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TMI Blog2015 (12) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... place at a subsequent date. As on the date when the goods were cleared, there was no certainty that there would be price escalation and it was beyond comprehension to ascertain the exactitude of such an escalation. It would be impossible to expect the assessee to pay the excise duty, at the time of clearance of the goods, on the basis of price escalation that took place at a later date in future. Therefore, as on the date of clearance when excise duty was paid, it could not be treated as 'short paid' on the said date. As a consequence when the principal amount, namely, the excise duty itself was not payable (i.e. on the differential) on the date of clearance of the goods, there cannot be any question of law to pay interest. Registry is directed to place the matter before the Hon'ble Chief Justice of India for constituting a Larger Bench to go into the issue involved in this case which is of seminal importance having far reaching ramifications. - Matter referred to larger bench. - Civil Appeal Nos. 2150 of 2012, Civil Appeal No. 2562 of 2012, Civil Appeal No. 599 of 2013, Civil Appeal No. 600 of 2013, Civil Appeal Nos. 1522-1523 of 2013 - - - Dated:- 7-12-2015 - A. K. Sikri A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he final products manufactured by the assessee are cleared on payment of appropriate duty of excise leviable thereon. The final products are either directly sold at the factory gate or are transferred to various Branch Sales Offices from where they are sold to the customers. The sales either from the factory or from the BSOs are in terms of purchase orders received from the customers. The assessee sold the rails to the Indian Railways in terms of the Price Circular No. LP-06 of 2005 dated 24.02.2005 w.e.f. 01.07.2004. In terms of the prices quoted in the purchase orders, the assessee discharged central excise duty at the time of removal of the rails to the Indian Railways. Such price was the transaction value of the goods in terms of Section 4 of the Act at the given time. In terms of the price variation clause and also in terms of the agreement with the Indian Railways, the price circular dated 24.02.2005 effective from 01.07.2004 was revised upwards with increase in the agreed upon price. A revised price circular No. LP-010/06 dated 20.07.2006 was issued revising the agreed upon price. In terms of the revised price circular the assessee discharged differential duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... differential duty arose at a later date due to price variation clause in the contract for sale. The moment the assessee received the enhanced price due to price escalation, it paid differential duty on its own immediately on receipt of the said price. 8. It is in this backdrop it is to be examined as to whether the difference in price, as per the decision taken by the Railways on a later date i.e. much after the date on which the goods were cleared, can be treated as price as on the date when the goods were actually removed and, therefore, it is to construed that the duty initially paid was 'short paid' to bring this event within the fold of Section 11AB of the Act. As per the assessee, provisions of Section 11AB of the Act would not be attracted at all inasmuch as, by no stretch of imagination, it can be treated that on the date of removal of the goods when the duty was paid as per the price fixed at that time, it is now to be treated as 'short paid' only because of the occurrence of an event at a later date which could not be visualised or taken into consideration at the time of removal of these goods. 9. For proper understanding of the matter, we may reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund. (d) duty determined under Section 11A(2). (e) Section 11A(2) requiring Notice issued under Section 11A. (f) duty payment under Section 11A(2B). (g) interest is payable on such reduced or increased duty determined to be payable by Commissioner (Appeals) or Appellate Tribunal etc. 11. Before proceeding further, we would like to point out that we are not treading on a virgin territory, inasmuch as the provisions of Section 11AB of the Act have already been interpreted by this Court in two judgments under almost similar circumstances. These are: (a) CCE v. SKF India Ltd. (2009) 13 SCC 461 (b) CCE v. International Auto Limited. (2010) 2 SCC 672 12. In SKF India Ltd. case, the assessee was engaged in the manufacture and sale of ball bearings and textile machine parts. It sold goods manufactured by it on certain prices on payment of excise duty leviable on the price on which the goods were sold. Later on, there was a revision of prices with retrospective effect. Following the revision the assessee raised supplementary invoices on its buyers and also paid the differential duty on the goods sold earlier. The Revenue took the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant discussion touching the aforesaid aspect, as contained in the judgment: 11. Section 11-A puts the cases of non-levy or short-levy, non-payment or short-payment or erroneous refund of duty in two categories. One in which the non-payment or short-payment, etc. of duty is for a reason other than deceit; the default is due to oversight or some mistake and it is not intentional. The second in which the non-payment or short-payment, etc. of duty is by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty ; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. 12. Section 11-A, however allow the assessees-in-default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short-payment, etc. of duty is by reason of fraud, collusion, etc. are dealt with under sub-section (1-A) of Section 11-A and the cases where the non-payment or short-pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is evident that Section 11-AB comes into play if the duty paid/levied is short. Both, the Commissioner (Appeals) and CESTAT have observed that the assessee paid the duty on its own accord immediately when the revised rates became known to them from their customers. The differential duty was due at that time i.e. when the revised rates applicable with retrospective effect were learnt by the assessee, which was much after the clearance of the goods and, therefore, question of payment of interest does not arise as the duty was paid as soon as it was learnt that it was payable. Finding that provisions of Section 11-A(2) and 11-A(2-B) were not applicable as the situation occurred in the instant case was quite different, Section 11-AB(1) was not at all applicable, and therefore, the assessee was not required to pay interest. It further held that a case of this nature would not fall in the category where duty of excise was not paid or short-paid. 17. We are unable to subscribe to the view taken by the High Court in Rucha Engg. 