TaxTMI 
TaxTMI 
2008 (10) TMI 76
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....rom the following facts:- The respondents in Appeals 1 to 20 and the appellants in the rest of the batch, hereinafter referred to as the assessees, are engaged in the manufacture of excisable goods. During the material period, they had paid duty of excise on the goods in the manner laid down under the Rule 8(1) of the Central Excise (No. 2) Rules, 2001/the Central Excise Rules, 2002. Such payments at the time and place of removal of the goods were made on the assessable value based on the price originally agreed between the assessees and their buyers. Subsequently, there was upward revision of price of the goods due to increase of cost of raw material and/or other factors and, consequently, the assessee issued supplementary invoice for realizing the differential price from the buyer and paying differential duty. Such payment of differential duty was made without payment of interest. In most of the cases, there was no express provision for variation of price in the contract between the assessee and the buyer. However, in such cases also, the buyer agreed for price hike thereby enabling the assessee to realize the differential price and pay differential duty. In other cases, there....
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....rred the following issues to be considered and decided upon by this Bench:- (a) Whether, in the facts of these cases, the additional amount paid by the buyer towards price of the goods in terms of the supplementary invoice issued by the assessee after removal of the goods can be considered to be part of the 'transaction value' under Section 4 of the Central Excise Act; (b) Whether the payment of duty under the supplementary invoice by the assessee is covered by sub-section (2B) of Section 11A of the Act; (c) Whether, on the amount of duty paid under the supplementary invoice, interest is leviable under Section 11AB from the first date of the month succeeding the month in which duty was paid in the first instance in terms of the original invoice. 2. Heard both sides. The ld. SDR for the Revenue and the ld. counsel for the assessees referred in extenso to Section 4, Section 11A and Section 11AB of the Central Excise Act as also to Rules 7 and 8 of the Central Excise Rules, 2002. They also referred to certain circulars issued by the CBEC. They also relied on judicial authorities in support of their respective viewpoints on the above issues. It was also argued by some of th....
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...., and inform the Central Excise officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid: Provided that the Central Excise officer may determine the amount of short payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1. - Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or to the rules made thereunder with intent to evade payment of duty. Explanation 2. - For the removal of doubts, it is hereby declared that the interest under Section 11AB shall be payable on the amount paid by the person under the sub-section and also on the amount of short-....
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....he Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case maybe, in writing giving reasons for payment of duty on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, may order allowing payment of duty on provisional basis at such rate or on such value as may be specified by him. (2) The payment of duty on provisional basis may be allowed, if the assessee executes a bond in the form prescribed by notification by the Board with such surety or security in such amount as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, deem fit, binding the assessee for payment of difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed. (3) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall pass order for final assessment, as soon as may be, after the relevant information, as may be required for finalizing the assessment, is available, but within a period not exceeding six months from the date ....
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....argued by the ld. SDR that the differential value realized by the assessees from their buyers under supplementary invoices was an integral part of the transaction value of the goods and, therefore, the differential duty paid on the differential value would be a duty which 'ought to have been paid' at the time of removal of the goods. In other words, there was a short payment of duty at the time of clearance of the goods, which attracted sub-section (2B) of Section 11A of the Act. Consequently, interest under Section 11AB was payable on the differential duty paid under supplementary invoice, for the period from the first day of the month succeeding month in which such duty ought to have been paid to the date of actual payment of the duty. In this connection, the SDR referred to a circular of the CBEC (F.No.6/20/2005-CX.1 dt. 14-3-2006), wherein it was clarified that interest under Section 11AB was chargeable from the date of original clearance in cases where supplementary invoices were raised due to upward revision of price of the goods. Further, the SDR submitted that the assessees were under the regime of self-assessment and had to pay duty on the transaction value, paid or payabl....
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....ing which it remained unpaid. It was also pointed out that the department's appeal against Final Order No. 1723/2006 of the Bangalore Bench of this Tribunal, wherein the Revenue's plea for levy of interest under Section 11AB on the duty paid under supplementary invoices had been rejected, was admitted by the Karnataka High Court. The department's appeal against the decision of the Tribunal's West Zonal Bench (Mumbai) in Anil Hitkari v. CCE, Delhi, 2005 (186) E.L.T. 97 (Tri.-Mumbai.), wherein it had been held that any price increase after clearance of excisable goods was no reason to enhance assessable value of the goods in the absence of price escalation clause in purchase order was admitted by the Supreme Court as reported in 2007 (208) E.L.T. A39 (S.C.). The ld. SDR also referred to sub-rule (3) of Rule 8, which mandated that, if the assessee failed to pay the amount of duty by due date, he would be liable to pay the amount with interest at the rate specified by the Central Government by Notification under Section 11AB and that such interest would be payable for the period from the first date after the due date till the date of payment of duty. Finally, the SDR referred to the Bo....
