CESTAT, Chennai: Additional Amounts Collected Almost Concurrently Without Raising Second Invoices, Assessee Liable For Interest and Penalty

M/s. Sitalakshmi Mills Ltd. v. CCE, Madurai, decided on 20.01.2011

Relevant Facts:

During the course of audit of accounts of the assessee by the Internal Audit Party attached to department, it was noticed that the assessee had collected an amount of Rs. 1,01,74,796/- from Ekadantha Synthetics, Bhiwandi towards additional conversion charges for the period from 1.4.2005 to 31.12.2005 through debit notes Nos.19A to 140A. As per Rule 6 of the Central Excise Valuation (Determination of Assessable Value) Rules, 2000, the assessee had to pay duty on the additional conversion charges collected from Ekadantha Synthetics, Bhiwandi as the amount collected over and above the value shown in the Central Excise invoices raised for clearance of the goods is includible in the transaction value as additional consideration of sale of the goods.

When it was pointed out by the Audit Party, the assessee paid duty amount of Rs.8,13,984/- and Education Cess of Rs.16,280/- in RG23A Part II on 27.02.2007.

Under these circumstances, the Assistant Commissioner of Central Excise, Madurai I Division issued a Show Cause Notice to the assessee on 1.8.2007 demanding differential duty of excise of Rs.8,13,984/- and Education Cess of Rs.16,280/- on the additional conversion charges received from Ekadantha Synthetics, Bhiwandi with interest of Rs.1,67,658/-. It was also proposed to appropriate the amount debited in RG23A Part II on 27.2.2007 towards the above demand and impose penalty under Section 1 1AC of the Central Excise Act, 1944.

The Joint Commissioner of Central Excise, Madurai confirmed the demand of duty, interest and imposed penalty of Rs.8,30,264/- under Section 1 1AC of the Act. The Commissioner (Appeals) upheld the demand of duty, order for appropriation of amount, demand of interest but set aside the penalty imposed under Section 1 IAC of the Act.

Issue before the tribunal:

Whether, in the present circumstances, interest on duty and penalty under section 11AC of the act was payable?

Decision of the tribunal:

Confirming the liability for payment of interest as well as penalty, the tribunal held as follows:

this is a not case of the type dealt with by the Honble Supreme Court in the case of CCE, Pune Vs. SKF India Ltd. 2009 (239) ELT 385 (SC) where extra amounts have been collected on the ground of escalation after a lapse of time and the duty has been paid. Even in those cases, the Honble Supreme Court held that interest is payable on the additional amount with effect from the date the duty was originally payable while holding that penalty was not leviable in such cases. The facts in this case are totally different.

The appellants have collected additional amounts almost concurrently by issuing debit notes without raising second invoices. The extra amounts received have not been shown to the Department and no duty has been paid on receipt of the extra amounts. This is a clear case of suppression with intention to evade payment of duty. Such a case warrants application of extended time limit for issue of demand, the payment of interest as well as imposition of penalty under Section 11AC of the Act.