M/S. STEEL AUTHORITY OF INDIA LTD. versus COMMISSIONER OF CENTRAL EXCISE, RAIPUR
[2015] 10 S.C.R. 938, Supreme Court of India, 2015
Outcome: Matter referred to larger bench
Segment: Issues
(2015] 10 S.C.R. 938 
A 
M/S. STEEL AUTHORITY OF INDIALTD. 
B 
v. 
COMMISSIONER OF CENTRAL EXCISE, RAIPUR 
(Civil Appeal No. 2150 OF 2012) 
DECEMBER 07, 2015 
[A.K. SIKRI AND R. F. NARIMAN, JJ.] 
Central Excise Act, 1944 - s. 11 AB - Interest on delayed 
C payment of duty- Supplementary invoices raised by seller 
due to price increase by virtue of price variation clause in 
the sale contract- Differential duty paid by seller on value of 
such supplementary invoices- Payment of interest u/s. 11 AB 
on the said differential duty- Held: As on the date when the 
D goods were cleared, there was no certainty that there would 
be price escalation - It is impossible to expect the assessee 
to pay the excise duty, at the time of clearance of the goods, 
on the basis of price escalation that took place at a later date 
in future - Thus, as on the date of clearance when excise 
E duty was paid, it could not be treated as 'short paid' on the 
said date - As a consequence when the principal amount, 
namely, the excise duty itself was not payable· (on the 
differential) on the date of clearance of the goods, there cannot 
be any question of law to pay interest - However, Supreme 
F 
Court in earlier decisions-SKF and International Auto case 
held that interest would be payable on the duty paid on 
supplementary invoices - The said Bench did not consider 
the effect of the expression 'ought to have been paid' occurring 
in s. 11 AB - Thus, the decision in SKF and International Auto 
G case
needs re-consideration - Matter referred to the larger 
Bench. 
Referring the matter to the larger Bench, the Court 
H 
HELD: 1.1 The assessee had discharged the excise 
938
STEEL AUTHORITY OF INDIALTD.v. 
939 
CMMNR. OF CENTRAL EXCISE, RAIPUR 
duty on t~e goods cleared by it on the basis of invoices A 
raised indicating the value of these goods and as on the 
date of the clearance of these goods. "Fhe price declared 
in the said invoice was the transaction value of the goods 
in terms of Section 4 of the Central Excise Act, 1944 
inasmuch as that was the price fixed between the parties B 
at which the goods were to be supplied at the time and 
place of removal. The occasion for differential duty arose 
at a later date due to price variation clause in the contract 
for sale. The moment the assessee received the 
enhanced price due to price escalation, it paid differential C 
duty on its own immediately on receipt of the said price. 
[Para 7) (946-F-H] 
1.2 Interest under Section 11AB can be levied/ 
. charged where any duty of excise has not been levied D 
or paid or has been short levied or short paid. In such 
an event, interest is liable to be paid 'from the first date 
of the month succeeding the month in which the duty 
ought to have been paid'. Section 4(1 )(a) of the Act 
provides that the value of the goods shall be the price E 
'actually paid or payable' for the goods. This means the 
price which has been 'paid' or 'agreed to be paid' by the 
buyer of the goods. For the purposes of Section 11AB, 
the expression 'ought to have been paid' would mean F 
the time when the price is agreed upon by the seller and 
the buyer. In other words,
the right of the seller to receive 
the revised price crystallises only when the buyer agrees 
to sanctions the same, and only at that time can liability 
to pay duty, if at all, on the revised price arise. Both parties G 
are not aware of the final price at the time when the goods 
are removed. In the context of price revision subsequent 
to clearance, duty 'ought to be paid' only after the 
sanctioning of the revised priced by the buyer. The 
differential duty·on·account of price revision is paid in H
940 
SUPREME COURT REPORTS 
[2015] 108.C.R. 
A the month when the revised price is agreed between the 
seller (as~essee) and the buyer and it ought to have been 
paid only at that time and not before. [Para 19) [958-C-H] 
1.3 One has also to keep in mind the difference 
B between 'what should be the quantum of duty to be paid' 
and 'when such duty is payable'. In the cases price 
revision, the quantum of duty would be on the escalated 
price but the time for payment of differential duty is when 
the parties agree for the escalation in prices. On that 
C reckoning, it would follow that interest clock for 
differential duty will start ticking from the date differential 
duty is due, i.e., the date of agreement of escalated prices 
and not before. This concept was clarified with the latest 
amendment in 2015 to Section 11A with regard to the 
D 'relevant date' for payment of interest. [Para 20) 
[959-A-C] 
1.4 The Bench in* SKF case and **International Auto 
case which held that interest would be payable, did not 
E consider the effect of the expression 'ought to have 
been paid' occurring in Section 11AB of the Act. It is 
undeniable that under Section 4 of the Act, the excise 
duty is to be paid on the 'transaction value' and such a 
transaction value has to be seen at the time of clearance 
F of the goods. Indubitably, when the goods were cleared, 
the excise duty was paid taking into consideration the 
price that was actually charged and was reflected in the 
invoices
raised for the said purpose. The Department 
cannot plead that as on that date, this was not the price 
G charged. No doubt, when the differential payment is made 
at a later date, further amount towards excise duty 
becomes payable as a result of said differential in price. 
Further, such an event took place at a subsequent date. 
As on the date when the goods were cleared, there was 
H no certainty that there would be price escalation and it
STEEL AUTHORITY OF INDIALTD.v. 
