Interest Liability Under Rule 7 of Excise Rules Arise Only When Assessment Were Made Provisional After New Rules: CESTAT rules in favour of Cadbury India [Read Order]

As a relief to Cadbury India, the Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that interest liability under rule 7 of the Central Excise Rules arises only when assessments were made provisional after new rules.

M/s Cadbury India Ltd, the appellant challenged the order of Commissioner of Central Excise (Appeals), Pune – I, is the changeability of interest in terms of rule 7 of Central Excise  Rules, 2002 following confirmation of demand of ₹ 36,07,51,390/- on finalization of provisional assessment and most of which had been discharged, except for ₹ 4,79,41,410/- which was paid vide challan dated 27th March 2012, during the pendency of adjudication. 

Of the interest confirmed by the adjudicating authority, the first appellate authority had set aside ₹ 2,09,50,522/- by relying upon the decision of a Larger Bench of the Tribunal in Bimetal Bearings Ltd v. Commissioner of Central Excise, Chennai and all that now remains is the interest payable on the amount that had not been discharged till the completion of adjudication. 

The appellant had cleared intermediate goods during 1992-96, provisionally under rule 9B of Central Excise Rules, 1944, owing to the dispute in valuation which came to be decided ultimately by the Supreme Court holding that cost of production was to be defined for the purpose following CAS4 guidelines.

The assessments were thereby finalized on 30th December 2011 and the appellant was required to pay differential duty for the period amounting to ₹ 4,79,41,410/- as recorded supra and, except for the portion on which disputed interest continues to subsist, the consequential dues had been discharged by them.  Though the assessments were rendered as provisional under rule 9B of Central Excise Rules, 1944, the finalization occurred after Central Excise Rules, 2002 came into effect. 

It was evident that the issue of leviability of interest on finalization of provisional assessment, in all cases about clearances before 2001, has been set at rest by the Central Board of Indirect Taxes & Customs (CBIC) in circular supra.

As regards revenue plea interest will be chargeable for the entire period because the power to charge interest existed under Sec. 37. A two-member bench Mr C J Mathew, Member (Technical) and Mr Ajay Sharma, Member (Judicial) observed that Sec. 37 was only an enabling power to charge interest and once the power is not exercised the interest cannot be charged.

In view of the clarification issued by the Central Board of Indirect Taxes & Customs (CBIC) as well as the judicial determination in their case, the CESTAT set aside the impugned order.

To Read the full text of the Order CLICK HERE

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