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TMI Blog2008 (2) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mani, K.R. Madhavan, Madhusudhanan, Ms. G. Dhana Madhri and Ms. Natasha Jhaver, Counsel/Consultants, for the Appellant. S/Shri N.J. Kumaresh, SDR and Dr. Nitish Birdi, SDR, for the Respondent. [Order per: P.G. Chacko, Member (J)]. - In all these appeals, the substantive issue is whether the assessees are liable to pay interest under Section 11AB of the Central Excise Act on differential duty paid under supplementary invoices issued in the wake of revision of price after removal of the goods. At the time of removal of the goods, duty was paid on the assessable value based on the price originally agreed between the assessee and the buyer. Subsequently, there was upward revision of price of the goods due to increase of cost of raw material and/or other factors and, consequently, the assessee issued supplementary invoice for realizing the differential price from the buyer and paying differential duty. Such payment of differential duty was made without payment of interest. In most of the cases, there was no express provision for variation of price in the contract between the assessee and the buyer. However, in such cases also, the buyer agreed for price hike thereby enabling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain Circulars issued by the CBEC. Both sides have also relied on judicial authorities in support of their respective viewpoints. According to learned SDR Shri Kumaresh, the differential value realized by the assessees from their buyers under supplementary invoices is an Integral part of the transaction value and therefore the differential duty paid on the differential value would be a duty which ought to have been paid at the time of removal of the goods. In this view of the matter, there was a short-payment of duty at this time of clearance of the goods, attracting sub-section (2B) of Section 11A. Consequently, interest under Section 11AB was payable on the differential duty paid under supplementary invoice, for the period from the first day of the month succeeding the month in which such duty ought to have been paid to the date of payment of the duty. In this connection, learned SDR has referred to a Circular of CBEC (F. No. 6/20/2005-CX.1 dated 14-3-2006), wherein it was clarified that interest under Section 11AB of the Central Excise Act was chargeable from the date of original clearance in cases where supplementary invoices were raised due to upward revision of price of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d). 6.4 In this case, it is not disputed by the appellant that there was a short payment. The quantum of short payment is not known as finalization takes place between the appellant and the customer at a later date. Section 4(3)(d) clearly provides that any payment in connection with the sale that could become payable at a later point of time shall be added to the transaction value". Reliance has also been placed on the decision of another learned Single Member: in Insulators Electrical Co. v. Commissioner of Central Excise - 2006 (202) E.L.T. 734 (Tri.-Del.) wherein a payment of differential duty made consequent upon revision of price after clearance of the goods was held to be payment of duty 'sort-paid' for purposes of sub-section (2B) of Section 11A and accordingly the assessee was held liable to pay interest under Section 11AB on the differential duty. Learned SDR has also referred to the judgment of the Apex Court in Central Provinces Manganese Ore Co. Ltd. v. Commissioner of Income Tax - (1986) 3 SCC 461 and has argued that the levy of interest under Section 11AB is in the nature of compensation as the Revenue was deprived of the benefit of differential duty for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple of compensation, interest is not recoverable under Section 11AB; and that the decision of the Bombay High Court in Rucha Engineering case is conclusive on the issue and the same has to be followed. learned Advocate Shri K.S. Venkatagiri has advanced a further argument to the effect that the payment of duty under supplementary invoice could only be considered as duty due to the Government under Section 11D of the Act. As the duty collected from the buyer (under supplementary invoice) in excess of the duty paid at the time of removal of the goods was paid forthwith to the Government, no demand of interest can be made under Section 11DD either. Learned Advocate Shri V. Balasubramanian has argued that, there being no machinery provision for levy of interest in the Central Excise Act, unlike in the Customs Act, any demand under Section 11AB is not enforceable. It has also been pointed out that, in the case of UCAL Systems Ltd. v. Commissioner of Central Excise, Chennai -2007 (216) E.L.T. 370 (Tri. - Chennai), it was held that interest under Section 11AB was not leviable in the absence of determination of duty under Section 11A( 2) of the Act. Learned Counsel has also mooted the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not recognized as 'duty of excise' and the same is required to be paid to the Central Government under Section 11D along with interest under Section 11DD. In the present appeals, it is not the case of the assessees that they collected from the buyers any amount (as representing duty of excise) in excess of the duty assessed, and paid. The expression "duty assessed and paid" found in Section 11D(1) covers not only the duty paid at the time