Sharavathy Conductors Pvt. Ltd. v. Commissioner Of Central Excise

V. Padmanabhan, Member (Technical):— The present appeal is directed against the order dated 30.06.2011 passed by the Commissioner (Appeals), Bangalore. The appellant is engaged in the manufacture of Electrical Conductors falling under Chapter 76 of the first schedule to the Central Excise Tariff Act, 1985. The assessee raised supplementary invoices on account of revision in prices of Conductors subsequent to clearance of the goods from the factory. They discharged the differential duty on such supplementary invoices. However they failed to pay interest on such differential duty in terms of Section 11AB of the Central Excise Act, 1944. The Department took the view that interest is to be charged on such differential duty under Section 11AB from the date of original clearance of the goods till the date of payment of differential duty. A show-cause notice was issued on 20.01.2010 demanding payment of interest to the extent of Rs. 1,02,569/- (Rupees One Lakh Two Thousand Five Hundred and Sixty Nine only) for the supplementary invoices raised during the period June 2007 to December 2007. The demand stands confirmed by the original authority vide his order dated 27.12.2010. This order was upheld by the Commissioner (Appeals) vide her order dated 30.06.2011. Hence the present appeal.

2. The main contention of the assessee in the present appeal is that the show-cause notice dated 20.01.2010 issued for demand of interest on the differential duty paid during June to December 2007 would be hit by limitation. They have contended that the Department is required to issue a show-cause notice under Section 11A within the normal period of one year even for demand of interest. They have relied upon the following case law to support their view:

a) UCAL Fuel Systems Ltd. v. CCE, reported in 2010-TIOL-127-CESTAT-MAD

b) CC v. T.V.S. Whirlpool Ltd., reported in 1996 (86) E.L.T. 144 upheld by the Hon'ble Supreme Court as reported in 2000 (119) E.L.T. A 177 (S.C)

3. Heard Mr. K. Parameswaran learned advocate for the appellant as well as Mrs. Ezhil Mathi, learned DR for the Revenue.

4. The learned advocate submitted that they are not contesting the payment of differential duty on the supplementary invoices raised to the customers. However, their submission is that the show-cause notice is hit by time-bar inasmuch as earlier show-cause notice stands issued by the Department covering the period upto May 2007 which has been issued and adjudicated invoking the extended period of time limit.

5. Learned DR on the other hand submitted that the time limit specified under Section 11A is not applicable for recovery of interest. She submitted that interest gets automatically charged when differential duty is payable and is paid after delay. She relied upon the decision of the Tribunal in the case of SKH Auto Components Ltd. v. CCE, Delhi-IV Final Order No. 553/2011-EX dated 23.06.2011.

6. It is not disputed that differential duty is payable on the supplementary invoices issued to the customer subsequent to the date of clearance of the goods. Such differential duty also stands paid. The question before us is whether interest is required to be paid on such differential duty. If so from what date the interest is liable to be paid and finally whether the show-cause notice issued for recovery of interest is hit by time-bar inasmuch as the same has been issued beyond the normal period of time limit of one year available under Section 11A of the Central Excise Act.

6.1. The question of liability for payment of interest has been considered at length and settled by the Hon'ble Supreme Court of India in the case of Commissioner Of Central Excise, Pune v. Skf India Limited . reported in 2009 (239) E.L.T. 385 wherein it has been held that whenever the assessee recovered differential price by raising supplementary invoices and paid differential duty it implies that there was a short payment of duty though completely unintended and without any element of deceit and such payment of differential duty clearly came under sub-section (2B) of Section 11A and attract levy of interest under Section 11AB of the Act. The Apex Court further reiterated and amplified the above position in the case of Commissioner Of Central Excise v. International Auto Limited ., 2010 (250) E.L.T. 3 (S.C.). However the Apex Court in the case of Steel Authority of India Ltd. v. CCE, Raipur, 2015 (326) E.L.T. 450 (S.C) has proposed that the question of chargeability of interest is to be referred to Larger Bench of the Apex Court. However since the issue is pending, the legal position is not in doubt that interest is liable to be paid from the date of original clearance of goods till the date of payment of differential duty on supplementary invoices.

6.2. Now we turn to the specific argument of the appellant saying that the show-cause notice is hit by time-bar inasmuch as it has been issued on 20.01.2010 for the period June 2007 to December 2007. The learned DR has argued that there is no time limit for issue of notice for recovery of interest. She has relied upon the case of SKH Auto Components Ltd. When we consider the definition of ‘relevant date’ in Section 11A of the Central Excise Act, we find that the amendment has been carried out w.e.f. 14.05.2015 to the effect that relevant date, in the case where only interest is to be recovered, will be the date of payment of duty to which such interest relates. However the amendment is prospective w.e.f. 14.05.2015 and cannot be applied to the prior period. However the Hon'ble Apex Court in the case of Commissioner v. T.V.S. Whirlpool Ltd., 2000 (119) E.L.T. A 177 (S.C) has held as follows:

“It is only reasonable that the period of limitation that applies to a claim for the principal amount should also apply to the claim for interest thereon”.

7. Respectfully following the said decision, we hold that when the normal time limit prescribed is one year from the relevant date for recovery of the principal amount, it is reasonable to adopt the same period for recovery of interest as well. Therefore in the instant case, we are of the view that Department should have initiated the proceedings for recovery of interest within a period of one year from the date of filing of monthly returns. Since the show-cause notice for payment of interest has been issued only on 20.01.2010 for recovery of interest for the period June 2007 to December 2007, it will be beyond the period of one year and therefore will be barred by limitation. It is also on record that the Department has already issued one show-cause notice invoking the extended period of limitation for recovery of interest for the period upto May 2007. This demand stands quashed by the Tribunal in Final Order dated 23.06.2011.

8. In line of the above discussion, the impugned order is set aside and appeal allowed.