By TIOL News Service

NEW DELHI, JAN 31, 2013: THERE are sixteen appeals involved and which includes some filed by Revenue.

In all these cases, the assessees had supplied excisable goods to their customers against contracts with Price Escalation Clause. At the time of clearance, the duty had been paid on the provisional price, though the same was subject to variation in terms of the Price Escalation Clause. In none of these cases, the assessees had opted for provisional assessment in terms of the provisions of Rule 7 of the Central Excise Rules, 2002 and the duty had been paid at the time of clearance on the provisional price. Subsequently, there was upward revision of price from back date and the assessees received the escalation amount from their customers against the supplementary invoices raised by them and all that time, the assessees paid the duty on the price differential. However, while paying duty, they did not pay interest on the same as per provisions of Section 11AB of the CEA, 1944. The department was of the view that since the price had been revised upward from the back date and on account of such upward revision of the price, the appellant had received the differential amount, while paying duty on such price differential, they should also have paid the interest on the duty under the provisions of Section 11 AB. Since the assessees in these cases had not paid interest under Section 11AB on the duty paid under the supplementary invoices, the department issued show cause notices for demand of the same.

Pursuant to the adjudication proceedings and lower appellate proceedings, both, the Revenue and the appellants are in appeal before the CESTAT.

These are the arguments advanced by the appellant assessees -

+ the price differential received on account of retrospective price escalation also includes the element of interest, that interest on receivables is deductible from the assessable value, that the assessees in these cases have paid duty on the entire amount of price escalation which includes the element of interest that when the assessees have paid duty on the element of interest, there is no justification for demanding interest for delay in payment of duty in terms of provisions of Section 11 AB. That this point has not been considered by the Apex Court in the cases of SKF India Ltd. (2009 TIOL-82-SC-CX) and International Auto Ltd. (2010-TIOL-05-SC-CX) ;

+ even if the interest under Section 11 AB is held to be payable on the duty paid on the price differential received on account of price escalation, the recovery of the some would be subject to limitation period prescribed u/s 11A of the CEA, 1944. Reliance is placed on the apex Court decision in TVS Whirlpool 2010 (119) ELT A-77 (SC) wherein the Apex court held that it is only reasonable that period of limitation that applies to a claim for principal amount should also apply to the claim for interest thereon. Quality Ice Cream and Others vs. Union of India (2012-TIOL-252-HC-DEL-CX) CCE, Vadodara-II Vs. Gujarat Narmada Co. Ltd. (2012-TIOL-273-HC-AHM-IT),

+ that Tribunal in the case of EMCO Ltd. Vs. CCE (2011-TIOL-1585-CESTAT-MUM) following Apex Court's judgement in the case of TVS Whirlpool Ltd. has held that for recovery of interest, the limitation period prescribed for recovery of short levy, non-levy or erroneously refunded duty as prescribed under Section 11 A(1) would apply, that in these cases since the Assessees had paid the duty on the price differential received on their own under intimation to the Department, there is no question of suppression of any information and it is only the normal limitation period of one year from the relevant date which would be applicable and that in view of this, even if it is held that in respect of the duty paid under the supplementary invoices on the price differential amount received, the interest under Section 11 AB is also payable, its recovery would be subject to the normal limitation period of one year prescribed under Section 11 A of the Central Excise Act, 1944.

The Revenue representative submitted as under -

+ that the issue involved in this case stands settled by the Apex Court in its judgements in the cases of CCE Vs. SKF India Ltd. (2009 TIOL-82-SC-CX) and CCE Vs. International Auto (2010-TIOL-05-SC-CX) ; that these judgments are binding on the Tribunal;

+ that the appellants' plea that the price differential amount on account of upward price revision from back date also includes the element of interest and that the duty had also been paid on the interest, had neither been raised before the adjudicating authorities nor before the first appellate authority and hence the same cannot be raised at this stage, that in any case, this point raised by the appellant has absolutely no relation to the point of dispute;

