataka Vidyuth Karkhane Ltd., vs. CCE, Bangalore -2007 (78) RLT 621 (CESTAT-Ban.) in which it has been held that interest provision would be applicable after the expiry of the period of one month from the date when the amount is determined. The Division Bench took the view that whether the difference of duty is paid prior to the finalization of provisional assessment under sub-rule (3) or later, interest has to be paid on the differential amount from the first day of the month succeeding the month for which the duty is determined as provided in rule 7(4), but as this view was in conflict with the decision in M/s Karnataka Vidyuth Karkhane Ltd. (supra), directed that the records of these appeals be placed before the President for constituting the Larger Bench to resolve the conflict.
2. No issue, as such, has been framed in the referral order and, as indicated above, reference was made on account of conflict with the decision in M/s Karnataka Vidyuth Karkhane Ltd. (supra), at the time of hearing before the Larger Bench, the entire gamut of the dispute as briefly indicated above was gone into by both sides.
3. The brief facts of the case of M/s Bimetal Bearings Limited, appellants in three appeals, are that they have two manufacturing units - one at Chennai and the other at Coimbatore. The former manufactures steel strips with copper coating while at the latter unit thin-walled bearings are manufactured. The product of the Chennai unit is input for the Coimbatore unit. During the period of dispute the Chennai unit cleared the product on payment of duty to the sister unit at Coimbatore. As there was no sale involved in the transaction, they valued the goods under rule 8 of the Valuation Rules, namely, the Central Excise Valuation (Determination of Price of the Excisable Goods) Rules, 2000 applicable to excisable goods manufactured and captively consumed. As the value of certain goods used in the manufacture of the finished product was not ascertainable on the date of clearance of the finished product for the purpose of determining the assessable value under rule 8, the appellants applied for provisional assessment in terms of rule 7(1) of the Central Excise Rules which was allowed by the Jurisdictional Assistant Commissioner of Central Excise and duty was accordingly paid on provisional basis. Before the assessment could be finalised, the appellant themselves worked out the final assessable value on the basis of CAS-4 norms and paid differential duty thereon. In due course, the assessing authority finalized the assessment in terms of sub-rule (3) of rule 7. It may be mentioned here that the result of such finalization was no different from what the appellant had themselves worked out as stated above. Dispute arose as to whether the appellant was liable to pay interest on the differential amount of duty and, if so, to what extent. The Assistant Commissioner demanded interest on the differential amount for the period from the first day of the month succeeding the month(s) for which the duty was payable till the date of payment of such duty. The appellant preferred appeal before the Appellate Authority against the confirmation of demand but without success.
4. The facts of the case of M/s Ennore Foundries Limited are more or less similar except that there was no clearance of excisable goods to a sister unit and therefore the clearances involved sale and Rule 8 was not applicable. However, in this case there was a different reason for provisional assessment which was allowed by the jurisdictional Assistant Commissioner namely, that clearances had been made under contracts containing a price variation clause, and therefore, the value of certain inputs which were required to be included for determining the assessable value of the final product was not ascertainable. Like M/s Bimetal Bearings Limited they also suo motu worked out the duty liability and paid differential duty before the assessment came to be finalized by the assessing authority. A similar demand of interest on the differential amount of duty having been made and confirmed by the Assistant Commissioner and the appeals therefrom having been dismissed by the appellate authority, they have approached this Tribunal in the present appeals challenging the said orders.
5. As the dispute revolves around rule 7 of Central Excise Rules involving interpretation of certain provisions thereof, the rule may be quoted so far as relevant as under:-
7. Provisional assessment.- (1) Where the assessee is unable to determine the value of excisable goods or determine the rate of duty applicable thereto, he may request the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in writing giving reasons for payment of duty on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, may order allowing payment of duty on provisional basis at such rate or on such value as may be specified by him.
(2) The payment of duty on provisional basis may be allowed, if the assessee executes a bond in the form prescribed by notification by the Board with such surety or security in such amount as the Assistant 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) . . . (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. (5) Where the assessee is entitled to a refund consequent to order for final assessment under sub-rule (3), subject to sub-rule (6), there shall be paid an interest on such refund at the rate specified by the Central Government by notification issued under section 11BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund. (6) .
6. Shri V. Balasubramaniam appearing for M/s Bimetal Bearings Limited submitted that the assessee is liable to pay interest consequent to order for final assessment, that is, after the assessment is finalized and that the assessed duty is paid. Where the differential duty is paid suo motu before finalization of assessment, he is not liable to pay interest on the amount. Counsel placed reliance on the instructions of the Central Board of Excise & Customs contained in para 2.7 of Part IV (Provisional Assessment) of Chapter 3 of CBECs Excise Manual of Supplementary Instructions, 2005 which reads as under:-
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 finalise assessment and communicate the amount.
7. The reliance on the Boards instructions (supra) is totally misconceived. The instruction merely stipulates that the assessee will not be liable to pay interest on account of any delay on the part of the Department in finalization of assessment after payment of duty. The word duty in the sentence he may pay the duty . Clearly means full duty. Where the full duty stands paid, any delay on the part of the Department in finalization of assessment cannot cause any disadvantage and create liability for the assessee. The instruction cannot be understood to mean that the assessee will not be liable to pay interest even though he did not pay the full duty on time and paid the differential duty before the finalization of assessment. Thus we do not find any conflict between the Boards instructions and the provisions of rule 4(7). Even if there was any conflict, it hardly need be pointed out, a departmental instruction or circular can not override a statutory provision, and the same has to be read down in accord with the statute. The circular or instructions can clarify the provision consistent or in accord with the relevant statutory provisions, it cannot enlarge or reduce the scope of a statutory provision.
