Bharat Heavy Electricals Ltd vs Commissioner Of Central Excise

[Arising out of Order-in-Appeal No.151-152/2013 (M-III) & 16 to 20/2013 (M-III) (D) dt. 2.12.2013 passed by the Commissioner of Central Excise (Appeals), Chennai]

Bharat Heavy Electricals Ltd. Appellant

Versus

Commissioner of Central Excise, Chennai-III Respondent

Appearance:

Shri Raghavan Ramabadran, Advocate For the Appellant

Shri B. Balamurugan, AC (AR) For the Respondent

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing :27.3.2015 Date of Pronouncement :30.06.2015

FINAL ORDER No.40721-40727/2015

As the issues involved in all the seven appeals are common and arising out of a single OIA dt. 2.12.2013, all the appeals are taken up together for disposal.

2. The brief facts of the case are that appellant, a Public Sector Undertaking are manufacturers of Boiler Auxiliary products including Electrostatic Precipitator falling under Chapter Heading 84 of CETA 1985 and are registered with Central Excise and discharging duty on the final products. They opted for provisional assessment under Rule 7 of Central Excise rules due to price variation clause in the contract and variation of rate per Kg adopted on the estimated design value. On finalisation of the price, they have paid the differential duty on their own by raising the supplementary invoices on the goods already cleared before finalisation of assessment. Subsequently assessments were finalised by jurisdictional Asst. Commissioner by his orders dt.21.1.2011, 31.3.2011 & 26.8.2011 for different periods. In respect of 2 OIOs dt. 31.5.2011 and 26.8.2001, the LA demanded interest under Rule 7 (4) of CER where the differential duty was already paid by them before finalisation. In respect of remaining 5 orders dt. 21.1.2011, 31.3.2011 and 26.8.2011, the LA did not demand interest. The assessee filed appeal against the two orders and the Revenue reviewed the AC's 5 orders and filed appeals. Commissioner (Appeals) in his common order held that interest is chargeable on differential duty paid under supplementary invoices issued for the price variation and rejected the assessees appeals and allowed the Revenue appeals.

3. Heard both sides.

4. The Ld. Advocate appearing for the appellant submits that the present case relates to finalisation of provisional assessment under Rule 7 of CER and the differential duty was paid before finalisation of the provisional assessment by the jurisdictional AC. As per rule 7 (4) of CER, interest is demandable and the assessee is liable to pay interest on the differential duty if any consequent to the order of final assessment at the rates specified by notification issued under Section 11AB from the first day of the month succeeding month for which such amount is determined till the date of payment. In their case, the appellants have already paid the differential duty on their own calculation before finalisation of assessment and there is no differential duty payable on account of final assessment made by the adjudicating authority. Therefore, no interest is payable. The Commissioner (Appeals) held that interest is chargeable on the differential duty paid on the supplementary invoices issued after the due date of removal of goods and he held that interest is chargeable from the 1st day of the month succeeding the month for which duty is finalised.

He further submits that interest is payable only from the date of finalisation decided by the adjudicating authority. He further submits that Commissioner (Appeals) in the impugned order wrongly relied on the Honble Supreme Courts decision in the case of CCE Pune Vs SKF India Ltd.  2009 (239) ELT 385 (SC) which is not applicable to the present case as in that case there was no provisional assessment and in their case, the goods were cleared under provisional assessment under Rule 7. He relied on Honble Bombay High Courts order in the case of Ceat Ltd. Vs CCE - 2015 (317) ELT 192 (Bom.) wherein the Hon'ble High Court allowed the appeal on a similar issue and distinguished the Honble Supreme Court judgement in the case of SKF India Ltd. (supra) and the Tribunals Larger Bench decision in the case of Cadbury India Ld. Vs CCE  2008 (232) ELT 224 (Tri.-LB). He submits that the Tribunal in the appellants own case [BHEL Vs CCE Bhopal-2012 (275) ELT 614 (Tri.-Del.)] has dismissed their appeal by following the decision of Larger Bench and in the above case differential duty was paid only after finalisation of assessment and the said decision will not apply.

He submits that since the Apex Court decision of SKF India Ltd. and the Larger Bench decision have been distinguished by the Honble Bombay High Court in the case of CEAT Ltd. (supra) the Tribunals order in their own case is not applicable. In addition to above, he relied on the following case laws :-

(i) Ispat Industries Ltd. Vs CCE Nagpur 2007 (290) ELT 280 (Tri.-Mum.)

(ii) CCE Nagpur Vs Ispat Industries Ltd.

2010 (259) ELT 662 (Bom.)

(iii) Tata Motors Ltd. Vs CCE Pune 2011 (269) ELT 415 (Tri.-Mum.)