941 
CMMNR. OF CENTRAL EXCISE, RAIPUR 
was beyond comprehension to ascertain the exactitude A 
of such an escalation. It would be impossible to expect 
the assessee to pay the excise duty, at the time of 
clearance of the goods, on the basis of price escalation 
that took place at a later date in future. Therefore, as on 
the date of clearance when excise duty was paid, it could B 
not be treated as 'short paid' on the said date. As a 
consequence when the principal amount, namely, the 
excise duty itself was not payable (i.e. on the differential) 
on the date of clearance of the goods, there cannot be c 
any question of law to pay interest. No doubt, on receipt 
of differential price, when the buyer agreed to escalation 
in the price, further excise duty also become payable and 
on that reckoning one can say that the excise duty 
originally paid became 'short paid'. However, that would D 
only attract pflyment on differential excise duty and not 
the interest thereon. [Para ~1-22) [960-A-C] 
1.5 The two judgments in SKF India Ltd. and. 
International Auto are by the same Bench. International 
Auto follows SKF India Ltd. The primary factor by which E 
the Bench was influenced was that there is a loss of 
revenue to the Government and, therefore, the 
Government should compensate for that. It proceeds on 
the basis that the price which was originally stated at 
the time of removal of the goods was 'underst~ted' F 
(International Auto). However,
value of the goods for the 
purpose of duty is 'at the time of removal', which remains 
fundamental principle from the inception of the Central 
Excise Act originally enacted in 1944 and remains valid 
G 
till date. It is, therefore, diffic~lt to accept that the price 
was 'understated' on the date of removal of those goods. 
[Para 23) [960-D-F] 
1.6 The observations of the Bench that the imposition 
~
of interest is to compensate the Department for loss of H
942 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A revenue is contrary to the Constitution Bench judgment 
in the case of*** J.K. Synthetics Limited v. Commercial 
Taxes Officer that interest was compensatory in nature 
was specifically rejected. The Constitution Bench 
considered in detail the correctness of earlier three 
B member Bench judgment in the case of Associated 
Cement Company Limited v. Commercial Tax Offic~r, Ko ta 
and Others wherein majority view was that interest 
claimed on unpaid tax dues could be charged as it was 
compensatory in character and not penal. [Para 25] 
C [962-D-F] 
1.7 The decision in SKF and Auto International 
require a re-look for the reasons given. The Registry is 
directed to piace the matter before the Hon'ble Chief 
D Justice of India for constituting a Larger Bench to go 
into the issue involved in the instant case. [Para 27] 
[962-A-B] 
E 
F 
G 
*CCE v. SKF India Ltd. (2009) 13 sec 461 :2009 
(10) SCR 714; **CCE v. International Auto Limited 
(2010) 2 sec 672: 2010 (1) SCR 211; CCE v . . 
Rucha Engg. (P) Ltd. First Appeal No. 42 of 2007 
decided 
on 
03.04.2007; 
MR/= 
Ltd. v. 
Commissioner of Central Excise, Madras ( 1997) 
5. SCC 104; *** J. K. Synthetics Limited v. 
Commercial Taxes Officer(1994) 4 SCC 276; 
Associated Cement Company Limitecj v . . 
Commercial Tax Officer, Kota and Others (1981) 
4 SCC 578:1982 (1) SCR 563; Keshav Mills 
Company Limited v. Commissioner of Income 
Tax, Bombay (1965) 2 SCR 908 - referred to. 
CASE LAW
REFERENCE 
H 2009 (10) SCR 714 
referred to. 
Para 11

. STEEL AUTHORITY OF INDIA LTD.v. 
943 
CMMNR. OF CENTRAL EXCISE, RAIPUR 
2010 (1) SCR 211 
referred to. 
Para 11 
A 
(1997) 5 sec 104 
referred to. 
Para 24 
(1994) 4 sec 276 
referred to. 
Para 25 
8 
1982 (1) SCR 563 
referred to. 
Para 25 
(1965) 2 SCR 908 
referred to. 
Para 26 
c 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 
2150 of2012 
From the Judgment and Order No. 615/2010-Ex dated 
13.08.2010 of the Customs, Excise & Service Tax Appellate D 
Tribunal, New Delhi in Appeal No. E/367/2008 
WITH 
C. A. No. 2562 OF 2012 
C. A. Nos. 599, 600 & 1522-1523 OF 2013· 
V. Lakshmikumaran, M. P. Devanath, Hemant Bajaj, L. 
Charanaya,Aditya Bhattacharya,Anandh K., T. D. Satish for 
the Appellant. 
E 
K. Radhakrishnan, Arijit Prasad, A. Sharma, 8. Krishna 
F 
Prasad for the Respondent. 
The Judgment of the Court. was delivered by 
A.K. SIKRI, J. 1. In all these appeals, identical question 
of law is involved and for the sake of brevity, we are discussing G 
the question of law by taking note of the facts from Civil Appeal 
No.2150of2012. 
