GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
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Ö×¸ü¯ ÃÖÓ./GENERAL CIRCULAR NO 12/2007
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Sub:- CE – Supplementary invoice - Chargeability of interest on
differential duty paid – clarification – Regarding.
Copies of the following letters, on the above subject are communicated
for information, guidance and necessary action.
Sl.No. Authority Reference No. Date Remarks
a) CBEC F.No.6/20/2005-CX.1 09.03.07 Enclosed
b) C.No.IV/16/-/2006–CZO 07.08.06 Enclosed
Gen. Cir No.
c) CBEC F.No.208/27/2003–CX.6 18.12.06
Gen. Cir No.
d) CBEC F.No.6/20/2005–CX.I 14.03.06
e) DGCEI F.No.574/CE/5/Misc/2003 28.07.03 Enclosed
.ÃÖÓ./ C.No. IV/16/04/2007 – Cx Pol ÃÖê •ÖÖ¸üß
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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
New Delhi, the 9th March, 2007.
The Chief Commissioner of central excise,
Subject:- Chargeability of interest of supplementary invoices -
Clarification sought for – Regarding.
I am directed to refer to your letter No. IV/16/2006 – CZO (Tech)
dated 07.08.2006 on the above mentioned subject and to forward herewith
a copy of instruction F.No.208/27/2003 – CX.6 dated 18.12.2006 in this
Under Secretary to the Government of India.
CHIEF COMMISSIONER OF CENTRAL EXCISE
CHENNAI ZONE : CHENNAI
C.No.IV/16/ /2006-CZO (TECH) Dated : 07-08-2006
Smt. Chitra Saha,
Member (Central excise),
Central Board of Excise and Customs,
Sub : - Chargeability of interest of supplementary invoices –
clarification sought for – Regarding.
Please refer to Board’s letter F.No.6/20/2005-CX.I dated 14-03-2006,
which was issued with reference to this office letter of even number dated
2. The CESTAT, West Zonal Bench has recently opined that the interest
on supplementary invoices is not required to be paid as the situation is not
covered either under Section 11 A (1) or Section 11 A (2B) of the Central
Excise Act, 1944 in the case of Commissioner of central excise Vs. Rucha
Engineering P Ltd (copy enclosed)*. In this zone, though demands on similar
nature have been made by the Original Adjudicating Authorities, on appeal
to Commissioner (Appeals), the issue was decided in favour of the
assessees, i.e. against the Department. However, such cases have been
appealed before the CESTAT. In view of the decision taken by the
Commissioner (Appeals), the SCNs of this nature have been transferred to
the Call Book.
3. The chargeability of interest in situations mentioned under Sl.No.5 & 6
of para 4 read with the points raised under para 7 of this office letter of even
number dated 18-07-2005 again require consideration in the light of the
observation by the CESTAT order above cited. Otherwise, the relevant
Section(s) of the Act may be modified suitably, so as to cover these two
* - reported in 2006 (077) RLT 0335 (CESTAT-Mum.)
DIRECTORATE GENERAL OF CENTRAL EXCISE INTELLIGENCE
WEST BLOCK-8, WING-6, R.K.PURAM, NEW DELHI – 110 066
F.No. 574/CE/5/Misc/2003 Dated : 28-07-2003
Sub : - Charging of interest under Section 11AB - Regarding.
Available intelligence indicate that there is a practice in many
industries, specially in motor vehicles and parts thereof and their vendors,
that many a time they are raising supplementary invoices in addition to the
original invoices. Of course, duty is paid on the supplementary invoice, but
after a lapse of considerable time. The question is whether the amount of
duty paid on the supplementary invoice should be subjected to interest or
not. Evidently, central excise duty is leviable as and when the goods are
manufactured, but duty is collected at the time of clearance of goods.
However, further facility of payment of duty after one month of clearance
has been allowed with reference to products – say ‘A’ if Rs.100/- is paid on
1st of June and the remaining Rs.50/- is paid in the month of November,
obviously duty is discharged, on Rs.100/-. Duty as above is also paid as
leviable on Rs.50/-, as these Rs.50/- are with respect to goods ‘A’ cleared on
1st of June. Therefore, differential interest is leviable. Even otherwise a
simple analogy of the money lender if applied, if a person has returned
Rs.100/- to the money lender and Rs.50/- is returned after 5 months the
money lender is obviously going to charge interest for this Rs.50/- for the
2. Provisions for interest on delayed payment are contained in Section
11AB. These provisions are for duty determined under sub-section (2) of
Section 11A or duty which has been paid under sub-section (2B) of section
11A. Section (2) of 11 A is for determination of duty on show cause notices
after taking into consideration representation etc. Sub-section (2B) of 11A
gives authority to pay duty and not to follow the long procedure of
adjudication etc. Under this assessee gets a benefit that is penalty is not
imposed. But Section 11AB specifically includes provision for interest even in
a situation of sub-section (2B) of Section 11A, they have to pay the interest.