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 pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and, in that event, such assessee in default would not be served with the demand notice under Section 11-A(1) of the Act. However, Explanation 2 to the sub-section makes it clear that such payment would not be exempt from interest chargeable under Section 11-AB of the Act. What is stated in Explanation 2 to sub-section (2-B) is reiterated in Section 11-AB of the Act, which deals with interest on delayed payment of duty. 8. From the scheme of Section 11-A(2-B) and Section 11-AB of the Act, it becomes clear that interest is levied for loss of revenue on any count. In the present case, one fact remains undisputed, namely, accrual of price differential. What does differential price signify It signifies that value, which is the function of the price, on the date of removal/clearance of the goods was not correct. That, it was understated. Therefore, the price indicated by the supplementary invoice is directly relatable to the value of the goods on the date of clearance, hence, enhanced duty. This enhanced duty is on the corrected value of the goods on the date of rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . His alternate submission was that these judgments do not correctly interpret the provisions of Section 11AB of the Act and, therefore, matter required a fresh look by a Larger Bench. 16. It is difficult to accept the first submission. As already pointed out above, the factual scenario in which the aforesaid two cases were decided were similar, nay, almost identical. When this Court on the basis of same type of events interpreted the provisions of Section 11AB of the Act in a particular manner and held, in no certain terms, that interest was payable, it is difficult to countenance the argument of the assessee that these cases are distinguishable on facts. Therefore, we advert to the second plank of Mr. Lakshmikumaran's submissions which was argued with all vehemence, covering the entire length and breadth of the statutory provisions with relevant case laws. 17. In the first instance, he pointed out that in these appeals, there can be two distinct types of transactions: (a) where the price of the goods is 'fixed' at the time and place of removal, and as a result of subsequent negotiations (often protracted) the price is retrospectively revised by the buyer; (b) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the final price at the time when the goods are removed. In the context of price revision subsequent to clearance, duty 'ought to be paid' only after the sanctioning of the revised priced by the buyer. The differential duty on account of price revision is paid in the month when the revised price is agreed between the seller (assessee) and the buyer and it ought to have been paid only at that time and not before. 20. One has also to keep in mind the difference between 'what should be the quantum of duty to be paid' and 'when such duty is payable'. In the cases price revision, the quantum of duty would be on the escalated price but the time for payment of differential duty is when the parties agree for the escalation in prices. On that reckoning, it would follow that interest clock for differential duty will start ticking from the date differential duty is due, i.e., the date of agreement of escalated prices and not before. This concept gets clarified with the latest amendment in 2015 to Section 11A with regard to the 'relevant date' for payment of interest. 21. We have already taken note of judgments in SKF and International Auto including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;understated' (para 8 of International Auto). However, value of the goods for the purpose of duty is 'at the time of removal', as emphasised above which remains fundamental principle from the inception of the Central Excise Act originally enacted in 1944 and remains valid till date. It is, therefore, difficult to accept that the price was 'understated' on the date of removal of those goods. 24. We further find that the Bench distinguished earlier three member Bench judgment in the case of MRF Ltd. v. Commissioner of Central Excise, Madras (1997) 5 SCC 104 on the purported ground that there was 'sea change' in Section 11A of the Act (which was originally inserted by Act 25 of 1978) when Parliament inserted major changes in that Section vide Act 14 of 2001 w.e.f. 11.05.2001, Act 32 of 2003 w.e.f. 14.05.2003 and Act 14 of 2001 whereby Section 11AB of the Act was also amended. However, we are of the opinion that amendments made to Section 11A in 2001 and 2003 have nothing to do with the valuation of the goods based on 'the price at the time of removal'. MRF was a case where a particular price was charged by the said assessee from the buyer on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he argument that interest was compensatory in nature was specifically rejected. The Constitution Bench considered in detail the correctness of earlier three member Bench judgment in the case of Associated Cement Company Limited v. Commercial Tax Officer, Kota and Others (1981) 4 SCC 578 wherein majority view was that interest claimed on unpaid tax dues could be charged as it was compensatory in character and not penal. Bhagwati, J. had, however, dissented giving various reasons, one of which was that tax which has yet to be ascertained through the process of ascertainment could not be treated as tax payable from the date of submission of the return and, therefore, no interest could be charged from the date of filing of the return upto the date of assessment. This view of Bhagwati, J. was accepted after detailed discussion with the following conclusion: ...Our attention was, however, drawn by Mr. Sen to two cases. Even in those cases, CIT v. M. Chandra Sekhar, (1985) 1 SCC 283 and Central Provinces Manganese Ore Co. Ltd. v. CIT, (1986) 3 SCC 461, all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn to any relevant and material statutory provision, or was any previous decision of this Court bearing on the point not noticed Is the Court hearing such plea fairly unanimous that there is such an error in the earlier view What would be the impact of the error on the general administration of law or on public good Has the earlier decision been followed on subsequent occasions either by this Court or by the High Courts And, would the reversal of the earlier decision lead to public inconvenience, hardship or mischief These and other relevant considerations must be carefully drawn in mind whenever this Court is called upon to exercise its jurisdiction to review and revise its earlier decisions. These considerations becomes still more significant when the earlier decision happens to be a unanimous decision of a Bench of five learned Judges of this Court. 27. We have kept in mind the aforesaid consideration and feel that decision in SKF and Auto International require a re-look for the reasons given by us above. We, thus, direct the Registry to place the matter before the Hon'ble Chief Justice of India for constituting a Larger Bench to go into the issue involved in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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