Supplementary Invoices - Levy of interest on differential duty due to Price Revision.

[Naveed S]

It is an undisputed fact that “where any duty of excise has not been paid or levied or has been short-levied or short paid or erroneously refunded or the differential duty has to be paid when supplementary invoices are issued by the assessee, then all such duty would have to be paid along with interest u/s 11AA. The Supreme Court of India in the matter of CCE vs SKF India Ltd 2009 (7) TMI 6 - SUPREME COURT  has also confirmed the said fact. It is a settled legal position that interest is payable for issuance of Supplementary Invoices. Surprisingly, even after the Supreme Court’s order, however still appeals are filed on the same issue. Recently, an appeal was filed by an appellant against a CESTAT order challenging payment of interest for supplementary invoices issued by the assessee.

The assessee is an appellant herein and the appeal is filed against the Final Order No.40500 dated 31.10.2013, passed by the Customs, Excise and Service Tax Appellate Tribunal, Chennai, made in Appeal No.E/624/06.

The assessee in this case is involved in the manufacture of automobile parts such as light fittings and accessories and clears them on payment of excise duty to buyers based on transaction value worked out on the contracted price. Subsequently, they raise supplementary invoice after negotiation with the buyer and they secure higher price in respect of the goods cleared earlier by the assessee. Consequent to the supplementary invoice, for the differential value, excise duty is payable, and the appellant, it appears, did pay the differential duty on the amounts received from the buyer. The Deputy Commissioner of Central Excise, Division 4, demanded interest under Section 11A (2B) read with Section 11 AB of the Central Excise Act on the differential duty paid from the date of original clearance to the customers in the said demand order. Aggrieved over the said assessment, the assessee preferred an appeal to the Commissioner (Appeals), who decided the appeals by Order-in-Appeal No.11/2006 (M-IV) dated 31.4.06 and set aside the demand order of the Deputy Commissioner of Central Excise. The Department, however, preferred an appeal to the Tribunal and the Tribunal disposed of the appeal by a short order, which reads as follows:-

“We find that the Hon'ble Supreme Court in the case of CCE vs SKF India Ltd 2009 (7) TMI 6 - SUPREME COURT held that payment of differential duty at a later date is clearly a case of short-payment of duty at the time of clearance and, therefore, interest is payable under Section 11 AB of Central Excise Act, 1944. The Hon'ble Supreme Court restored the order passed by the Assistant Commissioner insofar as charge of interest and also observed that there is no question of imposition of penalty.

Based on above Tribunal order, the assessee preferred an Appeal to the High Court who vide order no. 2014 (9) TMI 335 - MADRAS HIGH COURT in the case of M/s. SL Lumax Ltd. Versus The Commissioner of Central Excise disposed the appeal of the appellant based on following observation:-

5. It could be seen that in SKF's case (supra), the Supreme Court, relying upon the decision in Rajasthan Spinning and Weaving Mills case 2009 (5) TMI 15 - SUPREME COURT OF INDIA, clearly held that in the scheme of the four sections (11A, 11AA, 11AB and 11 AC) interest is leviable on delayed and deferred payment of duty for whatever reasons. In fine, the Supreme Court clearly held that payment of differential duty clearly came under sub-section (2B) of Section 11-A and attracts levy of interest under Section 11 AB of the Act. The relevant portion of the order of the Supreme Court in SKF's case (supra) is extracted hereinbelow for easy reference :-

“14. We are unable to subscribe to the view taken by the High Court. 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.”

6. Thus, it is clear that the facts of the present case are identical to the facts of the case before the Supreme Court in SKF's case (supra) and, therefore, this Court finds no reason to take a different view from the one taken by the Supreme Court as discussed above. Accordingly, this Court finds no error in the order passed by the Tribunal warranting interference and, no questions of law, much less substantial questions of law arise for consideration in this appeal.

The reason for highlighting the above High Court order is to make it clear that supplementary invoices issued under rule 11 of Central Excise Rules,  do attract payment of interest thereon. The said fact was also confirmed by the Supreme Court and now by the High Court as referred above. Therefore, it is always advisable to accept such settled issues and pay interest accordingly as and when accrued for such supplementary invoices issued, rather than to file Appeal and waste precious time of all.