2011 (8) TMI 532 - AT - Central Excise

Levy of interest under Section 11AB - differential duty paid by the appellants under supplementary invoices on account of retrospective price increase granted to the appellants subsequent to the removal of goods - whether payment of duty before issuance of show cause notice exempts the assessee from liability to pay interest u/s. 11AB - The issue was whether the interest was not paid in terms of Section 47 read with Section 61(3) of the Customs Act and in that context it was observed that The position being similar held that the same logic will apply in respect of the recovery to be made under the Customs Act where no period of limitation has been prescribed - The said observation was made having noted that under Section 28 of the Customs Act period of limitation prescribed for recovery of duty is six months or five years and also the period for claim of refund was six months - In that context it was observed that where no period of limitation is specifically prescribed for any specific action under the Act the recovery should satisfy the principle of such general provision of recovery of the duty - Accordingly appeal is dismissed.

Summary

Issues Involved:
1. Levy of interest under Section 11AB of the Central Excise Act, 1944.
2. Bar of limitation for recovery of such interest.

Detailed Analysis:

1. Levy of Interest under Section 11AB of the Central Excise Act, 1944:
The primary issue in the appeal was the levy of interest on the differential duty paid by the appellants under supplementary invoices due to retrospective price increases granted after the removal of goods. The demand for Rs. 14,55,132/- was confirmed along with interest of Rs. 12,79,569/- and Rs. 5,74,375/-. The court referred to a similar case, M/s SKH Auto Components Ltd. vs. C.C.E., Delhi IV, which was disposed of by an order dated 23.6.2010, ruling against the assessee.

The court cited the SKF India Ltd. case, where the Supreme Court dealt with the liability to pay interest pursuant to the issuance of supplementary invoices. It clarified that under the scheme of Sections 11A, 11AA, 11AB, and 11AC, interest is leviable on delayed or deferred payment of duty for whatever reasons, irrespective of whether the non-payment or short payment was intentional or due to oversight.

The court emphasized that the payment of differential duty by the assessee at the time of issuing supplementary invoices to customers falls under sub-section (2B) of Section 11A of the Act. This provision makes it clear that even if the duty is paid before the notice is issued, the liability to pay interest under Section 11AB remains.

2. Bar of Limitation for Recovery of Interest:
The appellants contended that the demand for interest, related to June 2007, was barred by limitation as the show cause notice was issued on 05.08.2009, beyond the one-year period prescribed under Section 11A of the Central Excise Act, 1944. They argued that there was no allegation of suppression of facts nor justification for invoking the extended period of limitation.

The Departmental Representative countered that no limitation period is prescribed for the recovery of interest, citing the CCE, Jaipur vs. Raghuvar (India) Ltd. case, where the Supreme Court held that courts cannot import a specific period of limitation by implication where none is prescribed. The Bombay High Court in CCE&C, Aurangabad vs. Padamashri V.V. Patil S.S.K. Ltd. also held that no limitation period applies to the demand for interest.

The court noted that the demand for interest was made within five years, which is considered a reasonable period for enforcing recovery. It was emphasized that prescribing a period of limitation is a legislative function, and judicial authorities cannot encroach upon this domain.

The court also referred to the T.V.S. Whirlpool case, where the Tribunal held that in the absence of a prescribed period of limitation for specific actions under the Customs Act, a reasonable period should be applied. The Supreme Court upheld this principle, stating that the period of limitation for the principal amount should also apply to the claim for interest.

Conclusion:
The court concluded that the action taken for recovery of interest was within a reasonable period and not barred by limitation. Consequently, the appeal was dismissed based on the reasons recorded in the SKH Auto Components Ltd. case and the principles established in the aforementioned judgments.