Central Excise Act, 1944: s.11AB – Demand of interest under s.11AB – Whether interest is payable under s.11AB of the Act on the differential excise duty with retrospective effect that became payable on the basis of escalation clause – Held: If there is a non-levy, nonpayment, short-levy or short-payment, the same becomes recoverable under s.11A – In any of the four contingencies namely, non-levy, non-payment, short-levy or short-payment referred to in s.11A, s.11AB is attracted – Thus, in any of the four contingencies, for any duty that is determined or paid as provided under s.11A, necessarily the assessee becomes liable to pay interest under s.11AB – The interest clock ticks from the date as provided in r.8 r/w s.11AB – The expression “the month in which the duty ought to have been paid” under s.11AB of the Act, when it is read alongwith r.8, which declares that the duty on the goods removed from the factory or warehouse during a month is to be paid on the 6th day of the following month would mean that the Legislature has understood the expression “the month in which the duty ought to have been paid” under the Act in the same sense as it is declared in r.8 – Central Excise Rules, 2002 – r.8.
Central Excise Act, 1944: s.11AB – When price is revised upward with retrospective effect and the excise duty on the same is paid immediately on a future date, whether interest is payable under s.11AB from the first day of the month succeeding the month in which the duty ought to have been paid under the Act – Held: Under the Rules, goods become exigible to duty on removal – Assessment is to be done by assessee itself by way of self-assessment – In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the goods takes place – When the provisional assessment is finalized, the assessee becomes liable, however, to pay interest from the first date of the month succeeding the month for which the amount is determined – Central Excise Rules, 2002 – r.8.
Dismissing the appeals, the Court
HELD : 1. The scheme of the Central Excise Act and the Rules are a separate code. Section 11A is a provision for recovery. If there is a non-levy, non-payment, short-levy or short-payment, the same becomes recoverable under Section 11A. If there is any of the four contingencies referred to in Section 11A, then Section 11AB is attracted. The working of the parent Act is intricately intertwined with the rules. Therefore, if the value which is declared by way of self-assessment, by way of rule 6 and on which the duty is paid is not the full value then under the scheme of Section 11A read with Section 11AB and the Rules, the assessee incurs liability for interest when in a case where there is full value found and it dates back to the date of removal. In this case, admittedly, at the time goods were removed the price was not fixed. The assessee was fully conscious of the fact that it was subject to variation and had knowledge that the value it was declaring was amenable to upward revision. The circumstances were indeed clearly appropriate for the assessee to invoke the provisions of Rule 7 and seek an order for provisional assessment. [Paras 35, 36] [440-A-D]
Rainbow Industries (P) Ltd. v. CCE (1994) 6 SCC
563 : [1994] 4 Suppl. SCR 135 ; Balarpur Industries Ltd. v. Assistant Collector of Customs and Central Excise & Ors. (1995) Suppl. (3) SCC 429 ; Collector of Central Excise, Baroda v. Cotspun Ltd. (1999) 7 SCC
633 : [1999] 3 Suppl. SCR 184 ; M/s. Eastland Combines, Coimbatore v. Collector of Central Excise, Coimbatore AIR 2003 SC 843 : [2003] 1 SCR 98 ; ITW Signod India Limited v. Collector of Central Excise (2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751 – referred to.
2. Undoubtedly, the amended provisions of Section 11A empowered recovery of duty even in a case where the classification list has been approved earlier and it would operate from the date of removal and not from the date on which show cause was issued. Section 11A which was inserted by Act 26 of 1978 is substantially the reproduction of Rule 10 of 1944 Rules. Section 11AB, it came to be inserted by Act 33 of 1996. Thereafter, it was amended by Act 10 of 2000, Act 14 of 2001, Act 20 of 2002 and Act 49 of 2005. Section 11A must necessarily be read with Section 11AB. This is for the reason that interest under Section 11AB is premised upon the duty of excise not being levied or paid or short levied, short paid or erroneously refunded. Such duty is either determined under sub-Section (2) of Section 11A or without such determination it being paid under sub-Section (2B) of Section 11A. In any of the circumstances, namely, nonlevy, non-payment, short-levy and short-paid, any duty has been determined or paid as has been provided under Section 11A, necessarily the assessee becomes liable to pay interest from the first date of the month succeeding the month in which duty ought to have been paid. [Paras 43, 45-47] [448-G-H; 452-B; F-H; 453-A-B]
N.B. Sanjana, Assistant Collector of Central Excise, Bombay & Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd.; 1978 E.L.T. (J 399) – referred to.
3. Under the Rules, goods become exigible to duty on removal. Assessment is to be done by assessee itself by way of self-assessment. In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the goods takes place. Undoubtedly, if the removal takes place in March, the payment is to be made by 31st of March. In the case of provisional assessment, the assessee entertains a doubt regarding the actual value or the rate of duty. He applies and he is permitted under the order to remove goods on a provisional assessment. The assessment is thereafter finalized. When the provisional assessment is finalized, the assessee becomes liable however to pay interest from the first date of the month succeeding the month for which the amount is determined. Under Rule 7(4), the expression “succeeding the month for which such amount” is determined refer to the month of removal of the goods. When the provisional assessment has such consequences, it would occasion an invidious discrimination to place an interpretation on Section 11AB by which those assesses who go in for provisional assessment under Rule 7 are called upon to pay interest upon finalization of the assessment with reference to the date of removal in a case where the value is fully determined as a result of escalation clause being worked resulting in an upward revision of prices and under Section 11AB payability arises with reference to the date of decision to grant escalation. In other words, the law will have to be interpreted in a manner that it is fair and equal to similarly situated group of assessees. Legislative intention, in this regard, also cannot be otherwise. Legislature has clearly in Section 11AB spelt out the time with reference to the Act and the Rules. The expression “the month in which the duty ought to have been paid” under this Act, when it is read alongwith Rule 8, which declares that the duty on the goods removed from the factory or warehouse during a month is to be paid on the 6th day of the following month would mean that the Legislature has understood the expression “the month in which the duty ought to have been paid” under the Act in the same sense as it is declared in Rule 8. [Paras 49-51] [453-C-H; 454-A-B; D]
Collector of Central Excise, Baroda v. Cotspun Ltd. (1999) 7 SCC 633 : [1999] 3 Suppl. SCR 184
– referred to.