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....rential value. 5(a) The Ld. advocate Shri Jaikumar submitted that the price of goods indicated in purchase order had been fixed after negotiations; that this amount represented the transaction value and duty was paid thereon; that any question of short-payment of duty would arise only where a lesser amount of duty than what was determined at the time of clearance of the goods was paid; and that, in the absence of short-payment of duty, there was no question of payment of interest under Section 11AB. However, he fairly conceded that the differential price collected under supplementary invoices by his clients from their buyers was also chargeable to duty of excise as it was part of the transaction value of the goods. Otherwise, differential duty would not have been paid by his clients under the supplementary invoices. It was also conceded that this differential duty was paid at the rate which prevailed on the date of clearance of the goods. These arguments were heard in appeal No.E/647/07 which involved price variation clause in purchase order and in appeal No.E/648/07 which did not involve any such clause. 5(b) In the cases presented by the ld. Advocate Shri N. Viswanathan, th....
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.... amount" occurring in the definition of "transaction value" and submitted that the same did not include price of the goods and therefore the differential price paid by the assessee in terms of the amended purchase order issued by the buyer was not to be construed as part of "transaction value" of the goods cleared long ago. It was also argued that the duty paid on the differential value was not "duty ought to have been paid" at the time of removal of the goods. 5(d) The ld. advocate Shri Venkatagiri argued that the original assessments were final; that the price of the goods was 'fixed and firm' at the time of its removal and therefore provisional assessment was not resorted to; that, for this reason, Rule 7 is not applicable; that any assessment cannot be deemed to be provisional in the absence of a specific order of the proper officer of Central Excise for such assessment as held by the Apex Court in Metal Forgings v. Union of India - 2002 (146) E.L.T. 241 (S.C.); that there is no provision in the Act or the Rules for deeming an assessment to be provisional; that, there being no demand of duty under Section 11A, it is not open to the department to allege short-levy or short-pa....
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....a further argument to the effect that the payment of duty under supplementary invoice could only be considered as duty due to the Government under Section 11D of the Act. As the duty collected from the buyer (under supplementary invoice) in excess of the duty paid at the time of removal of the goods was paid forthwith to the Government, no demand of interest can be made under Section 11DD either. 5(e) The ld. advocate Shri J. Sankararaman submitted that the judgment of the Karnataka High Court in Commissioner v. Araco Automative India Pvt. Ltd., 2006 (200) E.L.T. 203 (Kar.) was the answer to the substantive issue before this Bench and the same required to be followed by this Bench in the absence of decision of the jurisdictional High Court (Madras) on the same issue. In support of this proposition, the counsel also referred to Madura Coats v. Collector, 1996 (82) E.L.T. 512 (Tribunal) wherein a judgment of the Karnataka High Court was, in the absence of any decision of the Madras High Court, held to be binding precedent for the South Regional Bench (Madras) of the Tribunal. 5(f) The learned advocate Sh. V. Balasubramanian invoked the maxim lex non cogit ad impossibilia in his....
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....nt that the buyer is liable to pay to the assessee in connection with the sale of the goods, whether payable at the time of the sale or at any other time. Whatever is recovered from the buyer by reason of, or in connection with, the sale of excisable goods, whether payable at the time of sale or at any other time is part of the transaction value. It was submitted at the bar that the amount received by the assessee from the buyer upon price revision subsequent to clearance of the goods was not to be considered as part of the transaction value inasmuch as the original price agreed between the assessee and the buyer was 'firm' at the time of removal of the goods. We find it difficult to accept this argument inasmuch as 'transaction' as contemplated under Section 4(3)(d) does not just end with the removal of the goods. Undisputedly, the 'transaction' - a term not defined in the Act or any rule - is 'sale' of excisable goods in all these cases. Any amount that the buyer is liable to pay to the assessee by reason of, or in connection with, the sale of the goods, whether payable at the time of sale or at any other time, is part of the transaction value of the goods. This 'any amount' is i....