2. The appellant/assessee herein, which is a public sector 
undertaking of the Government of India, has been selling iron 
H
944 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
and steel products, that are manufactured by it, to the Indian 
Railways. For this purpose, contract was signed between the 
said two parties and the goods were being sold to the Indian 
Railways at the price mutually agreed upon between them. On 
each removal of these goods for supply to the Railways, the 
B assessee had been paying the excis~ duty as per the price 
disclosed by the assessee in the invoices issued at the time 
of the removal of the goods. Goods in this manner were 
supplied during the period January, 2005 to July, 2006 which 
period is involved in the instant appeal. It so happened that 
C there was an upward revision in the price by the Railways in 
August, 2006 covering the period in question. On that basis, 
assessee was paid the price difference on the fixation of 
enhanced consideration forthe goods supplied. The assessee 
0 
paid the differential duty of Rs.142.78 crores voluntarily in 
August, 2006. According to the Revenue/respondent, since 
the differential duty was paid in August, 2006 and not paid at 
the time of clearance of the goods, there was delay in paying 
the differential duty and, therefore, under Section 11AB of the 
E Central Excise-Act, 1944 (hereinafter referred to as the 'Act'), 
the assessee was liable to pay interest on the differential duty 
amount paid by it. The contention of the Revenue has been 
upheld by the Authorities below including Custom Excise and 
Service Tax Appellate
Tribunal (hereinafter referred to as the 
F 
'Tribunal'). 
3. The question, thus, that arises for consideration in these 
appeals is as to whether interest is leviable under Section 11AB 
of the Act on the differential duty amount paid under 
G supplementary invoices due to price increase by virtue of price 
variation clause in the sale contract. Now, facts in some detail: 
The assessee is engaged in the manufacture of iron and 
steel products falling under Chapter 72 and 73 of the schedule 
of the Central Excise Tariff Act, 1985. The final products 
H
STEEL AUTHORITY OF INDIALTD.v. CMMNR. OF 
945 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
manufactured includes rails. The final products manufactured A 
by the assessee are cleared on payment of appropriate duty 
of excise leviable thereon. The final products are either directly 
sold at the factory gate or are transferred to various Branch 
Sales Offices from where they are sold to the customers. The 
sales either from the factory or from the BSOs are in terms of B 
purchase orders received from the customers. The assessee 
sold the rails to the Indian Railways in terms of the Price Circular 
No. LP-06 of 2005 dated 24.02.2005 w.e.f. 01.07.2004. 
In terms of the prices quoted in the purchase orders, the C 
assessee discharged central excise duty at the time of removal 
of the rails to the Indian Railways. Such price was the 
"transaction value" of the goods in terms of Section 4 of the 
Act at the given time. In terms of the price variation clause 
and also in terms of the agreement with the Indian Railways, 
D 
the price circular dated 24.02.2005 effective from 01.07 .2004 
was revised upwards with increase in the agreed upon price. 
A revised price circular No. LP-010/06 dated 20.07.2006 was 
issued revising the agreed upon price. 
In terms of the revised price circular the assessee 
discharged differential duty of Rs.142, 78,88, 172/- on the rails 
cleared during the period from January, 2005 to July, 2006. 
The differential duty was paid in August, 2006 under intimation
E 
to the Departmental Authorities. 
F 
4. In the above background, on a scrutiny of ER-1 return 
filed by the assessee for the month of August, 2006, a show 
cause notice dated 01.06.2007 was issued to the assessee 
contending that in respect of the differential duty of Rs.142. 78 G 
crores paid in August, 2006, the assessee are required to pay 
an interest of Rs.15,51,81,231/- under Section 11AB of the 
Act. The notice alleged that since the price was not correctly 
determined at the time of removal of goods there was short 
payment of duty hence the assessee is liable to pay interest. 
H
946 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
The notice also alleges that since the price was not final the 
duty should be treated as paid on the provisional price and in 
terms of Rule 7(4) of the Central Excise Rules interest under 
Section 11AB is payable. The notice also relied on circular 
dated 28.07.2003 to allege that the assessee is required to 
B pay interest. The notice also proposed to impose penalty under 
Rule 25 for contravention of Rules 7 and 8 of the Rules. 
5. The assessee filed detailed reply dated 17 .10.2007 
challenging the allegations contained in the show cause ntoice 
C and contending that no interest is payable on the differential 
duty paid on account of price variation. 
6. The Commissioner of Central .Excise, Raipur passed 
order dated 31.10.2007 confirming the amount of interest 
D proposed in the show cause notice and also imposing penalty 
of Rs.2,00,000/-. Against the order dated 31.10.2007 passed 
by the Commissioner of Central Excise, Raipur, assessee filed 
an appeal before the Tribunal. The Tribunal has passed the 
impugned order dated 13.08.201 o· and .dismissed the appeal. 
E This order is challenged by way of instant appeal. 
7. It becomes manifest from the aforesaid facts that the 
assessee had discharged the excise duty on the goods 
cleared by it on the basis of invoices raised indicating the value 
F of these goods and as on the date of the clearance of these 
goods. It cannot be disputed that the price declared in the said
invoice was the transaction value of the goods in terms of 
Section 4 of the Act inasmuch as that was the price fixed 
between the parties at which the goods were to ~e supplied at 
G the time and place of removal. The occasion for differential 
duty arose at a later date due to price variation clause in the 
contract for sale. The moment the assessee received the 
enhanced price due to price escalation, it paid differential duty 
on its own immediately on receipt of the said price. 
H
STEEL AUTHORITY OF INDIALTD.v. CMMNR. OF 
947 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
8. It is in this backdrop it is to be examined as to whether A 
the difference in price, as per the decision taken by the 
Railways on a later date i.e. much after the date on which the 
goods were cleared, can be treated as price as on the date 
when the goods were actually removed and, therefore, it is to 
construed that the duty initially paid was 'short paid' to bring 
B 
this event within the fold of Section 11AB of the Act. As per the 
assessee, provisions of Section 11AB of the Act would not be 
attracted at all inasmuch as, by no stretch of imagination, it 
can be treated that on the date of removal of the goods when 
the duty was paid as per the price fixed at that time, it is now to C 
be treated as 'short paid' only because of the occurrence of 
an event at a later date which could not be visualised or taken 
into consideration at the time of removal of these goods. 