(iv) CCE Vs Ispat Industries Ltd.

2014 (301) ELT A70 (SC)

4. On the other hand, Ld. A.R. reiterated the Revenues appeal and reiterated the impugned order. He submits that interest is payable as the appellants have paid the differential duty by raising the supplementary invoices on account of price revision. He submits that Honble Supreme Court decision in the case of SKF India (Ltd. (supra) is clearly applicable to the present case. He further submits that the Tribunal Division Bench in their own case (supra) on identical issue of demand of interest had dismissed their appeal and held that interest will arise from the date of clearance of goods. Since the said order is not stayed or set aside, the Tribunal order attained finality and binding on the appellant.

5. Ld.AR further submits that in the case of Ispat Inustries Ltd. relied by the appellant, Revenue filed appeal against the Honble Bombay High Court order. The Honble Supreme court while dismissing the appeal has also clearly held that question of law is kept open. He relied the following citations :-

(1) CCE Pune Vs SKF India Ltd.

2009 (239) ELT 385 (SC) (2) Cadbury India Ltd. Vs CCE Pune 2008 (232) ELT 224 (Tri.-LB) (3) BHEL Vs CCE Bhopal 2012 (275) ELT 614 (Tri.-Del.) (4) Excel Rubber Ltd. Vs CCE Hyderabad 2011 (268) ELT 419 (Tri.-LB)

6. I have carefully considered the submissions of both sides and examined the records. The main issue in all these appeals relates to demand of interest and whether the appellant is required to pay interest on the differential duty paid on account of price variation raised through the supplementary invoices before taking into account the provisional assessment availed by the appellant. Commissioner (Appeals) in his impugned order at para 8,9 & 10 has clearly dealt the issue in detail and relied on Honble Supreme Courts decision in the case of CCE Vs SKF India Ltd. (supra) I find that the appellant opted for provisional assessment on account of price variation clause in each of the contract. There is no dispute on the fact though they opted for provisional assessment immediately on finalising the price they raised supplementary invoice for recovering the amount from buyers and paid the differential duty. Appellants mainly relied on Bombay High Court decision in CEAT Ltd. (supra), and also contended that Honble Supreme Courts decision in the case of SKF India Ltd. is not applicable in their case. In this regard, I find that the Principal Bench of this Tribunal in the appellants own case reported in BHEL Vs CCE Bhopal (supra), has discussed the identical issue in depth and held against the appellant. The relevant paragraphs of the said Principal Bench of the Tribunal decision are reproduced as under :-

11.?As regards the merits of the case, it is the contention on behalf of the appellants that the case of the appellants is not covered by the decision of the Apex Court in the matter of Commissioner of Central Excise, Pune v. S.K.F. India Ltd. reported in 2009 (239) E.L.T. 385. According to the learned Advocate for the appellants, S.K.F. India Ltd. ruling is applicable only in cases where there is short-payment of duty which is recoverable under Section 11A and it would not apply to the differential duty recoverable under Rule 7(3) of the said Rules and the occasion to demand the duty would not arise unless the assessment is finalized.

.... .... ....

16.?Placing reliance in the decision in the matter of S.K.F. India Ltd. it is submitted that though the decision does not deal with the issue of charging interest on payment of duty on finalisation of assessment, it does cover cases where the duty is paid at any subsequent date by the assessee on account of revision of price. The provisional assessment in the case in hand was resorted to because the appellants were not certain about the price at the time of removal of the goods. In other words, the provisional price was subjected to revision. Resort to Rule 7 protects the assessee from penal action which can be attracted for failure to pay the appropriate duty at the time of removal of the goods. Merely because the appellants took shelter of the provision of law comprised under Rule 7 that cannot exonerate the payment of interest on the delayed payment of duty. The situation in the case in hand is akin to the price revision at a future date and the same is fully covered by the decision of the Apex Court in S.K.F. India Ltd. case. Undisputedly, the differential duty was paid subsequent to the date of payment due at the time of removal of the goods. Finalization of the assessment does not alter the procedure of levy and collection of duty consequent to price variation.

17.?In rejoinder, it was sought to be contended on behalf of the appellants that sub-rule (4) of Rule 7 has been enacted in exercise of delegated legislative power, in terms of Section 37(1)(ibb) of the said Act and therefore, the authority for charging interest under the said provision shall remain confined to the amount which becomes payable consequent to the finalisation of the assessment and cannot extend the amount already paid prior to the finalisation of the assessment. In other words, while interpreting the Rule 7(4), the expression month for which such amount is determined is necessarily to be understood to mean any month subsequent to the passing of the assessment of finalisation order and not prior thereto.

