Commr. of
Central Excise, Pune Vs. M/S SKF India Ltd. [2009] INSC 1136 (6 July 2009)
Judgment
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS.
5190-5191/ 2008 Commissioner of Central Excise, Pune ........Appellant Versus
M/s SKF India Ltd. .......Respondent
AFTAB
ALAM,J.
Weaving
Mills (Appeal arising from SLP (C) No.15927 of 2007) we had the occasion to
examine the nature and scope of the penalty provision in the Central Excise Act
as contained in section 11AC, one of the four sections, forming a quartet,
concerning recovery of unpaid duty, interest on deferred 2 payment/realisation
of duty and penalty for non-payment of duty. In this case we are called upon to
consider the conditions that would attract the levy of interest on excise duty
not levied or short levied, not paid or short paid or erroneously refunded as
provided under sections 11A, 11AA and 11AB of the Act. It may thus be seen as
the sequel to the earlier decision in M/s. Rajasthan Spinning & Weaving
Mills.
2. The
facts of the case are fairly simple and admitted by both sides.
The
respondent-assessee is engaged in the manufacture and sale of ball- bearings
and textile machine parts. It sold goods manufactured by it on certain prices on
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 demanded from its customers the balance of the higher
prices and issued to them supplementary invoices. At the same time it also paid
the differential duty on the goods sold earlier. The Revenue took the view that
the assessee was liable to pay interest on differential duty. The assessee was
given a notice dated April 4, 2006 demanding Rs.95,590/- as interest on delayed
payment of duty under section 11AB of the Central Excise Act and further asking
it to show cause why penalty may also not be imposed on it under section 37(3)
of the Act. The assessee gave its reply stating that the payment of
differential duty was made 3 by it at the time of issuing supplementary
invoices to the customers and, therefore, there was no question of charging
interest much less any penalty.
However,
the Assistant Commissioner Central Excise, Pune II Division, confirmed the
demand of interest by his order dated June 5, 2006 and further imposed a
penalty of Rs.5, 000/- against the assessee. The assessee took the matter in
appeal before the Commissioner (Appeals) Central Excise, Pune I, who by his
order dated August 30, 2006 allowed the appeal and set-aside the order of the
Assistant Commissioner. The Revenue then brought the matter before the Customs,
Excise and Service Tax Appellate Tribunal but its appeal was dismissed by order
dated January 3, 2008. The Tribunal, following certain decisions of the Bombay
High Court held that no interest was chargeable where there was no time-gap
between the payment of the differential duty and issuance of supplementary
invoices to the customers on the basis of upward revision of prices in respect
of the goods sold earlier.
3.
Aggrieved by the order of the Tribunal, the Revenue has come to this Court in
appeal.
4. In
Rajasthan Spinning & Weaving Mills we noted that the three issues of
recovery, interest and penalty arising from non-levy or short levy of duty,
non-payment or short payment of duty or erroneous refund of duty are dealt with
under sections 11A (recovery of duties), 11AA an 11AB (interest on 4 delayed
payment of duty) and 11AC (penalty for short levy or non levy of duty) of the
Act. Section 11A is a long section which has become longer by the insertion of
sub-sections by later amendments. In its present form section 11A reads as
under.
"11A.
Recovery of duties not levied or not paid or short- levied or short-paid or
erroneously refunded.-(1) When any duty of excise has not been levied or paid
or has been short- levied or short-paid or [erroneously refunded, whether or
not such non-levy or non-payment, short-levy or short payment or erroneous
refund, as the case may be, was on the basis of any approval, acceptance or
assessment relating to the rate of duty on or valuation of excisable goods
under any other provisions of this Act or the rules made thereunder], a Central
Excise Officer may, within [one year] from the relevant date, serve notice on
the person chargeable with the duty which has not been levied or paid or which
has been short-levied or short-paid or to whom the refund has erroneously been
made, requiring him to show cause why he should not pay the amount specified in
the notice;
Provided
that where any duty of excise has not been levied or paid or has been
short-levied or short-paid or erroneously refunded by reason of fraud,
collusion or any wilful mis-statement or suppression of facts, or contravention
of any of the provisions of this Act or of the rules made thereunder with
intent to evade payment of duty, by such person or his agent, the provisions of
this sub-section shall have effect, [as if] for the words ["one
year"], the words "five years" were substituted:
Explanation.
