2007 (7) TMI 461 - AT - Central Excise

Interest - Valuation - Held that - it is not disputed by the appellant that there was a short payment. The quantum of short payment is not known as finalization takes place between the appellant and their customer at a later date. Section 4(3)(d) clearly provides that any payment in connection with the sale that could become payable at a later point of time shall be added to the transaction value - interest upheld - appeal dismissed.

Summary

Issues:
Appeal against recovery of interest under Section 11AB of the Central Excise Act, 1944 for non-payment of interest on differential duty; Determination of transaction value for self-assessment of duty in cases involving price escalation clause.

Analysis:
1. The appellant removed excisable goods on payment of duty, but there was a revision in rates for certain consignments leading to supplementary invoices for the differential duty without interest payment, which was ordered by the original authority and upheld by the Commissioner (Appeals).
2. The appellant argued that in the foundry industry, price fixations are based on initial agreements with buyers, and any subsequent price revisions through supplementary invoices should not attract interest under Section 11AB as the duty was paid correctly at the time of clearance.
3. The Tribunal noted that the transaction value for self-assessment of duty was not correctly determinable due to price escalation clauses in the original supply agreements, giving the appellant the option of seeking provisional assessment under Rule 7.
4. Even if the assessment was not provisional, interest becomes payable in cases involving price escalation clauses as the transaction value includes future payments based on escalation clauses, making the duty payment provisional until finalization between the appellant and the customer.
5. The appellant's argument of short payment was acknowledged, with the Tribunal emphasizing that any payment becoming payable at a later point of time, as in the case of price escalation clauses, should be added to the transaction value as per Section 4(3)(d) of the Central Excise Act.
6. Ultimately, the Tribunal upheld the decision of the Commissioner (Appeals) regarding interest liability, stating that no valid ground was presented to interfere with the finding, resulting in the dismissal of the appeal.

This judgment clarifies the application of interest liability under Section 11AB in cases involving differential duty payment due to price revisions with price escalation clauses, emphasizing the inclusion of future payments in the transaction value for duty assessment.