Cce, Trichy vs M/S. P.S.P. Steel Pvt. Ltd

(Arising out of Order-in-Appeal No. 128/2005 dated 24.8.2005 passed by the Commissioner of Central Excise (Appeals), Trichy)

CCE, Trichy Appellant

Vs.

M/s. P.S.P. Steel Pvt. Ltd. Respondent

Appearance

Shri B. Balamurugan, Ac (AR) for the Appellant Ms. Minchu Mariam Punnose, Advocate, for the Respondent

CORAM

HONBLE SHRI R. PERIASAMI, TECHNICAL MEMBER

Date of Hearing / Decision: 27.3.2015

Final Order No. 41070 / 2015

Revenue has filed this appeal against the order of the Commissioner (Appeals) dated 24.8.2005.

2. The brief facts of the case are that the respondents are manufacturers of MS ingots falling under Chapter 720690. An offence case was registered against the respondents for clandestine removal of the finished goods without payment of duty. The adjudicating authority confirmed the demand of Rs.19,34,306/- and also appropriated the entire amount already paid. He also imposed penalty of Rs.10,000/- under Rule 25 of Central Excise Rules, 2001 red with Section 11AC of the Central Excise Act, 1994 along with interest under Section 11AB. The respondents preferred appeal before the Commissioner (Appeals) against imposition of penalty and levy of interest. Commissioner (Appeals) allowed the appeal of the respondents and set aside both interest and penalty. The said order was reviewed by the Department and Revenue has filed this present appeal against setting aside of interest demanded under Section 11AB of the Act.

3. The learned AR for Revenue reiterates the grounds of appeal and submits that the period of dispute involved is 2001 to June 2003. It is a clear case of clandestine removal of the finished goods. The respondents have paid the duty before issuance of the show-cause notice. The adjudicating authority has correctly confirmed the demand and has also demanded interest as per the amended Section 11AB which came into effect from 11.5.2001 when the demand is confirmed under sub-section (2) or sub-section (2b) of Section 11A, interest is payable which is mandatory. He further submits that it is immaterial whether the respondents paid duty before or after issuance of show-cause notice, the liability of interest arises from the date of month succeeding the month in which the duty ought to have been paid as per Section 11AB. He relied on the decisions of the Honble Supreme Court in the cases of Commissioner of Trade Tax, Lucknow Vs. Kanhai Ram Thekedar  2005 (185) ELT 3 (SC) and CCE, Pune Vs. SKF India Ltd.  2009 (239) ELT 385 (SC).

4. On the other hand, the learned counsel for the respondent reiterated the findings of the learned Commissioner (Appeals) and submits that there is no intention to evade payment of duty and also Revenue has not appealed against the Order-in-Original passed by the adjudicating authority on the reduced penalty. Since they have paid the entire dues before issue of show-cause notice, the Commissioner (Appeals) has rightly set aside the penalty and interest.

5. I have heard both sides and perused the records. The short issue in this case relates to demand of interest under Section 11AB which was confirmed by the adjudicating authority where the lower appellate authority has set aside the interest. So Revenue has preferred appeal only against setting aside of interest demanded under Section 11AB of the Act. On perusal of the adjudication order and the records, the demand of duty has been confirmed for the clandestine removal of the goods for the period 2001 to June 2003. The investigating authorities have clearly brought out the clandestine removal aspect and the case was detected on 29.7.2003 itself and the respondents paid the entire duty during the investigation itself i.e. between 2.8.2003 and 17.1.2005 on various dates. The adjudicating authority in his order dated 14.6.2005 has clearly discussed the applicability of interest and also rightly confirmed the demand of interest under section 11AB on the demand already paid by the respondents. I find that the Commissioner (Appeals) has set aside the interest under section 11AB by relying on the decisions of the Honble High Court and the Honble Supreme Court which were pertaining prior to amendment of Section 11AB whereas the present case is covered under the amended provisions of Section 11AB which came into effect from 11.5.2001. The Honble Supreme Court in the case of CCE, Pune Vs. SKF Ltd. (supra) has held that interest is payable under Section 11AB. The relevant paragraphs are reproduced as under:-

10.?Sub-section (2B) of Section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment, of the duty. What is stated in Explanation 2 to sub-section (2B) is reiterated in Section 11AB that states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under sub-section (2B) of Section 11A, shall, in addition to the duty, be liable to pay interest .......It is thus to be seen that unlike penalty that, is attracted to the category of cases in which the non-payment or short payment etc. of duty is by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty, under the scheme of the four Sections (11A, 11AA, 11AB & 11AC) interest is leviable on delayed or deferred payment of duty for whatever reasons.

11.?The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub-section (2B) of Section 11A of the Act.

12.?The Bombay High Court, Aurangabad Bench, in its decision in The Commissioner of Central Excise, Aurangabad v. M/s. Rucha Engineering Pvt. Ltd., (First Appeal No. 42 of 2007) that was relied upon by the Tribunal for dismissing the Revenues appeal took the view that there would be no application of Section 11A (2B) or Section 11AB where differential duty was paid by the assessee as soon as it came to learn about the upward revision of prices of goods sold earlier. In M/s. Rucha Engineering the High Court observed as follows:

It is evident that the Section (11AB) comes into play if the duty paid/levied is short. Both, the Commissioner (Appeals) and the CESTAT have observed that the Assessee paid the duty on its own accord immediately when the revised rates became known to them from their customers. The differential duty was due at that time i.e. when the revised rates applicable with retrospective effect were learnt by the Assessee, which was much after the clearance of the goods and therefore, question of payment of interest does not arise as the duty was paid as soon as it was learnt that it was payable. Finding that provisions of Section 11A (2) and 11A (2B) were not applicable as the situation occurred in the instant, case was quite different, Section 11AB (1) was not at all applicable, and therefore, the Assessee was not required to pay interest.

13.?It further held that a case of this nature would not fall in the category where duty of excise was not paid or short-paid.

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.

15.?for the reasons discussed above we set aside the judgments and orders passed by the Tribunal and the Commissioner (Appeals). We restore the order passed by the Assistant Commissioner in so far as charge of interest is concerned. On the facts of this case there is no question of imposition of any penalty. Hence, that part of the order of the Assistant Commissioner is set aside.

6. The ratio of the Honble Supreme Court is squarely applicable to the facts of the present case as the issue falls under the amended provisions of Section 11AB which came into effect from 11.5.2001. Once the demand is confirmed, interest is payable.

7. By respectfully following the decision of the Honble Supreme Court, I hold that interest is payable under Section 11AB and the impugned order passed by the Commissioner (Appeals) insofar as setting aside of interest is set aside and the appeal of Revenue is allowed.

(Operative portion of the order was pronounced in open court 27.3.2015)

(R. PERIASAMI) Technical Member Rex

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