2011 (9) TMI 778 - AT - Central Excise

Interest on differential duty - The learned Counsel for the appellant submits that the liability to pay differential duty arose on account of price variation clause in respect of supplies made to their customers - The price variation is on account of any rise or fall in the cost of labour, on account of raw materials used in the manufacture of parts of towers, on account of changes in the price of zinc and other materials, price of high speed diesel oil, All India Average Consumer Price Index for Industrial workers etc - In the instant case since the appellant clearly knew that the prices are liable to undergo revision, they should have resorted to provisional assessment. On finalization of the assessment, they should have discharged the differential duty liability along with interest thereon as per the provisions of law - In the case of Commissioner of Central Excise v. International Auto Ltd. - (2010 -TMI - 76216 - SUPREME COURT OF INDIA) wherein it has been held that when differential duty is paid after clearance, it indicates short payment/short levy on date of removal. Therefore interest becomes leviable under Section 11AB of the Central Excise Act, 1944 - Appeal is dismissed

Issues:
1. Liability to pay interest on differential duty paid by the appellant.
2. Application of Section 11AB of the Central Excise Act, 1944.
3. Interpretation of price variation clause in the contract agreement.
4. Provisional assessment and finalization of duty liability.
5. Comparison of judicial precedents - BHEL case and International Auto Ltd. case.

Analysis:

Issue 1: Liability to pay interest on differential duty paid
The appellant raised supplementary invoices to customers due to price variations in raw materials and labor charges, resulting in a differential central excise duty liability. The appellant argued they are not liable to pay interest on the differential duty paid, citing a judgment where similar circumstances did not attract interest liability. However, the department contended that interest is leviable under Section 11AB of the Act when differential duty is paid after clearance, indicating short payment/short levy. The tribunal held that the appellant's self-assessment of duty without provisional assessment led to short payment initially, triggering interest liability under Section 11AB.

Issue 2: Application of Section 11AB of the Central Excise Act
The tribunal explained that Section 11AB imposes interest when excise duty is not levied or paid correctly, emphasizing that interest is for loss of revenue due to short payment. The tribunal highlighted that the enhanced duty paid after clearance indicates short-payment on the date of removal, justifying the levy of interest under Section 11AB. Citing the decision in International Auto Ltd. case, the tribunal concluded that interest is payable when there is a delay in duty payment, whether determined by the department or self-ascertained by the assessee.

Issue 3: Interpretation of price variation clause
The contract agreement contained a price variation clause based on raw material prices and consumer price index, indicating potential price revisions. The tribunal noted that the appellant should have opted for provisional assessment under Rule 7 of the Central Excise Rules, 2002, considering the fluctuating prices. Failure to do so led to short payment initially, necessitating interest payment on the differential duty liability.

Issue 4: Provisional assessment and finalization of duty liability
The tribunal emphasized that the appellant's awareness of price variations required them to resort to provisional assessment to avoid short payment of duty. The failure to inform the department about provisional pricing led to short payment initially, necessitating interest payment on the corrected duty liability. The tribunal highlighted the importance of following procedural requirements for provisional assessment to avoid interest liabilities.

Issue 5: Comparison of judicial precedents
The tribunal distinguished the BHEL case from the International Auto Ltd. case, noting that the appellant failed to demonstrate identical facts to apply the former's judgment. Emphasizing the applicability of the principle laid down by the Apex Court in the International Auto Ltd. case, the tribunal dismissed the appeal, stating that interest is payable on delayed duty payment regardless of whether determined by the department or self-ascertained by the assessee.

In conclusion, the tribunal upheld the lower authorities' orders, emphasizing the appellant's failure to follow procedural requirements for provisional assessment and the consequent interest liability under Section 11AB of the Central Excise Act, 1944.

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