Whether adjustment of excess payments made at the time of provisional as¬sessment possible towards short-payments at the time of final assessment ?

PJ/Case Law/2013-14/2087

Case:- COMMISSIONER OF C. EX. & CUS, NASHIK Vs PERFECT CIRCLE VICTOR LTD.

Citation:- 2014 (299) E.L.T. 509 (Tri. - Mumbai)

Brief facts:- This is an appeal filed by the Revenue against Order-in-Appeal No. CEX-XI/JMJ/273/916/ NSK/APL/2004, dated 28-6-2004 passed by the Commissioner of Central Excise & Customs (Appeals), Nashik.
The respondent, M/s. Perfect Circle Victor Ltd., Nashik are manufacturers of Gaskets and Piston Rings. They claimed deduction towards secondary packing, cash discounts, volume discounts, handling charges and year-end discount from the sale price to arrive at the excisable value. The period involved is 1988-89 to 1993-94. The assessments were provisional during the material time. The assessments were finalized vide Order-in-Original No. 14/1995 dated 24-6-1995 wherein the assessing authority disallowed the deductions on account of secondary packing, volume discount, cash discount and handling charges. However, he allowed the deductions claimed by the respondent-assessee towards year-end discount. Thereafter, he adjusted the excess payment of Rs.19,18,569.20 made by the respondent-assessee from the amount of Rs.65.89 lakhs due from the respondent-assessee on account of the finalization of the provisional assessment and accordingly directed the respondent-assessee to make the balance payment of Rs.146,70,430.80. The Revenue was aggrieved of the same on the ground that the adjudicating authority should not have adjusted the excess payments towards the short-payments and the assessee should have been directed to file a refund application for the excess payments made. Therefore, the Revenue filed an appeal before the lower appellate authority. The lower appellate authority dismissed the appeal of the Revenue as infructuous and hence the Revenue is before Tribunal.
The only ground urged in the appeal memorandum is that, if there is an excess payment made by the assessee, then the procedure prescribed under Section 11B of the Central Excise Act, 1944 should have been followed and such excess payment should not have been adjusted against short-payments and, therefore the assessing officer committed an error. Since the appellate authority did not consider this aspect, the impugned order has to be set aside and the Revenue's appeal allowed.

Appellant’s contention:-The appellant reiterates the grounds urged in the appeal memorandum. However, he submitted that there was a provision for adjustment of excess payments towards short-payments under the Central Excise Rules during the material period of time. The said Rule was amended subsequently in 1999 to provide that, if any refunds are to be made, then the procedure under Section 11B should be followed.

Respondent’s contention:-The respondent submits that during the impugned period i.e., in 1995 when the assessments were finalized, sub-rule (5) of Rule 98 itself provided for adjustment of excess payments made towards short-payments at the time of finalisation of the provisional assessments and, therefore, the orders passed by the lower authorities are sustainable in law and there is no merit in the appellant's appeal. Therefore, he pleads for dismissal of appellant's appeal.

Reasoning of judgment:-Having carefully considered the rival submissions, the assessments in the case were finalized vide order dated 24-5-1995. The relevant provisions of Rule 98 read as Follows:
"(5) When the duty leviable on the goods is assessed finally in accordance with the provisions of these rules, the duty provisionally assessed shall be adjusted against the duty finally assessed, and if the duty provisionally assessed falls short of, or is in excess of the duty finally assessed, the assessee shall pay the deficiency or be entitled to a refund, as the case may be”
From the above provisions, it is abundantly clear that any excess payments made can be adjusted towards short-payments at the time of finalizing of the provisional assessments. The finalization of the assessments has been done vide Order-in-Original No. 14/1995, dated 24-6-1995. Therefore, the adjudicating authority has correctly adjusted the excess payments made by the assessee towards the short-payments which were due from them. The said Rule was subsequently amended by adding a proviso which stated that :
"5.1 Provided that, if an assessee is entitled to a refund, such refund shall not be made to him except in accordance with the procedure established under sub-section (2) of section 11B of the Act."
This provision has been incorporated in the statute vide Notification No. 45/99-C.E., dated 25-6-1999. Therefore, prior to 25-6-1999 the adjudicating authority could adjust the excess payments made at the time of provisional assessment towards short-payments arising at the time of final assessment. Therefore, they do not find any merit in the appeal filed by the Revenue.

Decision:- Appeal allowed.

Comment:- The crux of the case is that the excess payments made at the time of provisional assessment can be adjusted towards short-payments arising at the time of final assessment for the period upto 25.6.1999. However, due to amendment after 25.6.1999, assessee is required to file refund for the excess payments made by him in terms of provisions contained in section 11B of the Central Excise Act, 1994.

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PJ/Case Law/2013-14/2087

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