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TMI Blog2008 (10) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... s, P.R. Venkataraman, P.C. Anand, N. Viswanathan, T. Ramesh, J. Shankarraman and K.R. Madhavan, Counsel/Consultants, for the Appellant. Shri N.J. Kumaresh, SDR, for the Respondent. [Order per: P.G. Chacko, Member (J)]. - Three issues (vide infra) were referred to this Bench pursuant to Misc. Order No.102/08 dated 25-2-2008 [2008] (232) E.L.T. 128 (T)] of the South Zonal Bench, Chennai and the same arose from the following facts:- The respondents in Appeals 1 to 20 and the appellants in the rest of the batch, hereinafter referred to as the assessees, are engaged in the manufacture of excisable goods. During the material period, they had paid duty of excise on the goods in the manner laid down under the Rule 8(1) of the Central Excise (No. 2) Rules, 2001/the Central Excise Rules, 2002. Such payments at the time and place of removal of the goods were made on the assessable value based on the price originally agreed between the assessees and their buyers. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore (vide Final Order No. 1575/2005 dated 6-9-2005 in Mysore Electrical Industries Ltd. v. CCE, Bangalore-III and Final Order No. 1723/2006 dated 9-10-2006 in BHEL v. CCE, Bangalore-III ) on the question whether interest under Section 11AB of the Central Excise Act was leviable on the differential duty paid under supplementary invoice issued in the wake of upward revision of price after removal of the goods. It referred the following issues to be considered and decided upon by this Bench:- (a) Whether, in the facts of these cases, the additional amount paid by the buyer towards price of the goods in terms of the supplementary invoice issued by the assessee after removal of the goods can be considered to be part of the 'transaction value' under Section 4 of the Central Excise Act; (b) Whether the payment of duty under the supplementary invoice by the assessee is covered by sub-section (2B) of Section 11A of the Act; (c) Whether, on the amount of duty paid under the supplementary invoice, interest is leviable under Section 11AB from the first date of the month succeeding the month in which duty was paid in the first instance in terms of the original invoice. 2. Heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Explanations thereto) reads thus: (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 (1) in respect of the duty, and inform the Central Excise officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid: Provided that the Central Excise officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1. - Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 6 (without its proviso) of the said Rules reads thus: Assessment of duty. - The assessee shall himself assess the duty payable on any excisable goods. Rule 7 (shorn of sub-rules 5 6) of the said Rules is reproduced below:- RULE 7. Provisional assessment . — (1) Where the assessee is unable to determine the value of excisable goods or determine the rate of duty applicable thereto, he may request the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case maybe, in writing giving reasons for payment of duty on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, may order allowing payment of duty on provisional basis at such rate or on such value as may be specified by him. (2) The payment of duty on provisional basis may be allowed, if the assessee executes a bond in the form prescribed by notification by the Board with such surety or security in such amount as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, deem fit, binding the assessee for payment of difference between the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' at the time of removal of the goods. In other words, there was a short payment of duty at the time of clearance of the goods, which attracted sub-section (2B) of Section 11A of the Act. 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 month in which such duty ought to have been paid to the date of actual payment of the duty. In this connection, the SDR referred to a circular of the CBEC (F.No.6/20/2005-CX.1 dt. 14-3-2006), wherein it was clarified that interest under Section 11AB was chargeable from the date of original clearance in cases where supplementary invoices were raised due to upward revision of price of the goods. Further, the SDR submitted that the assessees were under the regime of self-assessment and had to pay duty on the transaction value, paid or payable, to be determined by them at the time of removal of the goods. For such self-assessment under Rule 6, it was for them to ascertain whether the price available at the time of removal was final or provisional. In all cases, whether the contract contained price escalation clause or not, negotiatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, was admitted by the Karnataka High Court. The department's appeal against the decision of the Tribunal's West Zonal Bench (Mumbai) in Anil Hitkari v. CCE, Delhi, 2005 (186) E.L.T. 97 (Tri.-Mumbai.), wherein it had been held that any price increase after clearance of excisable goods was no reason to enhance assessable value of the goods in the absence of price escalation clause in purchase order was admitted by the Supreme Court as reported in 2007 (208) E.L.T. A39 (S.C.). The ld. SDR also referred to sub-rule (3) of Rule 8, which mandated that, if the assessee failed to pay the amount of duty by due date, he would be liable to pay the amount with interest at the rate specified by the Central Government by Notification under Section 11AB and that such interest would be payable for the period from the first date after the due date till the date of payment of duty. Finally, the SDR referred to the Bombay High Court's judgment dated 3-4-2007 in First Appeal No. 42 of 2007-2008 (223) E.L.T. 161 (Bom.) (CCE Aurangabad v. Rucha Engineering Pvt. Ltd.), which was in favour of the assessee. It was pointed out that the High Court's judgment had since been set aside by the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only where a lesser amount of duty than what was determined at the time of clearance of the goods was paid; and that, in the absence of short-payment of duty, there was no question of payment of interest under Section 11AB. However, he fairly conceded that the differential price collected under supplementary invoices by his clients from their buyers was also chargeable to duty of excise as it was part of the transaction value of the goods. Otherwise, differential duty would not have been paid by his clients under the supplementary invoices. It was also conceded that this differential duty was paid at the rate which prevailed on the date of clearance of the goods. These arguments were heard in appeal No.E/647/07 which involved price variation clause in purchase order and in appeal No.E/648/07 which did not involve any such clause. 5(b) In the cases presented by the ld. Advocate Shri N. Viswanathan, the purchase orders had price variation clauses incorporated therein. Referring to Section 4(1)(a) of the Act, he submitted that the time and place of removal were essential for determining transaction value. In other words, transaction value was referable to the time and place of rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "transaction value" of the goods cleared long ago. It was also argued that the duty paid on the differential value was not "duty ought to have been paid" at the time of removal of the goods. 