# M/S STEEL AUTHORITY OF INDIA LTD v. COMMISSIONER OF CENTRAL EXCISE, RAIPUR

- **Citation:** [2019] 7 S.C.R. 400
- **Court:** Supreme Court of India
- **Decided:** 2019-05-08
- **Case number:** Civil Appeal No. 2150 of 2012
- **Bench:** Ranjan Gogoi, Uday Umesh Lalit, K. M. Joseph
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-steel-authority-of-india-ltd-v-commissioner-of-central-excise-raipur-34004
- **Pages:** 60

## Headnote

Central Excise Act, 1944: s.11AB - Demand of interest under
s.11AB - Whether interest is payable under s.11AB of the Act on the
differential excise duty with retrospective effect that became payable
on the basis of escalation clause - Held: If there is a non-levy, nonpayment, short-levy or short-payment, the same becomes recoverable
under s.11A - In any of the four contingencies namely, non-levy,
non-payment, short-levy or short-payment referred to in s.11A,
s.11AB is attracted - Thus, in any of the four contingencies, for
any duty that is determined or paid as provided under s.11A,
necessarily the assessee becomes liable to pay interest under s.11AB
- The interest clock ticks from the date as provided in r.8 r/w s.11AB
- The expression "the month in which the duty ought to have been
paid" under s.11AB of the Act, when it is read alongwith r.8, which
declares that the duty on the goods removed from the factory or
warehouse during a month is to be paid on the 6th day of the
following month would mean that the Legislature has understood
the expression "the month in which the duty ought to have been
paid" under the Act in the same sense as it is declared in r.8 -
Central Excise Rules, 2002 - r.8.
Central Excise Act, 1944: s.11AB - When price is revised
upward with retrospective effect and the excise duty on the same is
paid immediately on a future date, whether interest is payable under
s.11AB from the first day of the month succeeding the month in
which the duty ought to have been paid under the Act - Held: Under
the Rules, goods become exigible to duty on removal - Assessment
is to be done by assessee itself by way of self-assessment - In a
case where duty is payable on the basis of the value, the assessee is
to apply the rate of duty to the value and pay the duty on or before
the sixth day of the month succeeding the month in which removal
of the goods takes place - When the provisional assessment is
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400
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finalized, the assessee becomes liable, however, to pay interest from
the first date of the month succeeding the month for which the amount
is determined - Central Excise Rules, 2002 - r.8.
Dismissing the appeals, the Court
HELD : 1. The scheme of the Central Excise Act and the
Rules are a separate code. Section 11A is a provision for recovery.
If there is a non-levy, non-payment, short-levy or short-payment,
the same becomes recoverable under Section 11A. If there is
any of the four contingencies referred to in Section 11A, then
Section 11AB is attracted. The working of the parent Act is
intricately intertwined with the rules. Therefore, if the value which
is declared by way of self-assessment, by way of rule 6 and on
which the duty is paid is not the full value then under the scheme
of Section 11A read with Section 11AB and the Rules, the
assessee incurs liability for interest when in a case where there
is full value found and it dates back to the date of removal. In
this case, admittedly, at the time goods were removed the price
was not fixed. The assessee was fully conscious of the fact that it
was subject to variation and had knowledge that the value it was
declaring was amenable to upward revision. The circumstances
were indeed clearly appropriate for the assessee to invoke the
provisions of Rule 7 and seek an order for provisional assessment.
[Paras 35, 36] [440-A-D]
Rainbow Industries (P) Ltd. v. CCE (1994) 6 SCC
563 : [1994] 4 Suppl. SCR 135 ; Balarpur Industries
Ltd. v. Assistant Collector of Customs and Central
Excise & Ors. (1995) Suppl. (3) SCC 429 ; Collector
of Central Excise, Baroda v. Cotspun Ltd. (1999) 7 SCC
633 : [1999] 3 Suppl. SCR 184 ; M/s. Eastland
Combines, Coimbatore v. Collector of Central Excise,
Coimbatore AIR 2003 SC 843 : [2003] 1 SCR 98 ; ITW
Signod India Limited v. Collector of Central Excise
(2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751 - referred
to.
