C.E.A. No.61 of 2008 & -1- C.E.A.No.62 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.E.A. No.61 of 2008 & C.E.A. No.62 of 2008 Date of Decision:January 16, 2008. Commissioner of Central Excise, Panchkula. ...Appellant. Versus M/s Polyplastics ...Respondent CROAM: HON'BLE MR. JUSTICE M.M.KUMAR HON'BLE MR. JUSTICE H.S.BHALLA Present: Mr. Sanjeev Kaushik, Central Government Counsel, for the appellant. 1. Whether Reporters of local papers may be allowed to see the judgment? Yes. 2. To be referred to the Reporters or not? Yes. 3. Whether the judgment should be reported in the Digest? Yes. M.M.KUMAR, J. The revenue has preferred these appeals (CEA Nos.61 & 62 of 2008) under Section 35(G) of the Central Excise Act, 1944 (for brevity, `the Act'), claiming that a substantial question of law would arise from the order dated 03.10.2007 (A-4) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for short, `the Tribunal'). The following substantial question of law has been claimed by the revenue: - C.E.A. No.61 of 2008 & -2- C.E.A.No.62 of 2008 “Whether the assessee is not liable to pay interest on the goods which although cleared in the past but had issued supplementary invoices of duty on escalation of prices?” The dealer – respondent is holder of Central Excise Registration Certificate for manufacture of name plates, emblems and logos etc. under chapter heading No.8708 of the schedule to the Central Excise Tariff Act, 1985. The revenue has claimed that the aforesaid items be classified under chapter heading 3926.90 of the schedule to the Central Excise Tariff Act, 1985. On scrutiny, it was found that for the months of October and November 2003 they have raised supplementary invoices and had also paid central excise duty on the same. Those invoices were issued subsequent to those invoices which were issued from January 2003 to August 2003 on removal of goods. The revenue claimed that interest becomes payable on duty paid on such supplementary invoices as per the rate prescribed under Section 11AB of the Act because the duty was not paid within the prescribed time. A letter was sent on 31.12.2003 which was duly replied by the dealer on 07.01.2004. The stand taken in the reply is that interest under Section 11AB of the Act is not recoverable in case where duty was not levied/paid or short paid/levied on account of fraud, willful mis-statement or suppression of facts. The dealer claimed that the duty has been paid within a bona fide belief and there was no allegation or fraud or collusion. As such even no demand was raised by the department. Thereafter a show cause notice was also issued to the dealer on 19.10.2004 to show cause to the Assistant Commissioner as to why C.E.A. No.61 of 2008 & -3- C.E.A.No.62 of 2008 the amount on duty short paid by the dealer should not be demanded under the provisions of Section 11A of the Act and the amount already paid should not be appropriated against the demand. It was further alleged that why interest be not recovered from the dealer. The dealer contested the claim made by the revenue. However, the Assistant Commissioner ordered the recovery of interest amount. The rationale for the aforesaid view is discernible from the following paras of the order dated 25.01.2005 passed by the Assistant Commissioner: - “The provisions of Section 11AB are applicable in respect of duty determined under Sub Section (2) of Section 11A of duty which has been paid under Sub-Section (2B) of Section 11A. Sub Section 2 of 11A is for determination of duty on show cause notice after looking into consideration of representation etc. and Sub-Section (2B) of Section 11A gives authority to pay duty without issue of show cause notice and following the procedures of adjudication etc. Under this the assessee gets the benefit that penalty is not imposed upon him. Section 11AB provides recovery of interest on duty irrespective of fact whether the short levy/non levy of duty is on account of mis-declaration/mis- statement or contravention of Rules with intent to evade duty etc. or otherwise. In the instant case proper show cause ntice for demand for short paid duty and interest has been issued to the notice under Section 11A and Section 11AB respectively of the Central Excise Act, 1944 vide C.No.V (39) Demand/Polyplastics/46/YNR/04/4963 dated 19.10.2004. Hence, the plea of the notice in this regard is not convincing and