5(d) The ld. advocate Shri Venkatagiri argued that the original assessments were final; that the price of the goods was 'fixed and firm' at the time of its removal and therefore provisional assessment was not resorted to; that, for this reason, Rule 7 is not applicable; that any assessment cannot be deemed to be provisional in the absence of a specific order of the proper officer of Central Excise for such assessment as held by the Apex Court in Metal Forgings v. Union of India - 2002 (146) E.L.T. 241 (S.C.); that there is no provision in the Act or the Rules for deeming an assessment to be provisional; that, there being no demand of duty under Section 11A, it is not open to the department to allege short-levy or short-payment of duty and to invoke Section 11AB r/w. Section 11A(2B) for levy of interest; that the assessee did not receive any undue benefit as the differential duty was paid at the time of issue of supplementary invoice itself and, therefore, even on the principle of compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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. 5(e) The ld. advocate Shri J. Sankararaman submitted that the judgment of the Karnataka High Court in Commissioner v. Araco Automative India Pvt. Ltd., 2006 (200) E.L.T. 203 (Kar.) was the answer to the substantive issue before this Bench and the same required to be followed by this Bench in the absence of decision of the jurisdictional High Court (Madras) on the same issue. In support of this proposition, the counsel also referred to Madura Coats v. Collector, 1996 (82) E.L.T. 512 (Tribunal) wherein a judgment of the Karnataka High Court was, in the absence of any decision of the Madras High Court, held to be binding precedent for the South Regional Bench (Madras) of the Tribunal. 5(f) The learned advocate Sh. V. Balasubramanian invoked the maxim lex non cogit ad impossibilia in his bid to establish that the duty paid under supplementary invoice could hardly partake the character of 'duty ought to have been paid' and therefore Section 11AB was not applicable. 5(g) The learned advocate Sh. T.S. Balasubramanian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with, the sale of excisable goods, whether payable at the time of sale or at any other time is part of the transaction value. It was submitted at the bar that the amount received by the assessee from the buyer upon price revision subsequent to clearance of the goods was not to be considered as part of the transaction value inasmuch as the original price agreed between the assessee and the buyer was 'firm' at the time of removal of the goods. We find it difficult to accept this argument inasmuch as 'transaction' as contemplated under Section 4(3)(d) does not just end with the removal of the goods. Undisputedly, the 'transaction' - a term not defined in the Act or any rule - is 'sale' of excisable goods in all these cases. Any amount that the buyer is liable to pay to the assessee by reason of, or in connection with, the sale of the goods, whether payable at the time of sale or at any other time, is part of the transaction value of the goods. This 'any amount' is in addition to 'the amount charged as price'. Obviously, the amount charged as price is the basic and essential part of the transaction value. Any amount received from the buyer on account of price revision is also part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 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 be- lated 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. 6(d) The provisions of Section 11AB also shall have to be construed so as to avoid anomalous situations. Under sub-section (1) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case law cited by counsel on what could be held to be provisional assessment is irrelevant. 6(e) 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 person to do the impossible. This doctrine, in our view, cannot be invoked by any person who himself failed to do the possible, to do what the law required him to. In the present case, as we have already observed, the assessees were placed in such a situation at the time of removal of the goods that they should have resorted to provisional assessment under Rule 7 of the Central Excise Rules, 2002. Had they done so, they would have been liable to pay interest on the amount of duty paid [upon finalization of the assessment under sub-rule (4) of Rule 7] on the differential value of the goods realized from the buyer, from the first day of the month succeeding the month for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which prevailed on the dates of clearance of their 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 account 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 Central Excise Rules, 2002. Having regard to this conduct of the assessees, we are of the view that, on the principle of compensation also, the assessees are liable to pay interest under Section 11AB on the differential duty covered by the supplementary invoices for the period specified under that Section. 6(g) We find that the Hon'ble High Court's decision in Rucha Engineers' case, since set aside by the Apex Court, is no longer available as any precedent. The Hon'ble Supreme Court has rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontra view taken by the coordinate Bench in Arvind Mills (supra), we would have held issues (a), (b) and (c) in favour of the Revenue. 8. We shall now take up the additional issue (d) for consideration. It was argued by counsel that even if it be held that interest was payable under Section 11AB on the amounts of differential duty paid under supplementary in voices by the assessees subsequent to clearance of the goods, the Revenue had no statutory mechanism for recovery of such interest. It was submitted that, unlike in Section 28 of the Customs Act, there was no provision in Section 11A of the Central Excise Act for demanding interest on duty. According to counsel, the Central Excise Rules also did not provide any recovery mechanism in respect of interest payable under Section 11AB. In this connection, reliance was placed on the decision of Hon'ble Madras High Court's decision in Eternit Everest Ltd. v. Union of India - 1997 (89) E.L.T. 28 (Mad.). It was also pointed out that the department's Civil Appeal against the High Court's decision was dismissed by the Apex Court vide 2002 (141) E.L.T. A.285 (S.C.). The counsel's arguments were contested by the SDR who perceived a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter, we further hold that, if the assessee does not pay such interest, it can be recovered by the proper officer of Central Excise in terms of Section 11 of the Act, which provision (without the proviso thereto) is reproduced below:- 11. Recovery of sums due to Government. — In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder, including the amount required to be paid to the credit of the Central Government under section 11 the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1863 (54 of 1963) to levy such duty or require the payment of such sums may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such person; and if the amount payable is not so recovered he may prepare a certificate signed by him specifying the amount due from the person liable to pay the same and send it to the Collector of the district in wh ..... 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