2. Undoubtedly, the amended provisions of Section 11A
empowered recovery of duty even in a case

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M/S STEEL AUTHORITY OF INDIA LTD.
v.
COMMISSIONER OF CENTRAL EXCISE, RAIPUR
(Civil Appeal No. 2150 of 2012)
MAY 8, 2019
[RANJAN GOGOI, CJI, UDAY UMESH LALIT AND
K. M. JOSEPH, JJ.]
Central Excise Act, 1944: s.11AB - Demand of interest under
s.11AB - Whether interest is payable under s.11AB of the Act on the
differential excise duty with retrospective effect that became payable
on the basis of escalation clause - Held: If there is a non-levy, nonpayment, short-levy or short-payment, the same becomes recoverable
under s.11A - In any of the four contingencies namely, non-levy,
non-payment, short-levy or short-payment referred to in s.11A,
s.11AB is attracted - Thus, in any of the four contingencies, for
any duty that is determined or paid as provided under s.11A,
necessarily the assessee becomes liable to pay interest under s.11AB
- The interest clock ticks from the date as provided in r.8 r/w s.11AB
- The expression "the month in which the duty ought to have been
paid" under s.11AB of the Act, when it is read alongwith r.8, which
declares that the duty on the goods removed from the factory or
warehouse during a month is to be paid on the 6th day of the
following month would mean that the Legislature has understood
the expression "the month in which the duty ought to have been
paid" under the Act in the same sense as it is declared in r.8 -
Central Excise Rules, 2002 - r.8.
Central Excise Act, 1944: s.11AB - When price is revised
upward with retrospective effect and the excise duty on the same is
paid immediately on a future date, whether interest is payable under
s.11AB from the first day of the month succeeding the month in
which the duty ought to have been paid under the Act - Held: Under
the Rules, goods become exigible to duty on removal - Assessment
is to be done by assessee itself by way of self-assessment - In a
case where duty is payable on the basis of the value, the assessee is
to apply the rate of duty to the value and pay the duty on or before
the sixth day of the month succeeding the month in which removal
of the goods takes place - When the provisional assessment is
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finalized, the assessee becomes liable, however, to pay interest from
the first date of the month succeeding the month for which the amount
is determined - Central Excise Rules, 2002 - r.8.
Dismissing the appeals, the Court
HELD : 1. The scheme of the Central Excise Act and the
Rules are a separate code. Section 11A is a provision for recovery.
If there is a non-levy, non-payment, short-levy or short-payment,
the same becomes recoverable under Section 11A. If there is
any of the four contingencies referred to in Section 11A, then
Section 11AB is attracted. The working of the parent Act is
intricately intertwined with the rules. Therefore, if the value which
is declared by way of self-assessment, by way of rule 6 and on
which the duty is paid is not the full value then under the scheme
of Section 11A read with Section 11AB and the Rules, the
assessee incurs liability for interest when in a case where there
is full value found and it dates back to the date of removal. In
this case, admittedly, at the time goods were removed the price
was not fixed. The assessee was fully conscious of the fact that it
was subject to variation and had knowledge that the value it was
declaring was amenable to upward revision. The circumstances
were indeed clearly appropriate for the assessee to invoke the
provisions of Rule 7 and seek an order for provisional assessment.
[Paras 35, 36] [440-A-D]
Rainbow Industries (P) Ltd. v. CCE (1994) 6 SCC
563 : [1994] 4 Suppl. SCR 135 ; Balarpur Industries
Ltd. v. Assistant Collector of Customs and Central
Excise & Ors. (1995) Suppl. (3) SCC 429 ; Collector
of Central Excise, Baroda v. Cotspun Ltd. (1999) 7 SCC
633 : [1999] 3 Suppl. SCR 184 ; M/s. Eastland
Combines, Coimbatore v. Collector of Central Excise,
Coimbatore AIR 2003 SC 843 : [2003] 1 SCR 98 ; ITW
Signod India Limited v. Collector of Central Excise
(2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751 - referred
to.
