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Judgment
Prabha Sridevan, J.—In this civil miscellaneous appeal, the following substantial questions of law are framed for consideration.
(i) Whether Rule 8 of the Central Excise Rules, 2001 or Rule 173G(1)(d) of Central Excise Rules, 1944 is applicable to the facts and
circumstances of the case, where it is not the delay in payment of duty on fortnightly basis.
(ii) Whether the first respondent - Tribunal is right in holding that Rule 173G(1)(d) of C.E. Rules and/Rule 8 of CE Rules, 2001 are applicable to
the present case?
The appellant is the manufacturer of HSD bars falling under Ch. No. 721490 of Central Excise Tariff. Their products are cleared with their
consignment agent, stock transfer sales (depot) and on conversion which are referred as ""outlets"". At the time of clearance of the goods from the
factory gate, they adopt the market value as assessable value for payment of duty and subsequently on receipt of information regarding the value at
which the three outlets have sold the said product, the assessee works out and pay the differential duty.
A show cause notice was issued on 27.2.2003 calling upon the appellant to show cause as to why interest should not be demanded from them
under the earlier Rule 173G(1)(d) and Rule 8 of the Central Excise Rules 2001/2002. In reply, they gave their worksheet and they also stated that
since the nearest value of the goods at the same time at the depot was not available, they had adopted the market value as applicable at the time of
clearance as the assessable value and paid duty accordingly. Subsequently on receipt of information from the outlets, they worked out and paid the
differential amount. According to them the applicable rule is Rule 7 of the Central Excise Valuation Rules, 2000 and that they relied on the said rule
to show that when the goods are not sold at the factory gate, then the value of the goods shall be the value at the time nearest to the time of
removal from the factory gate, if the value of such goods sold from the depot is not available. According to them they were not liable to pay any
interest, since they had paid the differential duty even before the show cause notice.
In the order in original, it was held that the assessee had to pay interest for the entire period, since they have not followed Rule 7 of the Central
Excise Valuation Rules. The Commissioner (Appeals) recorded the following facts as admitted.
Admittedly the appellant is clearing the consignment from factory gate to Depot/ consignment agent, adopting market value, as the price at the
Depots/consignment agent, is not available. On receipt of information from the consignment agents/depots who sold the product, to the customers
the Appellant works out the differential duty payable on the excess value adopted by their outlets.
and therefore came to the conclusion that the appellant had, on their own volition, worked out the differential duty and paid the same to the
department without waiting for instructions from the department and it is only after payment of the differential duty, that the department had issued
the show cause notice. The Commissioner (Appeals) also held that the appellant had acted in a bona fide manner and the excess payment was still
retained by the department and therefore the demand of interest appears to be incorrect.
Against this, the department went on appeal. It is a short order. Even the Tribunal had held that when they paid duty, there was short payment.
It was also recorded that the payment was voluntary and there was no suppression or criminal or quasi criminal element in the conduct of the
assessee. However the Tribunal had held that the differential amount of duty was paid long after the due date of payment. We are unable to see
how the Tribunal came to this conclusion when the Commissioner (Appeals) recorded that the appellant had paid the differential duty without even
waiting for any instruction from the department and that in fact it is only on payment of the differential duty that the department got seized of the
issue and had issued the show cause notice.
We find that in an almost identical case in Commissioner of Central Excise, Aurangabad v. Rucha Engineering Private Limited 2008(223) E.L.T.
161 (BOM.), the assessee, who was a manufacturer of motor vehicle parts had cleared the goods as per the Purchase Order placed with them by
their customers and had paid the Central Excise duty. After clearance of the goods, the assessee received the amendment to the said Purchase
Order for enhancement of rate with retrospective effect. Therefore on the basis of the supplementary invoice, he paid the differential duty. The
Bombay High Court after quoting Rule 11AB of the Central Excise Act, 1944 held:
It is evident that the section comes into play if the duty paid/levied is short. Both, the Commissioner (Appeals) and the CESTAT have observed
that the assessee paid the duty on its own accord immediately when the revised rates became known to them from their customers. The differential
duty was due at that time i.e. when the revised rates applicable with retrospective effect were learnt by the assessee, which was much after the
clearance of the goods and therefore, question of payment of interest does not arise as the duty was paid as soon as it was learnt that it was
payable.
...but this is the case wherein the assessee upon learning that the rates of the goods cleared were revised/escalated and therefore, they are liable
to pay more duty than already paid at the time of clearance of the goods, has voluntarily paid the duty. Thus there is no delay. This is, therefore,
not a case where duty of excise has not been paid or short-paid.
and therefore dismissed the appeal filed by the revenue.
In this case it is true that there is no supplementary invoice. But the Commissioner (Appeals) had recorded that if the goods were not sold at or
about the same time from the place where the goods were transferred, then the value will be the normal transaction value at the time nearest to the
time of removal of goods under assessment. Rule 7 reads as follows:
Rule 7:- Where the excisable goods are not sold by the assessee at the time and place of removal but are transferred to a depot, premises of a
consignment agent or any other place or premises (hereafter referred to as ""such other place"") from where the excisable goods are to be sold after
their clearance from the place of removal and where the assessee and the buyer of the said goods are not related and the price is the sole
consideration for the sale, the value shall be the normal transaction value of such goods sold from such other place at or about the same time and,
where such goods are not sold at or about the same time, at the time nearest to the time of removal of goods under assessment.
In this case, since it has been admitted that the value of the goods sold from the depot was not available, the appellant had adopted the value
nearest to the time of removal of goods under assessment and paid the differential duty in respect of the actual price of the goods sold.
The Commissioner (Appeals) had held that Rule 173G(1)(d) of Central Excise Rules, 1944 and Rule 8 of Central Excise Rules, 2001/2002 can
only be invoked where there was failure in Fortnightly/monthly payment of duty and there is no finding that there was such failure. Therefore the
above questions of law are answered in favour of the appellant. The order of the first respondent is set aside and the appeal is allowed. No costs.