2013 (3) TMI 456 - AT - Central Excise

Recovery of Interest Section 11AB. - Department is of the opinion that assessee while paying the differential amount of duty did not pay the interest on the same as under the provisions of section 11AB. According to the Assesse, the recovery of interest is subject to the limitation period prescribed under Section 11A and since there is no suppression of facts on part of the assessee, only normal limitation period of one year would be available. On the other hand, according to the Department, there is no limitation period for recovery of interest. The department placed reliance on the case based on Hon ble Delhi High Court in the case of Kwality Ice Cream and Others v. Union of India 2012 (1) TMI 88 - Delhi High Court the Apex Court held that it is only reasonable that period of limitation that applies to a claim for principal amount should also apply to the claim for interest thereon also. Held that - Interest on a duty liability confirmed under Section 11A(2) or self-ascertained and paid under Section 11A(2B) is by automatic operation of Section 11AB and for recovery of such interest, no show cause notice is required and hence the limitation period prescribed under Section 11A is inapplicable. The interest under Section 11AB on a duty demand confirmed under Section 11A(2) or self-admitted/self-ascertained duty liability under Section 11A(2B) or for delay in payment of duty self-assessed under Rule 6 of Central Excise Rules, 2002 by the due date prescribed under Rule 8 ibid is sum due to the Government , which is recoverable under Section 11 of the Central Excise Act, 1944 and for which there is no limitation period. The show cause notices issued in these cases, even if invoking Section 11A, have to be treated as mere communication to the assessee for recovery of interest under Section 11.while the appeals filed by the Revenue are allowed, the appeals filed by the assessee are dismissed. All stay and Misc. applications also stand disposed of.

Summary

Issues Involved:
1. Whether interest under Section 11AB is payable on the differential duty paid under supplementary invoices due to retrospective price escalation.
2. Whether the recovery of such interest is subject to the limitation period prescribed under Section 11A of the Central Excise Act, 1944.

Detailed Analysis:

1. Interest under Section 11AB on Differential Duty:
The core issue revolves around whether the assessees are liable to pay interest under Section 11AB on the differential duty paid due to retrospective price escalation. The Tribunal referred to the Apex Court's judgments in CCE v. SKF India Ltd. and CCE v. International Auto Ltd., which held that interest under Section 11AB is chargeable on the differential duty paid on price escalation amounts. The Tribunal emphasized that:
- The differential duty paid by the assessees on supplementary invoices falls under Section 11A(2B).
- Interest under Section 11AB is automatic for any delayed payment of duty, regardless of the reason for the delay.

In response to the assessees' argument that the price differential includes an element of interest, which should be deductible from the assessable value, the Tribunal noted:
- This plea was not raised during the adjudication or appellate proceedings and was introduced for the first time at the Tribunal level.
- The assessees failed to provide documentary evidence to substantiate that the price escalation included an interest component.
- The Tribunal drew an adverse presumption that the interest component was not considered in the price escalation, referencing the Supreme Petrochem case for support.

Ultimately, the Tribunal concluded that the interest under Section 11AB is payable on the differential duty paid under supplementary invoices due to retrospective price escalation.

2. Limitation Period for Recovery of Interest:
The second issue concerns whether the recovery of interest is subject to the limitation period prescribed under Section 11A. The Tribunal analyzed:
- Section 11A provides the mechanism for determining duty liability and prescribes a limitation period for issuing show cause notices.
- Interest liability under Section 11AB arises automatically once the duty liability is determined or admitted.
- The Tribunal cited several Supreme Court judgments, including Commissioner of Trade Tax, Lucknow v. Kanhai Ram Thekedar, which held that interest liability is automatic and does not require a separate notice.

The Tribunal differentiated between the adjudication process under Section 11A and the recovery process under Section 11:
- Section 11A deals with the determination of duty liability, requiring a show cause notice within a prescribed limitation period.
- Section 11 deals with the recovery of sums due to the Government, including interest, which does not require a show cause notice and is not subject to the limitation period under Section 11A.

The Tribunal also addressed contrary judgments from the Delhi and Gujarat High Courts but maintained its stance based on the Supreme Court's rulings.

Conclusion:
The Tribunal held that:
- Interest under Section 11AB is payable on the differential duty paid under supplementary invoices due to retrospective price escalation.
- The recovery of such interest is not subject to the limitation period prescribed under Section 11A.

Accordingly, the appeals filed by the Revenue were allowed, and the appeals filed by the assessees were dismissed.