2. Undoubtedly, the amended provisions of Section 11A
empowered recovery of duty even in a case where the
classification list has been approved earlier and it would operate
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from the date of removal and not from the date on which show
cause was issued. Section 11A which was inserted by Act 26 of
1978 is substantially the reproduction of Rule 10 of 1944 Rules.
Section 11AB, it came to be inserted by Act 33 of 1996. Thereafter,
it was amended by Act 10 of 2000, Act 14 of 2001, Act 20 of 2002
and Act 49 of 2005. Section 11A must necessarily be read with
Section 11AB. This is for the reason that interest under Section
11AB is premised upon the duty of excise not being levied or
paid or short levied, short paid or erroneously refunded. Such
duty is either determined under sub-Section (2) of Section 11A
or without such determination it being paid under sub-Section
(2B) of Section 11A. In any of the circumstances, namely, nonlevy, non-payment, short-levy and short-paid, any duty has been
determined or paid as has been provided under Section 11A,
necessarily the assessee becomes liable to pay interest from the
first date of the month succeeding the month in which duty ought
to have been paid. [Paras 43, 45-47] [448-G-H; 452-B; F-H;
453-A-B]
N.B. Sanjana, Assistant Collector of Central Excise,
Bombay & Ors. v. The Elphinstone Spinning and
Weaving Mills Co. Ltd.; 1978 E.L.T. (J 399) - referred
to.
3. Under the Rules, goods become exigible to duty on
removal. Assessment is to be done by assessee itself by way of
self-assessment. In a case where duty is payable on the basis of
the value, the assessee is to apply the rate of duty to the value
and pay the duty on or before the sixth day of the month
succeeding the month in which removal of the goods takes place.
Undoubtedly, if the removal takes place in March, the payment
is to be made by 31st of March. In the case of provisional
assessment, the assessee entertains a doubt regarding the actual
value or the rate of duty. He applies and he is permitted under
the order to remove goods on a provisional assessment. The
assessment is thereafter finalized. When the provisional
assessment is finalized, the assessee becomes liable however to
pay interest from the first date of the month succeeding the month
for which the amount is determined. Under Rule 7(4), the
expression "succeeding the month for which such amount" is
determined refer to the month of removal of the goods. When
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the provisional assessment has such consequences, it would
occasion an invidious discrimination to place an interpretation
on Section 11AB by which those assesses who go in for provisional
assessment under Rule 7 are called upon to pay interest upon
finalization of the assessment with reference to the date of
removal in a case where the value is fully determined as a result
of escalation clause being worked resulting in an upward revision
of prices and under Section 11AB payability arises with reference
to the date of decision to grant escalation. In other words, the
law will have to be interpreted in a manner that it is fair and equal
to similarly situated group of assessees. Legislative intention,
in this regard, also cannot be otherwise. Legislature has clearly
in Section 11AB spelt out the time with reference to the Act and
the Rules. The expression "the month in which the duty ought to
have been paid" under this Act, when it is read alongwith Rule 8,
which declares that the duty on the goods removed from the factory
or warehouse during a month is to be paid on the 6th day of the
following month would mean that the Legislature has understood
the expression "the month in which the duty ought to have been
paid" under the Act in the same sense as it is declared in Rule 8.
[Paras 49-51] [453-C-H; 454-A-B; D]
Collector of Central Excise, Baroda v. Cotspun Ltd.
(1999) 7 SCC 633 : [1999] 3 Suppl. SCR 184
- referred to.
