Gujarat High Court
Commissioner vs M/S on 9 December, 2011
Author: Akil Kureshi
Bench: Akil Kureshi
Gujarat High Court Case Information System
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TAXAP/534/2011 8/ 8 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 534 of 2011
To
TAX
APPEAL No. 535 of 2011
=========================================================
COMMISSIONER
CENTRAL EXCISE,CUSTOMS & SERVICE TAX - Appellant(s)
Versus
M/S
MUTUAL INDUSTRIES LTD - Opponent(s)
=========================================================
Appearance
:
MR
RJ OZA for
Appellant(s) : 1,
MR PARESH M DAVE for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 09/12/2011
ORAL
ORDER
(Per : HONOURABLE MS JUSTICE SONIA GOKANI)
1. Being aggrieved by the order of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) dated 30.9.2010, the present appellant has preferred an appeal u/s. 35G of Central Excise Act, 1944 ("hereinafter referred to as Act") proposing following questions of law :
[a] Whether the provisions for interest on delayed payment contained in section 11AB are applicable only for duty determined under sub-section (2) of the Section 11A or also for duty which has been paid under sub-section 11A of the Central Excise Act, 1944 ?
[b] Whether in the facts and circumstances of the case, the impugned order passed by the Tribunal is contrary to decision of the Hon'ble Supreme Court in the matter of CCE, Pune Vs. SKF India Ltd. reported in 2009 (239) ELT 385 [SC] and in the matter of CCE Vs. International Auto Ltd. 2010 (25) ELT 3[SC] ?
[c] Whether in the facts and circumstances of the case, the respondent is liable to pay interest, when it pays the duty because of subsequent refixation of prices through supplementary invoices, from the date of clearance of the goods ?
2. Heard learned Senior Counsel Mr.R.J.Oza. On due consideration of the material placed before this Court, it emerges that the appellant is engaged in the manufacturing of excisable goods falling under different Chapters and clearing the same under cover of their invoices, on the assessable value agreed by and between the petitioner and their buyer The said agreement contained clause of price escalation. Revised purchased orders were issued subsequently and supplementary invoices were raised as well.
3. As noted by the Tribunal, the disputes concerns interest leviable on differential duty paid subsequently on the supplementary invoices. The Tribunal after considering the same on the judgement of this Court and that of Karnataka High Court and dismissed the appeal. The impugned order is challenged proposing the aforementioned question of law .
4. Learned counsel candidly pointed out that the identical questions have been decided in Tax Appeal No. 185 of 2008, allowing the appeal of Revenue and setting aside the order of Tribunal.
5. On perusal of the order passed in Tax Appeal No. 185 of 2008, this bench while adjudicating the identical questions of law has held thus :
"Having heard learned counsel for the parties, to our mind, the entire issue is squarely covered by the decision of the Supreme Court in the case of SKF India Limited [Supra]. It was the case wherein the assessee-manufacturer had sold certain ball-bearings and textile machine parts. At the time of sale, the assessee received certain price upon which excise duty at the rate prevalent was also paid up. Later on, however, there was a revision of price with retrospective effect. Following such revision, the assessee demanded from its customers, the balance price and issued to them supplementary invoices. At that time, the assessee paid the differential duty on the goods sold earlier. The Revenue was however of the opinion that the assessee was liable to pay interest on the differential duty paid later. It was in this background that the Apex Court, interpreting various provisions of the Central Excise Act, in particular Section 11AB thereof, held that the assessee was liable to pay interest even if non payment of duty or short payment of duty at the initial stage was wholly unintentional. We find that the view of the Bombay High Court in its decision in the case of CCE v. Rucha Engg. (P) Limited [not reported] in which the Bombay High Court had taken a different stand, was over-ruled, which could be seen from the observations of the Apex Court in paragraph 12 to 14 of the judgment, which read as follows :-
"12. The Bombay High Court, Aurangabad Bench, in its decision in The Commissioner of Central Excise, Aurangabad v. M/s. Rucha Engineering Prvt. Limited [First Appeal No. 42 of 2007] that was relied upon by the Tribunal for dismissing the Revenue's appeal took the view that there would be no application of Section 11A [2B] or Section 11AB where differential duty was paid by the assessee as soon as it came to learn about the upward revision of prices of goods sold earlier. In M/s. Rucha Engineering, the High Court observed as follows :
"It is evident that the Section [11AB] 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 differential duty was due at that time, ie., when the revised rates applicable with retrospective effect was learned 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."
13. 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.
14. We are unable to subscribe to the view taken by the High Court. 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 prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demand the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act."
As already noted, the decision in the case of SKF India Limited [Supra] was followed in subsequent decision in the case of CCE v. International Auto Limited [Supra]. The Apex Court observing that the differential price signified that value, which is the function of the price, on the date of removal/clearance of the goods was not correct. It was further observed that the when the differential duty is paid after the date of clearance, it indicates short payment/short levy on the date of removal, hence interest which is for loss of revenue, becomes leviable under Section 11AB of the Act. Here again, the decision of the Bombay High Court in the case of Rucha Engineering Pvt. Limited [Supra] was not approved.
Section 11AB of the Central Excise Act, 1944 reads as under :-
11AB. Interest on delayed payment of duty - [1] Where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, the person who is liable to pay duty as determined under sub-section (2), or has paid the duty under sub-section 2 (B), of Section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below [ten per cent] and not exceeding thirty-six per cent. 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, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of Section 11A till the date of payment of such duty :
Provided that in such cases where the duty become payable consequent to issue of an order, instruction, or direction by the Board under Section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty five days from the date of issue of such order, instruction or direction as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid.
[2] The provisions of sub-section (1) shall not apply to cases where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President.
Explanation 1 : Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal "National Tax Tribunal" or, as the case may be, the Court, the interest shall be payable on such reduced amount of duty.
Explanation 2 : Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal "National Tax Tribunal" or, as the case may be, the Court, the interest shall be payable on such increased or further increased amount of duty."
To our mind, facts on material aspects are similar in the present case. It is of course true that a part of the price received by the assessee for the goods sold was based on fluctuating price regime and fluctuated on the basis of factors over which the assessee had no control. Whereas, in SKF case, assessee received higher price for goods already cleared and sold on account of retrospective price increase. However, to our mind, this distinction is not material. What is important is that the assessee received differential price of the goods after its clearance. At the time of clearance, assessee had paid excise duty only on the price it had received till then. For the difference, it had to pay interest under Section 11AB, as held by the Apex Court in the case of SKF India Limited [Supra]. We are unable to agree with the learned counsel for the assessee that there is a revenue neutral case. The Apex Court, in a subsequent decision in the case of CCE v. International Auto Limited [Supra] has further elaborated that on interest loss to the Revenue, Section 11AB would be applicable in similar cases.
In the result, Tax Appeal is allowed. Question is answered in favour of the Revenue. The impugned judgment of the Tribunal is set-aside and that of the Adjudicating Authority is restored. It is clarified that this direction pertains only to the question of interest payable by the assessee under Section 11AB of the Act.
6. The facts are similar and the questions of law being identical with no new facts having emerged to be adjudicated, these Tax Appeals are also to be allowed setting aside the impugned order of the Tribunal, answering the question in favour of the revenue on identical terms as passed in earlier Tax Appeal by restoring the matter to the file of Assessing Officer. Tax Appeals are accordingly disposed of .
{Akil Kureshi, J.} {Ms.Sonia Gokani,J.} Bina* Top