9. For proper understanding of the matter, we may D 
reproduce provisions of Section 11AB of the Act at this stage, 
which reads as under: 
"(1) Where any duty af excise has not been levied or 
paid or has been short-levied or short-paid or erroneously E 
refunded, the person who is liable to pay the duty as 
determined under sub-section (2), or has paid the duty 
under sub-section (28), of Section 11A, shall, in addition 
to the duty, be liable to pay interest at such rate not below 
eighteen percent and not
exceeding thirty-six percent per F 
annum, as is for the time being fixed by the Central 
Government, by notification in the Official Gazette, from 
the first date of the month succeeding the month in which 
the duty ought to have been paid under this Act, or from 
the date of such erroneous refund, as the case may be, G 
but for the provisions contained in sub-section (2), or sub-
section (28), of Section 11A till the date of payment of 
such duty: 
Provided that in such cases where the duty becomes H
948 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
payable consequent to issue of an order, instruction or 
direction by the Board under Section 37B, and such 
amount of duty payable is voluntarily paid in full, without 
reserving any right to appeal against such payment at 
any subsequent stage, within forty-five days from the date 
of issue of such order, instruction or direction, as the case 
may be, no interest shall be payable and in other cases 
the interest shall be payable on the whole of the amount, 
including the amount already paid. 
(2) The provisions of sub-section ( 1) shall not apply to 
cases where the duty had become payable or ought to 
have been paid before the date on which the Finance 
Bill, 2001 receives the assent of the President. 
Explanation 1. - Where the duty determined to be payable 
is reduced by the Commissioner (Appeals}, the Appellate 
Tribunal or, as the case may be, the Court, the interest 
shall be payable on such reduced amount of duty. 
Explanation 2. - Where the duty determined to be payable · 
is increased or further increased by the Commissioner 
(Appeals), the Appellate Tribunal or, as the case may 
be, the Court, the interest shall be payable on such 
increased or further increased amount of duty." 
10. A bare reading of the aforesaid provision reflects that 
in order to attract the same, following requirements need to 
be fulfilled: 
(a) 
Non-levy or non-payment of duty. 
(b) 
Short levy or short payment of duty.
(c) 
erroneous refund. 
(d) 
duty determined under Section 11A(2).
STEEL AUTHORITY OF INDIALTD. v. CMMNR. OF 
949 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
(e) 
Section 11A(2) requiring Notice issued under A 
Section 11A. 
(f) 
duty payment under Section 11A(2i3). 
(g) 
interest is payable on such reduced or increased 
8 
duty determined to be payable by Commissioner 
(Appeals) or Appellate Tribunal etc. 
11. Before proceeding further, we would like to point out 
that we are not treading on a virgin territory, inasmuch as the 
provisions of Section 11AB of the Act have already been C 
interpreted by this Court in two judgments under almost similar 
circumstances. These are: 
(a) CCE v. SKF India Ltd. 1 
D 
(b) CCE v. International Auto Limited. 2 
12. In SKF India Ltd. case, the assessee was engaged 
in the manufacture and ~ale of ball bearings and textile machine 
parts. It sold goods manufactured by it on certain prices on 
E 
payment of excise duty leviable on the price on which the goods 
were sold. Later on, there was a revision of prices with 
retrospective effect. Following the revision the assessee raised 
supplementary invoices on its buyers and also paid the 
differential duty on the goods sold earlier. The Revenue took F 
the view that the assessee was liable to pay interest on 
differential duty. This factual position would reflect that it was 
almost same that prevails in the present appeals. Though, the 
demand made in Order-in-Original was set aside by the 
Commissioner (Appeals) and the order of the Commissioner G 
(Appeals)
was upheld by the CESTAT holding that no interest 
was chargeable where there was time gap between the 
payment of differential duty and issuance of supplementary 
'(2009) 13 sec 461 
2(201 o) 2 sec 672 
·H
950 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A invoices to the customers on the basis of upward revision of 
prices in respect of the goods sold earlier. The said view of 
the Tribunal was reversed by this Court holding that interest 
was payable under Section 11 AB of the Act. After reproducing 
the provisions of Section 11AB, the Court in the first instance 
B pointed out that the aforesaid provision was not happily worded 
c 
D 
E 
and made following remarks in this behalf: 
"9. If the object of the law is to state clearly and 
unambiguously the obligations of the person whom the 
law addresses and to spell out plainly and without any 
confusion the consequences of failure to discharge the 
obligations cast by the law then the four sections of the 
Act fall miles short of the desired objective. Even as 
originally cast the provisions were far from very happily 
framed and worded. Subjected to amendments from time 
to time those provisions have now become so 
complicated that in order to discern their meaning it 
becomes necessary to read them, back and forth several 
times. 
10. We see no reason why the two periods for which 
interest is leviable may not qe put together and dealt with 
in one consolidated provision instead of being split up in 
Sections 11-AAand 11-AB. Also, there is much scope 
F 
to reorganise all the different sub-sections of Section 11-
A and to present the scheme of that section in a more 
coherent and readable form. Be that as it may. In the 
case
in hand we have to deal with the law as it stands 
now." 