Otherwise sometime a very odd situation may arise. The manufacturer pays
a huge amount of Rs.5crores under sub-section 2B of section 11 A and no
interest is charged. This is not intended. That is why even 2B situations are
covered under 11 AB for charging interest on late payments.
3. The above type of situations may arise not only in motor vehicles and
their vendors, but it may be there in other industries also. It is, therefore,
requested that the practice, if any, for not charging the interest needs to be
stopped and for past cases necessary action as stipulated within the purview
of the law be taken.
4. Action taken and result thereof may please be intimated.
In the Customs, Excise & Service Tax Appellate Tribunal, Mumbai
Shri T. Anjaneyulu, Member (Judicial)
Commissioner of Central Excise, Aurangabad
Rucha Engineering Pvt. Ltd.
Final Order No. A/791/WZB/2006/CIV/SMB dt. 6.6.2006 certified on
30.6.2006 in Appeal No. E/257/2005
Summary of the case: $
Interest - Supplementary Invoices - The assessee had cleared the
goods as per purchase order placed by their customer and paid excise duty
accordingly. After clearing the goods, the assessee had received the
amendment to the purchase order for enhancement of the rate with
retrospective effect. The assessee, therefore, calculated and paid the
differential duty by issuing supplementary invoices to the customer but
failed to pay interest under Section 11 AB of the Central Excise Act, 1944.
There is no case of any non-payment, short levy or short payment as
envisaged under Section 11A (1). The situation occurred in this case cannot
be compared with the Section 11A (2) as such it is held that the provisions
of Section 11 AB (2) (b) are not applicable. Accordingly, the appeal is
dismissed. (Paras.2, 5, 6)
Cases Quoted -
MRF Ltd. Vs. CCE, Madras 1997 (20) RLT 656 (SC) - Referred [Para 5]
Eicher DEMM Vs. CCE, Chandigarh 2001 (47) RLT 275 (CEGAT-Del.) - Referred [Para 5]
W.S. Industries (I) Ltd. Vs. CCE, Ban. 2002 (141) ELT 0278 (Tri.) - Referred [Para 5]
Advocated By -
Shri C. Lama, JDR for Appellants
None for Respondents
Per T. Anjaneyulu:
Heard both sides.
2. The respondents are called absent. No representation for them. In the
instant case, show cause notice dated 26.4.2004 was issued to the assessee
alleging that the assessee had failed to pay interest leviable on differential
duty paid by them by issuing supplementary invoices to the customer. The
assessee had cleared the goods as per purchase order placed by their
customer i.e. M/s. Bajaj Auto Limited and paid excise duty accordingly. After
clearing the goods, the assessee had received the amendment to the
purchase order for enhancement of the rate with retrospective effect. The
assessee, therefore, calculated and paid the differential duty by issuing
supplementary invoices to the customer but failed to pay interest under
Section 11 AB of the Central Excise Act, 1944. The period relates to January
2004 and interest has been worked out to Rs. 1,37,001/-.
3. The assessee's contention is that they have paid appropriate duty at
the time of clearance of the goods as such there was neither short levy nor
short payment of duty and application of Section 11AB does not arise.
4. After due consideration of the matter, the demand was confirmed by
the Assistant Commissioner of Central Excise & Customs, Aurangabad. On
filing the appeal, the Commissioner (Appeals) set aside the impugned order
passed by the Assistant Commissioner.
5. It is the observation of the Commissioner (Appeals) that in order to
invoke the provisions of Section 11 AB there must be an order of
determination of duty under Section 11A (2) or else the duty must have
been paid on their own account in the manner prescribed under Section 11
AB (2). Further, it is observed that there is no case of any non-payment,
short levy or short payment as envisaged under Section 11A (1). The
situation occurred in this case cannot be compared with the Section 11A (2)
as such it is held that the provisions of Section 11 AB (2) (b) are not
applicable. The Commissioner also relied upon the following case law: -
(a) MRF Ltd. Vs. CCE, Madras-1997 (20) RLT 656 (SC)=1997(03)LCX0074
Eq 1997 (092) ELT 0309 (SC)
(b) Eicher DEMM Vs. CCE, Chandigarh-2001 (47) RLT 275 (CEGAT-
Del.)=2001(09)LCX0149 Eq 2002 (140) ELT 0227 (Tri. -Del.)
(c) W.S. Industries (I) Ltd. Vs. CCE, Bangalore-2001(12)LCX0151 Eq
2002 (141) ELT 0278 (Tri.)
6. After consideration of the matter at length, I am also of the view that
Section 11 AB (1) of the Central Excise Act is not applicable to the present
situation. Hence, no merit in the appeal filed by the Revenue. Accordingly,
the appeal is dismissed.
Pronounced in Court.
Equivalent 2006 (077) RLT 0335 (CESTAT-Mum.)