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Commissioner Of C. Ex., Aurangabad v. Rucha Engineering Pvt. Ltd.
Factual and Procedural Background
The Department issued a show cause notice-cum-demand on 26-4-2004 to the Respondent Assessee, requiring payment of interest amounting to Rs. 1,37,001/- under Section 11AB of the Central Excise Act, 1944, for delayed payment of differential duty. The Assessee, a manufacturer of motor vehicle parts under sub-headings 8708.00 and 8714.00 of the Central Excise Tariff Act, 1985, had cleared goods as per original Purchase Orders from their customer, M/s Bajaj Auto Limited, and paid excise duty accordingly. Subsequently, the Assessee received amendments to the Purchase Orders increasing the rates retrospectively, leading to payment of differential duty via supplementary invoices. The Assistant Commissioner confirmed the demand for interest, but the Commissioner (Appeals) allowed the Assessee's appeal and set aside the order. The Department's subsequent appeal to the Customs Excise and Service Tax Appellate Tribunal (CESTAT) was dismissed, prompting the Department to file the present appeal under Section 35G of the Central Excise Act, 1944.
Legal Issues Presented
- Whether the Assessee is liable to pay interest under Section 11AB of the Central Excise Act, 1944, on the differential duty paid retrospectively after the clearance of goods.
- Whether the payment of differential duty by the Assessee, made voluntarily upon learning of revised rates, attracts the levy of interest for delayed payment under the provisions of Section 11AB.
Arguments of the Parties
Appellant's Arguments
- The Department contended that since the goods were cleared earlier, the entire duty was payable on the date of clearance, and therefore, interest under Section 11AB was leviable on the differential duty despite voluntary payment by the Assessee.
- Learned Assistant Solicitor General argued that any time-gap between the date the Assessee learned of the retrospective rate revision and the date of payment would render the Assessee liable for interest under Section 11AB.
Respondent's Arguments
- The Assessee voluntarily paid the differential duty immediately upon learning of the revised rates, without any delay.
- Section 11AB applies only when duty has not been paid, short paid, or erroneously refunded, which was not the case here as the differential duty was paid as soon as it was due.
- The provisions of Sections 11A(2) and 11A(2B) were not applicable as the situation did not involve short payment or erroneous refund but a voluntary payment upon knowledge of retrospective revision.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court analyzed Section 11AB, which mandates interest payment only where duty has not been levied, short levied, short paid, or erroneously refunded. The Court noted that the Assessee voluntarily paid the differential duty immediately upon becoming aware of the retrospective rate revision, thus negating any delay in payment. Both the Commissioner (Appeals) and CESTAT had found that since the duty was paid promptly after the Assessee learned of the revised rates, the interest provisions under Section 11AB were not applicable. The Court observed that the situation did not fall within the ambit of Sections 11A(2) or 11A(2B), which deal with determination of duty liability in cases of short payment or refund, further supporting the conclusion that interest was not payable. The Assistant Solicitor General’s argument that any time-gap would attract interest was examined but found unsupported by the record, as no such gap existed. Consequently, the Court concurred with the lower authorities' view, finding no basis to impose interest under Section 11AB.
Holding and Implications
The appeal is summarily dismissed.
The direct effect of this decision is that the Assessee is not liable to pay interest under Section 11AB on the differential duty voluntarily paid after learning of the retrospective rate revision. The Court’s ruling affirms the principle that interest under Section 11AB is chargeable only when there is delayed or short payment of duty, and not where the duty is paid promptly upon becoming liable. No new precedent was established beyond the application of existing statutory provisions to the facts of this case.
1. Heard learned Assistant Solicitor General Shri Alok Sharma, for the appellant.
2. Appeal under Section 35G of the Central Excise Act, 1944 is directed against the order passed by the Commissioner, Central Excise and Customs (Appeals), Aurangabad dated 18-10-2004 and the judgement and order dated 6-6-2006 delivered by the Member, Customs Excise and Service Tax Appellate Tribunal (for short, “CESTAT”), Mumbai.