G 
H 
13. Thereafter, the Court contrasted the provisions of 
Section 11Awith Section 11AB and some other provisions. It 
also took note of the judgment of High Court of Bombay in 
CCE v. Rucha Engg. (P) Ltd. 3 wherein the Bombay High Court 
3First Appeal No. 42 of 2007 decided on 03.04.2007
STEEL AUTH0RiTYOF lr.JDIALTD. v. CMMNR. OF 
951 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
had held that Section 11 AB of the Act is not applicable in such A 
a situation. The Court, however, rejected the aforesaid view 
of the Bombay High Court. We would like to reproduce the 
relevant discussion touching the aforesaid aspect, as 
contained in the judgment: 
"11. Section 11-A puts the cases of non-levy or short-
levy, non-payment or short-payment or erroneous refund 
of duty in two categories. One in which the non-payment 
B 
or short-payment, etc. of duty is for a reason other than 
deceit; the default is due to oversight or some mistake c 
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 D 
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 kinds of cases to make amends, subject of course 
to certain terms and conditions. The cases where the 
non-payment or short-payment, etc. of duty is by reason 
E 
of fraud, collusion, etc. are dealt with under sub-section 
F 
(1-A) of Section 11-A and the cases where the non-
payment or
short-payment of duty is not intentional under 
sub-section (2-B). 
13. Sub-section (2-B) of Section 11-A provides that the G 
assessee-in-default 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 H
952 
A 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
by him and in that event he would not be given the demand 
notice under sub-section (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 duty 
ought to have been paid till the date of payment of the 
duty. 
14. What is stated in Explanation 2 to sub-section (2-B) 
is reiterated in Section 11-AB that states where any duty 
of excise has not been levied or paid or has been short-
levied or short-paid or erroneously refunded, the person 
who has paid the duty under sub-section (2-B) of Section 
11-A, shall, in addition to the duty, be liable to pay 
interest. ... It is thus to be seen that unlike penalty that is 
attracted to the category of 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 issuance of supplementary invoices to the 
customers demanding the balance of the revised prices
clearly falls under the provision of sub-section (2-B) of 
Section 11-A of the Act. 
15. The Bombay High Court, Aurangabad Bench, in its 
decision in CCEv. Rucha Engg. (P) Ltd., (FirstAppeal 
No. 42 of 2007 decided on 
3-4-2007) that was relied 
upon by the Tribunal for dismissing the Revenue's appeal 
took the view that there would be no application of Section 
11-A(2-B) or Section 11-AB where differential duty was
STEEL AUTHORITY OF INDIA LTD. v. CMMNR. OF 
953 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
paid by the assessee as soon as it came to learn about A 
the upward revision of prices of goods sold earlier. 
16. In Rucha Engg. 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 B 
(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 duty was due at that time i.e. 
when the revised rates applicable with retrospective C 
effect were learnt by the assessee, which was much after 
the clearance of the goods and, therefore, question of 
payment of interest does not arise as the duty was paid 
as soon as it was learnt that it was payable. Finding that 
provisions of Section 11-A(2) and 11-A(2-B) were not D 
applicable as the situation occurred in the instant case 
was quite different, Section 11-AB(1) was not at all 
applicable, and therefore, th~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. 
E 
17. We are unable to subscribe to the view taken by the F· 
High Court in Rucha Engg. 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 those were G 
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 H
954 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
unintended and without any element of deceit, etc. The 
payment of differential duty thus clearly came under sub-
section (2-B) of Section 11-Aand attracted levy of interest 
under Section 11-AB of the Act." 
B 
14. Fact situation in International Auto Limited was also 
almost similar. In that case, the assessee, viz., International 
Auto Limited had supplied auto parts to its customers 
(manufacturers of motor vehicles) who determined the prices 
of auto parts having regard to the cost of raw material, 
C manufacturing cost, profit margin, etc. and placed orders with 
the assessee. Since price difference arose between the price 
on the date of removal and the enhanced price at which the 
goods stood ultimately sold, the Department issued show 
cause notice proposing_ to levy interest on the differential duty, 
D paid by the assessee, under Section 11-AB of the Act. The 
assessee took up the defence that prices indicated in the 
purchase order were final and not liable to change at the time 
of removal of the goods and, thus, it was not the case of'short 
levy' on which interest could be charged. After extensively 
E quoting from the judgment of SKF India Ltd. and following the 
same, aforesaid contention of the assessee was repelled. In 
addition, the judgment also contained some further discussion 
on Section 11AB of the Act which needs to be taken note of. It 
F runs as under: 
G 
H 
"6. Section 11-A of the Act deals with
recovery of duty 
not levied or not paid or short-levied or short-paid. The 
said section, which stood inserted by Act 25 of 1978, 
underwent a sea change when Parliament inserted major 
changes in that section videAct 14 of 2001 (with effect 
from 11-5-2001) and Act 32 of 2003 (with effect from 14-
5-2003). It needs to be mentioned that simultaneously 
Act 14 of 2001 also made changes to Section 11-AB of 
the Act.
STEEL AUTHORITY OF INDIA LTD. v. CMMNR. OF 
955 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
. 7. In SKF India Ltd., (2009) 13 SCC 461, it has been, A 
inter alia, held, as can be seen from the abovequoted 
paragraphs, that sub-section (2-8) 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 8 
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 interest 
chargeable under Section 11-A8 of the Act. What is C 
stated in Explanation 2 to sub-section (2-8) is reiterated 
in Section 11-A8 of the Act, which deals with interest on 
delayed payment of duty. 
8. From the scheme of Section 11-A(2-8) and Section D 
11-A8 of the Act, it becomes clear that interest is levied 
for loss of revenue on any count. In the present case, one 
fact remains undisputed, namely, accrual of price 
differential. What does differential price signify? It 
signifies that value, which is the function of the price, on E 
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 F 
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 which is for loss of G 
revenue, becomes leviable under Section 11-A8 of the 
Act. 
