Interest on differential duty to be computed after adjusting excess duty paid.

PJ/Case Law/2014-15/2384

Case:-CCE, BANGALORE-LTU VERSUS TOYOTA KIRLOSKAR AUTO PARTS PVT LTD

Citation:-2014-TIOL-1875-CESTAT-BANG

Brief Facts:-Appeal No. 291/2008 is filed by Revenue and the period covered is 2006-07. Appeal No. 782/2008 is filed by the assessee and the period covered is 2005-06. In both the appeals issue involved is common and therefore both the appeals are taken together and a common order is being passed.

Appellant opted for provisional assessment in respect of their manufactured goods since the customer to whom the goods were cleared namely Toyota Kirloskar Motor Pvt. Ltd. was related person and therefore transaction value under Section 4(1)(a) of Central Excise Act 1944 (Act) was not applicable. The provisional assessment was permitted. The provisional assessment was finalized after getting the necessary details from the assessee and in both the cases it was found that there was short payment of duty in respect of certain items cleared by the appellant and in respect of certain items there was excess payment of duty. As far as the year 2005-06 is concerned, there was a short payment of duty was of Rs.1,30,65,161/- which was remitted by the appellant even before finalization of provisional assessment on 30.10.2006 itself. Assessment was finalized on 22.12.2006. The excess payment amounted to Rs. 47,51,060/- in respect of which no refund was claimed by the appellant. As regards the year 2006-07, the excess payment was Rs. 1,10,84,180/- and short payment of duty was Rs. 35,29,558/-.

Respondent Contentions:-The learned counsel submits that the Hon'ble High Court of Karnataka in the case of the same appellant in their order reported in [2012 (276) E.L.T. 332 (Kar)] = 2012-TIOL-10-HC-KAR] have held that for the purpose of calculation of interest for short-fall in payment of duty on finalization of provisional assessment, when the assessee is manufacturing more than one item, each item is not to be treated separately and the total duty payable for all the goods has to be calculated. Therefore in respect of the year 2006-07, where excess payment of duty was more than the short-fall, no liability arises on the payment as a result of finalization of assessment. As regards the year 2005-06 he submits that the issue as to whether interest has to be paid and if so from what date interest has to be paid had come up for consideration before the Tribunal in the case of Ispat Industries Ltd. Vs. CCE, Nagpur [2007 (209) E.L.T. 280 (Tri.-Mum.)] = 2006-TIOL-1994-CESTAT-MUM and Tribunal took the view that if differential duty is paid prior to final assessment, no interest is liable to be paid.He submitted that this decision was upheld by the Hon'ble High Court of Bombay as reported in [2010 (259) E.L.T. 662 (Bom.)]. He also submits that the matter was carried to the Supreme Court and the Hon'ble Supreme Court passed the following order on the appeal.

"Delay condoned.

The special leave petition is dismissed. However, the question of law is kept open."

In view of the decision of the Hon'ble High Court of Mumbai which is against the Revenue and SLP filed has been dismissed he submits that the decision of the Bombay High Court has to be followed in the appellant's case also. He submits that in view of the decision of the High Court, the Larger Bench decision in the case of Cadbury India Ltd. Vs. CCE, Pune-I [2008 (232) E.L.T. 224 (Tri.-LB)] = 2008-TIOL-1986-CESTAT-MUM-LB relied upon by the learned AR has no relevance.

Reasoning of Judgment:-We have considered the submissions. As regards the differential duty, in view of the decision of the Hon'ble High Court of Karnataka, the duty has to be calculated after considering the duty payable on all the goods together and therefore excess payment if any will have to be adjusted towards short payment to calculate the differential duty payable.

Coming to the date from which interest is to be calculated, it was considered that the submission of the learned counsel that Bombay High Court decision has to be followed is not correct. This is because Hon'ble Supreme Court where the matter was challenged, while rejecting the SLP, kept the issue of law open. This means that clearly Hon'ble Supreme Court did not consider the law to have attained finality and therefore the dismissal of SLP was only a decision in personam. The legal issue remains open and it cannot be said that decision of Hon'ble High Court of Bombay has laid down the law. Under these circumstances, it was considered that the decision of the Larger Bench of the Tribunal relied upon by the AR is required to be followed.

In view of the above observations, it was held that interest is liable to be paid by the appellant from 1^st day of the next month on the differential duty payable for each month as finalized. Needless to say the interest has to be calculated only if there is a differential duty payable after setting off the excess payment towards short payment. Appeals are decided in above terms.

Decision:- Appeal accordingly decided

Comment:-The essence of this case is that interest on differential duty is to be calculated after adjusting the excess tax if paid. Moreover, another ratio of this case is that when an appeal filed against the order of High Court is dismissed by Supreme Court without considering the question of law, then it cannot be concluded that the issue has attained finality.

Prepared by: Hushen Ganodwala

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PJ/Case Law/2014-15/2384

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