The liability to pay interest under Rule 7(4) of the Central Excise Rules, 2002 does not arise if the differential duty is paid before the finalization of the assessment. The determination of the amount payable to the Central Government is crucial in establishing the liability to pay interest.

1. These Appeals by the Assessee challenge the order passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Mumbai, dated 24th January, 2014.

2. Since perusal of this order reveals that there are substantial questions of law, we proceed to admit these Appeals on the following substantial questions of law:

“(i) Whether in the facts and circumstances of the case, the Appellate Tribunal is correct in holding that interest is payable on differential duty arising on finalization of provisional assessment under Rule 7 of Central Excise Rules, 2002?

(ii) Whether the Appellate Tribunal is correct in not following two binding precedents of this Court reported at Ispat Industries – 2010 (259) ELT 662 (Bom.) & Tata Motors – Order dated 1.2.2012 in Central Excise Appeal No.54 of 2011?”

3. Since extensive arguments of both sides have been heard, by consent of parties, we proceed to dispose of these Appeals finally.

4. The facts necessary to appreciate the arguments of the learned Senior Counsel, appearing for the Assessee and the Advocate of the Revenue are that the Appellants engaged themselves, inter alia, in manufacture of tyres, tubes and flaps falling under Chapter Heading 40 to the First Schedule of the Central Excise Tariff Act, 1985. The period relevant for our purpose is April 2010 to March 2011. The Appellant cleared the manufactured goods, to their depot/C & F Agent etc. for subsequent sale in the replacement market and secondly, the original equipment manufacturers or other buyers from the factory gate.

5. They cleared the aforesaid manufactured goods on payment of central excise duty as per the value determined in terms of section 4(1)(a) and section 4(1)(b) of the Central Excise Act. Thus, the Assessee paid the duty on the transaction value/normal transaction value as the case may be. The Assessee has set out the details, the mode of computation and the tax amount and stated that in cases of clearance of their goods to depot/distribution centres/C & F Agencies for sale in the replacement market, the normal transaction value, namely, the price actually to be realized was not known. This was because the Assessee claimed certain deductions and permissible in terms of this statute. Since these deductions could not be quantified they were determined ad hoc. In the light of the above, it was not possible for the Assessee to do the self assessment at the time of clearance. Therefore, the Appellants cleared the manufactured goods on provisional assessment basis under Rule 7 of the Central Excise Rules, then, prevailing.

6. The Appellants pointed out to the Revenue as to how at the end of each financial year, they obtained a cost accountant certificate and in relation to the quantification of discount but we are not concerned with this in any further details. Suffice it to note that the Appellants forwarded the requisite documents and records to the jurisdictional Assistant Commissioner/Deputy Commissioner of Central Excise and also the Range Superintendent of Central Excise for finalization of the provisional assessment for the particular financial year. While furnishing the aforesaid details to the concerned authorities, pertinently, the Appellants also paid the differential duty without waiting for normal order of Deputy/Assistant Commissioner finalizing the provisional assessment. Thus, during the relevant period the Appellants-Assessees had paid the differential duty amount before passing of order for finalization of assessment. The details thereof are provided at para 17 page 6 of the paper book. The final assessment order came to be passed on 4th January, 2012 and finalizing the provisional assessment for the financial year 2010-2011.

7. It is in these circumstances that a notice to show cause-cum-demand came to be issued on 14th September, 2012 seeking to recover from the Assessee the interest of Rs.5,11,090/- under Rule 7(4) of the Central Excise Rules read with section 11AB of the Act on the amo