2008 (10) TMI 76 - AT - Central Excise

Tribunal: Additional Payments by Buyer Post-Removal Part of Transaction Value

The Tribunal concluded that the additional amount paid by the buyer under supplementary invoices post-removal constitutes part of the transaction value ... Transaction value - short-payment / short-levy of duty - Section 11A(2B) - self-ascertainment and payment of short-paid duty - Section 11AB - interest on delayed payment of duty - provisional assessment and interest under Rule 7(4) - Rule 8(3) and Rule 8(4) - manner of payment and recovery of interest - Section 11 - recovery of sums due to GovernmentTransaction value - short-payment / short-levy of duty - Whether the additional amount realized by the buyer by way of supplementary invoice after removal of goods forms part of the transaction value and therefore gives rise to duty which 'ought to have been paid' at the time and place of removal - HELD THAT: - The Tribunal examined the definition of 'transaction value' under Section 4(3)(d) and held that any amount the buyer is liable to pay to the assessee by reason of or in connection with the sale, whether payable at the time of sale or at any other time, is part of the transaction value. It reasoned that the amount charged as price comprises both the price collected at removal and any differential price collected subsequently on account of price revision, and that duty must be paid on that transaction value with reference to the time (and place) of removal. The Bench expressed the view that, with this construction, the differential duty paid pursuant to supplementary invoices is a duty short-paid with reference to the time of removal. However, because this view conflicts with the coordinate Bench decision in Arvind Mills, the Tribunal did not finally resolve the controversy and directed constitution of a fiveMember Bench to address the conflict after placing records before the Hon'ble President. [Paras 6, 7, 10]Taken in favour of the Revenue by this Bench but remanded for decision by a fiveMember Bench to resolve conflict with the coordinate BenchSection 11A(2B) - self-ascertainment and payment of short-paid duty - Section 11AB - interest on delayed payment of duty - Whether payment of duty under supplementary invoice is covered by Section 11A(2B) and attracts interest under Section 11AB measured from the date the duty 'ought to have been paid' - HELD THAT: - The Tribunal held that where a duty has been short-paid, the person chargeable may self-ascertain and pay the duty under Section 11A(2B) and, by virtue of Explanation 2 to that sub-section and the language of Section 11AB(1), interest under Section 11AB is payable on the amount so paid (and any additional short-payments determined by the officer) from the first day of the month succeeding the month in which the duty ought to have been paid with reference to the time of removal. The Bench equated the legal effect of self-ascertainment under Section 11A(2B) with finalization of a provisional assessment for the purpose of attracting interest, and rejected the plea that absence of delay measured from the date of price revision or supplementary invoice avoids interest liability. Notwithstanding this view, because it conflicts with the Arvind Mills coordinate Bench decision, the issue was referred to a fiveMember Bench for authoritative determination. [Paras 6, 10]Bench held Section 11A(2B) payments attract interest under Section 11AB but referred the question for determination by a fiveMember Bench due to contrary coordinateBench authoritySection 11AB - interest on delayed payment of duty - provisional assessment and interest under Rule 7(4) - Whether interest under Section 11AB is leviable on the differential duty paid under supplementary invoice from the first day of the month succeeding the month in which duty was paid in the first instance - HELD THAT: - Relying on the statutory scheme, the Tribunal reasoned that interest under Section 11AB is compensatory and payable where duty has been short-paid with reference to the time of removal. It held that differential duty paid after removal, even if paid promptly after price revision, is nevertheless a belated payment relative to the time of removal and therefore attracts interest from the date the duty ought to have been paid. The Bench further observed that an assessee who could reasonably have resorted to provisional assessment under Rule 7 but did not, cannot escape interest liability by invoking impossibility. As this conclusion conflicts with a coordinate Bench decision, the point was directed to be decided by a constitution of five Members. [Paras 6, 10]Bench favoured levy of interest under Section 11AB on differential duty but referred the issue to a fiveMember Bench for resolution of conflicting authorityRule 8(3) and Rule 8(4) - manner of payment and recovery of interest - Section 11 - recovery of sums due to Government - Whether there is a statutory mechanism for recovery of interest payable under Section 11AB on amounts of duty paid under supplementary invoice - HELD THAT: - The Tribunal construed subrule (4) of Rule 8 as specifically making the provisions of Section 11 applicable for recovery of duty assessed under Rule 6 and interest under subrule (3). Noting that Rule 8(3) itself references Section 11AB, the Bench