2009 (1) TMI 126 - HC - Central Excise

Liability to pay interest on the goods which although cleared in the past but had issued supplementary invoices of duty on escalation of prices - in order to raise a demand for payment of interest u/s 11AB the condition precedent is the existence of an order determining the duty u/s 11A(2) or the duty must have been paid on their own account in the manner prescribed u/s 11AB(2) - held that the provisions of Section 11AB(2)(b) of the Act are not attracted to the facts and hence interest is not payable revenue appeal dismissed

Summary

Issues:
1. Whether the assessee is liable to pay interest on goods cleared in the past but with supplementary invoices issued due to price escalation?

Analysis:
1. The revenue filed appeals under Section 35(G) of the Central Excise Act, 1944, claiming a substantial question of law regarding the liability of the assessee to pay interest on goods cleared in the past but with supplementary invoices issued due to price escalation. The dealer, a holder of Central Excise Registration Certificate, classified items under chapter Heading No.8708, while the revenue claimed they should be under chapter heading 3926.90. The revenue asserted that interest was payable on duty from supplementary invoices as duty was not paid within the prescribed time under Section 11AB of the Act.

2. A show cause notice was issued to the dealer to explain why the short-paid duty should not be demanded under Section 11A of the Act and why interest should not be recovered. The Assistant Commissioner ordered the recovery of interest, citing the applicability of Section 11AB for recovery of interest on duty regardless of the reason for short levy/non-levy. The Commissioner upheld this view, emphasizing that interest compensates the revenue for being deprived of the money to which it was entitled.

3. On further appeal to the Tribunal, it was opined that the liability to pay interest on duty from supplementary invoices could not be inferred. The Tribunal relied on precedents, including a decision by the Aurangabad Bench of the Bombay High Court, holding that the dealer was not liable to pay interest. The High Court, after considering the arguments, concluded that no substantive question of law arose for admission of the appeals. It was held that the provisions of Section 11AB were not attracted as there was no case of non-payment, short levy, or short payment under Section 11A(1) of the Act.

4. The High Court further noted that a Division Bench of the Bombay High Court had approved the view taken by the Tribunal in a similar case. Considering the minimal amount of the demand for interest, the court ruled in favor of the dealer, dismissing the appeals by the revenue. The judgment highlighted that the provisions of Section 11AB(2)(b) were not applicable to the facts of the case, following precedents and legal interpretations.