Indian Explosives Limited Vs. Commissioner of Central Excise and Service Tax - Court Judgment

Heard both sides. The appellant filed this appeal against the impugned order whereby demand of interest under Section 11AB of the Central Excise Act is confirmed.

2. Brief facts of the case are that the appellant are clearing goods to their sister-unit and paying duty on approximate basis. Subsequent clearances of the goods, at the end of the financial year, as per the cost construction method the appellant are arriving at the cost of assessable value of the goods and paying differential duty. Show-cause notice was issued to the appellant for demand of interest under Section 11AB of the Act in respect of the differential duty paid subsequent to the clearance of the goods.

3. The contention of the appellant is that at the time of clearance it is difficult to arrive at the cost of manufacture. Therefore, at the end of the financial year, when the actual data of cost is available, the appellant are arriving at the actual cost of production and are paying differential duty, in case lesser duty was paid at the time of clearance of the goods. During the argument the appellant admitted that they have not asked for provisional assessment of the goods. The contention is that as the differential duty was paid by the appellant after arriving at the cost of manufacture, therefore, demand of interest is not sustainable.

4. Learned DR, appearing on behalf of the Revenue, submitted that the appellant are liable to pay interest on the differential duty as the duty has been paid after the clearance of the goods and relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Pune vs. SKF India Ltd. 2009-TIOL-82-SC-CX. The Revenue also relied upon the decision of the Tribunal in the case of Gujarat State Fertilizers and Chemicals Ltd. vs. Commissioner of Central Excise, Vadodara 2007 (218) ELT 238 (Tri.-Ahmd.) whereby in similar situation the demand of interest was upheld. The Revenue also submitted that even in case of provisional assessment as provided under Rule 7 of Central Excise Rules, on finalisation of the assessment, in case there was short-payment of duty, the same has to be paid along with interest, hence the demand of interest is rightly made.

5. I find that the admitted facts of the case are that the differential duty was paid after the date of clearance of the goods. The assessments were not provisional nor the appellant asked for provisional assessment. Even in the case of provisional assessment, as per Rule 7 of Central Excise Rules, at the time of finalisation, if it is found that duty has been short-paid, the manufacturer is liable for interest on the duty amount which is short-paid till the date of payment of duty. The Hon'ble Supreme Court in the case of Commissioner of Central Excise, Pune vs. SKF India Ltd. (supra), on the issue of interest on late payment of differential duty has held as under:

"14. We are unable to subscribe to the view taken by the High Court. It is to be noted that: the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act."

6. The Tribunal in the case of Gujarat State Fertilizers and Chemicals Ltd. vs. Commissioner of Central Excise, Vadodara (supra) has also upheld the demand of interest where the goods were cleared to the other unit and differential duty was paid subsequently based on CAS-4. I find that the ratio of the above decision of the Supreme Court and the Tribunal is fully applicable to the facts of the present case.

7. In view of the above, I find no infirmity in the impugned order and the appeal is dismissed.