Suppression of additional consideration supports interest on delayed duty payment and penalty under section 11AC.

Additional consideration collected contemporaneously through debit notes and not disclosed at clearance was treated as duty-bearing value, so interest ran from the date duty became payable and the challenge failed. The same conduct, involving non-accounting of extra amounts for duty purposes and disclosure only after audit detection, was held to amount to suppression with intent to evade duty; penalty under section 11AC of the Central Excise Act, 1944 was therefore leviable and the lower appellate relief was reversed.

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Issues: (i) Whether interest was payable on the duty attributable to additional conversion charges collected through debit notes and paid only after audit. (ii) Whether penalty under section 11AC of the Central Excise Act, 1944 was leviable on the facts of the case.

Issue (i): Whether interest was payable on the duty attributable to additional conversion charges collected through debit notes and paid only after audit.

Analysis: The additional amounts were collected almost concurrently for the same consignments by issuing debit notes and were not disclosed to the department at the time of clearance. Duty was paid only after the audit pointed out the omission. On those facts, the delay in payment was not a case of mere later adjustment of price after a lapse of time, but of non-payment on additional consideration already received. Interest therefore followed from the date the duty became payable.

Conclusion: Interest was payable and the assessee's challenge failed.

Issue (ii): Whether penalty under section 11AC of the Central Excise Act, 1944 was leviable on the facts of the case.

Analysis: The concurrent collection of extra amounts by debit notes, without raising second invoices or accounting for the amounts for duty purposes, amounted to suppression with intent to evade duty. Since the demand itself was not disputed on the basis of limitation and payment was made only after departmental detection, the case attracted the penal consequence under section 11AC. The setting aside of penalty by the lower appellate authority was therefore unsustainable.

Conclusion: Penalty under section 11AC was leviable and the assessee's challenge failed.

Final Conclusion: The duty-related interest demand was sustained and the original penalty was restored, leaving the assessee without relief and the revenue's stand accepted on both contested issues.

Ratio Decidendi: Where additional consideration is collected contemporaneously but not brought to duty, suppression with intent to evade duty justifies interest on delayed payment and penalty under section 11AC.

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