In a recent case the Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that the demand of Interest under section 11B of Central Excise Act, 1944 is not valid in absence of knowledge on price escalation. The tribunal viewed that notice was issued on 19.09.2013, which is well beyond the normal period of limitation. Also none of the ingredients as contained in proviso to Section 11 A(1) being validly made out in the present case, the larger period of limitation, cannot be invoked.
The appellant M/s. Skipper Ltd. (Unit-I) had filed the appeal challenging the Order passed by the Commissioner, HaldiaCommissionerate whereby the Commissioner apart from confirming and appropriating duty paid on the supplementary invoices has also demanded interest of Rs.8,55,102/- under Section 11B and Section 11AA of Central Excise, 1944 besides imposing penalty of Rs. 51,70,284 on the appellant under Section 11AC of the Act ibid read with Rule 25 of the Central Excise Rules, 2002.
What’s New in Invoice Management? Find Out! – Enroll Today
The appellant entered into contracts with various parties for manufacture, testing, inspection and supply of transmission line towers. Such contracts contained a price variation clause depending on the cost of the input, labour and other costs that are not determinable at the time of initial clearance of goods under cover of Central Excise Invoices. Central Excise duty was thus paid on the basis of the assessable value as shown in the invoice for the purpose at the time of initial clearance of the goods.
The price escalation was calculated on the basis of All India Industrial Price Indices determined by the Reserve Bank of India and communicated by All India Electrical Manufacturers Association, Ministry of Labour and Employment, Government of India. At times, it also happens that instead of price escalation, there is a reduction of price.
What’s New in Invoice Management? Find Out! – Enroll Today
The appellant submitted that it is not possible at the time of original clearance to foresee any price escalation at the time of clearance of goods and therefore, supplementary invoices for differential amount are raised consequent to determination of the price escalation and differential duty on the said differential assessable value paid by way of the said supplementary invoices. A show cause notice dated 19.09.2013 was issued to the appellant in respect of the goods cleared during the period 2009-10, 2011-12 demanding central excise duty on such price escalation along with interest.
It was submitted that the differential duty of Rs. 51,10,284/- was voluntarily paid by them even prior to the issuance of the said notice. They however dispute the payment of interest of Rs. 8,55,102/- demanded on the said differential amount of duty.
What’s New in Invoice Management? Find Out! – Enroll Today
The impugned Show Cause Notice was issued invoking the extended period of limitation inter alia alleging that the assessee were having knowledge about possibility of price escalation in respect of supplies of their final product yet theyotherwise neither disclosed the facts to the Department nor opted for provisional assessment of such goods.
It was evident that the Show Cause Notice for interest on differential duty on the escalated value was raised on 09/09/2013 i.e. well beyond normal period of limitation of one year from (31 March 2012) the date of payment of differential duty under the last of the aforesaid invoices.
What’s New in Invoice Management? Find Out! – Enroll Today
A two member bench of Mr R. Muralidhar, Member (Judicial) and Mr. Rajeev Tandon, Member (Technical) found that there is not any fraud or collusion or suppression for that matter under the aforesaid scheme of operation to suggest any intention to evade payment of duty, more so since it has been a regular practice of the assessee’s working.
The tribunal viewed that notice was issued on 19.09.2013, which is well beyond the normal period of limitation. Also none of the ingredients as contained in proviso to Section 11 A(1) being validly made out in the present case, the larger period of limitation, cannot be invoked.
The Tribunal set aside the impugned order qua demanding interest on the duty paid on supplementary invoices. Shri Aditya Dutta appeared for the Appellant and Shri S. K. Mukim authorised Representative appeared for the Respondent
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
