Post-clearance price escalation and supplementary invoices did not attract interest on differential excise duty.

Interest on differential central excise duty arising from supplementary invoices for post-clearance price escalation was not payable because the duty had been discharged on the value prevailing at removal, and the higher price crystallised only when the revised price was agreed later. The supplementary invoices were treated as reflecting a later escalation rather than a retrospective revision of the clearance value. Applying the transaction-value principle under Section 4 of the Central Excise Act, 1944, and the absence of short levy within Section 11A(2B), the analysis concluded that interest under Section 11AB did not arise.

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Issues: Whether interest was payable on differential central excise duty arising from supplementary invoices issued on account of post-clearance price escalation.

Analysis: The duty on the goods had been discharged on the value prevailing at the time of removal, and the higher price arose later because of escalation in input labour and other costs. The liability to pay differential duty crystallised only when the revised price was agreed, and the supplementary invoices did not amount to a retrospective revision of the price at the time of clearance. In such a situation, the case was distinguished from the authority relied upon by the Revenue, and the principles applied were that the transaction value under Section 4 of the Central Excise Act, 1944 is the value agreed at removal, while interest under Section 11AB of the Central Excise Act, 1944 does not arise where there is no short levy within the meaning of Section 11A(2B) of the Central Excise Act, 1944.

Conclusion: Interest on the differential duty was not payable, and the demand confirming interest was set aside.

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