4.1 In a case where goods are removed clandestinely, there
would be no levy. Equally, there will be non-payment. Thus, a
case of non-levy can overlap with non-payment. No doubt, there
can be cases where despite full levy there can be no payment,
may be by mistake or otherwise. Equally thus, if there is no nonlevy, there can be partial payment. That would make it a case of
short payment as the payment does not match the amount of duty
levied as per the self-assessment carried out by the assessee. A
short levy ordinarily would be a case where out of the ingredients
of assessment, namely, (1) rate of duty, (2) valuation and (3)
quantity removed, the components all or any are incorrectly
applied. As an instance if the full rate of duty applicable is not
applied though the valuation and the quantity is correctly arrived
at, it may fall under short-levy. In one sense it could be said that
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there is short-payment also, as if payment could be understood
as the amount which ought to have been paid but it has not been
paid, it may be a case of short payment. But it may be more
appropriate to put it under short levy where the deficit in payment
is essentially in terms of a short-levy. [Para 58] [456-B-D]
4.2 If short- levy is to be understood as confined to cases
where the assessment is not the full assessment, taking into
account the parameters involved correctly, namely, rate of duty,
valuation and quantity it could be classified as a case of short
levy as one of the components of proper assessment namely,
valuation has been incorrectly arrived at. The payment in such a
case is made in terms of the incorrectly assessed figure. The
payment matches the assessment under Rule 10 of 1944 Rules,
the expression "short-payment" is not used. Instead the words
"duty has not been paid in full", has been used. No doubt, in a
case where in law though the amount which is paid is in harmony
with the amount which is assessed, it is not the amount which
ought to have been paid by the assessee. The absence of full
payment of duty or short payment has indeed also in one sense
taken place. In a case where there is an escalation clause, goods
are cleared on a provisional price. Consequently, the value is
provisional. There is a subsequent escalation with retrospective
effect. It will affect the valuation which was employed in the selfassessment by the assessee which would necessarily be
provisional. Enhancement of the value will date back to the dates
of removal in view of the retrospective operation. Admittedly
the liability for payment of differential duty has arisen. Upon the
true value, in a case of retrospective escalation of price though
later agreed being received and consequential differential duty
being admittedly payable, it would result in Section 11A read with
Section 11AB applying. [Para 59] [456-F-H; 457-A-C]
4.3 It is true that the statutory authority has found it to be
a case of short payment. In the notice issued claiming interest it
is stated there is short levy. Proceeding on the basis that it is a
case of short levy, Section 11A read with Section 11AB is attracted
and the interest clock ticks from the date as provided in Rule 8
read with Section 11AB. If the concept of short payment is
stretched to include all amounts which ought to have been paid,
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it may also be treated as a case of short payment though juridically
it may be true that it may strictly fall under short levy. [Para 60]
[457-C-E]
5. As far as the scope of the second explanation of Section
11A(2)(b) is concerned, it contemplates payment voluntarily by
the assessee. It is without any notice being issued under Section
11A. There is also reference to liability on the part of the
assessee to pay interest under Section 11A(2)(b), not only on
the amount which is paid within the meaning of Section 11A(2)(b)
but on any short payment as may be determined by the excise
officer. This only means that payment can be by an assessee of
any of the four amounts namely, non-levy, non-payment, shortlevy or short-payment. Since there is no notice under Section
11A and non-determination of the amount as such pursuant to
which the amount is paid it may happen that there may be shortfall
in the amount which is paid by the assessee in comparison to
what the assessee is legally required to pay. [Para 62] [457-G-H;
458-A-C]
CCE v. SKF India Ltd. 2009 (13) SCC 461 : 2009] 10
SCR 714 ; CCE v. International Auto Ltd. 2010 (2) SCC
672 : [2010] 1 SCR 211 - relied on.
E.D. Sassoon & Co. Ltd. v. CIT AIR 1954 SC 470 :
1955 SCR 599 ; Commissioner of Income Tax, Madras
v. A. Gajapathy Naidu, Madras AIR 1964 SC 1653 :
1964 SCR 767 ; Vikrant Tyres Ltd. v. First Income Tax
Officer, Mysore 2001 (3) SCC 76 ; V.V.S. Sugars v. Govt.
of A.P. and Others 1999 (4) SCC 192 (India Carbon
vs. VBS Sugar): [1999] 2 SCR 925 ; P.G. & W. Sawoo
(P) Ltd. v. CIT & Ors. 2017 (13) SCC 284 - held
inapplicable.
