Retrospective price escalation triggers excise interest on differential duty paid later under the valuation rules.

Interest under Section 11AB was payable on differential central excise duty arising from retrospective escalation of the sale price of goods. The goods were initially cleared at one price, and additional consideration was received later under an escalation arrangement; although the assessee discharged duty on the enhanced value, the dispute was whether interest applied for the period between clearance and later payment. Applying the governing valuation and interest provisions, and following Supreme Court authority that retrospective price enhancement relates back to the time of removal for duty and interest purposes, CESTAT held that interest was attracted on the differential duty paid later. The assessee's challenge failed.

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Issues: Whether interest under Section 11AB was payable on differential Central Excise duty arising from retrospective escalation of the sale price of goods.

Analysis: The goods were cleared on an initial price and additional consideration was received later under an escalation arrangement, on which the assessee also discharged excise duty. The dispute was confined to whether interest became payable for the period between clearance and payment of duty on the enhanced value. Applying the governing valuation and interest provisions, and following the Supreme Court's ruling that retrospective enhancement of price relates back to the time of removal for duty and interest purposes, the liability to pay interest stood attracted on the differential duty paid later.

Conclusion: Interest under Section 11AB was payable on the differential duty, and the assessee's challenge failed.

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