2011 (3) TMI 726 - HC - Central Excise

Provision under sub-section (1) of Section 11A - The assessee-M/s. Presscom Products is a manufacturer of excisable goods falling under Chapter sub-heading No. 8714.00 of the Schedule to the Central Excise Tariff Act, 1985. They preferred a refund claim of Rs. 27,802/- in respect of interest amount paid by them under protest on the differential duty paid on the supplementary invoices raised during the months of July, September and November 2003 due to revision in price of their products after the dates of clearance - The provisions of sub-section (2B) shall not apply to any case where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President - Therefore, this provision is made only prospective - It has no retrospective operation - The intention of the legislature is made clear by express words by incorporating sub-section (2C) by the very same amendment by which this interest on delayed payment of duty was made leviable - Therefore, the order passed by the Tribunal holding that as the duty was paid even before the issue of show cause notice under sub-section (1) of Section 11A and, therefore, no interest is leviable is contrary to the aforesaid statutory provision as well as the law declared by the Apex Court and, therefore, it cannot be sustained - Accordingly, it is hereby set aside - The substantial question of law framed in this appeal is answered in favour of the revenue and against the assessee.

Issues Involved:
1. Liability of the assessee to pay interest on differential duty.
2. Interpretation of Section 11AB and Section 11A(2B) of the Central Excise Act, 1944.
3. Applicability of precedents and statutory provisions to the facts of the case.
4. Impact of the Central Board of Excise and Customs circular on litigation.

Issue-Wise Detailed Analysis:

1. Liability of the Assessee to Pay Interest on Differential Duty:
The primary issue revolves around whether the assessee is liable to pay interest on the differential duty paid through supplementary invoices. The Tribunal had previously ruled in favor of the assessee, stating that the interest was not chargeable as the duty was paid voluntarily before the issuance of a show cause notice. However, the revenue challenged this decision, arguing that interest is automatically leviable on delayed payment of duty under Section 11AB of the Central Excise Act, 1944, regardless of voluntary payment.

2. Interpretation of Section 11AB and Section 11A(2B) of the Central Excise Act, 1944:
The court analyzed the statutory provisions, particularly Section 11AB, which mandates interest on delayed payment of duty. Section 11A(2B) allows an assessee to pay unpaid duty before a notice is issued and avoid a demand notice, but this does not exempt the assessee from paying interest. The court emphasized that Explanation 2 to Section 11A(2B) and Section 11AB clearly state that interest is payable from the date the duty ought to have been paid until the actual payment date, irrespective of the reason for the delay.

3. Applicability of Precedents and Statutory Provisions to the Facts of the Case:
The court referred to the judgments of the Supreme Court in Commissioner of Central Excise v. SKF India Limited and Commissioner of Central Excise v. International Auto Limited. Both cases underscored that interest is leviable on differential duty paid after the date of clearance, as it constitutes short-payment on the original date of removal. The court found that the Tribunal's reliance on the Division Bench's decision in Commissioner of Central Excise, Bangalore-III v. Bharat Heavy Electricals Limited was misplaced because it did not consider the explanations to Section 11A(2B) and was contrary to the Supreme Court's rulings.

4. Impact of the Central Board of Excise and Customs Circular on Litigation:
The court acknowledged the circular issued by the Central Board of Excise and Customs, which aims to reduce government litigation by setting monetary limits for appeals. The circular stipulates that appeals should not be filed if the duty involved is below Rs. 2 lakhs. Although this appeal was filed before the circular's effective date, the court noted that the amount involved (Rs. 27,802/-) was below the threshold. Despite answering the substantial question of law in favor of the revenue, the court decided that the assessee should benefit from the circular's underlying policy, leading to the abatement of the interest payment.

Conclusion:
The court concluded that interest is leviable on the differential duty paid by the assessee under Section 11AB, affirming the statutory provisions and Supreme Court precedents. However, due to the Central Board of Excise and Customs circular and the minimal amount involved, the court allowed the appeal but abated the interest payment, aligning with the policy to reduce litigation.

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