MRF Ltd. v. Collector of Central Excise, Madras
1997 (5) SCC 104 ; J.K. Synthetics v. State of
Rajasthan (1994) 4 SCC 276 ; Purolator India Limited
v. Commissioner of Central Excise 2015 (10) SCC
715 : [2015] 9 SCR 812 ; India Carbon Ltd. & Ors. v.
State of Assam 1997 (6) SCC 479 : [1997] 3 Suppl.
SCR 1 ; E.I.D. Parry (India) Ltd. v. CCT 2005 (4) SCC
779 : [2005] 3 SCR 1144 - referred to.
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER
OF CENTRAL EXCISE, RAIPUR
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Case Law Reference
2009] 10 SCR 714
relied on
Para 1
[2010] 1 SCR 211
relied on
Para 1
1997 (5) SCC 104
referred to
Para 5
(1994) 4 SCC 276
referred to
Para 6
[2015] 9 SCR 812
referred to
Para 23
[1997] 3 Suppl. SCR 1
referred to
Para 25
1955 SCR 599
held inapplicable
Para 26
1964 SCR 767
held inapplicable
Para 27
2001(3) SCC 76
held inapplicable
Para 28
[1999] 2 SCR 925
held inapplicable
Para 28
2017(13) SCC 284
held inapplicable
Para 28
[2005] 3 SCR 1144
referred to
Para 31
[1994] 4 Suppl. SCR 135
referred to
Para 41
(1995) Suppl. (3) SCC 429
referred to
Para 41
[1999] 3 Suppl. SCR 184
referred to
Para 41
[2003] 1 SCR 98
referred to
Para 42
[2003] 5 Suppl. SCR 751
referred to
Para 42
1978 E.L.T. (J 399)
referred to
Para 44
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2150
of 2012.
From the Judgment and Order dated 13.08.2010 of the
Customs, Excise & Service Tax Appellate Tribunal, New Delhi in Appeal
No. E/367/2008.
With
Civil Appeal Nos. 2562 of 2012, 600, 1522-1523, 599 of 2013.
V. Sridharan, Sr. Adv., L. Badri Narayanan, Aditya Bhattacharya,
Victor Das, Ms. Apeksha Mehta, Manish Rastogi, Shrey Ashat, M. P.
Devanath, Vikas Singh Jangra, Advs. for the Appellants.
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Vikramjit Banerjee, ASG, K. Radhakrishnan, Sr. Adv., Arijit
Prasad, Shekhar Vyas, B. Krishna Prasad, Advs. for the Respondent.
The Judgment of the Court was delivered by
K. M. JOSEPH, J.
1. A Bench of two judges doubted the correctness of the judgment
rendered by a Bench of two learned judges of this Court in CCE v. SKF
India Ltd. 2009 (13) SCC 461 (hereinafter referred to as the "SKF Case")
as also the another judgment rendered by the same Bench in CCE v.
International Auto Ltd. 2010 (2) SCC 672 and on the said basis to resolve
the controversy the matter stood posted before us.
2. Very briefly put, the question which we are called upon to
consider and resolve is as to whether interest is payable on the differential
excise duty with retrospective effect that become payable on the basis
of escalation clause under Section 11AB of the Central Excise Act,
1944 (hereinafter referred to as "the Act").
3. In this batch of appeals, we will treat C.A. No.2150/2012 as
the leading case. We will refer to the said case as the SAIL Case. In
the said case originally, the appellant company which is manufacturer of
various products including rail sold the same to the Indian Railways.
The products were cleared on sale from 1st January, 2005 to July 2006.
The goods were cleared on the payment of excise duty on the payment
of price which was fixed based on their circular dated 24.04.2005.