of removal of the goods but also the differential duty paid later. It woulod follow that Sections 11D and 11DD are not applicable to the present cases. The concept of deemed value held the field only up to 30-6-2000. From 1-7-2000, we have an essentially different concept viz, transaction value as defined under Section 4(3)(d) of the Central Excise Act. Admittedly, for the purpose of payment of duty, all the cases before us are covered by Section 4(1)(a) of the Central Excise Act and accordingly the assessable value for payment of duty is the transaction value. Section 4(3)(d) defines 'transaction value' as follows :- "'transaction value' means the price actually paid or payable for the goods when sold, and includes in addition to the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be paid on the assessable value which is the transaction value. As this value is referable to the time and place of removal of the goods, the differential amount of duly paid under supplementary invoice by the assessee is an amount of duty short-paid with reference to the time of removal of the goods. Where any duty of excise has been short-paid, the person chargeable with the duty can, under sub-section (2B) of Section 11A of the Act, pay the amount of duty on the basis of his own ascertainment of such duty before service of notice him under sub-section (1) and inform the Department of such payment so that service of such notice can be avoided. In the present cases, the assessees were virtually acting in terms of sub section (2B) of Section 11A. Sub-section (2B) [with the Proviso and Explanations thereto] is reproduced below:- "(2B) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise officer before service of notice on him under sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid such duty forthwith. Of course, there was no delay in this payment with reference to the time at which the price was increased. The assessees are challenging the demand of interest on this basis. But there was a delay in the payment of such duty with reference to the time of removal of the goods and this is the basis of the Revenue's demand of interest. Explanation-2 makes it clear that the interest under Section 11AB has to be paid on the amount paid by the person under sub-section (2B) of Section 11A. This, in our view, is a clear indication of the legislative intent. The law considers that the payment of short-paid duty self-ascertained by an assessee and paid under intimation to the Central Excise officer in terms of Section 11A(2B) is a belated payment of duty. This delay can only be with reference to the time of removal of the goods. The argument that, there being no delay in the payment of such duty with reference to the time of price increase [or with reference to the time of issue of supplementary invoice], the question of payment of interest does not arise will render Explanation 2 nugatory. The provisions of Section 11AB also shall have to be construed so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory procedure, he ascertains the differential duty (payable on account of the price enhancement) and pays it up under Section 11A (2B), is he not liable to pay interest? In our view he is liable under Section 11AB construed harmoniously with the corpus juris of Central Excise. If the differential duty which is found payable on finalization of provisional assessment under Rule 7 is a duty which ought to have been paid at the time of removal of the goods, so is the differential duty which is found payable on ascertainment under sub-section (2B) of Section 11A. Therefore, the demand of interest under Section 11AB on the amount of duty paid under Section 11A (2B) from the first day of the month succeeding the month in which the duty ought to have been paid cannot be resisted. The defence of impossibility was taken to resist the demand of interest. The argument is that it was impossible for the assessee to have paid the differential amount of duty [which was occasioned by subsequent price revision] at the time of clearance of the goods and therefore it cannot be said that such duty "ought to have been paid" at the time of clearance of the goods. It is argued that the law cannot ask a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , thereby enabling the assessees to issue supplementary invoices for realizing differential price and paying differential duty. In none of these cases did any assessee claim interest from the buyer on the differential price belatedly paid. This would mean that, between the assessee and the buyer, the differential price was deemed to have been paid at the time of removal of the goods itself. If that be so, between the assessee and the department also, the differential price should be deemed to have been paid at the lime of removal of the goods. In the circumstances, in our view, the Revenue is entitled to plead that the payment of differential duty under supplementary invoice was payment of duty short-paid with reference to the date of removal of the goods. The denial of interest on such amount under Section 11AB would mean refusal to compensate the Government for the loss incurred on ac count of such duty having remained unpaid for a period of time. As we have already observed, the assessees had a statutory obligation to resort to provisional assessment, but this was not done, thereby depriving the Revenue of its right to levy interest under sub-rule (4) of Rule 7 of the Cen ..... 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