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

Citation: [2015] 10 S.C.R. 938 · Decided: 07-12-2015 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Matter referred to larger bench

Judgment (excerpt)

(2015] 10 S.C.R. 938 
A 
M/S. STEEL AUTHORITY OF INDIALTD. 
B 
v. 
COMMISSIONER OF CENTRAL EXCISE, RAIPUR 
(Civil Appeal No. 2150 OF 2012) 
DECEMBER 07, 2015 
[A.K. SIKRI AND R. F. NARIMAN, JJ.] 
Central Excise Act, 1944 - s. 11 AB - Interest on delayed 
C payment of duty- Supplementary invoices raised by seller 
due to price increase by virtue of price variation clause in 
the sale contract- Differential duty paid by seller on value of 
such supplementary invoices- Payment of interest u/s. 11 AB 
on the said differential duty- Held: As on the date when the 
D goods were cleared, there was no certainty that there would 
be price escalation - It is impossible to expect the assessee 
to pay the excise duty, at the time of clearance of the goods, 
on the basis of price escalation that took place at a later date 
in future - Thus, as on the date of clearance when excise 
E duty was paid, it could not be treated as 'short paid' on the 
said date - As a consequence when the principal amount, 
namely, the excise duty itself was not payable· (on the 
differential) on the date of clearance of the goods, there cannot 
be any question of law to pay interest - However, Supreme 
F 
Court in earlier decisions-SKF and International Auto case 
held that interest would be payable on the duty paid on 
supplementary invoices - The said Bench did not consider 
the effect of the expression 'ought to have been paid' occurring 
in s. 11 AB - Thus, the decision in SKF and International Auto 
G case needs re-consideration - Matter referred to the larger 
Bench. 
Referring the matter to the larger Bench, the Court 
H 
HELD: 1.1 The assessee had discharged the excise 
938 
STEEL AUTHORITY OF INDIALTD.v. 
939 
CMMNR. OF CENTRAL EXCISE, RAIPUR 
duty on t~e goods cleared by it on the basis of invoices A 
raised indicating the value of these goods and as on the 
date of the clearance of these goods. "Fhe price declared 
in the said invoice was the transaction value of the goods 
in terms of Section 4 of the Central Excise Act, 1944 
inasmuch as that was the price fixed between the parties B 
at which the goods were to be supplied at the time and 
place of removal. The occasion for differential duty arose 
at a later date due to price variation clause in the contract 
for sale. The moment the assessee received the 
enhanced price due to price escalation, it paid differential C 
duty on its own immediately on receipt of the said price. 
[Para 7) (946-F-H] 
1.2 Interest under Section 11AB can be levied/ 
. charged where any duty of excise has not been levied D 
or paid or has been short levied or short paid. In such 
an event, interest is liable to be paid 'from the first date 
of the month succeeding the month in which the duty 
ought to have been paid'. Section 4(1 )(a) of the Act 
provides that the value of the goods shall be the price E 
'actually paid or payable' for the goods. This means the 
price which has been 'paid' or 'agreed to be paid' by the 
buyer of the goods. For the purposes of Section 11AB, 
the expression 'ought to have been paid' would mean F 
the time when the price is agreed upon by the seller and 
the buyer. In other words, the right of the seller to receive 
the revised price crystallises only when the buyer agrees 
to sanctions the same, and only at that time can liability 
to pay duty, if at all, on the revised price arise. Both parties G 
are not aware of the final price at the time when the goods 
are removed. In the context of price revision subsequent 
to clearance, duty 'ought to be paid' only after the 
sanctioning of the revised priced by the buyer. The 
differential duty·on·account of price revision is paid in H 
940 
SUPREME COURT REPORTS 
[2015] 108.C.R. 
A the month when the revised price is agreed between the 
seller (as~essee) and the buyer and it ought to have been 
paid only at that time and not before. [Para 19) [958-C-H] 
1.3 One has also to keep in mind the difference 
B between 'what should be the quantum of duty to be paid' 
and 'when such duty is payable'. In the cases price 
revision, the quantum of duty would be on the escalated 
price but the time for payment of differential duty is when 
the parties agree for the escalation in prices. On that 
C reckoning, it would follow that interest clock for 
differential duty will start ticking from the date differential 
duty is due, i.e., the date of agreement of escalated prices 
and not before. This concept was clarified with the latest 
amendment in 2015 t

Excerpt shown. Read the full judgment & AI analysis in Lexace.