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Commissioner of Central Excise Versus M/s Pre-Stressed Udyog (India) Pvt. Ltd.

2015 (7) TMI 1078 - JHARKHAND HIGH COURT

Interest Under Section 11 AB - Procedures laid down in rule 7 of the Central Excise Rules, 2002 - Whether interest under Sub-Rule 4 of the Rule 7 of the Central Excise Rule, 2002 is leviable, even if such assessment is deemed provisional? - Whether, subsequent payment of differential duty on account of retrospective price escalation of excisable goods shall be deemed to be a case of short assessment and short levy of such goods cleared earlier and, as such interest shall be demandable in terms o .....

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presume that earlier assessment was provisional in nature in absence of any application preferred by the respondent under Rule 7 (1) of Rule, 2002.

In view of the aforesaid it has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. International Auto Limited reported in (2010 (1) TMI 151 - SUPREME COURT OF INDIA ) that whenever there is a delayed payment of duty and there is no order for provisional assessment the assessee manufacturer is liable to .....

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and there is bound to be an order passed by the Central Excise for provisional assessment which is not present in the facts of the present case.

Respondent is bound to make payment of interest under Rule 7 (4) even if the earlier assessment is provisional in nature.

Differential duty has been paid at much later stage after removal of the goods and, therefore, the respondent is liable to make payment of interest as demanded under Section 11 AB of the Central Excise Act, 194 .....

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Central Excise Rule, 2002 is leviable, even if such assessment is deemed provisional? iii) Whether, subsequent payment of differential duty on account of retrospective price escalation of excisable goods shall be deemed to be a case of short assessment and short levy of such goods cleared earlier and, as such interest shall be demandable in terms of Section 11A and 11AB of the Central Excise Act, 1944? It is submitted by counsel for the appellant that the respondent was engaged in manufacturing .....

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ction 11AB of Central Excise Act, 1944. The respondent-assessee never gave any declaration that there is a Price Escalation Clause in the contract with the Railway. No declaration was ever given by the respondent that the price at which the goods were sold is not final i.e. the price of the goods declared are provisional and, therefore, the respondent was directed to pay interest on differential duty. The respondent had not paid the interest hence a show cause notice dated 23rd April, 2004 was i .....

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entioned in both show cause notices against which an Appeal was preferred bearing Appeal No. 193/JSR/CEX/Appeal/2005 which was decided by the Commissioner (Appeal) Customs and Central Excise, Patna vide order dated 06.09.2005 whereby, the Appeal preferred by the respondent was dismissed mainly on the ground that duty paid at a later date from the date of removal of goods and whenever there is a price escalation claimed by the assessee, he ought to have apply for provisional assessment under Rule .....

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essment was provisional in nature. This presumption is unwarranted and uncalled for as 3submitted by the counsel for the appellant. There is nothing like such deeming provision, neither in the Central Excise Act nor under the Rules. Counsel for the appellant has relied upon decisions rendered by the Hon'ble Supreme Court reported in (2009) 13 SCC 461 and (2002) 146 ELT 241 (SC). It is submitted by counsel for the appellant that in view of these decisions and 7(1) and 7 (4) of the Rules, 2002 .....

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CESTAT, Kolkata in allowing the Appeal preferred by the respondent. What will be the price escalation was not known to the respondent-assessee nor it was certain to get the price escalation. Moreover, the respondent has already paid the differential duty no sooner did the price escalation has been received by the respondent. These aspects of the matter have been properly appreciated by the CESTAT, Kolkata and hence, this Appeal may not be entertained by this Court as no substantial question of l .....

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Escalation to neutralize the effect of increase in the value of inputs. It further appears from the facts of the case that respondent received differential value of the goods of escalated price at regular interval. The respondent paid differential duty much later from the date of removal of goods and, therefore, demand was made about payment of interest as per Section 11 AB of the Central Excise Act, 1944 to be read with Rule 7 (4) of the Central Excise Rules, 2002, but, the same was not paid a .....