8. Coming to the main argument that the assessee is liable to pay interest consequent to the order for final assessment, that is, after the assessment is finalized, in our opinion, the expression consequent to contemplates payment of central excise duty as the result of final assessment. The language of the rule is shall be liable to pay interest on any amount . consequent to order for final assessment. The assessment has to be finalized by the Department. The assessee cannot himself do it. Whether he is liable to pay any further amount in case he has paid the differential duty suo motu - cannot be determined at an earlier stage, much less by the assessee. This can be done only by the Department at the stage of finalization of assessment. If that is so, naturally, interest liability will abide by in the result of final assessment, that is, the quantum of duty finally assessed. Of course, where full differential duty stands paid, along with interest, the assessee will not be liable to pay any interest on the amount after finalization of assessment as stipulated in the Boards instructions (supra), and in such a case there is no question of demanding interest on account of delay on the part of the Department to finalise the assessment.
9. Interest is a measure of compensation. It is not a penalty and cannot be treated as a burden on the assessee. Where any amount is payable as duty, and only part thereof is paid by way of provisional assessment or even later, suo motu, it results in deprivation of differential duty to the exchequer, that is, financial loss to the exchequer and corresponding financial gain to the assessee. Therefore, whether differential duty is paid prior to or subsequent to final assessment, but beyond the due date, will make no difference. It is difficult to appreciate as to how an assessee can deny the liability to pay interest on the amount of duty. As a matter of fact, as held by the Supreme Court in Commissioner of Trade Tax vs. M/s Kanhai Ram Thekedar, 2005 TIOL 76- SC-CT, no show cause /demand notice is required to be given before passing order regarding interest.
10. In the ordinary course, the assessee is required to pay the duty by the fifth day of the succeeding month on monthly basis. Provisional assessment is a concession allowed to the assessee where he is unable to determine the value of the excisable goods or determine the rate of duty applicable to such goods. The request for provisional assessment can be accepted for reasons to be recorded in writing which means that the request is not to be routinely granted as a matter of course. Further, under sub-rule (2) of rule 7, the assessee is required to execute a bond in the prescribed form and, also, furnish surety or security to the satisfaction of Assistant /Deputy Commissioner of Central Excise binding the assessee for payment of difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed. Having opted for provisional assessment, on execution of such bond, with surety or security, the assesse can not deny the liability to pay interest on the differential amount of duty.
11. The decision in M/s Karnataka Vidyuth Karkhane Ltd., that interest provision would be applicable after expiry of the period of one month from the date when the amount is determined is in clear conflict with sub-rule (4) of Rule 7 which expressly lays down in unmistakable terms that the assessee shall be liable to pay interest on the differential amount from the first day of the month succeeding the month for which such amount is determined. As a matter of fact, pursuant to the finalization of assessment the assessee may be found entitled to refund, in which case too, interest, likewise, is to be paid to him from the first day of the month succeeding the month for which such refund is determined under sub-rule (5). Sub-rules (4) and (5) thus contain similar provisions as regard the effective period for which interest is payable - either by the assessee to the Department in the case of payment of differential duty or by the Department to the assessee, in the case of refund. In view of the clear provisions of rule 7(4) the Counsel for the assessee very fairly did not make any serious endeavour to support the decision in M/s Karnataka Vidyuth Karkhane Ltd. (supra). In these premises, it has to be held that the said decision does not lay down the correct law as to the period for which interest is payable on the differential amount.
12. Shri V. Balasubramaniam submitted that the charging of interest may be futile as the assessee is entitled to take credit of the amount on the very next day it is paid and therefore it will be futile exercise to demand interest on the amount of differential duty. Counsel referred to the decision of the Larger Bench in the own case of the appellant reported in 1996 (81) ELT 246 (Tribunal). In course of hearing it was brought to our notice that the issue arising from the plea of revenue neutrality has been referred to Larger Bench in the case of Bayer ABS Limited vs. CCE, Vadodara -2008 (226) ELT 386 (Tri. Ahmd.). As such we do not wish to go into this issue which is also not the subject matter of the present reference in details. We may nevertheless observe, prima-facie, that the plea overlooks the fact that credit can be taken only of the duty paid and not interest.
13. It was also submitted that where the assessee voluntarily pays duty before issuance of show cause notice he should not be saddled with interest. Counsel submitted that Tribunal has consistently taking this view and in this regard he placed reliance on certain decisions of the Tribunal. We are of the view that rule 7 of the Central Excise Rules is a self-contained law in the matter of a provisional assessment. The decisions cited by the Counsel were rendered in the context of imposition of penalty. Reference was also made to Section 11AA and 11AB of the Central Excise Act. On a bare reading it is clear that these provisions contemplate a different situation, the only relevance of these provisions is that interest will have to be calculated at the rate specified in the notification issued under section 11AA or section 11AB as provided in rule 7(4).
14. Shri M. Kannan, Advocate appearing for M/s Ennore Foundries Limited adopted the submission of Sh. V. Balasubramaniam. He attempted to address us on merits of the case. However, considering the scope of reference, we do not want to go into the merits which is to be examined by the Division Bench.
15. The reference is thus answered in the affirmative and it is held that even where duty is paid suo motu before finalization of assessment under rule 7 of the Central Excise Rules, the manufacturer will be liable to interest on the differential amount of duty.
16. The reference having been answered, the appeal, may now be listed before Division Bench for disposal on merit.
[Pronounced on .2008]
(Justice S.N. Jha)
President
[P.G. Chaco]
Member [Judicial]
[M. Veeraiyan]
Member [Technical]
[Pant]