+ so far as the question of limitation is concerned, the Tribunal in the case of SKH Auto Components Vs. CCE, Delhi-IV (2011-TIOL-1041-CESTAT-DEL) has held that since in the statute no limitation period has been prescribed for recovery of interest, the court or the Tribunals cannot read into statute book something which is not there and cannot invent a limitation period for recovery of interest in absence of any limitation period having been prescribed under the statute. The decision in Padmashri V.V. Patil S.S.K. Ltd. (2007-TIOL-419-HC-MUM-CX), wherein it was held that interest is a civil liability of the assessee, who has retained the amount of public exchequer and which ought to have gone in the pocket of the Government much earlier and that the interest on the duty evaded is payable and the same is compulsory, even if no notice has been issued is also relied upon.

+ Wherever any duty demand has been upheld against the assessee, the interest liability is automatic and there is no question of issuing issue show cause notice for recovery of interest and hence there is no limitation period for recovery of interest.

The Bench extracted the paragraphs 7 and 8 of the judgement in the case of International Auto Ltd and observed that the said judgement and the decision in SKF India Ltd. are squarely applicable to the facts of this case.

On the submission that the price revision includes the element of interest, the bench observed -

"11.1 We are not convinced with the aforesaid submissions. Firstly, for the reason that this plea was not raised by the assessees during the adjudication proceedings or the proceedings before the Commissioner (Appeals). This plea has been taken for the first time before the Tribunal and that too at the stage of final argument, which in our view, cannot be considered, as it relates to the question of fact. Otherwise also, the appellants/assessees have not placed on record documentary evidence regarding the fixation of the price escalation. That evidence alone, could have given a clue whether while fixing the final price of the goods cleared by the assessees interest component on the differential of provisional price and final price was taken into account since the appellant have with held the best evidence. In this regard, we are inclined to draw adverse presumption that the interest component on differential between the provisional and find price was not taken into consideration while fixing the final price on the basis of various factors like increase in cost of raw materials, labour charges, etc. We are supported in taking this view by the judgement of the Larger Bench of the Tribunal in the case of CCE Vs. Supreme Petroleum reported in - (2009-TIOL-1133-CESTAT-MUM-LB), wherein it was held that since the transaction value depends on the contract between the seller and fee buyer and the Revenue is not privy to the contract of the sale, in these circumstances, if the seller (assessee) claims certain deductions from the transaction value on account of certain expenses incurred which are not includible in the transaction value, the burden of proving that those expenses were incurred is on the assessee. In this case, if the assessees claim that the price differential on account of retrospective price escalation received by them also included the element of interest, which is deductible from the assessable value, the burden of proof would be on the assessees for which they have to produce cogent evidence. Just a claim that the price differential received by the assessees also includes element of interest is without merit.

11.2 Thus, we do not find any merit in this plea of the assessees."

Saying so, the Bench held that the interest under Section 11 AB is payable on the duty paid under Section 11A(2B) under supplementary invoice on the price differential on account of retrospective price escalation received by the assessees and if the same has not been paid, the same would be recoverable from the assessees.

On the question of limitation, the Bench after a detailed discussion had this to say -

"18.1 Interest on a duty liability confirmed under Section 11 A (2) or self ascertained and paid under Section 11 A (2B) is by automatic operation of Section 11 AB and for recovery of such interest, no show cause notice is required and hence the limitation period prescribed under Section 11 A is inapplicable.

18.2 The interest under Section 11 AB on a duty demand confirmed under Section 11A(2) or self admitted/self ascertained duty liability under Section 11 A(2B) or for delay in payment of duty self assessed under Rule 6 of Central Excise Rules, 2002 by the due date prescribed under Rule 8 ibid is "sum due to the Government", which is recoverable under Section 11 of the Central Excise Act, 1944 and for which there is no limitation period. The show cause notices issued in these cases, even if invoking Section 11 A, have to be treated as mere communication to the assessee for recovery of interest under Section 11."

In fine, the appeals filed by the Revenue were allowed and those filed by assessees were dismissed.

In passing: A mind all logic is like a knife all blade. It makes the hand bleed that uses it. - Rabindranath Tagore, Stray Birds.

(See 2013-TIOL-187-CESTAT-DEL)