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d show cause notice dated 26/27th July, 2004 and late payment of Central Excise duty and interest calculated is as under: Sl. No. Period Differential Amount Duty due on Duty paid on No. of days Amount of interest A B C D E F G 1 Aug,03 to May,04 5134221 06th September, 2003 30th June, 2004 299 40545 Rule 7(1) and 7(4) of the Central Excise Rules, 2002 reads as under: "Rule-7 (1) When the assessee is unable to determine the value of excisable goods or determine the rate of duty applicable th .....

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r which such amount is determined, till the date of payment thereof." In view of the aforesaid provisions the respondent-assessee has never applied for provisional assessment nor the respondent has ever pointed out that there is a Price Escalation Clause in the contract and the respondent assessee is going to get a price escalation and, therefore, as per Rule 7 (1) it cannot be said that the earlier assessment was provisional in nature. This aspect of the matter has not been properly apprec .....

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fer application for price escalation and therefore he should have preferred an application under 7 (1) for provisional assessment, but, the respondent has failed to point out such price escalation nor he had ever applied for provisional assessment. These facts are admitted facts. It is also admitted fact that differential duty was paid at later stage after recovery of the goods. 4. As a cumulative effects of these two facts the respondent is bound to make payment of interest upon delayed payment .....

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s liable to make payment of the interest upon Rule 7 (1) and 7 (4) of the Rules, 2002. Thus, in any case i.e. even in the case of provisional assessment and even in the case of normal 6assessment whenever there is a delayed payment of duty, after removal of the goods, the assessee is bound to make payment of interest. 5. It is true that in this Tax Appeal the amount involved is less than 50,000/(Fifty thousand). Nonetheless, price escalation clause in the contract is now a common phenomena. Thos .....

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r such type of fault committed by respondent-assessee and therefore, even if the amount involved in this case is much lessor we are deciding this Appeal because it will effect several other cases. It has been held by the Hon'ble Supreme Court in the case of Metal Forgings Vs. Union of India reported in (2002) 146 E.L.T. 241 (S.C.) at Paragraph Nos. 11 and 12 which reads as under: "11. The next question for our consideration is whether the order made by the Assistant Collector on 22-01-1 .....

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lector anything short of a final order, therefore, he rejected the contention of the Revenue on this count. While the Technical Member and the third Member following the judgment of this Court in the case if Samrat International (Supra) came to the conclusion that the order of the Assistant Collector could be treated as a provisional order because there was correspondence regarding the excisability and the classification list filed by the appellants. From the above we notice that the majority of .....

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to be treated as the provisional merely because some appeal or other proceeding is pending questioning the classification involved therein. As a matter of fact, this Court in the case of Coastal Gases & Chemicals Pvt. Ltd. V. Asstt. C.C.E., Visakhapatnam (Supra) while considering the judgment in Samrat International Case (Supra) held thus: "On the facts of that case, however, this Court had held that the payment of duty which was made by the appellants in that case was provisional and .....

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under Rule 9 B of the Rules, and then material to show that the goods were cleared on the basis of said provisional classification. These facts in the instant case are missing, therefore,in our opinion there is no material in the instant case to establish the fact that either there was a provisional classification or there was an order made under Rule 9B empowering the clearances on the basis of such provisional classification. In the absence of the same, we cannot accept the argument of the Re .....

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cturer of the goods is bound to make payment of interest upon delayed payment of Central Excise Duty and whenever clearance of the goods were made on provisional basis there should be an order passed by the Central Excise authority. In the facts of the present case, there is no such type 8of order passed by the Central Excise authority for removal of goods on provisional decision nor for provisional assessment any application has been preferred. It has been held by the Hon'ble Supreme Court .....

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t or short-payment, etc. of duty is "by reason of fraud, collusion or any wilful misstatement 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"; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are dealt with differently. 12. Section 11-A, however allow the assessees-in-default in both kin .....

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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 subsection (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11-AB, that is, for the period from the first date of the month succeeding the month in which the d .....

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cases in which the non-payment or short-payment, etc. of duty is "by reason of fraud, collusion or any wilful misstatement 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 (11-A, 11- AA, 11-AB and 11-AC) interest is leviable on delayed or deferred payment of duty for whatever reasons. The payment of differential duty by the assessee at the time of issua .....

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hose 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 (2-B) of Section 11-A and attracted levy of interest under Section 11-AB of the Act. 18. For the reasons discussed .....

