2018 (6) TMI 78 - AT - Central Excise

Price escalation - Price Variation clause - duty short levied - higher price of the goods - interest on delayed payment - supplementary invoice due to price escalation on account of increase in input labour and other costs - Held that - The balance of higher price of the goods is due to the reasons, which could not be foreseen by the appellant at the time he made delivery of those goods and thus, it cannot be considered as the retrospective revision of the price - the Commissioner (Appeals) has wrongly held that the price indicated by the supplementary invoice is directly relatable to the value of goods on the date of clearance because on the date of clearance there was no agreement between the seller and the buyer of the goods about the escalated price as are mentioned in the supplementary invoice and in accordance of Section 4 of the act whatever the transaction value is agreed between the parties at the time of clearance is relevant for Section 11A and even the purpose of Section 11AB the expression ought to have been paid would mean the time when the price is agreed upon by the seller and the buyer. Since both the parties were not aware of escalated price or possibility of escalation at the time the goods were removed, the supplementary invoice cannot be a ground to call the said duty paid as the short levied. Demand do not sustain - appeal allowed.

Summary

Issues Involved:
Recovery of interest on delayed payment of duty due to supplementary invoices and imposition of penalty under Central Excise Act, 1944.

Analysis:
1. The appeal was filed against the order of the Commissioner (Appeals) regarding the recovery of interest and imposition of penalty. The appellant, engaged in manufacturing Aluminium Hollow Sections, raised supplementary invoices due to price variation, leading to unpaid interest of ?89,809 during August 2013 to March 2014. The Deputy Commissioner directed to recover the interest and imposed a penalty of ?10,000. The Commissioner upheld the interest recovery but rejected the penalty imposition.

2. The appellant argued that the interest payment was not necessary as the goods were dispatched before the price escalation, making the Supreme Court case Commissioner of Central Excise vs. SKF India Ltd. inapplicable. The Department contended that as per Section 11A(2B), the duty must be paid based on the assessee's ascertainment, and interest under Section 11AA/11AB is applicable to such payments.

3. The Tribunal analyzed the case, noting that the appellant paid duty based on the goods' value at the time of removal and later issued supplementary invoices due to price escalation from increased costs. Referring to legal precedents like Commissioner vs. Bharat Electricals Ltd. and Steel Authority of India vs. Commissioner of Central Excise, it was established that the duty was paid promptly upon discovering the revised rates, absolving the appellant from interest liability.

4. The Tribunal concluded that the Commissioner (Appeals) erred in linking the supplementary invoice price directly to the goods' value at clearance, as the revised price agreement between parties post-clearance determines duty liability. Since the escalated price was unknown at the time of removal, the duty paid was not short levied, and interest payment was not warranted.

5. Consequently, the Tribunal allowed the appeal, setting aside the liability to pay interest of ?89,809. The decision was based on the understanding that the duty was paid promptly upon learning of the revised rates, aligning with legal principles and precedents. The order was pronounced on 22nd May 2018.