Subsequently, the prices were enhanced by way of price circular dated
20.07.2006. The revision came into effect with retrospective effect. It
is based on the same that SAIL deposited Rs.142 crores by way of
excise duty. This was done in August 2006. Thereupon, the officers of
the department indulged in correspondence with SAIL seeking details
regarding the clearances which were effected. On the basis of material
made available, SAIL was called upon to remit interest under Section
11AB of the Act. SAIL filed its objections. It is after considering the
objections, the authority found that SAIL was liable to pay interest on a
sum of Rs.142 crores calculated based on the date of removal of the
goods during the period from January, 2005 to July,2006. Various
objections raised by the appellants were dealt with and they were found
merit less. An appeal was carried before the Tribunal. The Tribunal
relied upon the judgment of this Court in SKF India Ltd. Case (supra)
and accordingly dismissed the appeal. Thereafter when the matter came
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up before this Court, a Bench of two learned judges after elaborately
hearing the matter doubted the correctness of the decision in SKF case
and also International Auto and hence the cases were referred to us in
the decision reported in 2015 (16) SCC 107. We heard learned counsel
for the parties.
4. In SKF case also the assessee on the basis of revision of prices
with retrospective effect paid the differential duty on being called upon
to pay the said amount. Thereafter the Revenue called upon the assesee
to pay interest under Section 11AB of the Act. A Bench of two learned
judges after considering Sections 11A and 11AB disapproved the
judgment of the Bombay High Court in CCE v. Rucha Engineering P.Ltd.
holding inter alia as follows:
"11. Section 11-A puts the cases of non-levy or short-levy, nonpayment 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 misstatement 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 with differently.
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 shortpayment, etc. of duty is by reason of fraud, collusion, etc. are
dealt with under sub-section (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
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
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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.
17. We are unable to subscribe to the view taken by the High
Court in Rucha Engg. [ First Appeal No. 42 of 2007 decided on
3-4-2007] 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 under sub-section (2-B) of
Section 11-A and attracted levy of interest under Section 11-AB
of the Act."
5. The same Bench in International Auto case came to reiterate
the same view in the latter decision. The Bench also proceeded to
distinguish the decision in MRF Ltd. v. Collector of Central Excise,
Madras 1997 (5) SCC 104. This is what the court has laid down in
regard to MRF case in paragraph 9.
"9. 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 judgment of this Court in MRF
Ltd. [(1997) 5 SCC 104 : (1997) 92 ELT 309] 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 14-51983. 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 its price list was approved by the Government on
14-5-1983, but subsequent thereto, on account of consumer
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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 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 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."
6. A Bench of two learned judges who have referred the cases
felt that the MRF decision would continue to prevail, the value at the
time of removal of the goods alone would govern the Situation which is
a fundamental principle which continues to hold good till now. The
additional duty to be paid in future cannot be treated as attracting the
concept of "short payment". Though the differential duty may be payable
but the interest is not payable. The interest clock would start ticking
from the date the differential duty is due, that is, the day on which the
parties agree upon the escalated price and not before. The expression
"ought to have been paid" found in Section 11AB was not considered by
this Court in SKF case, it was pointed out. The Court felt that SKF
Case runs contrary to the Constitution Bench decision in JK Synthetics
and interest cannot be demanded by way of damages or compensation.
7. In our view, the following questions will fall to be decided by us:
1)
Whether the decision in SKF case and also in International
Auto lay down the correct law having regard to the decision
of this Court in MRF case which was in fact rendered by a
Bench of three Judges.
2)
The effect of the judgment in JK Synthetics v. State of
Rajathan as also the other judgments cited before us in regard
to demand for interest under fiscal statutes.
3)
Whether the determination of duty under Section 11A(2) is
necessary to sustain the demand for interest under Section
11AB of the Act.
4)
The impact of Rule 7 of the Central Excise rules which
contemplates provisional assessment.
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5)
Whether payment of differential duty can be treated as a
case of payment of duty under the head "short paid".
6)
The effect of decisions under the Income Tax Act relating to
accrual of income and the impact of accrual of income under
the Income Tax Act on the liability under Section 11AB of
the Act having regard to the statutory scheme under the Act
and the Rules.