held that the rulemaking authority intended the term 'due date' to be read synonymously with the date the duty 'ought to have been paid' under Section 11AB. Consequently, if the assessee fails to pay the interest, the proper officer may recover it by invoking Section 11 of the Act (deduction, attachment and sale, or certificate to the Collector for recovery as an arrear of land revenue). The Tribunal therefore rejected the contention that no recovery mechanism exists for interest under Section 11AB. [Paras 9]Held for the Revenue: interest under Section 11AB is recoverable and Section 11 (read with Rule 8(4)) supplies the statutory recovery mechanismFinal Conclusion: The Bench held that differential amounts realized by way of supplementary invoices can constitute part of the transaction value and that differential duty paid under Section 11A(2B) attracts interest under Section 11AB; it further held that Rule 8(4) read with Section 11 provides a recovery mechanism for such interest. Because the view on valuation and interest conflicts with a coordinate Bench decision (Arvind Mills), issues concerning transaction value and liability to interest (issues (a)-(c)) were referred for consideration by a fiveMember Bench, while the question of statutory recovery (issue (d)) was finally decided in favour of the Revenue. Issues Involved:1. Whether the additional amount paid by the buyer towards the price of goods under supplementary invoices post-removal can be considered part of the 'transaction value' under Section 4 of the Central Excise Act.2. Whether the payment of duty under the supplementary invoice by the assessee is covered by sub-section (2B) of Section 11A of the Act.3. Whether interest is leviable under Section 11AB on the amount of duty paid under the supplementary invoice from the first date of the month succeeding the month in which duty was initially paid.4. Whether the Central Excise Act or Rules contain any provision for the recovery of interest payable under Section 11AB on any amount of duty paid under supplementary invoices.Detailed Analysis:Issue (a): Transaction Value:The Tribunal considered whether the additional amount paid by the buyer under supplementary invoices post-removal forms part of the 'transaction value' under Section 4 of the Central Excise Act. The Tribunal noted that 'transaction value' includes any amount the buyer is liable to pay to the assessee in connection with the sale, whether payable at the time of sale or at any other time. It was concluded that the differential price collected subsequently due to price revision is part of the transaction value. The Tribunal emphasized that the 'transaction' does not end with the removal of goods and includes any amount received from the buyer in connection with the sale, making it part of the transaction value.Issue (b): Coverage under Section 11A(2B):The Tribunal examined whether the payment of duty under supplementary invoices falls under sub-section (2B) of Section 11A of the Act. It was observed that when the assessees paid differential duty based on price revision, they acted in terms of Section 11A(2B), which allows for self-ascertainment and payment of duty before the service of notice. The Tribunal noted that the payment of differential duty under supplementary invoices is a belated payment of duty with reference to the time of removal of goods, thus falling under Section 11A(2B).Issue (c): Interest under Section 11AB:The Tribunal addressed whether interest is leviable under Section 11AB on the differential duty paid under supplementary invoices. It was concluded that interest under Section 11AB is payable from the first day of the month succeeding the month in which the duty ought to have been paid, which is at the time of removal of the goods. The Tribunal rejected the argument that there was no delay in payment with reference to the time of price increase, stating that the delay must be considered with reference to the time of removal of the goods. The Tribunal emphasized that the interest under Section 11AB serves as compensation for the delayed payment of duty.Issue (d): Provision for Recovery of Interest:The Tribunal considered whether the Central Excise Act or Rules provide a mechanism for the recovery of interest payable under Section 11AB. It was held that sub-rule (4) of Rule 8 of the Central Excise Rules, 2002, which allows for the recovery of interest under Section 11AB, is applicable. The Tribunal noted that this rule mandates that any unpaid duty along with interest can be recovered by the proper officer of Central Excise under Section 11 of the Act. The Tribunal rejected the argument that there was no provision for recovering such interest, concluding that Section 11 provides the necessary mechanism for recovery.Conclusion:The Tribunal held that the additional amount paid under supplementary invoices is part of the transaction value, the payment of duty under supplementary invoices is covered by Section 11A(2B), interest is leviable under Section 11AB on the differential duty, and the Central Excise Act and Rules provide a mechanism for the recovery of such interest. The Tribunal directed the records to be placed before the Hon'ble President for constituting a bench of five Members to resolve the conflict with the coordinate Bench's view in Arvind Mills case.