2010 (1) TMI 151 - SC - Central Excise

Interest payable on price-differential payments after clearance under Explanation (2) to sub-section 2(B) of Section 11A and Section 11AB

SC upheld recovery of interest on differential duty where a show-cause notice was issued for the price difference between removal and eventual sale. The ... Recovery of interest on differential duty - show cause notice issued - difference arose between the price on the date of removal and the enhanced price at which the goods stood ultimately sold - Held that:- Explanation (2) to sub-section 2(B) of section 11A ibid states that payment by assesees in default by own ascertainment or as ascertained by C.E. officer not exempt from interest chargeable under section 11AB ibid. Interest leviable for loss of revenue on any count. Accrual of price differential duty when paid after clearance, it indicates short payment/ short levy on date of removal hence interest become leviable. Issues:Recovery of interest on differential duty under Section 11AB of the Central Excise Act, 1944.Analysis:The Department sought to recover interest on differential duty paid by the assessee, which was disputed. The assessee supplied auto parts to manufacturers of motor vehicles like Tata Motors, Mahindra and Mahindra, and Piaggio Vehicles Private Limited, with prices determined based on various factors. The Department issued a show-cause notice for interest on the price difference between the date of removal and the enhanced price at sale. The assessee argued that interest was not leviable under Section 11AB as prices in purchase orders were final, with no scope for retrospective price changes. The assessee relied on a previous judgment but the Supreme Court found no merit in the argument, citing the SKF India Limited case.The Supreme Court referenced the SKF India Limited case, explaining the provisions of Section 11A for non-levy or short-levy of duty. The Court highlighted that interest under Section 11AB is leviable on delayed payment of duty for any reason, unlike penalties for intentional defaults. The Court held that the payment of differential duty by the assessee fell under sub-section (2B) of Section 11A, attracting interest under Section 11AB. The Court disagreed with a High Court decision and emphasized that the situation constituted short payment of duty, leading to interest liability under Section 11AB.The Court discussed the changes in Section 11A and 11AB due to amendments in 2001 and 2003, emphasizing the accrual of price differential as a key factor. The judgment differentiated this case from a previous one concerning a claim for refund, stating that the current scenario involved the imposition of interest to compensate for revenue loss. The Court concluded that the judgment in the SKF India Limited case was applicable to the present case, allowing the civil appeal with no costs incurred.