1. Interest leviable on subsequent payment of duty under supplementary invoice

Facts

The assessee was engaged in the manufacture and sale of ball-bearings and textile machine parts. It sold goods manufactured by it on certain prices on payment of excise duty leviable on the price at which the goods were sold. Later on, there was a revision of price with retrospective effect. Following the revision, the assessee demanded from its customers the balance payment by issuing to them supplementary invoices. While it paid the differential duty on the goods sold earlier, it did not pay interest thereon. Revenue was of the view that interest also was payable, hence after losing before the Commissioner (Appeals) and Tribunal, it filed an appeal before the Hon’ble Supreme court.

Held

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, followed that at the time of sale, the goods carried a higher value and they 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. Thus it was clearly a case of short payment of duty, though completely unintended, and without any element of deceit etc. The payment of differential duty clearly came under sub-section (2B) of section 11A and attracted levy of interest under section 11AB of the Act. The decision of the Hon’ble Bombay High Court in the case of Rucha Engineering was overruled.

Commissioner of Central Excise vs. SKF India Ltd. – 2009 (239) E.L.T. 385 (SC).

2. Interest payable on goods remaining in warehouse beyond the interest free period even if goods imported under DEPB scheme as debit in DEPB scheme is payment of duty

Facts

Assessee held private bonded warehouse under section 58 of the Customs Act, 1962. It received the goods in the warehouse from the customs bonded warehouse under the transfer bond. The goods were cleared from the warehouse by filing ex-bond bill of entry and paying duty by debiting DEPB scrip. The Bill of entry was assessed and the assessee was asked to pay interest on clearance of goods beyond the period of 90 days as per section 61(2)(i) of the Customs Act. The payment of interest was disputed on the ground that the goods cleared against DEPB scrip were exempt under a notification issued under section 25 of the Customs Act. Hence, no interest was leviable. The dispute came up before the Madras High Court.

Held

In case of import under DEPB scheme, exporters are issued DEPB scrips which allows specific amounts to be utilized for payment of customs duty. Hence, the importers using DEPB scrips, pay duty not by cash but by way of credit. Therefore, goods cleared under DEPB scrip cannot be treated as exempted goods but have to be considered as duty paid goods, unlike in that of DEEC scheme as held by the Hon’ble Supreme Court in the case of Indian rayon & Industries Ltd. reported in 2008 (87) RLT 723 (SC). Consequently, the assessee was required to pay interest for delay in payment of duty.

Tanfac Industries Ltd. vs ACC – 2009 (93) RLT 865 (Mad.)

3. Penalty under section 11AC- reduction of penalty to 25% if paid duty and interest within 30 days permissible under second proviso to section 11AC upheld by Gujarat High Court

Facts

Assessee has paid the duty in January, 2002 and an adjudication order was passed in February 2004, under which a penalty of 100% was imposed by the adjudicating authority with an option to pay reduced penalty of 25%, if duty with interest was paid within 30 days, in terms of second proviso to section 11AC. Assessee carried the matter to Commissioner (Appeals) but did not succeed. In further appeal to Tribunal, the Tribunal reduced the penalty to 25%, namely, from Rs.1,03,628/- to Rs. 25,907/-. Department challenged the said order before the High Court.

Held

The amount paid prior to the raising of a demand has to be considered as having been paid in compliance with the first proviso to section 11AC and, accordingly, the equivalent penalty under section 11AC of the Act will get reduced to 25%, if an assessee complies with the second proviso to section 11AC. Accordingly, the revenue’s appeal was dismissed and the reduction of penalty to 25% by the Tribunal was upheld.

CCE, Ahmedabad vs Akash Fashion Prints Pvt. Ltd. – 2009 (93) RLT 471(Guj-HC).

4. Transfer of credit on shifting of factory permissible even if stock of inputs not available, having been used up

Facts

Assessee is a manufacturer of plastic multilayer tubes & closers falling under Chapter 39. It was availing Credit of duty paid on inputs & capital goods. On transfer of the factory from Pondicherry to its own unit in Gujarat, it applied for transfer of unutilized credit from Pondicherry to Gujarat unit. Dept issued an order rejecting the request for transfer of credit, which was challenged. In the Tribunal, the assessee’s appeal was allowed quoting the provisions of Rule 10 of Cenvat Credit Rules, 2004. The Revenue filed an appeal before the High Court, challenging the Tribunal’s order.

Held:

Though no stock of inputs or capital goods was available on the date of transfer, the transfer of Cenvat credit was permissible as the availability of inputs is extraneous to the provisions of Rule 10. The Revenue’s appeal was, therefore, dismissed.

CCE, Pondicherry vs. CESTAT - 2009 (240) ELT 367 (Mad-HC)

5. Principles of unjust enrichment not applicable to refund of redemption fine or/and penalty

Facts

Assessee had filed a claim for the refund of redemption fine paid consequent upon an adjudication order which was subsequently set aside in India. Both Commissioner (Appeals) and CESTAT rejected the refund claim on the ground that the appellants had not discharged the burden of proving that they had not passed on the incidence of the redemption fine to any other person. The refund amount was directed to be credited to the Consumer Welfare Fund. Assessee, therefore, filed an appeal before High Court.

Held

The principles of unjust enrichment do not apply in case of redemption fine and penalty. As the Act imposes restriction only on refund of ‘duty’ under section 28 of the Customs Act, the principles of “unjust enrichment” is not applicable to redemption fine imposed under the said Act.

United Spirits Ltd. vs Commissioner of Customs, Mumbai - 2009 (240) ELT 513 (Bom-HC).