8. Before we proceed to deal with the matter in greater detail, we
must at once notice the following finding in the reference order passed
by this Court in Steel Authority of India vs. CCE (supra):
"21. 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;
(b) where the price at the time and place of removal is "not
fixed" (price subject to escalation clause), and 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 in the 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" definition
in Section 4 of the 1944 Act but before 2010.
22. 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 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, till the date when differential duty was
paid."
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER
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Therefore, we proceed further in this matter on the basis that the
price at the time of removal is not fixed. That is, the price is subject to
revision under the escalation clause. There is also admittedly no dispute
raised either before the Bench which referred the matter or before us
by the learned counsel for the appellant that differential duty is indeed
payable on the subsequently revised price which is to operate with
retrospective effect.
9. At this juncture we think it apposite to refer to the facts in MRF
case (MRF Limited v. Collector of Central Excise, Madras). MRF Case
was decided on 12.3.1997 and it is reported in 1997 (5) SCC 104. The
appeal was filed in this Court against the order passed by the Tribunal
dated 24.9.1986. By the impugned order the assessee's claim for refund
of excess duty paid on differential price on the date of removal and the
reduced price was rejected. The case set up by the assessee was that
the price list was approved on 14.5.1983. Subsequently, there was
resistance by the consumers. The Ministry of Commerce, Government
of India, thereupon directed the manufacturer- assessee pursuant to a
decision taken in a meeting of Manufacturers to bring down the prices
to the pre 14.5.1983 level. On the basis of the same a difference in the
prices arose. This led to a claim for refund. The Tribunal was of the
view that the prices at the time of removal alone mattered. The
subsequent reduction in the prices for whatever reason was totally
irrelevant. Thereafter, the court proceeded to hold as follows:
"2. We have heard the learned counsel for the assessee. Once
the assessee has cleared the goods on the classification and price
indicated by him at the time of 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 prices for whatever
reason cannot be a matter of concern to the Central Excise
Department insofar as the liability to payment of excise duty was
concerned. This is the view which was taken by the Tribunal in
the case of Indo Hacks Ltd. V. CCE (1986) 25 ELT 69 (Trib)and
it seems to us that the Tribunal's view that the duty is chargeable
at the rate and price when the commodity is cleared at the factory
gate and not on 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
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is concerned. That being 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 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 same with
no order as to costs."
10. We may at once notice a feature which stands out. In the
MRF case at the time when the goods were removed, the prices were
fixed and there was absolutely no occasion for the assessee or the
department to even contemplate a price revision either upwards or
downwards. The price was not provisional. Therefore, we would think
that out of the two situations which are noted in paragraph 21 of the
Reference Order, the first situation would be comparable to the facts of
the decision obtaining in MRF case. In case where the price is fixed
there would be no occasion for the assessee to seek refund but here in
the case before us, admittedly the case does not fall under the first
category even according to the appellants. It could be said that the price
was subject to variation based on the operation of the price escalation
clause. Now the time is ripe for us to consider the statutory framework
under the Act and the Rules made under the Act. Section 2(h) of the
Act defines sale and purchase as follows:
2(h) "sale" and "purchase", with their grammatical variations and
cognate expressions, mean any transfer of the possession of goods
by one person to another in the ordinary course of trade or business
for cash or deferred payment or other valuable consideration."
11. Interestingly, unlike under the definition of Sale of Goods Act,
1930, "sale" under the Act takes place on transfer of possession. However
we need not say anything further as it is not necessary for the cases at
hand. Section 3 is the charging section. With effect from 1.7.2000 under
the Finance Act of 2000, Section 4 of the Act which is crucial for our
case reads as follows:
"4. Valuation of excisable goods for purpose of charging of duty
of excise -
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER
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(1) Where under this Act, the duty of excise is chargeable on any
excisable goods with reference to their value, then, on each removal
of the goods, such value shall -
(a) In a case where the goods are sold by the assessee, for
delivery at the time and place of the removal, the assessee and
the buyer of the goods are not related and the price is the sole
consideration for the sale, be the tansaction value;
(b) In any other case, including the case where the goods are
not sold, be the value determined in such manner as may be
prescribed
(2) The provisions of this section shall not apply in respect of any
excisable goods for which a tariff value has been fixed under
sub-section (2) of section 3.