9. In our view, with the entire change in the scheme of 
recovery of duty under the Act, particularly after insertion H
956 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2015] 1 O S.C.R. 
of Act 14 of 2001 and Act 32 of 2003, the judgment of 
lhis Court in MRF Ltd. would not apply. That judgment 
was on interpretation of Section 11-B of the Act, which 
concerns claim for refund of duty by the assessee. That 
judgment was in the context of the price list approved on 
14-5-1983. In that case, the assessee had made a claim 
for refund of excise duty on the differential between the 
price on the date of removal and the reduced price at 
which tyres were sold. The price was approved by the 
Government. In that case, the assessee submitted that 
its price list was approved by the Government on 14-5-
1983, but subsequent thereto, on account of consumer 
resistance, the Government of India directed the 
assessee to roll back the prices to pre-14-5-1983 level 
and on that account, price differential arose on the basis 
of which the assessee claimed refund of excise duty 
which stood rejected by this Court on the ground that once 
the assessee had cleared the goods on classification, 
the assessee became liable to payment of duty on the 
date of removal and subsequent reduction in the prices 
for whatever reason cannot be made a matter of concern 
to the Department insofar as the liability to pay excise 
duty was concerned. 
10. In the present case, we are concerned with the 
imposition of interest which, as stated above, is charged 
to compensate the Department for loss of revenue. Be 
that as it
may, as stated above, the scheme of Section 
11-A of the Act has since undergone substantial change 
and, in the circumstances, in our view, the judgment of 
this Court in MRF Ltd. has no application to the facts of 
this case. In our view, the judgment of this Court in SKF 
India Ltd. is squarely applicable to the facts of this case." 
15. Mr. Lakshmikumaran, who appeared for the
STEEL AUTHORITY OF INDIALTD. v. CMMNR. OF 
957 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
assessees in these appeals, insisted on a different course of A 
action. He adopted two pronged strategy. His first endeavour 
was to show that the judgments in the cases of SKF and 
International Auto were not applicable as the aforesaid cases 
were distinguishable. His alternate submission was that these 
judgments do not correctly interpret the provisions of Section 
B 
11AB of the Act and, therefore, matter required a fresh look by 
a Larger Bench. 
16. It is difficult to accept the first submission. As already 
pointed out above, the factual scenario in which the aforesaid C 
two cases were decided were similar, nay, almost identical. 
When this Court on the basis of same type of events interpreted 
the provisions of Section 11AB of the Act in a particular manner 
and held, in no certain terms, that interest was payable, it is 
difficult to countenance the argument of the assessee that these D 
cases are distinguishable on facts. Therefore, we advert to 
the second plank of Mr. Lakshmikumaran's submissions which 
was argued with all vehemence, covering the entire length and 
breadth of the statutory provisions with relevant case laws. 
E 
17. In the first instance, he pointed out that in these 
appeals, there can be two distinct types of transactions: (a) 
where the price of the goods is 'fixed' at the time and place of 
removal, and as a result of subsequent negotiations (often
protracted) the price is retrospectively revised by the buyer; 
F 
(b) where the price at the time and place of removal is 'not 
fixed' (price subjectto escalation clause), ahd the final price is 
agreed between the seller and buyer subsequently. According 
to him in the cases falling in the first category, even the 
differential duty is not payable. However, all these appeals fall G 
in second category and, therefore, we are not indulging in any 
discussion pertaining to the first category. We may also point 
out that in all these appeals, the period in dispute (i.e. the period 
in which supplementary invoices on account of price revision 
were raised) is post the introduction of the 'transaction value' 
H
958 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
definition in Section of the Act, 1944 but before 2010. 
18. It is a common case of the parties and even the learned 
counsel for the assessee admits that in non-fixed price 
scenario, differential duty is liable to be paid on subsequent 
B revision of price which the assessee had already paid the 
differential duty at or about the time when revised price was 
agreed upon by the seller and the buyer. The question, however, 
is as to whether interest thereon is payable from the date of 
clearance of goods when duty was paid on the basis of invoice, 
c till the date when differential duty was paid. 
19. Starting from the basics, it is axiomatic that interest 
under Section 11 AB can be levied/charged where any duty of 
excise has not been levied or paid or has been short levied or 
0 
short paid. In such an event, interest is liable to be paid 'from 
the first date of the month sucqeeding the month in which the 
duty ought to have been paid'. Section 4(1)(a) of the Act 
provides that the value of the goods shall be the price 'actually 
paid or payable' for the goods. This means the price which 
E has been 'paid' or 'agreed to be paid' by the buyer of the goods. 
We find force in the argument of the assessee that the 
expression 'ought to have been paid' in Section 11AB has to 
be understood in this light. Thus, for the purposes of Section 
11AB, the expression 'ought to have been paid' would mean 
F the time when the price is
agreed upon by the seller and the 
buyer. In other words, the right of the seller to receive the 
revised price crystallises only when the buyer agrees to 
sanctions the same, and only at that time can liability to pay 
duty, if at all, on the revised price arise. Both parties are not 
G aware of the final price at the time when the goods are 
removed. In the context of price revision subsequent to 
clearance, duty 'ought to be paid' only after the sanctioning of 
the revised priced by the buyer. The differential duty on account 
of price revision is paid in the month when the revised price is 
H
STEEL AUTHORITY OF INDIALTD. v. CMMNR. OF 
959 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
agreed between the seller (assessee) and the buyer and it A 
ought to have been paid only at that time and not before. 