4.1 In a case where goods are removed clandestinely, there would be no levy. Equally, there will be non-payment. Thus, a case of non-levy can overlap with non-payment. No doubt, there can be cases where despite full levy there can be no payment, may be by mistake or otherwise. Equally thus, if there is no nonlevy, there can be partial payment. That would make it a case of short payment as the payment does not match the amount of duty levied as per the self-assessment carried out by the assessee. A short levy ordinarily would be a case where out of the ingredients of assessment, namely, (1) rate of duty, (2) valuation and (3) quantity removed, the components all or any are incorrectly applied. As an instance if the full rate of duty applicable is not applied though the valuation and the quantity is correctly arrived at, it may fall under short-levy. In one sense it could be said that there is short-payment also, as if payment could be understood as the amount which ought to have been paid but it has not been paid, it may be a case of short payment. But it may be more appropriate to put it under short levy where the deficit in payment is essentially in terms of a short-levy. [Para 58] [456-B-D]
4.2 If short- levy is to be understood as confined to cases where the assessment is not the full assessment, taking into account the parameters involved correctly, namely, rate of duty, valuation and quantity it could be classified as a case of short levy as one of the components of proper assessment namely, valuation has been incorrectly arrived at. The payment in such a case is made in terms of the incorrectly assessed figure. The payment matches the assessment under Rule 10 of 1944 Rules, the expression “short-payment” is not used. Instead the words “duty has not been paid in full”, has been used. No doubt, in a case where in law though the amount which is paid is in harmony with the amount which is assessed, it is not the amount which ought to have been paid by the assessee. The absence of full payment of duty or short payment has indeed also in one sense taken place. In a case where there is an escalation clause, goods are cleared on a provisional price. Consequently, the value is provisional. There is a subsequent escalation with retrospective effect. It will affect the valuation which was employed in the selfassessment by the assessee which would necessarily be provisional. Enhancement of the value will date back to the dates of removal in view of the retrospective operation. Admittedly the liability for payment of differential duty has arisen. Upon the true value, in a case of retrospective escalation of price though later agreed being received and consequential differential duty being admittedly payable, it would result in Section 11A read with Section 11AB applying. [Para 59] [456-F-H; 457-A-C]
4.3 It is true that the statutory authority has found it to be a case of short payment. In the notice issued claiming interest it is stated there is short levy. Proceeding on the basis that it is a case of short levy, Section 11A read with Section 11AB is attracted and the interest clock ticks from the date as provided in Rule 8 read with Section 11AB. If the concept of short payment is stretched to include all amounts which ought to have been paid, it may also be treated as a case of short payment though juridically it may be true that it may strictly fall under short levy. [Para 60] [457-C-E]
5. As far as the scope of the second explanation of Section 11A(2)(b) is concerned, it contemplates payment voluntarily by the assessee. It is without any notice being issued under Section 11A. There is also reference to liability on the part of the assessee to pay interest under Section 11A(2)(b), not only on the amount which is paid within the meaning of Section 11A(2)(b) but on any short payment as may be determined by the excise officer. This only means that payment can be by an assessee of any of the four amounts namely, non-levy, non-payment, shortlevy or short-payment. Since there is no notice under Section 11A and non-determination of the amount as such pursuant to which the amount is paid it may happen that there may be shortfall in the amount which is paid by the assessee in comparison to what the assessee is legally required to pay. [Para 62] [457-G-H; 458-A-C]
CCE v. SKF India Ltd. 2009 (13) SCC 461 : 2009] 10 SCR 714 ; CCE v. International Auto Ltd. 2010 (2) SCC
672 : [2010] 1 SCR 211 – relied on.
E.D. Sassoon & Co. Ltd. v. CIT AIR 1954 SC 470 : 1955 SCR 599 ; Commissioner of Income Tax, Madras v. A. Gajapathy Naidu, Madras AIR 1964 SC 1653 : 1964 SCR 767 ; Vikrant Tyres Ltd. v. First Income Tax Officer, Mysore 2001 (3) SCC 76 ; V.V.S. Sugars v. Govt. of A.P. and Others 1999 (4) SCC 192 (India Carbon vs. VBS Sugar): [1999] 2 SCR 925 ; P.G. & W. Sawoo (P) Ltd. v. CIT & Ors. 2017 (13) SCC 284 – held inapplicable.
MRF Ltd. v. Collector of Central Excise, Madras 1997 (5) SCC 104 ; J.K. Synthetics v. State of Rajasthan (1994) 4 SCC 276 ; Purolator India Limited v. Commissioner of Central Excise 2015 (10) SCC
715 : [2015] 9 SCR 812 ; India Carbon Ltd. & Ors. v. State of Assam 1997 (6) SCC 479 : [1997] 3 Suppl. SCR 1 ; E.I.D. Parry (India) Ltd. v. CCT 2005 (4) SCC
779 : [2005] 3 SCR 1144 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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