(3) For the purpose of this section,-
(a) "assessee" means the person who is liable to pay the duty
of excise under this Act and includes his agent;
(b)
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(c)
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(d) "transaction value" means the price actually paid or payable
for the goods, when sold, and includes in addition to the amount
charged as price, any amount that the buyer is liable to pay to,
or on behalf of, the assessee, by reason of, or in connection
with the sale, whether payable at the time of the sale or at any
other time, including, but not limited to, any amount charged
for, or to make provision for, advertising or publicity, marketing
and selling organization expenses, storage, outward handling,
servicing, warranty, commission or any other matter; but does
not include the amount of duty of excise, sales tax and other
taxes, if any, actually paid or actually payable on such goods."
12. Section 11A was inserted in the year 1980 and it underwent
changes. Section 11A of the Act as it stood at the relevant time read as
follows:
"11A. Recovery of duties not levied or not paid or short-levied or
shot-paid or erroneously refunded - (1) When any duty of excise
has not been levied or paid or has been short-levied or short-paid
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or [erroneously refunded, whether or not such non-levy or nonpayment, 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 shortlevied 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 shot-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.
[Provided further that where the amount of duty which has not
been levied or paid or has been short-levied or short-paid or
erroneously refunded is one crore rupees or less a notice under
this sub-section shall be served by the Commissioner of Central
Excise or with his prior approval by any officer subordinate to
him:
Provided also that where the amount of duty which has not
been levied or paid or has been short-levied or short-paid or
erroneously refunded is more than one crore rupees, no notice
under this sub-section shall be served without the prior approval
of the Chief Commissioner of Central Excise.]
(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.
(3)
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(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;]"
13. Section 11AB is undoubtedly the most crucial Section as far
as this case is concerned. Section 11AB read as follows:
"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 shot-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 the rules
made thereunder with intent to evade payment of duty, the person
liable to pay duty as determined under sub-section (2) of section
11A shall, in addition to the duty, be liable to pay interest [at such
rate not below eighteen 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
day of the month succeeding the month in which the duty ought to
have been paid under this Act or the rules made thereunder or
from the date of such erroneous refund, as the case may be, but
for the provisions contained in sub-section (2) of section 11A, till
the date of payment of such duty.
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(2) For the removal of doubts, it is hereby declared that the
provisions of sub-section (1) shall not apply to cases where the
duty became payable before the date on which the Finance (No.2)
Bill, 1996 receives the assent of the President."
Explanation 1 and 2 are not extracted.
14. It is also now relevant to notice certain rules under the Central
Excise Rules, 2002. Rules 4,5,6,7 and 8 read as under:
"RULE 4. Duty payable on removal.-
(1) Every person who produces or manufactures any excisable
goods, or who stores such goods in a warehouse, shall pay the
duty leviable on such goods in the manner provided in rule 8 or
under any other law, and no excisable goods, on which any duty is
payable, shall be removed without payment of duty from any place,
where they are produced or manufactured, or from a warehouse,
unless otherwise provided :
Proviso and Explanation omitted.
(1A)
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(2) Notwithstanding anything contained in sub-rule (1), where
molasses are produced in a khandsari sugar factory, the person
who procures such molasses, whether directly from such factory
or otherwise, for use in the manufacture of any commodity, whether
or not excisable, shall pay the duty leviable on such molasses, in
the same manner as if such molasses have been produced by the
procurer.
(3) Omitted
(4)
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RULE 5. Date of determination of duty and tariff valuation. -
(1) The rate of duty or tariff value applicable to any excisable
goods, other than khandsari molasses, shall be the rate or value in
force on the date when such goods are removed from a factory
or a warehouse, as the case may be.
(2) The rate of duty in the case of khandsari molasses, shall be
the rate in force on the date of receipt of such molasses in the
factory of the procurer of such molasses.
M/S STEEL AUTHORITY OF INDIA LTD. v.