3. A show cause notice-cum-demand was issued by the Department to the Respondent Assessee on 26-4-2004. The Assessee was called upon to pay interest of Rs. 1,37,001/- under Section 11AB of the Central Excise Act, 1944. After considering the say filed by the Assessee, the Assistant Commissioner, Central Excise and Customs, Aurangabad-II Division was pleased to confirm the notice and recovery of Rs. 1,37,001/- towards interest on delayed payment of differential duty under/Section 11AB(1) of the Central Excise Act, 1944. The Assessee carried the matter in appeal before the Commissioner, Central Excise and Customs (Appeals), Aurangabad who after consideration of the matter, was pleased to allow the appeal and set aside the impugned order. Appeal filed by the Department before the CESTAT did not find favour with the members and was dismissed. Hence, the Department is before us.
4. So far as facts are concerned, respondent/Assessee are the manufacturers of motor vehicle parts falling under sub-heading No. 8708.00 and 8714.00 of the Central Excise Tariff Act, 1985. The Assessee had cleared goods as per Purchase Order placed with them by their customers M/s Bajaj Auto Limited and paid Central Excise duty accordingly. After the clearance of the goods, the Assessee had received the Amendment to the said Purchase Order for enhancement of rate with retrospective effect.
5. The Assessee, therefore, calculated and paid the differential duty by issuing the supplementary invoice to the customer. It is the claim of the Department that on this differential duty paid in accordance with the supplementary invoice, the Assessee ought to pay interest as chargeable under Section 11AB of the Central Excise Act, 1944. The claim is based on the contentions that since the goods were cleared earlier, the entire duty was payable on the date of clearance of the goods and therefore, differential duty although paid by the Assessee voluntarily, the interest upon the same calculated to Rs. 1,37,001/- for the period September, 2002 to January, 2004 is leviable and ought, to be paid by the Assessee. Section 11AB is quoted by the Assistant Commissioner in his order. It reads thus:—
“Where any duty of excise has not been levied or has been short levied or short paid or erroneously refunded, the person who is liable to pay the duty as determined under sub-section (2) or has paid the duty under section (2b), of section 11a, shall, in addition to the duty, be liable to pay interest at such rate not below (ten percent) and not exceeding thirty-six percent per annum as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act.”
6. It is evident that the section comes into play if the duty paid/levied is short. Both, the Commissioner (Appeals) and the 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 11a(2) and 11A(2B) were not applicable as the situation occurred in the instant case was quite different, Section 11AB(1) was not at all applicable, and therefore, the Assessee was not required to pay interest.
7. Learned Assistant Solicitor General Shri Sharma vehemently urged that if there is time-gap between the date on which the differential rates applicable with retrospective effect were learnt and the date on which the duty was paid, assessee would be liable to pay interest. Eventually, either on going through the order in original, dated 30-6-2004 passed by the Assistant Commissioner, Central Excise and Customs, Aurangabad or upon going through the text of the show cause notice-cum-demand dated 26-4-2004, a copy of which is produced for ready reference (marked “X” for identification purposes), there is nothing to indicate that there was any time-gap between the date on which the revised rates applicable with retrospective effect were learnt by the Assessee and the date on which differential duty was paid. Had that been the case, the levy of interest as under Section 11AB could have been considered because of delayed payment of duty, but this is the case wherein the Assessee upon learning that the rates of the goods cleared were revised/escalated and therefore, they are liable to pay more duty than already paid at the time of clearance of the goods, has voluntarily paid the duty. Thus, there is no delay.
8. This is, therefore, not a case where duty of excise has not been paid or short-paid. We are, therefore, inclined to concur with the view taken by the Commissioner (Appeals) and the CESTAT, which calls for no interference.
9. Accordingly, this appeal is summarily dismissed.
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