2019 (7) TMI 1777 - AT - Central Excise

Liability to pay differential interest under Section 11AB of the Central Excise Act - Price escalation clause - interest for the period when the Central Excise duty was due as per the original invoice, upto the date of payment of balance duty, under the supplementary invoice raised - HELD THAT - The similar issue was considered by the Hon ble Supreme court in Steel Authority of India Ltd. Vs. Commissioner of Central Excise, Raipur 2019 (5) TMI 657 - SUPREME COURT where it was held that the interest was levied to be paid holding that the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly that differential duty is paid. We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal. Thus, the appellant is liable to pay interest - Learned Counsel states that the amount of pre-deposit made by them, exceeds the amount of interest payable under Section 11AB of the Act. Accordingly, the adjudicating authority are directed to verify the calculation of interest as submitted by the appellant and to refund the excess amount paid by the appellant (if any), with interest as provided under Section 35FF of the Act - appeal dismissed.

Summary

Issues involved:
Whether interest is payable under Section 11AB of the Central Excise Act for upward price revision post removal of goods.

Analysis:

1. Issue of Interest Payment Post Upward Price Revision: The main issue in this judgment revolves around whether the appellant-assessee is liable to pay interest under Section 11AB of the Central Excise Act for the period when the Central Excise duty was due as per the original invoice, up to the date of payment of balance duty under the supplementary invoice raised post an upward price revision. The Hon'ble Supreme Court, in a similar context, considered the issue of interest on differential duty due to a price escalation clause in the Steel Authority of India Ltd. case. The Larger Bench of the Supreme Court framed several questions for fresh decision, including the correct law interpretation, the impact of relevant judgments, the necessity of duty determination under Section 11A(2) for interest under Section 11AB, the significance of Rule 7 of the Central Excise Rules, and whether payment of differential duty can be treated as short paid duty.

2. Judicial Interpretation and Precedent: The Hon'ble Supreme Court, in its judgment, clarified the interpretation of Section 11AB, emphasizing that the duty should be paid for every removal of goods on or before the 6th day of the succeeding month. The Court rejected the notion that the expression "ought to have been paid" refers to the time when the price was agreed upon, stating that such an interpretation would contradict the provisions of the Act and the Rules. The Court highlighted that in cases of provisional assessment, duty and interest date back to the month for which the duty is determined, not the month of final assessment. The Court emphasized that the value of goods at the time of removal should prevail, even if the price is provisional and subject to retrospective variation.

3. Decision and Direction: Based on the law laid down by the Hon'ble Supreme Court, the Member (Judicial) held that the appellant is indeed liable to pay interest under Section 11AB. The Member directed the adjudicating authority to verify the calculation of interest submitted by the appellant and refund any excess amount paid by the appellant, if applicable, along with interest as provided under Section 35FF of the Act. Consequently, both appeals were dismissed based on the interpretation and guidance provided by the Supreme Court.

In conclusion, this judgment provides a detailed analysis of the issue concerning interest payment post upward price revision under the Central Excise Act, drawing on the interpretation and precedent set by the Hon'ble Supreme Court. The decision underscores the importance of adhering to the statutory provisions and principles governing the payment of duty and interest in cases of price revisions post removal of goods.