The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Chennai, has allowed the set off of excess excise duty payments against any shortfalls within the same assessment period without attracting interest charges. The decision came in response to the appeal filed by M/s. Jonas Woodhead & Sons (India) Ltd. The CESTAT ruled in favour of the appellant by setting aside the revenue’s demand for interest on shortfall amounts, which had been covered by the appellant’s excess duty payments.
The case pertains to a series of appeals filed by M/s. Jonas Woodhead & Sons (India) Ltd., a Chennai-based manufacturer, disputing the revenue’s practice of treating excise duty payments individually for each clearance without considering the overall duty liability for the period.
The appellant had, on multiple occasions, paid excess excise duty on certain transactions and had shortfalls on others within the same period. However, the revenue insisted on charging interest for these shortfalls, disregarding the appellant’s cumulative excess payments.
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The appellant, M/s.Jonas Woodhead & Sons (India) Ltd., represented by Shri N. Viswanathan argued that the excess payments should be set off against any shortfalls and that imposing interest was unwarranted.
The respondent revenue, the Commissioner of Goods and Services Tax (GST) & Central Excise and others, represented by Shri M. Selvakumar contended that the appellant’s excess duty payments should not be set off against shortfalls.
It was also argued that each clearance should be treated individually for duty assessment, and any shortfall in duty should attract interest charges, as per the established provisions of excise duty regulations.
The two-member bench of the CESTAT comprising Mr. P. Dinesha (Judicial Member) and Mr. Vasa Seshagiri Rao (Technical Member) concluded that excise duty liability should be assessed on an aggregate basis. Relying on the earlier decision in the appellant’s own case and precedent set by the Karnataka High Court, the bench reasoned that once the excess payments for a period are accounted for, it would be unreasonable to impose interest on shortfall amounts.
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The bench cited Rule 7 of the Central Excise Rules, 2002, which governs the adjustment of duty payments. The CESTAT held that the aggregate duty liability should be calculated based on the total clearances within a specified period. The bench also referenced the judgment by the Karnataka High Court in Toyota Kirloskar Motor Pvt. Ltd. v. Commissioner of Central Excise to stress that any excess payment made by an assessee should logically offset shortfalls within the same assessment period.
The ruling protects taxpayers from being penalised with interest charges on technical shortfalls. The CESTAT clarified that unless there is a net shortfall in duty payments after adjustments, interest cannot be levied, as this would contradict the principle underlying excise duty regulations.
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