2014 (1) TMI 108 - AT - Central Excise

Court Upholds Interest Demand on Differential Duty Payment

The court upheld the Commissioner of Central Excise's demand for interest on the voluntarily paid differential duty by the appellant units, ruling that ... Interest on differential duty u/s 11AB of Central Excise Act - Waiver of Pre-deposit – Necessary particulars for determination of assessable value by CAS-4 method was not available - Held that:-The differential duty payment was not at the instance of the department - voluntary payment of duty would squarely attract sub-section (2B) – Thus, the liability to pay interest in terms of the relevant Explanation to the sub-section is irresistible - Prima facie, the appellant is liable to pay interest under Section 11AB of the Act on the differential amounts of duty paid under supplementary invoices – Following Commissioner of C. Ex. vs. SKF India Ltd. [2009 (7) TMI 6 - SUPREME COURT ] - Assessee offered to make pre-deposit of Rs. 10 lakhs towards the total demand of interest of Rs. 1.15 crores – the amount offered by the assessee accepted as the pre-deposits – Upon such submission rest of the duty to be waived till the disposal – Partial stay granted. Issues:1. Challenge against interest demanded by the Commissioner of Central Excise on differential duty paid by appellant units.2. Applicability of interest on differential duty under sub-section (2B) of Section 11A of the Central Excise Act.3. Distinction between the present case and cited cases regarding interest on differential duty.4. Voluntary payment of duty by appellant units and the liability to pay interest under Section 11AB of the Act.Analysis:1. The judgment addresses a challenge against interest demanded by the Commissioner of Central Excise on the differential duty paid by the appellant units. The units had cleared their products to other units of the company through stock transfer without following the CAS-4 method of valuation initially. Subsequently, the correct value was determined under CAS-4, and the appellant units paid the differential duty through supplementary invoices to the recipient units. The issue arose when no interest was paid on this differential duty, leading to show-cause notices being issued demanding interest and proposing penalty. The impugned orders were passed in response to these show-cause notices, focusing on the interest on the differential duty paid.2. The debate centered on the applicability of interest on the differential duty paid under sub-section (2B) of Section 11A of the Central Excise Act. The appellant argued that the delayed payment was not due to any fault on their part and that they were allowed by the CBEC Circular to determine the correct assessable value over time. On the contrary, the Additional Commissioner contended that interest was automatic on such payments, citing precedents like Commissioner of C. Ex. vs. SKF India Ltd. and Commissioner of C. Ex. vs. International Auto Ltd. where interest was deemed chargeable under Section 11AB of the Act for similar situations. The appellant attempted to distinguish their case from these precedents, emphasizing the stock transfer nature of the transactions and the availability of CENVAT credit to the recipient units.3. The judgment rejected the appellant's attempt to distinguish their case from the cited precedents, emphasizing that the differential duty was paid voluntarily by the appellant units after clearance of goods and was communicated to the Central Excise officer promptly. This voluntary payment triggered the application of sub-section (2B) and the consequential liability to pay interest under Section 11AB. The court found the apex court's decisions in the cited cases applicable to the present scenario, leading to a direction for the appellant to pre-deposit a specified amount towards the total interest demand, with a waiver and stay against the remaining balance contingent on compliance.4. The judgment concluded by accepting the appellant's pre-deposit offer due to the absence of penalties and the sole dispute revolving around the interest on the voluntarily paid differential duty. The court's decision to allow the pre-deposit and grant a waiver and stay against the balance of interest marked the resolution of the stay applications in the case, providing a clear directive for compliance and further proceedings.