2009 (7) TMI 6 - SC - Central Excise

Retrospective price revision caused non-intentional excise shortfall under Section 11A(2B); interest under 11AB, no penalty under 11A(1A)

Commissioner of Central Excise, Pune Versus M/s SKF India Ltd.

SC held that short payment of excise duty here fell within section 11A(2B) as non-intentional short levy arising from retrospective price revision. The ... Nature and scope of the penalty provision in the Central Excise Act as contained in section 11AC - differential duty - recovery, interest and penalty arising from non-levy or short levy of duty, non-payment or short payment of duty or erroneous refund - HELD THAT:- Section 11A puts the cases of non-levy or short levy, non-payment or short payment or erroneous refund of duty in two categories. One in which the non-payment or short payment etc. of duty is for a reason other than deceit; the default is due to oversight or some mistake and it is not intentional. The second in which the non-payment or short payment etc. of duty is 'by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty'; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short payment etc. of duty is by reason of fraud collusion etc. are dealt with under sub-section (1A) of section 11A and the cases where the non-payment or short payment of duty is not intentional under sub-section (2B). The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub-section (2B) of section 11A of the Act. 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 demanding 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. Thus, we set aside the judgments and orders passed by the Tribunal and the Commissioner (Appeals). We restore the order passed by the Assistant Commissioner in so far as charge of interest is concerned. On the facts of this case there is no question of imposition of any penalty. Hence, that part of the order of the Assistant Commissioner is set aside. In the result the appeals are allowed. Issues Involved:1. Liability to pay interest on differential duty under sections 11A, 11AA, and 11AB of the Central Excise Act.2. Applicability of sections 11A (2B) and 11AB when differential duty is paid upon retrospective price revision.3. Imposition of penalty under section 37(3) of the Central Excise Act.Issue-wise Detailed Analysis:1. Liability to pay interest on differential duty under sections 11A, 11AA, and 11AB of the Central Excise Act:The Supreme Court examined the nature and scope of the penalty and interest provisions in the Central Excise Act, specifically sections 11A, 11AA, and 11AB. Section 11A deals with the recovery of duties not levied or short-levied, while sections 11AA and 11AB pertain to interest on delayed payment of duty. The Court noted that section 11A categorizes cases of non-payment or short payment of duty into two groups: one due to oversight or mistake, and the other due to intentional deceit. Both categories allow the assessee to make amends, but interest is leviable on delayed payment of duty regardless of the reason for the delay.2. Applicability of sections 11A (2B) and 11AB when differential duty is paid upon retrospective price revision:The facts of the case involved the respondent-assessee manufacturing and selling goods on certain prices and paying excise duty accordingly. Upon a retrospective price revision, the assessee issued supplementary invoices and paid the differential duty. The Revenue demanded interest on the delayed payment of this differential duty. The Tribunal, following the Bombay High Court's decision in M/s Rucha Engineering Pvt. Ltd., held that no interest was chargeable as there was no time-gap between the payment of differential duty and issuance of supplementary invoices. However, the Supreme Court disagreed, stating that the payment of differential duty falls under sub-section (2B) of section 11A and attracts interest under section 11AB. The Court emphasized that the goods were initially cleared on short payment of duty, and the differential duty was paid later, making it a clear case of short payment of duty, albeit unintended.3. Imposition of penalty under section 37(3) of the Central Excise Act:The Assistant Commissioner had imposed a penalty of Rs. 5,000 on the assessee, which was set aside by the Commissioner (Appeals) and the Tribunal. The Supreme Court upheld the decision to not impose any penalty, given that the short payment of duty was unintentional and without any element of deceit. The Court restored the order of the Assistant Commissioner only in so far as the charge of interest was concerned, setting aside the penalty.Conclusion:The Supreme Court set aside the judgments and orders of the Tribunal and the Commissioner (Appeals), restoring the order of the Assistant Commissioner concerning the charge of interest. The Court held that interest is leviable on delayed payment of differential duty under section 11AB, even if the payment was made upon retrospective price revision. The imposition of penalty was deemed unnecessary in this case. The appeals were allowed with no order as to costs.