2014 (10) TMI 482 - HC - Central Excise

Demand of interest u/s 11AB on differential duty - Held that - assessees have cleared goods and paid duty thereon and raised supplementary invoices, but however failed to pay interest payable under Section 11AB of the Act. In view of the decision of the Supreme Court in SKF India Ltd. case, referred 2009 (7) TMI 6 - SUPREME COURT , the first plea raised by the learned counsel for the appellants fails and in that regard, we find no infirmity in the order passed by the Tribunal. Section 11AA of the Act, as amended by Section 64 of the Finance Act, 2011 (8 of 2011), does not in any way advance the case of the appellant, as we find that the liability to pay interest on delayed payment of duty is clearly envisaged in Section 11A(2B) read with Explanation 2 to the said provision. Such interest was leviable even during the period in question. In fact, the Supreme Court in SKF India Ltd. case, referred supra, observed that there is some ambiguity in the said provisions, which was a cause for amendment brought to Section 11AA of the Act. If the object of the law is to state clearly and unambiguously the obligations of the person whom the law addresses and to spell out plainly and without any confusion the consequences of failure to discharge the obligations cast by the law then the four sections of the Act fall miles short of the desired objective. Even as originally cast the provisions were far from very happily framed and worded. Subjected to amendments from time to time those provisions have now become so complicated that in order to discern their meaning it becomes necessary to read them back and forth several times. We see no reason why the two periods for which interest is leviable may not be put together and dealt with in one consolidated provision instead of being split up in sections 11AA and 11AB. Also, there is much scope to reorganise all the different subsections of section 11A and to present the scheme of that section in a more coherent and readable form. Section 11AA of the Act, which came into effect from 8.4.2011, will have no bearing to the facts of the present case. In any event, the decision of the Supreme Court in SKF India Ltd. case, referred supra, squarely applies to the period in question and the law declared by the Supreme Court binds the issue in question. The liability of the assessee stands confirmed by the provisions of Section 11A(2B) read with Explanation 2 to the said provision and Section 11AB of the Act. Therefore, the plea of the appellants that their voluntary payment of duty would not attract interest is unacceptable and in such view of the matter, the second contention is also untenable. - Decided against assessee.

Summary

Issues Involved:
1. Liability to pay interest under Section 11AB of the Central Excise Act, 1944, on raising supplementary invoices.
2. Ignoring the Karnataka High Court decision in BHEL.
3. Following the Karnataka High Court decision in Presscom despite conflicting decisions.
4. Preference for decisions favoring the assessee when multiple judgments exist.

Detailed Analysis:

1. Liability to Pay Interest under Section 11AB:
The primary issue revolved around whether the appellant is liable to pay interest under Section 11AB of the Central Excise Act, 1944, on supplementary invoices raised due to price revisions. The appellant argued that interest under Section 11AB applies only when there is a demand by the department due to short payment, and since they paid the differential duty voluntarily upon price revision, no interest is payable. The court, referencing the Supreme Court's decision in *Commissioner of Central Excise v. SKF India Ltd.*, clarified that Section 11A categorizes non-payment or short payment of duty into intentional and unintentional. The unintentional category, as per Section 11A(2B), still mandates interest under Section 11AB for delayed payments. The court concluded that the payment of differential duty via supplementary invoices falls under Section 11A(2B), attracting interest under Section 11AB, thus rejecting the appellant's argument.

2. Ignoring the Karnataka High Court Decision in BHEL:
The appellant contended that the first respondent ignored the Karnataka High Court's decision in *Bharat Heavy Electricals Ltd. (BHEL)*, which held that interest is not payable on supplementary invoices. The court noted that the Supreme Court's ruling in *SKF India Ltd.* overrides the BHEL decision. The BHEL decision was considered per incuriam (not properly considering relevant law) by another Division Bench of the Karnataka High Court in *Commissioner of Central Excise v. Presscom Products*. The court emphasized that the Supreme Court's decision in *SKF India Ltd.* is binding and takes precedence.

3. Following the Karnataka High Court Decision in Presscom:
The appellant questioned the reliance on the *Presscom* decision, arguing it conflicted with the BHEL decision and was not referred to a Full Bench despite both being Division Bench decisions. The court reiterated that the *Presscom* decision, which aligns with the Supreme Court's ruling in *SKF India Ltd.*, correctly interprets the law. The decision in *BHEL* was found to be per incuriam, and thus, the reliance on *Presscom* was justified.

4. Preference for Decisions Favoring the Assessee:
The appellant argued that when two decisions exist on the same issue, the one favoring the assessee should be followed. However, the court dismissed this argument, stating that the Supreme Court's decision in *SKF India Ltd.* is authoritative and binding, thus taking precedence over conflicting High Court decisions. The court emphasized that the law declared by the Supreme Court must be followed, irrespective of conflicting High Court judgments.

Conclusion:
The court dismissed the appeals, upholding the demand for interest under Section 11AB on differential duties paid through supplementary invoices. The decisions of the lower authorities and the Tribunal were affirmed, and the substantial questions of law were answered against the assessees. The court emphasized the binding nature of the Supreme Court's rulings and the proper interpretation of Sections 11A and 11AB of the Central Excise Act, 1944.