- Where the service of the notice is stayed by an order of a court, the period
of such stay shall be excluded in computing the aforesaid period of [one year]
or five years, as the case may be.
5 [(1A)
When any duty of excise has not been levied or paid or has been short-levied or
short paid or erroneously refunded, by reason of fraud, collusion or any wilful
misstatement or suppression of facts, or contravention of any of the provisions
of this Act or the rules made thereunder with intent to evade payment of duty,
by such person or his agent, to whom a notice is served under the proviso to
sub-section (1) by the Central Excise Officer, may pay duty in full or in part
as may be accepted by him, and the interest payable thereon under Section 11AB
and penalty equal to twenty-five per cent of the duty specified in the notice
or the duty so accepted by such person within thirty days of the receipt of the
notice.] (2) The [Central Excise Officer] shall, after considering the
representation, if any, made by the person on whom notice is served under
sub-section (1), determine the amount of duty of excise due from such person
(not being in excess of the amount specified in the notice) and thereupon such
person shall pay the amount so determined.
Provided
that if such person has paid the duty in full together with, interest and
penalty under sub-section (1A), the proceedings in respect of such person and
other persons to whom notice are served under sub-section (1) shall, without
prejudice to the provisions of section 9, 9A and 9AA, be deemed to be
conclusive as to the matters stated therein:
Provided
further that, if such person has paid duty in part, interest and penalty under
sub-section (1A), the Central Excise Officers, shall determine the amount of
duty or interest not being in excess of the amount partly due from such
person.] [(2A) Where any notice has been served on a person under sub- section
(1), the Central Excise Officer,- (a) in case any duty of excise has not been
levied or paid or has been short-levied or short-paid or erroneously refunded,
by reason of fraud, collusion or any wilful mis-statement or suppression of
facts, or contravention of any of 6 the provisions of this Act or the rules
made thereunder with intent to evade payment of duty, where it is possible to
do so, shall determine the amount of such duty, within a period of one year;
and (b)
in any other case, where it is possible to do so, shall determine the amount of
duty of excise which has not been levied or paid or has been short-levied or
short-paid or erroneously refunded, within a period of six months, from the
date of service of the notice on the person under sub-section (1) (2B) Where
any duty of excise has not been levied or paid or has been short-levied or short-paid
or erroneously refunded, the person, chargeable with the duty, may pay the
amount of duty [on the basis of his own ascertainment of such duty or on the
basis of duty ascertained by a Central Excise Officer] before service of notice
on him under sub- section (1) in respect of the duty, and inform the Central
Excise Officer of such payment in writing, who, on receipt of such information
shall not serve any notice under sub- section (1) in respect of the duty so
paid:
Provided
that the Central Excise Officer may determine the amount of short payment of
duty, if any, which in his opinion has not been paid by such person and, then,
the Central Excise Officer shall proceed to recover such amount in the manner
specified in this section, and the period of "one year"
referred
to in sub-section (1) shall be counted from the date of receipt of such
information of payment.
Explanation
1. - Nothing contained in this sub-section shall apply in a case where the duty
was not levied or was not paid or was short-levied or was short-paid or was
erroneously refunded by reason of fraud, collusion or any wilful mis-statement
or suppression of facts, or contravention of any of the provisions of this Act
or of the rules made thereunder with intent to evade payment of duty.
7
Explanation 2.- For the removal of doubts, it is hereby declared that the
interest under section 11AB shall be payable on the amount paid by the person
under this sub- section and also on the amount of short-payment of duty, if
any, as may be determined by the Central Excise Officer, but for this
sub-section.
(2C) The
provisions of sub-section (2B) shall not apply to any case 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.] (3) For the purposes of this
section- (i) "refund" includes rebate of duty of excise on excisable
goods exported out of India or on excisable materials used in the manufacture
of goods which are exported out of India;
(ii)
"relevant date" means,- [(a) in the case of excisable goods on which
duty of excise has not been levied or paid or has been short-levied or short-
paid.
