By TIOL News Service

NEW DELHI, AUG 21, 2013: THE appellant had manufactured and cleared DDT 50% WDP and Malathion TG to the Government, Department of Health under National Vector Borne Disease Control Programme (NVBDCP) on payment of appropriate Central Excise duty and Education Cess.

In all these cases, the assessee had supplied excisable goods to their customers against contracts with Price Escalation Clause. At the time of clearance, the duty had been paid on the provisional price, though the same was subject to variation in terms of the Price Escalation Clause. In none of these cases, the assessee had opted for provisional assessment u/r 7 of CER, 2002 and the duty had been paid at the time of clearance on the provisional price.

Subsequently, the Ministry of Health and Welfare, with retrospective effect, revised and enhanced the prices for the supplies made in 2002 to 2005. On the basis of revised enhanced sale price, the petitioner paid differential duty as below:-

This act of payment of differential duty against supplementary invoices was welcomed by the department by issuance of two SCNs, both dated September, 4, 2008, one related to the FY 2001-02 and the other to FY 2002-03 to 2004-05.

Inasmuch as it is the stand of the department that the assesse should have paid interest u/s 11AB of the CEA, 1944 in respect of the differential duty paid.

By two adjudication orders dated 03/11/2009, the contention of the appellant that interest should not be levied as the SCNs were beyond limitation was rejected. The appellant did not succeed in first appeal and then approached the CESTAT.

The Bench rejected the contention of the appellant and held that interest was payable. See 2013-TIOL-187-CESTAT-DEL.

On the question of limitation, the Bench had this to say -

"18.1 Interest on a duty liability confirmed under Section 11 A (2) or self ascertained and paid under Section 11 A (2B) is by automatic operation of Section 11 AB and for recovery of such interest, no show cause notice is required and hence the limitation period prescribed under Section 11A is inapplicable.

18.2 The interest under Section 11 AB on a duty demand confirmed under Section 11A(2) or self admitted/self ascertained duty liability under Section 11 A(2B) or for delay in payment of duty self assessed under Rule 6 of Central Excise Rules, 2002 by the due date prescribed under Rule 8 ibid is "sum due to the Government", which is recoverable under Section 11 of the Central Excise Act, 1944 and for which there is no limitation period. The show cause notices issued in these cases, even if invoking Section 11 A, have to be treated as mere communication to the assessee for recovery of interest under Section 11. "

Now, the appellant is before the Delhi High Court and the following substantial question of law was framed -

"Whether the Tribunal fell into error in holding that for recovery of interest on account of retrospective revision of the prices, the extended period of limitation under Section 11A could be invoked vis-a-vis interest, especially in view of the decision of the Supreme Court in Commissioner v. T.V.S. Whirlpool Ltd., 2010 (119) ELT A177 (SC) and of this Court in Kwality Ice Cream Company and Anr. v. UOI and Others, W.P. (C) 14414-15/2006 =  (2012-TIOL-252-HC-DEL-CX)?"

The High Court agreed that interest was payable u/s 11AB of the CEA, 1944 as held by the CESTAT by relying on the Supreme Court decision in Commissioner of Central Excise versus International Auto Limited, - (2010-TIOL-05-SC-CX).

However, on the question of limitation, the High Court relied and extracted the following decisions -

+ Kwality Ice Cream Company and Another vs. UOI & Ors - (2012-TIOL-252-HC-DEL-CX)

+ Commissioner versus TVS Whirlpool Limited, 2000 (119) ELT A177 (SC)

+ Commissioner, Central Excise Commissionerate versus VAE VKN Industries Private Limited (CEA No. 67/2011 (O&M) decided on 17th April, 2012.

+ Central Excise Appeal No.116/2011, Commissioner of Central Excise Mumbai-III vs Supreme Petrochem Limited.

+ Tax Appeal No.56/2011, Commissioner of Central Excise and Customs, Vadodara-II vs M/s Gujarat Narmada Fertilizers Company Limited, - (2012-TIOL-273-HC-AHM-IT)

The High Court, thereafter, observed -

"12. In the present case there is no allegation and it cannot be held that the longer period of limitation of five years is applicable. It cannot be said that the short payment was due to fraud, collusion etc. which means intentional, deliberate or deceitful means. In view of the aforesaid position, it has to be held that the period of limitation of one year would apply to the present cases and the show cause notices were belated and barred by limitation.

13. Tribunal in the impugned decision has referred to the decision of the Supreme Court in  Commissioner of Trade Tax, Lucknow versus Kanhai Ram Thekedar, 2005 (185) ELT 3 (SC)  = (2005-TIOL-76-SC-CT). The said decision arose out of proceedings initiated under the U.P. Sales Tax Act, 1948 (subsequently known as U.P. Trade Tax Act, 1948). After referring to the applicable provisions it was held that levy of interest was automatic under the provisions of the said Act, interest should have been paid voluntarily and by non-payment the respondent therein had become a defaulter. In these circumstances, it was observed by the Supreme Court as under:-

"17. xxx"

14. A reading of the aforesaid paragraph would show that in the said case notice of payment for interest was issued after four years and it was held that it was beyond a reasonable period and the department could recover the amount from the Assessing Officer, who had not taken steps for four years and not from the respondent assessee therein. The finding of the Supreme Court on interpreting the applicable Act was that no limitation period was prescribed, therefore, proceedings for recovery could be initiated within a reasonable time. The ratio in the said case is distinguishable for the reason that payment of interest is to be made under Section 11A and, therefore, the period of limitation prescribed therein would equally apply as has been held by the Delhi High Court in the case of Kwality Ice Cream Company (supra), Punjab and Haryana High Court in the case of M/s VAE VKN Industries Private Limited (supra) and Gujarat High Court in Gujarat Narmada Fertilizers Company Limited (supra). These judgments have relied upon the decision of the Supreme Court approving the view of the tribunal in TVS Whirlpool Limited (supra) wherein parimateria provisions of the Customs Act were considered. This being a distinguishing feature, we feel that the appellant is entitled to succeed in the present appeals…."

In fine the question of law was answered in favour of the appellant and the appeals were disposed of.

(See 2013-TIOL-631-HC-DEL-CX)