20. One has also to keep in mind the difference between 
'what should be the quantum of duty to be paid' and 'when 
such duty is payable'. In the cases price revision, the quantum B 
of duty would be on the escalated price but the time for payment 
of differential duty is when the parties agree for the escalation 
in prices. On that reckoning, it would follow that interest clock 
for differential duty will start ticking from the date differential 
duty is due, i.e., the date of agreement of escalated prices C 
and not before. This concept gets clarified with the latest 
amendment in 2015 to Section 11Awith regard to the 'relevant 
date' for payment of interest. 
21. We have already taken note of judgments in SKF and o 
International Auto including the reasons which have been given 
in support of the view that interest would be payable. At the 
outset, we may mention that the Bench did not consider the 
effect of the expression 'ought to have been paid' occurring in 
Section 11AB of the Act. It is undeniaole that under Section 4 
E 
of the Act, the excise duty is to be paid on the 'transaction 
value' and such a transaction value has to be seen atthe time 
of clearance of the goods. Indubitably, when the goods were 
cleared, the excise duty was paid taking into
consideration 
the price that was actually charged ·and was reflected in the F 
invoices raised for the said purpose. The Department cannot 
plead that as on that date, this was not the price charged. No 
doubt, when the differential payment is made at a later date, 
further amount towards excise duty becomes payable as a 
result of said differential in price. Further, such an event took G 
place at a subsequent date. As on the date when the goods 
were cleared, there was no certainty that there would be price 
escalation and it was beyond comprehension to ascertain the 
exactitude of such an escalation. It would be impossible to 
H
960 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A 
expect the assessee to pay the excise duty, at the time of 
clearance of the goods, on the basis of price escalation that 
took place at a later date in future. Therefore, as on the date 
of clearance when excise duty was paid, it could not be treated 
as 'short paid' on the said date. As a consequence when the 
B 
principal amount, namely, the excise duty itself was not payable 
(i.e. on the differential) on the date of clearance of the goods, 
there cannot be any question of law to pay interest. 
22. No doubt, on receipt of differential price, when the 
C 
buyer agreed to escalation in the price, further excise duty also 
become payable and on that reckoning one can say that the 
excise duty originally paid became 'short paid'. However, that 
would only attract payment on differential excise duty and not 
the interest thereon. 
D 
23. The two judgments in SKF India Ltd. and International 
Auto are by the same Bench. International Auto follows SKF 
India Ltd. The primary factor by which the Bench was influenced 
was that there is a loss of revenue to the Government and, 
E therefore, the Government should compensate for that. It 
proceeds on the basis that the price which was originally stated 
at the time of removal of the goods was 'understated' (para 8 
of International Auto). However, value of the goods for the 
purpose of duty is 'at the time of removal', as emphasised 
F 
above which remains fundamental principle from
the inception 
of the Central Excise Act originally enacted in 1944 and 
remains valid till date. It is, therefore, difficult to accept that 
the price was 'understated' on the date of removal of those 
goods. 
G 
H 
24. We further find that the Bench distinguished earlier 
three member Bench judgment in the case: of MRF Ltd. v. 
Commissioner of Central Excise, Madras4 on the purported 
ground that there was 'sea change' in Section 11 A of the Act 
'(1997) 5 sec 104
STEEL AUTHORITY OF INDIALTD. v. CMMNR. OF 
961 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
(which was originally inserted by Act 25 of 1978) when A 
Parliament inserted major changes in that Section vide Act 14 
of 2001 w.e.f. 11.05.2001, Act 32 of 2003 w.e.f. 14.05.2003 
and Act 14 of2001 whereby Section 11AB of the Act was also 
amended. However, we are of the opinion that amendments 
made to Section 11A in 2001 and 2003 have nothing to do B 
with the valuation of the goods based on 'the price at the time 
of removal'. MRF was a case where a particular price was 
charged by the said assessee from the buyer on the date of 
removal and excise duty paid thereupon. However, thereafter 
this price was reduced on the direction of the Government. C 
On that basis, assessee laid its claim for refund of excise duty 
on differential between price on the date of removal andthe 
reduced price at which the buyers were sold on the direction 
of the Government. This claim of the assessee was rejected 0 
and the order upheld by this Court as well with the following 
discussion: 
"2. We have heard the learned counsel forthe assessee. 
Once the assessee has cleared the goods on the 
classification and price indicated by him at the time of E 
the removal of the goods from the factory gate, the 
assessee becomes liable to payment of duty on that date 
and time and subsequent reduction in Excise Department 
insofar as the. liability to payment of excise duty was F 
concerned. This is the view
which was taken by the 
Tribunal in the case of lndo Hacks Ltd. v. CCE (1986) 
25 ELT 69 (Trib.) and it seems to us that the Tribunal's 
viewthatthe duty is chargeable atthe rate and price when 
the commodity is cleared at the factory.gate and not on G 
the price reduced at a subsequent date is 
unexceptionable. Besides as rightly observed by the 
Tribunal the subsequent fluctuation in the prices of the 
commodity can have no relevance whatsoever so far as 
the liability to pay excise duty is concerned. That being 
H
962 
A 
B 
c 
f 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
so, even if we assume that the roll back in the price of 
tyres manufactured by the appellant Company was 
occasioned on account of the directive issued by the 
Central Government, that by itself, without anything more, 
would not entitle the appellant to claim a refund on the 
price differential unless it is shown that there was some 
agreement in this behalf with the Government and the 
latter had agreed to refund the excise duty to the extent 
of the reduced price. That being so, we see no merit in 
this appeal brought by the assessee and dismiss the 
same with no order as to costs." 
