Provisional Assessment only applicable to specific situations as per Rule 7 of Central Excise Rules: CESTAT [Read Order]

The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Provisional Assessment is only applicable to Specific Situations as per Rule 7 of Central Excise Rules, 2002.

The appellant Revenue challenged the orderof Commissioner of Central Excise (Appeals), Pune – I is the empowerment vested in jurisdictional central excise authority to order ‘provisional assessment’ under rule 7 of Central Excise Rules, 2002 about clearance of goods effected by M/s Finolex Cables Ltd.

The respondent,3M Electro & Communication India Pvt Ltdis a manufacturer of ‘cable joining kits’ which is an assembly of several components that were either ‘bought out’ or manufactured in their factory. As the ‘cable joining kits’ were not liable to duties of central excise, liability was being discharged on the components so manufactured on a value corresponding to the cost of production, as per CAS-4 norms prescribed by the Institute of Costand Works Accountants of India, made applicable by circularof Central Board of Excise and Customs (CBEC). 

On submission of CAS-4 at the end of each financial year, the differential duty was also discharged by the respondent. The jurisdictional central excise officerordered a ‘provisional assessment’ for the financial year 2012-13 which was challenged successfully before the first appellate authority.  

The Authorised Representative submitted that the grounds of appeal for restoration of the order of ‘provisional assessment’ are correct in law and that the procedure adopted by the original authority could not but be validated.

The Counsel for the respondent submitted that rule 7 of Central Excise Rules, 2002 affords an option for ‘provisional assessment’ only to the assessee in specified situations and, necessarily, subject to execution of a bond for payment of the differential duty; it is contended that no such bond had been furnished.

Furthermore, it is contended that, in the event of assessment resorted to by the assessee not being found to be tenable, the jurisdictional central excise authority was empowered to take recourse to appropriate provision in the Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000 for re-determination.

In Commissioner of Central Excise, Pune – I v. Finolex Cables Ltd, the Tribunal held that “4. We have perused Rules 7 of the Central Excise Rules, 2002. Sub-rule (1) of such Rules states that “where the assessee is unable to determine the value of the excisable goods or determine of the rate of duty applicable thereto, he may request the Assistant Commissioner of Central Excise in writing giving reasons for payment of duty on a provisional basis and the Assistant Commissioner may order allowing payment of duty on a provisional basis at such rate or on such value as may be specified by him.” If such permission is granted, the rule provides Air execution of a Bond by the assessee with such surety or security as the said Assistant Commissioner may specify. The Rule further provides that where the provisional assessment has been sought, the Assistant Commissioner of Central Excise shall pass an order for final assessment as soon as may be. The C.B.E. & C. Manual also, in para 3.1 thereof, states that Rule 7 of the Central Excise Rules does not provide for the department, suo motu, issuing directions for resorting to provisional assessment. Therefore, when the Central Excise officers, during the scrutiny or otherwise, find that self-assessment is not in order, the assessee may be asked for all necessary documents, records or other information for issue duty demand for differential duty, if any, after conducting a proper inquiry and in case the assessee fails to provide the records/information, ‘best judgment’ method may be adopted to demand the duty. Thus, both the Rule and instructions issued thereon provide for assessment of duty finally in a case where the assessee is unable to determine the correct amount of duty or correct rate of duty and also does not opt for provisional assessment.”

In view of the decision of the Tribunal, the two-member bench of Mr C J Mathew, Member (Technical) and  Mr Ajay Sharma, Member (Judicial) dismissed the appeal of revenue.

To Read the full text of the Order CLICK HERE

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