18.?There can hardly be any dispute that Central Excise Rules, 2002 have been framed in exercise of the powers conferred under Section 37 of the Central Excise Act, 1944. Sub-section thereof clearly provides that the Central Government may make rules including rules conferring powers to issue Notification with retrospective effect under those rules to carry into effect the purposes of the said Act. Sub-section (2)(ibb) provides that in particular and without prejudice to the generality of the power granted under sub-section of Section 37, such rules may provide for charging of interest on the differential amount of duty which becomes payable or refundable upon finalization of all or any class of provisional assessment. In other words, apart from generality of power enshrined under sub-section (1) of Section 37 of the said Act, sub-section (2)(ibb) of Section 37 specifically provides that the Rules may provide for charging interest on differential amount of duty becoming payable consequent to the finalization of provisional assessment. The provision of law comprised thereunder nowhere specifies such Rules shall restrict the levy of interest for the period consequent to finalization of the assessement.

Rather it specifies that the Rules may provide for interest on the differential amount of duty becoming payable consequent upon the finalization of assessment. The expression becoming payable would obviously relate to the date on which the duty was required to be paid. Considering the provisions of Section 4 of the said Act, the duty becomes payable on each removal of the goods consequent to the manufacture thereof. Being so, the expression becomes payable under Section 37(2)(ibb) would relate to the date on which the duty was payable i.e. at the time of clearance of the goods in terms of the said Act. Merely because the differential amount of duty is ascertained consequent to the finalization of assessment, the due date for payment of such amount never stands changed or extended. It would always relate to the date of removal of the goods thereof. It is only the quantification of the differential amount of duty is ascertained consequent to the finalization of assessment. And that too merely because the assessee was not able to ascertain the exact quantum of duty in the absence of sufficient material to finalize the valuation of the goods at the time of clearance of goods.

That would not extend or change the due date for payment of duty. The due date for payment of duty is statutorily fixed being the date of removal of the goods consequent to the manufacture thereof, as the same cannot be changed by misinterpreting the provisions relating to the power of the Government to frame the Rules.

19.?Besides, Rule 7(4) clearly provides that the assessee shall be liable to pay interest on any amount payable to the Central Government consequent to order for finalization of assessment under sub-rule (3) at the rate specified by the Central Government by a Notification issued under Section 11AA or Section 11AB of the said Act from the first day of the month succeeding the month for which such amount is determined till the date of payment thereof. The provisions therefore, specifically states that the interest liability will commence from the month succeeding the month for which such amount is determined. The expression for refers to the month for which the amount is determined pursuant to finalization of assessment. Apparently, it discloses that the interest liability would commence from the month succeeding the day on which the duty was due and payable in relation to the goods cleared. In case the contention of the Advocate for the appellants is to be accepted then the expression used in Rule 7(4) would have been in instead of for, with reference to the month following the day on which duty was due.

.... .... ....

22.?Taking into consideration the law laid down by the Apex Court in SKF India Ltd. case, the provision of law referred herein above, we find no case for interference in the impugned order and hence the appeal fails and is hereby dismissed.

7. As seen from the above order, the principal Bench of this Tribunal has clearly explained at para 19 of the meaning of the expression the month for which such amount is determined mentioned in rule 7 (4) and held that the word used in the expression for it is clearly refers to the month for which amount is determined pursuant to finalisation of assessment and held that interest liability would commence from the month succeeding the day on which duty was due and payable in relation to the goods cleared. It was also explained if the appellant contention that interest is payable after finalisation is accepted, then the expression used in rule 7 (4) would been "in" instead of "for", with reference to the month following the day on which duty was due. In the present case also LAA at para-8 has also discussed this particular expression for which the said amount is determined used in the Rule 7 (4) of CER. The appellant placing reliance on Honble Bombay High Courts decision in the case of CEAT Ltd. (supra) and other decisions in the case of Ispat Industries Ltd. and TATA Motors Ltd. (supra) is not relevant in view of appellants own case wherein the Principal bench has already has decided the issue, and said order has not been set aside or stayed by any High Court or Supreme Court, it is binding on the appellant. By the above order, the issue attained finality and as far as the appellant is concerned this Tribunal is bound by the Division Bench decision in their own case and taking contrary view is not warranted. By respectfully following the Supreme Court decision in SKF India Ltd. and the Tribunal's Principal Bench decision (supra), I hold that interest is chargeable on the differential duty paid through supplementary invoices raised by the appellants. Accordingly, the impugned order is upheld and all the appeals are dismissed.

(Pronounced in open court on 30.06.2015)

(R. PERIASAMI) TECHNICAL MEMBER

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