We, thus, are of the view that principle laid down in MRF 
Ltd. would continue to prevail. 
o 
25. Mr. Lakshmikumaran argued, and we find force in this 
argument, that obseNations of the Bench in the aforesaid case 
that the imposition of interest is to compensate the Department 
for loss of revenue is contrary to the Constitution Bench 
judgment in the case of J.K. Synthetics Limited v. 
E Commercial Taxes Officer° wherein the argument that interest 
was compensatory in nature was specifically rejected. The 
Constitution Bench considered in detail the correctnes$ of 
earlier three member Bench judgment in the case of 
Associated Cement Company Limitedv. Commercial Tax 
F 
Officer, Kota and Others6 wherein majority view was that 
interest claimed on unpaid tax dues could be charged as it 
was compensatory in character and not penal.
Bhagwati, J. 
had, however, dissented giving variou:" reasons, one of which 
was that tax which has yet to be ascertained through the 
G process of ascertainment could not be treated as tax payable 
from the date of submission of the return and, therefore, no 
5 (1994) 4 sec 276 
H 
6 (1981) 4 sec 578
STEEL AUTHORITY OF INDIA LTD. v. CMMNR. OF 
963 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
interest could be ch~rged from the date of filing of the return A 
upto the date of assessment. This view of Bhagwati, J. was 
accepted after detailed discussion with the following conclusion: 
" ... Our attention was, however, drawn by Mr. Sen to two 
cases. Even in those cases, CITv. M. Chandra Sekhar, 
B . 
(1985) 1 SCC 283 and Central Provinces Manganese 
Ore Co. Ltd. v. CIT, ( 1986) 3 SCC 461, all that the Court 
pointed out was that provision for charging interest was, 
it seems, introduced in order to compensate for the loss 
occasioned to the Revenue due to delay. But then interest C 
was charged on the strength of a statutory provision may 
be its objective was to compensate the Revenue for delay 
in payment of tax. But regardless of the reason which. 
impelled the Legislature to provide for charging interest, 
the Court must give that meaning to it as is conveyed by D 
the language used and the purpose to be achieved. 
Therefore, any provision made in a statute for.charging 
or levying interest on delayed payment of tax must be 
construed as a substantive law and not adjectival law. 
So construed and applying the normal rule of E 
interpretation of statutes, we find, as pointed out by us 
earlier and by Bhagwati, J. in the Associated Cement 
Co. case, that ifthe Revenue's contention is accepted it 
leads to conflicts and creates certain anomalies which 
F 
could never have been
intended by the Legislature." 
26. We are conscious of the sentiments expressed by 
seven Judges Bench of this Court in Keshav Mills Company 
Limitedv. Commissionerof/ncome Tax, Bombay7wherein 
the Court sounded caution and stated the restraint-that has to G 
be exercised while dealing with the question as to whether 
earlier decisions of this Court should be reconsidered and 
revised. The Court observed that merely because two views 
7(1965) 2 SCR 908 
H
964 
SUPREME COURT REPORTS 
[2015] 10 S.C.R. 
A are ·possible should not be a reason to review the earlier 
judgment as it was necessary to maintain consistency and 
depict certainty in law. At the same time, Court made the 
following remarks: 
B 
c 
D 
E 
F 
G 
H 
" ... That is notto say that if on a subsequent occasion, the 
Court is satisfied that its earlier decision was clearly 
erroneous, it should not hesitate to correct the error; 
but before a previous decision is pronounced to ·be 
plainly erroneous, the Court must be satisfied with a fair 
amount of unanimity amongst its members that a revision 
of the said view is fully justified. It is not possible or 
desirable, and in any case it would be inexpedient to 
lay down any principles which should govern the 
approach of the Court in dealing with the question of 
reviewing and revising its earlier decisions. It would 
always depend upon several relevant considerations-
What is the nature of the infirmity or error on which a 
plea for a review and revision of the earlier view is 
based? On the earlier occasion, did some patent 
aspects ofquestion remain unnoticed, or was the 
attention of the Court not drawn to any relevant and 
material statutory provision, or was any previous 
decision of this Court bearing on the point not noticed? 
Is the Court hearing such plea fairly unanimous that there 
is such an error in the earlier view? What would be the 
impact of the error on the general administration of law 
or on
public good? Has the earlier decision been 
followed on subsequent occasions either by this Court 
or by the High Courts? And, would the reversal of the 
earlier decision lead to public inconvenience, hardship 
or mischief? These and other relevant considerations 
must be carefully drawn in mind whenever this Court is 
called upon to exercise its jurisdiction to review and revise

STEEL AUTHORITY OF INDIALTD. v. CMMNR. OF 
965 
CENTRAL EXCISE, RAIPUR [A.K.SIKRI, J.] 
its earlier decisions. These considerations becomes still A 
more significant when the earlier decision happens to 
be a unanimous decision of a Bench of five learned 
Judges of this Court." 
27. We have kept in mind the aforesaid consideration and 
B 
feel that decision in SKF and Auto International require a re-
look for the reasons given by us above. We, thus, direct the 
Registry to place the matter before the Hon'ble Chief Justice 
of India for constituting a Larger Bench to go into the issue 
involved in this case which is of seminal importance having far 
reaching ramifications. 
Nidhi Jain 
Matter referred to larger Bench.