(A) where
under the rules made under this Act a periodical return, showing particulars of
the duty paid on the excisable goods removed during the period to which the
said return relates, is to be filed by a manufacturer or a producer or a
licensee of a warehouse, as the case may be, the date on which such return is
so filed;
(B) where
no periodical return as aforesaid is filed, the last date on which such return
is to be filed under the said rules;
(C) in
any other case, the date on which the duty is to be paid under this Act or the
rules made thereunder;] 8 (b) in a case where duty of excise is provisionally
assessed under this Act or the rules made thereunder, the date of adjustment of
duty after the final assessment thereof;
(c) in
the case of excisable goods on which duty of excise has been erroneously
refunded, the date of such refund.]"
(emphasis
added)
5. Of the
two sections dealing with interest section 11AA relates to the period from
expiry of three months from the date of determination of the differential duty
under sub-section (2) of section 11A till the date of payment and section 11AB
is in regard to 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.
6. In
this case we are concerned with section 11AB which reads as under.
11AB.
Interest on delayed payment of duty.- [(1) 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 is liable to pay duty as determined under sub-section
(2), or has paid the duty under sub-section 2(B), of section 11A, shall, in
addition to the duty, be liable to pay interest at such rate not below [ten per
cent] and not exceeding thirty-six per cent.
Per
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, but for the
provisions contained in sub-section (2), or sub-section (2B), of section 11A
till the date of payment of such duty:
9
Provided that in such cases where the duty becomes 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 (l) 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 "National Tax 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 "National Tax
Tribunal" or, as the case may be, the court, the interest shall be payable
on such increased or further increased amount of duty.] (emphasis added)
7. 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 10 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. We see no reason
why the two periods for which interest is leviable may not be put together and
dealt with in one consolidated provision instead of being split up in sections
11AA and 11AB. Also, there is much scope to reorganise all the different
subsections of section 11A and to present the scheme of that section in a more
coherent and readable form.
8. Be
that as it may. In the case in hand we have to deal with the law as it stands
now.
9.
Section 11A 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
or short payment etc. of duty is for a reason other than deceit; the default is
due to oversight or some mistake 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 mis-statement 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"; 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 11 with differently. Section 11A,
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 of fraud collusion etc. are dealt
with under sub-section (1A) of section 11A and the cases where the non-payment
or short payment of duty is not intentional under sub-section (2B).
10.
Sub-section (2B) of section 11A provides that the 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 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 11AB, 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.
What is
stated in Explanation 2 to sub-section (2B) is reiterated in section 11AB 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 (2B) of section 11A, shall, in addition to the 12 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 mis-
statement 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 (11A, 11AA, 11AB & 11AC) interest is
leviable on delayed or deferred payment of duty for whatever reasons.
11. 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 (2B) of section 11A of
the Act.
12. The
Bombay High Court, Aurangabad Bench, in its decision in The Commissioner of
Central Excise, Aurangabad vs. M/s Rucha Engineering Pvt. Ltd., (First Appeal
No.42 of 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
11A (2B) or section 11AB where differential duty was paid by the assessee as
soon as it came to learn about the upward revision of prices of goods sold
earlier. In M/s Rucha Engineering the High Court observed as follows:
13
"It is evident that the section (11AB) comes into play if the duty
paid/levied is short. Both, the Commissioner (Appeals) and the 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 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 11A (2) and 11A
(2B) were not applicable as the situation occurred in the instant case was
quite different, section 11AB (1) was not at all applicable, and therefore, the
Assessee was not required to pay interest."
13. 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.
14. We
are unable to subscribe to the view taken by the High Court. 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 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 unintended and without any element of deceit
etc. The payment of differential duty thus clearly came 14 under sub-section
(2B) of section 11A and attracted levy of interest under section 11AB of the
Act.
15. For
the reasons discussed above we set aside the judgments and orders passed by the
Tribunal and the Commissioner (Appeals). We restore the order passed by the
Assistant Commissioner in so far as charge of interest is concerned. On the
facts of this case there is no question of imposition of any penalty. Hence,
that part of the order of the Assistant Commissioner is set aside.
16. In
the result the appeals are allowed but with no order as to costs.
..................................J. [ S.H. KAPADIA ]
..................................J. [ AFTAB ALAM ]
New Delhi,
July 6, 2009.
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