Supreme Court of India
M/S. STEEL AUTHORITY OF INDIA LTD.versusCOMMISSIONER OF CENTRAL EXCISE, RAIPUR
- Citation
- 2015 INSC 891
- Decided
- 7 December 2015
- Disposal
- Matter referred to larger bench
- Bench
- A K SIKRI
Holding
Interest under Section 11AB is not payable on the differential duty because the duty became payable only when the revised price was agreed, not at the time of clearance, and thus the duty was not short‑paid on the clearance date.
Summary
The Steel Authority of India Ltd. (appellant) sold steel products to Indian Railways under a contract containing a price‑escalation clause. The goods were cleared and excise duty paid on the original price; later the price was revised upward and the appellant paid a differential duty of Rs.142.78 crore. The Revenue claimed interest under Section 11AB of the Central Excise Act, 1944, arguing that the duty was short‑paid at clearance. The Supreme Court held that the duty on the revised price became payable only when the buyer agreed to the higher price, so the duty was not short‑paid at the time of clearance and interest could not be levied from that date. The Court noted that earlier decisions in SKF India Ltd. and International Auto Ltd. had not considered the expression “ought to have been paid” in Section 11AB and therefore required reconsideration. Consequently, the matter was referred to a larger Bench for further examination.
Issues considered
- Whether interest under Section 11AB of the Central Excise Act, 1944 is payable on differential excise duty arising from price escalation after the goods have been cleared.
- Whether the differential duty constitutes a short‑payment of duty at the time of clearance.
- Interpretation of the phrase “ought to have been paid” in Section 11AB.
- Whether the Supreme Court’s earlier judgments in SKF India Ltd. and International Auto Ltd. are applicable to the present facts.
- From which date the interest period should commence – the date of clearance or the date of agreement on the revised price.
Legislation cited
- Central Excise Act, 1944s. 11A, s. 11AB, s. 4
- Central Excise Ruless. 25, s. 7(4)
Subjects
Central ExciseSection 11ABDifferential dutyPrice escalationInterest liabilityTransaction valueSupplementary invoicesLarger BenchShort payment
Judgment
(2015] 10 S.C.R. 938
A M/S. STEEL AUTHORITY OF INDIALTD.
v.
COMMISSIONER OF CENTRAL EXCISE, RAIPUR
(Civil Appeal No. 2150 OF 2012)
B
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
any question of law to pay interest. No doubt, on receipt c
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
till date. It is, therefore, diffic~lt to accept that the price G
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]
*CCE v. SKF India Ltd. (2009) 13 sec 461 :2009
E (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)
F 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
G 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· E
V. Lakshmikumaran, M. P. Devanath, Hemant Bajaj, L.
Charanaya,Aditya Bhattacharya,Anandh K., T. D. Satish for
the Appellant.
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
paid the differential duty of Rs.142.78 crores voluntarily in
0
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.
E
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
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 SUPREME COURT REPORTS [2015] 10 S.C.R.
A 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
B 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.
c (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.
D 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 ·
E 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."
F 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.
G
(b) Short levy or short payment of duty.
(c) erroneous refund.
(d) duty determined under Section 11A(2).
H
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 ·H
2 (201 o) 2 sec 672
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
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
c 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
D 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.
E
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
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
H 3
First 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:
B
"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
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.
E
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
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 SUPREME COURT REPORTS [2015] 10 S.C.R.
A 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)
c 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
D 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
E 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
F
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.
G 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
H 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."
E
·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.
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:
"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
G 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.
H
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 SUPREME COURT REPORTS [2015] 1O S.C.R.
A 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
B 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
c 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
D
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
E 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
F 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
G
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
H
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
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
H '(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
f
962 SUPREME COURT REPORTS [2015] 10 S.C.R.
A 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
B 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
c 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 "... 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
c 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
D 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
E 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
F
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
G 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
H
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.
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