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Court in the case of Indian Refrigeration Industries Vs. Commissioner of Central Excise, Delhi reported in (2009) 16 SCC 405 at Paras 11 to 16 which reads as under: "11. As regards the contention that the demand raised was barred by time, it has been held that the classification list filed by the appellant w.e.f. 1-4-1978 was approved by the Assistant Collector on 17-12-1979 in which the benefit of exemption under Notification No. 71/78 claimed by the assessee was denied, against which the .....

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The larger Bench, in the aforesaid case, held as under: (ELT p. 337, para 6) "6. From the above discussion, we are clear in our mind that Samrat International (P) Ltd. envisage s payment of duty on provisional basis pending decision of classification list or price list. For these payments to be treated as provisional, procedure contemplated by Rule 9-B is not to be followed. Therefore, we are of the considered view that the observation made by the larger Bench of five members that there sh .....

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ng upon a judgment of this Court in Samrat International (P) Ltd. v. CCE. It has been held in the said case that the assessments made till the approval of the classification list would be deemed to be provisional and, therefore, procedure contemplated by Rule 9-B is not required to be followed. 13. Counsel for the appellant has pointed out that the observations made by this Court in Samrat International (P) Ltd. were explained in Metal Forgings v. Union of India and it was held that the decision .....

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f the Rules, and then material to show that the goods were cleared on the basis of the said provisional basis, and payment of duty was also made on the basis of said provisional classification. These facts in the instant case are missing, therefore, in our opinion there is no material in the instant case to establish the fact that either there was a provisional classification or there was an order made under Rule 9-B empowering the clearance on the basis of such provisional classification. In th .....

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approved by a three-Judge Bench of this Court in CCE v. Hindustan National Glass & Industries Ltd. 4 (refer to the observations made in para 18 of the judgment). 14. In view of the subsequent judgments of this Court in Metal Forgings case and Hindustan National Glass & Industries Ltd. case the impugned order based on the decision of Samrat International cannot be sustained. The assessment framed till the approval of the classification list on 17-12-1979 cannot be treated to be provision .....

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before either of the authorities below. We are not going into this question in view of our finding that the show-cause notice issued to the appellant was beyond the period of six months and therefore barred by time." (Emphasis Supplied) It has been held by the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. International Auto Limited reported in (2010) 2 SCC 672 Para 5,7 and 8 is under: "5. We find no merit in the submissions advanced on behalf of the asses .....

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to oversight or some mistake and it is not intentional. The second in which the non-payment or short-payment, etc. of duty is 'by reason of fraud, collusion or any wilful misstatement 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'; that is to say, it is intentional, deliberate and/or by deceitful means. Naturally, the cases falling in the two groups lead to different consequences and are deal .....

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ault 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 subsection makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11-AB, that .....

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t…. It is thus to be seen that unlike penalty that is attracted to the category of cases in which the nonpayment or short-payment, etc. of duty is 'by reason of fraud, collusion or any wilful misstatement 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 (11-A, 11- AA, 11-AB and 11-AC) interest is leviable on delayed or deferred payment of duty for w .....

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r Section 11-AB 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. 16. In RuchaEngg. the High Court observed as follows: 'It is evident that Section 11-AB comes into play if the duty paid/levied is short. Both, the Commissioner (Appeals) and 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 dut .....

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e assessee was not required to pay interest.' 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. 17. We are unable to subscribe to the view taken by the High Court in RuchaEngg. 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 tho .....

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as been, inter alia, held, as can be seen from the abovequoted paragraphs, that sub-section (2-B) of Section 11-A provides that the assessee in default may make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and, in that event, such assessee in default would not be served with the demand notice under Section 11-A(1) of the Act. However, Explanation 2 to the sub-section makes it clear that such payment would not be exempt from intere .....

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s the function of the price, on the date of removal/clearance of the goods was not correct. That, it was understated. Therefore, the price indicated by the supplementary invoice is directly relatable to the value of the goods on the date of clearance, hence, enhanced duty. This enhanced duty is on the corrected value of the goods on the date of removal. When the differential duty is paid after the date of clearance, it indicates short-payment/ short-levy on the date of removal, hence, interest w .....

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