2009 (7) TMI 6 - SC - Central Excise

Revision in price supplementary invoice - payment of duty on differential amount - The assessee gave its reply stating that the payment of differential duty was made by it at the time of issuing supplementary invoices to the customers and, therefore, there was no question of charging interest much less any penalty - It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of section 11A and attracted levy of interest under section 11AB of the Act.

Summary

Issues Involved:
1. Liability to pay interest on differential duty under sections 11A, 11AA, and 11AB of the Central Excise Act.
2. Applicability of sections 11A (2B) and 11AB when differential duty is paid upon retrospective price revision.
3. Imposition of penalty under section 37(3) of the Central Excise Act.

Issue-wise Detailed Analysis:

1. Liability to pay interest on differential duty under sections 11A, 11AA, and 11AB of the Central Excise Act:

The Supreme Court examined the nature and scope of the penalty and interest provisions in the Central Excise Act, specifically sections 11A, 11AA, and 11AB. Section 11A deals with the recovery of duties not levied or short-levied, while sections 11AA and 11AB pertain to interest on delayed payment of duty. The Court noted that section 11A categorizes cases of non-payment or short payment of duty into two groups: one due to oversight or mistake, and the other due to intentional deceit. Both categories allow the assessee to make amends, but interest is leviable on delayed payment of duty regardless of the reason for the delay.

2. Applicability of sections 11A (2B) and 11AB when differential duty is paid upon retrospective price revision:

The facts of the case involved the respondent-assessee manufacturing and selling goods on certain prices and paying excise duty accordingly. Upon a retrospective price revision, the assessee issued supplementary invoices and paid the differential duty. The Revenue demanded interest on the delayed payment of this differential duty. The Tribunal, following the Bombay High Court's decision in M/s Rucha Engineering Pvt. Ltd., held that no interest was chargeable as there was no time-gap between the payment of differential duty and issuance of supplementary invoices. However, the Supreme Court disagreed, stating that the payment of differential duty falls under sub-section (2B) of section 11A and attracts interest under section 11AB. The Court emphasized that the goods were initially cleared on short payment of duty, and the differential duty was paid later, making it a clear case of short payment of duty, albeit unintended.

3. Imposition of penalty under section 37(3) of the Central Excise Act:

The Assistant Commissioner had imposed a penalty of Rs. 5,000 on the assessee, which was set aside by the Commissioner (Appeals) and the Tribunal. The Supreme Court upheld the decision to not impose any penalty, given that the short payment of duty was unintentional and without any element of deceit. The Court restored the order of the Assistant Commissioner only in so far as the charge of interest was concerned, setting aside the penalty.

Conclusion:

The Supreme Court set aside the judgments and orders of the Tribunal and the Commissioner (Appeals), restoring the order of the Assistant Commissioner concerning the charge of interest. The Court held that interest is leviable on delayed payment of differential duty under section 11AB, even if the payment was made upon retrospective price revision. The imposition of penalty was deemed unnecessary in this case. The appeals were allowed with no order as to costs.