2011 (4) TMI 1274 - HC - Central Excise

High Court rules in favor of Revenue in Tax Appeal, restores Adjudicating Authority's decision on interest payment.

COMMR. OF C. EX. & CUS., VADODARA-I Versus CHLORITECH INDUSTRIES

The High Court allowed the Tax Appeal, ruling in favor of the Revenue and setting aside the Tribunal's judgment. The Court restored the decision of the ... Whether in the facts and circumstances of the cases, the Tribunal erred in holding that no interest as prescribed under the provisions of Section 11AB of the Act can be recovered when the differential duty is paid on price variation? Held 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 (2009 (7) TMI 6 - SUPREME COURT). 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 (2010 (1) TMI 151 - SUPREME COURT OF INDIA) has further elaborated that on interest loss to the Revenue, Section 11AB would be applicable in similar cases. Question is answered in favour of the Revenue Issues involved:Interpretation of Section 11AB of the Central Excise Act, 1944 regarding the recovery of interest on differential duty paid on price variation.Detailed Analysis:Issue 1: Interpretation of Section 11AB of the Central Excise Act, 1944The case involved a dispute over the recovery of interest under Section 11AB of the Central Excise Act, 1944 on the payment of differential duty due to price variation. The Revenue appealed against the decision of the Tribunal that held no interest could be recovered on such differential duty payment.Analysis: The High Court referred to the decision of the Supreme Court in the case of SKF India Limited, which established that interest under Section 11AB is applicable even if the non-payment or short payment of duty was unintentional. The Court highlighted that the differential duty paid after the clearance of goods signifies a short payment or short levy at the time of removal, making interest leviable under Section 11AB.Issue 2: Application of Legal PrecedentsThe appellant argued that the case was similar to the SKF India Limited case and should be decided accordingly. However, the respondent contended that the facts of the present case, where the price was bifurcated into fixed and fluctuating components, distinguished it from the SKF case.Analysis: The High Court compared the facts of the present case with the SKF India Limited case and emphasized that the crucial aspect was the payment of differential price after the clearance of goods. The Court rejected the argument of a revenue-neutral scenario presented by the respondent, citing the decision in the case of CCE v. International Auto Limited, which reiterated the applicability of Section 11AB in such situations.Issue 3: Overruling Contrary DecisionsThe High Court addressed the conflicting views presented in the case of CCE v. Rucha Engg.(P) Limited by the Bombay High Court, which took a different stance on the application of Section 11AB in cases of differential duty payment due to price revision.Analysis: The High Court overruled the Bombay High Court's decision and upheld the interpretation of Section 11AB as established in the SKF India Limited case. The Court emphasized that the payment of differential duty, even if unintended, falls under the purview of Section 11AB, leading to the imposition of interest.Conclusion:The High Court allowed the Tax Appeal, ruling in favor of the Revenue and setting aside the Tribunal's judgment. The Court restored the decision of the Adjudicating Authority regarding the payment of interest by the assessee under Section 11AB of the Central Excise Act, 1944.