IMPORTANT POINT
Interest is leviable on differential duty.

O R D E R

Delay condoned.

2. Leave granted.

3. In this case, Department seeks to recover interest on differential duty, paid by the assessee, under Section 11AB of the Central Excise Act, 1944, which is disputed by the assessee.

4. During the relevant Assessment Years, assessee supplied auto parts to their customers [manufacturers of motor vehicles], such as Tata Motors, Mahindra and Mahindra and Piaggio Vehicles Private Limited - who determined the prices of auto parts having regard to the cost of raw material, manufacturing cost, profit margin, etc. and placed orders with the assessee. In case of Tata Motors, orders were placed through internet under a software system known as “SRM”.

5. Since price difference arose between the price on the date of removal and the enhanced price at which the goods stood ultimately sold, the Department issued a show-cause notice proposing to levy interest on the differential duty, paid by the assessee, under Section 11AB of the Central Excise Act, 1944 [‘Act’, for short].

6. The case of the assessee, before us, was that such interest was not leviable under Section 11AB of the Act, particularly in view of the fact that prices indicated in the purchase orders were final during the period of supply of goods. According to the assessee, in the present case, the Department has accepted the position that the prices in the purchase orders were final. Further, according to the assessee herein, there was no price variation clause in the purchase orders, therefore, there was no scope for increase in prices subsequently and that too, retrospectively. In short, according to the assessee, prices indicated in the purchase orders were final and not liable to change at the time of removal of goods. It was submitted that, in the circumstances, the present case was not a case of short-levy or non-levy of the goods removed by the assessee calling for recovery under Section 11A of the Act, hence, this was not a case for charging of interest under Section 11AB of the Act. Learned counsel appearing on behalf of the assessee submitted that this case is squarely covered by the judgement of three learned Judges of this Court in the case of M.R.F. Limited vs. Collector of Central Excise, Madras,1 reported in [1997] 92 E.L.T.309.

7. We find no merit in the submissions advanced on behalf of the assessee. The controversy arising in this civil appeal is squarely covered by the judgement of this Court in the case of Commissioner of Central Excise, Pune vs. SKF India Limited,2 reported in [2009] 239 E.L.T.385. We quote hereinbelow relevant observations made in the case of SKF India Limited [supra], which reads as follows:

“9. Section 11A puts the cases of non-levy or short levy, non-payment 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 mis- statement 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. Section 11A, 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 short payment etc. of duty is by reason of fraud collusion etc. are dealt with under sub-section (1A) of section 11A and the cases where the non-payment or short payment of duty is not intentional under sub-section (2B).

10. Sub-section (2B) of section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the