acceptable. Hence, the demand of interest as proposed in the show cause notice stand established against the notice beyond any doubt.” C.E.A. No.61 of 2008 & -4- C.E.A.No.62 of 2008 On appeal, the Commissioner upheld the view taken by the Assistant Commissioner vide his order dated 26.09.2005. The Commissioner has placed reliance on the principle that once the revenue was deprived of use of money to which it was legitimately entitled, then it was required to be compensated by way of paying interest. The following observations of the Commissioner would represent his point of view: - “At the outset, I observe that interest is compensation paid by borrower to the lender for depreciation of use of his money. A person deprived of use of money to which he is legitimately entitled has a right to be compensated for the deprivation liability to pay interest is founded on the doctrine of compensation. I observe that in the instant case, there is no dispute that the buyer has granted price rise to the appellant after negotiations etc. with retrospective effect. The appellant paid differential duty by raising supplementary invoices at a later rate. This means that there was short payment of duty at the time of clearance of goods. It cannot be said that the appellant was not aware that price rise will be given by buyer. He may not be aware of the quantum of price rise. As the appellant was fully aware of the fact that price rise will sooner or later, follow, he should have followed the procedure of provisional assessment. Having not done so, the appellant has made himself liable in terms of Section 11AB of the Central Excise Act, 1944 for payment or interest on differential amount of duty paid later which is paid under Section 11A (2B) of the Act ibid. On this context, I observe that plain reading of Section 11AB clearly provides for charging of interest even if duty has been paid under Section 2B of Section 11A of the Act ibid.” C.E.A. No.61 of 2008 & -5- C.E.A.No.62 of 2008 When the matter was agitated by the dealer in further appeal to the Tribunal, it has opined that the liability to pay interest in respect of the duty deposited arising out of supplementary invoices cannot be inferred and the matter was found to be covered by the decisions of the various Benches of the Tribunal. One of the decision relied upon is CCE, Aurangabad Vs. M/s Rucha Engineering Private Limited- 2006(206) ELT 278 (Tribunal Mumbai). The aforesaid order of the Tribunal has been approved by the Aurangabad Bench of the Bombay High Court and it has thus been held that the dealer is not liable to pay interest. Having heard learned counsel for the revenue, we are of the considered view that no question of law much less a substantive question of law would arise warranting admission of these appeals. It is well settled that in order to raise a demand for payment of interest under Section 11 AB of the Act the condition precedent is the existence of an order determining the duty under Section 11 A(2) of the Act or the duty must have been paid on their own account in the manner prescribed under Section 11AB(2) of the Act. The Commissioner in his order has observed that the dealer had made himself liable to pay interest in terms of Section 11 AB of the Act on differential amount of duty which has been paid later. The aforesaid approach is not correct because there is no case of any non payment, short levy or short payment as envisaged under Section 11 A(1) of the Act. Section 11 A(2) of the Act contemplates entirely a different situation than the one in hand and therefore it has to be held that the C.E.A. No.61 of 2008 & -6- C.E.A.No.62 of 2008 provisions of Section 11 AB(2)(b) of the Act are not attracted to the facts of the present case. Moreover, a Division Bench of the Bombay High Court has approved the view taken by the Tribunal in the case of M/s Rucha Engineering Private Ltd. (supra). The aforesaid decision we have followed in the case of CCE Faridabad v. M/s Goodyear India Ltd. (CEA 106 of 2008 decided on 7.1.2009). Even otherwise, the total demand raised for payment of interest (Rs.19,464/- in C.E.A. No.61 of 2008 and Rs.48,061/- in C.E.A. No.62 of 2008) is diminutive in nature. Accordingly, the question is answered against the revenue and in favour of the dealer and the appeals are dismissed. ( M.M.KUMAR ) JUDGE January 16, 2009 ( H.S.BHALLA ) vinod JUDGE