COMMISSIONER OF CENTRAL EXCISEversusM/S. INTERNATIONALAUTO LIMITED

                    [2010] 1 S.C.R. 211

         COMMISSIONER OF CENTRAL EXCISE                         A
                            v.
          M/S. INTERNATIONALAUTO LIMITED
             (Civil Appeal No. 225 of 2010)
                     JANUARY 8, 2010
                                                                B
         [S.H. KAPADIA AND AFTAB ALAM, JJ.]

    Central Excise Act, 1944:

     ss. 11-A,(28), Explanation(2) and 11AB- Differential duty  c
- Interest on - HELD: From the Scheme of ss.11A(28) and
 11 AB, it becomes clear that interest is levied for loss of
revenue on any count - Differential price signifies that value,
which is the function of the price, on the date of removal/
clearance of the goods was not correct - That it was
understated - Therefore, the price indicated by the D
supplementary invoice is directly relatab/e to the value of the
goods on the date of clearance and, therefore, enhanced duty
is payable - 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/ E
short levy on the date of removal - Therefore, interest, which
is for loss of revenue, becomes /eviable u/s 11AB.

     Commissioner of Central Excise, Pune vs. SKF India
Limited (2009) 239 ELT 385, relied on.                          F

    M.R.F. Limited vs. Collector of Central Excise, Madras
(1997) 92 ELT 309, held inapplicable.

                     Case Law Reference:
                                                                G
    (1997) 92 ELT 309         held inapplicable    para 6
    (2009) 239 ELT 385        relied on            para 7

                             211
                                                                H
    2.12      SUPREME COURT REPORTS               [2010] 1 S.C.R.


A       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 225
    of 2010.

        From the Judgment & Order dated 10.9.2008 of the High
    Court of Judicature at Bombay in Central Excise Appeal No.
    127 of 2008.
B
        G.E. Vahanvati, S.G., Chinmoy Pradip Sharma, T.V.
    Ratnam, B.K. Parasad, Anil Katiyar for the Appellant.

         P.C. Jain, Sandeep Jain, Rajesh Kumar, Krishna Kumar
c   R. S., K.S. Mahadevan for the Respondent.
           The foliowing Order of the Court was delivered

                                ORDER

D          Delay condoned.
           Leave granted.

        In this case, Department seeks to recover interest on
  differential duty, paid by the assessee, under Section 11AB of
E the Central Excise Act, 1944, which is disputed by the
  assessee.

       During the relevant Assessment Years, assessee supplied
  auto parts to their customers [manufacturers of motor vehicles],
  such as Tata Motors, Mahindra and Mahindra and Piaggio
F Vehicles Private Limited - who determined the prices of auto
  parts having regard to the cost of raw material, manufacturing
  cost, profit margin, etc. and placed orders with the assessee.
  In case of Tata Motors, orders were placed through internet
  under a software system known as "SRM".
G
         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 a show-cause notice
    proposing to levy interest on the differential duty, paid by the
H
      COMMISSIONER OF CENTRAL EXCISE v.                    213
         INTERNATIONALAUTO LIMITED
assessee, under Section 11AB of the Central Excise Act, 1944       A
['Act', for short].

     The case of the assessee, before us, was that.such interest
was not leviable under Section 11AB of the Act, particularly in
view of the fact that prices indicated in the purchase orders 8
were final during the period of supply of goods. According to
the assessee, in the present case, the Department has
accepted the position that the prices in the purchase orders
were final. Further, according to the assessee herein, there was
no price variation clause in the purchase orders, therefore, there C
was no scope for increase in prices subsequently and that too,
retrospectively. In short, according to the assessee, prices
indicated in the purchase orders were final and not liable to
change at the time of removal of goods. It was submitted that,
in the circumstances, the present case was not a case of short-
levy or non-levy of the goods removed by the assessee calling D
for recovery u·nder Section 11A of the Act, hence, this was not
a case for charging of interest under Section 11AB of the Act.
Learned counsel appearing on behalf of the assessee
submitted that this case is squarely covered by the judgement
of three learned Judges of this Court in the case of M.R.F. E
Limited vs. Collector of Central Excise, Madras, reported in
[1997) 92 E.L.T.309.

     We find no merit in the submissions advanced on behalf
of the assessee. The controversy arising in this civil appeal is   F
squarely covered by the judgement of this Court in the case of
Commissioner of Central Excise, Pune vs. SKF India Limited,
reported in [2009) 239 E.L.T.385. We quote hereinbelow
relevant observations made in the case of SKF India Limited
[supra], which reads as follows:                                   G
     "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
                                                                   H
    214       SUPREME COURT REPORTS                       [2010] 1 S.C.R.