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....ascertained the amount of duty payable on the differential price of the goods [upon the buyer having agreed to increase the price of the goods] and paid such duty forthwith. of course, there was no delay in this payment with reference to the time at which the price was increased. The assessees are challenging the demand of interest on this basis. But there was a delay in the payment of such duty with reference to the time of removal of the goods and this is the basis of the Revenue's demand of interest. Explanation-2 makes it clear that the interest under Section 11AB has to be paid on the amount paid by the person under sub-section (2B) of Section 11A.This, in our view, is a clear indication of the legislative intent. The law considers that the payment of short-paid duty self-ascertained by an assessee and paid under intimation to the Central Excise officer in terms of Section 11A(2B) is a be- lated payment of duty. This delay can only be with reference to the time of removal of the goods. The argument that, there being no delay in the payment of such duty with reference to the time of price increase [or with reference to the time of issue of supplementary invoice], the questio....
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....n paid cannot be resisted. Before parting with this aspect, we would like to state that nothing contained in this paragraph is to be taken to mean that we have found provision for deemed provisional assessment. Therefore, the case law cited by counsel on what could be held to be provisional assessment is irrelevant. 6(e) The defence of impossibility was taken to resist the demand of interest. The argument is that it was impossible for the assessee to have paid the differential amount of duty [which was occasioned by subsequent price revision] at the time of clearance of the goods and therefore it cannot be said that such duty "ought to have been paid" at the time of clearance of the goods. It is argued that the law cannot ask a person to do the impossible. This doctrine, in our view, cannot be invoked by any person who himself failed to do the possible, to do what the law required him to. In the present case, as we have already observed, the assessees were placed in such a situation at the time of removal of the goods that they should have resorted to provisional assessment under Rule 7 of the Central Excise Rules, 2002. Had they done so, they would have been liable to pay inter....
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....essee and the department also, the differential price should be deemed to have been paid at the time of removal of the goods. In deed, it was so deemed by the assessees who paid duty on the differential price at the rates which prevailed on the dates of clearance of their goods. In the circumstances, in our view, the Revenue is entitled to plead that the payment of differential duty under supplementary invoice was payment of duty short-paid with reference to the date of removal of the goods. The denial of interest on such amount under Section 11AB would mean refusal to compensate the Government for the loss incurred on account of such duty having remained unpaid for a period of time. As we have already observed, the assessees had a statutory obligation to resort to provisional assessment, but this was not done, thereby depriving the Revenue of its right to levy interest under sub-rule (4) of Rule 7 of the Central Excise Rules, 2002. Having regard to this conduct of the assessees, we are of the view that, on the principle of compensation also, the assessees are liable to pay interest under Section 11AB on the differential duty covered by the supplementary invoices for the period spe....
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.... any significant difference between the deemed price under the old Section 4 and the actual price under the amended Section. We observe that the correctness of such a view is not beyond doubt. 7. But for the contra view taken by the coordinate Bench in Arvind Mills (supra), we would have held issues (a), (b) and (c) in favour of the Revenue. 8. We shall now take up the additional issue (d) for consideration. It was argued by counsel that even if it be held that interest was payable under Section 11AB on the amounts of differential duty paid under supplementary in voices by the assessees subsequent to clearance of the goods, the Revenue had no statutory mechanism for recovery of such interest. It was submitted that, unlike in Section 28 of the Customs Act, there was no provision in Section 11A of the Central Excise Act for demanding interest on duty. According to counsel, the Central Excise Rules also did not provide any recovery mechanism in respect of interest payable under Section 11AB. In this connection, reliance was placed on the decision of Hon'ble Madras High Court's decision in Eternit Everest Ltd. v. Union of India - 1997 (89) E.L.T. 28 (Mad.). It was also pointed ou....
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....duty which ought to have been paid at the time and place of clearance of the goods, would attract interest under sub-rule (3) of Rule 8 as well as under sub-section (1) of Section 11AB. In this view of the matter, we further hold that, if the assessee does not pay such interest, it can be recovered by the proper officer of Central Excise in terms of Section 11 of the Act, which provision (without the proviso thereto) is reproduced below:- 11. Recovery of sums due to Government. — In respect of duty and any other sums of any kind payable to the Central Government under any of the provisions of this Act or of the rules made thereunder, including the amount required to be paid to the credit of the Central Government under section 11 the officer empowered by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1863 (54 of 1963) to levy such duty or require the payment of such sums may deduct the amount so payable from any money owing to the person from whom such sums may be recoverable or due which may be in his hands or under his disposal or control, or may recover the amount by attachment and sale of excisable goods belonging to such perso....