In Central Excise Appeal No. 21581 of 2014 - CESTAT - Payment of differential duty through supplementary invoices attracts interest under Section 11AB of Central Excise Act: CESTAT (Bangalore)
Members D.M. Misra (Judicial) & R. Bhagya Devi (Technical) [31-05-2023]

Read Order: Ashok Iron Works (P) Ltd v. The Commissioner of Central Excise, Customs and Service Tax

Chahat Varma

New Delhi, June 2, 2023: The Bangalore bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that payment of differential excise duty through supplementary invoices, enhancing the value declared at the time of clearance of the goods, is subject to the levy of interest under Section 11AB of the Central Excise Act, 1944.

Factual background of the case was that Ashok Iron Works (P) Ltd. (appellants), who were engaged in the manufacture of excisable goods, namely C.I. raw castings, C.I. machined components, etc., were clearing the goods by paying duty based on the assessable value declared by them. By raising supplementary invoices, subsequent to removal of goods, the appellants discharged differential duty on the differential value collected under supplementary invoices but failed to pay interest on the differential duty paid against the supplementary invoices. The authorities issued a show cause notice invoking the extended period limitation, demanding the recovery of interest under Section 11AB of the Central Excise Act, 1944. After adjudication, the demands were confirmed, and penalties were imposed under Rule 27 of the Central Excise Rules, 2002.

The Tribunal held that the applicability of interest on differential duty paid on supplementary invoices due to enhancement of value, stands settled by the decision of Larger Bench of the Supreme Court in the case of Steel Authority of India Ltd. Vs. Commissioner of Central Excise, Raipur [LQ/SC/2019/856. The bench noted that the Larger Bench of the Supreme Court concurred with the view expressed by the Division Bench of the same Court in the case of Commissioner of Central Excise, Pune vs. SKF India Ltd. [LQ/SC/2009/1386], wherein the division bench held that, “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.”

The bench further ruled that the declaration of the differential duty paid and reflecting it in the monthly returns filed with the department from time to-time, would not fall within the scope of suppression of fact.

“In our opinion, the demand of interest can be sustained only for the normal period. Accordingly, the impugned order is modified to the extent of confirming recovery of interest for the normal period. Since there is no suppression of fact, we do not consider imposition of penalty, in the circumstances of the case, is warranted,” held the Tribunal.