The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench has held that on finalization of provisional assessment, the interest is to be calculated of the duty short-paid from the succeeding month on which the duty was payable.
The tribunal observed that the Appellant has voluntarily discharged the differential duty short paid and chose not to claim refund of the excess duty paid indue course of clearance to their other related interconnected undertaking, obviously for the reason that the Unit has already availed credit on the excess amount paid.
Facts
The appellant/assessee had requested for provisional assessment of the goods i.e. OE parts such as Front Axle, Rear Axle, Propeller Shaft, Stiffener etc. manufactured and cleared on payment of duty to their interconnected undertaking M/s. Toyota Kirloskar Motors Private Limited, Bidadi having business interest with each other, since the assessable value was determined as 110% of the cost of production and the overhead allocation to the goods manufactured by them could be finalized only after conclusion of the accounting year and the costing were to be carried out as the same was allowed by the Department.
The period involved is 2008-09 & 2009-10. On receiving the relevant data, the appellant approached the Department for finalization of assessment.
The Department raised objection for non-inclusion of the value of royalty paid by the appellant pursuant to an agreement with M/s. Toyota Motor Corporation, Japan, in computing the cost production under CAS-4 method, show-cause notice was issued on 09.04.2010 for the FY 2008-09 proposing to add the amount of royalty of Rs.5,55,72,586/- paid and duty of Rs.77,80,162/- demanded with interest. Similarly for the year 2009-10, amount of royalty paid and duty demanded with interest.
On finalization of the assessment, the adjudicating authority added the payments made towards royalty and finalized the assessment after appropriating the duty short-paid and directed payment of interest under Section 11AB of the Central Excise Act, 1944. The appellant challenged the orders before the learned Commissioner (Appeals), who in turn, rejected their appeals.
Arguments
The assessee contended that upon finalisation of provisional assessment order it is the cumulative effect which had to be considered while demanding interest u/r 7(4) of the CER, 2002. In other words, the demand of interest u/r 7(4) can only be on the net difference i.e., after adjusting the excess provisional duty paid, if any, by the Appellant as per the finalisation order itself. Hence, it is the case of the Appellant that in the case of appeal in E/935/2012, the demand of interest on the differential duty demanded of Rs.50,48,450/- is excessive and on the contrary the interest was payable only on net difference viz., Rs.30,49,570/-. In the case of second appeal in E/936/2012, there was excess duty paid (net difference) upon finalisation and hence no interest is demandable.
The department argued that it is an admitted fact that the appellant had cleared the goods to their interconnected units resorting to provisional assessment for the FY 2008-09 and 2009-10. Also, the appellant had calculated the assessable value based on CAS-4 method and submitted the same before the adjudicating authority for finalization of assessment. At the time of submission of the said details, it was informed that they had paid differential duty short-paid by them and raised supplementary invoices and passed on the same duty to their buyers. The said short-paid duty was discharged before finalization of the provisional assessment.
Conclusion
The tribunal concluded that the Appellant has voluntarily discharged the differential duty short paid and chose not to claim refund of the excess duty paid indue course of clearance to their other related interconnected undertaking, obviously for the reason that the said Unit has already availed credit on the excess amount paid. Therefore, to ascertain the interest payable on the differential short paid on finalisation of the provisional assessment for the Financial years 2008-09 & 2009-10.
Case Details
Case Name: Toyota Kirloskar Auto Parts Private Limited v/s The Commissioner of Central Excise (LTU)
Citation: Central Excise Appeal No. 935 of 2012
Tribunal: CESTAT Bangalore
Coram: Dr. D.M. Misra, Member (Judicial) and Mrs R Bhagya Devi, Member (Technical)