A         default is due to oversight or some mistake and it is not
          intentional. The second in which th_e 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
B         made thereunder with intent to evade payment of duty"; that
          is to say, it is intentional, deliberate and/or by deceitful
          me<Jt1s. Naturally, the cases falling in the two groups lead
          to different consequences and are dealt with differently.
          Section 11A, however allow the assessees in default in
c         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 11 A and t.he cases where the non-payment or
          short payment of duty is not intentional under sub-section
D
          (28).

          10. Sub-section (28) 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
E         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-
F         section makes it expressly clear that such payment would
          not be exempt from interest chargeable under section
          11A8, 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
G         Explanation 2 to sub-section (28) is reiterated in section
          11A8 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 (28) of section 11A, shall, in addition
H         to the duty, be liable to pay interest.. ... .lt is thus to be seen
 COMMISSIONER OF CENTRAL EXCISE v.                       215
    .INTERNATIONAL AUTO LIMITED
that unlike penalty that is attracted to the category of cases   A
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        B
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      C
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              D
decision in The Commissioner of Central Excise,
Aurangabad vs. Mis 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             E
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 Mis Rucha
Engineering the High Court observed as follows:

        It is evident that the section (11AB) comes into play    F
       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            G
       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         H
    216      SUPREME COURT REPORTS                     [2010) 1 S.C.R.


A                was paid as soon as it was learnt that it was
                 payable. Finding that provisions of section 11A (2)
                 and 11A (28) were not applicable as the situation
                 occurred in the instant case was quite different,
                 section 11A8 (1) was not at all applicable, and
B                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.
c
          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,
D         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
E         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 under sub-
          section (28) of section 11 A and attracted levy of interest
          under section 11AB of the Act."
F      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
  vide Act 14 of 2001 [with effect from 11st May, 2001) and Act
G 32 of 2003 [with effect from 14th May, 2003). It needs to be
  mentioned that simultaneously Act 14 of 2001 also made
  changes to Section 11A8 of the Act. In the case of S.K.F. India
  Limited [supra], it has been, inter alia, held, as can be seen
  from the above-quoted paragraphs, that sub-section 2(8) of
H Section 11A provides that the assessee in default may make
      COMMISSIONER OF CENTRAL EXCISE v.                         217
         INTERNATIONALAUTO LIMITED
payment of the unpaid duty on the basis of his own                      A
ascertainment or as ascertained by a Central Excise Officer
and, in that event, such assessee in default would not be served
with the Demand Notice under Section 11A(1) of the Act.
However, Explanation (2) to the sub-section makes it clear that
such payment would not be exempt from interest chargeable               B
under Section 11 AB of the Act. What is stated in Explanation
(2) to sub-section 2(8) is reiterated in Section 11AB of the Act,
which deals with interest on delayed payment of duty. From the
Scheme of Section 11A(2B) and Section 11AB of the Act, it
becomes clear that interest is levied for loss of revenue on any        c
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 the date of removal/clearance of the goods was not correct.
That, it was understated. Therefore, the price indicated by the         D
supplementary invoice is directly relatable to the value of the
goods on the date of 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        E
of removal, hence, interest which is for loss of revenue,
becomes leviable under Section 11AB of the Act. In our view,
with the entire change in the Scheme of recovery of duty under
the Act, particularly after insertion of Act 14 of 2001 and Act
32 of 2003, the judgement of this Court in the case of M.R.F.
Limited [supra] would not apply. That judgement was on                  F
interpretation of Section 11 B of the Act, which concerns claim
for refund of duty by the assessee. That judgement was in the
context of the price list approved on 14th May, 1983. In that
case, assessee had made a claim for refund of excise duty on
the differential between the price on the date of removal and           G
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 14th May, 1983, but subsequent thereto, on account of
consumer resistance, the Government of India directed the               H
    218     SUPREME COURT REPORTS                  [2010] 1 S.C.R.


A assessee to roll back the prices to pre-14th May, 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
s 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. In the present case, we are
  concerned with the imposition of interest which, as stated
c above, is charged to compensate the Department for loss of
  revenue. Be that as it may, as stated above, the Scheme of
  Section 11A of the Act has since undergone substantial
  change and, in the circumstances, in our view, the judgement
  of this Court in the case of M.R.F. Limited [supra] has no
  application to the facts of this case. In our view, the judgement
0
  of this Court in the case of SKF India Limited [supra] is squarely
  applicable to the facts of this case.

         Accordingly, civil appeal is allowed with no order as to
    costs.
E
    R.P.                                          Appeal allowed.