Facts

The Appellant Company is a manufacturer. The products were cleared on sale from 1st January, 2005 to July 2006 on the basis of prices in circular dated 24.04.2005. Subsequently, the prices were revised retrospectively, by way of price circular dated 20.07.2006. SAIL paid the duty amount on the price escalation. However, the authorities called upon SAIL  to pay interest under S. 11AB of  the Act. When the matter came up before a bench of two learned judges of the Hon’ble Supreme Court, the correctness of the casesCCE v. SKF India Ltd. 2009

(13) SCC 461 and CCE v. International Auto Ltd. 2010 (2) SCC 672 was doubted and the matter was referred to the largerbench.

Issue

Whether Interest was payable on differential excise duty with retrospective effect that become payable on basis of escalation Clause under Section 11AB of  Act, 1944.

View

When an Assessee, in similar circumstances, opts for provisional assessment upon     a final determination of the value consequently,  the duty and interest dates back   to the month “for which” the duty is determined and to the month in which final assessment is made. It may be true that the differential duty becomes crystallized only after the escalation is finalized but, it is not a case where escalation is to    have only prospective operation. It is to have retrospective operation. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value       on which differential duty is paid. In a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even   at the “time of removal”. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value atthe time of removal.

Held

Interest was payable on differential excise duty with retrospective effect that become payable on basis of escalation Clause under Section 11AB of Act, 1944.  (CA No. 2150 of 2012 dt. 8-5-2019)

Editorial: Central Excise duty was payable on removal (See Rule 4). The above ruling was in the context of section 4 which providedfor payment of duty at “time of removal” and “place of removal”. Such concepts do not exist under  GST regime. Hence, according to me, the ratio of the above ruling would not be relevant under the GST regime.

“A man of few words will rarely be thoughtless in his speech; he will measure everyword.”

– Mahatma Gandhi