Supplementary Invoices – Differential Duty - Interest Payable
IT is a general practice among the trade, especially those who use the raw materials which are susceptible to price fluctuations to have a price escalation clause in the purchase orders. The price of the finished goods is revised based on the raw material prices and the differential amounts are collected by what are popularly known as "supplementary invoices". These invoices are issued for collecting the additional amounts and excise duty is also paid on such additional amounts collected after the goods were cleared from the factory. The dispute was, whether the assessee is liable to pay interest under Section 11 AB of the Central Excise Act by treating the differential duty paid on the supplementary invoices as duty short paid. The matter was referred to Larger Bench in 2008-TIOL-575-CESTAT-MAD.
The Larger Bench referred the matter to a still Larger of Five Members in the now hanging in suspense Lucas case - 2008-TIOL-1843-CESTAT-MAD-LB.
It seems the 5 Member Larger Bench is ready with its decision, but is yet to be pronounced. Before that, a lot of judicial activity took place. The Bombay High Court in the Rucha Engineering case - held that no interest is payable.
Based on this Rucha case, the Punjab and Haryana High Court in the Polyplastics case - held that no interest was payable. Identical has been the decision of the same High Court in the case of Goodyear India Ltd - 2009-TIOL-55-HC- P&H-CX. But the High Court was not aware that Rucha Engineering had been set aside by the Supreme Court and remanded to the Tribunal.
So the situation was that we have
1. A High Court order that has been set aside and remanded.
2. Two High Court orders following the above High Court order which had been set aside.
3. A matter pending pronouncement of order by a Five Member Bench of the CESTAT.
Obviously, the issue is PENDING.
But in the Meantime, the matter was before the Supreme Court in another appeal and the Supreme Court recently pronounced its judgement holding that interest is payable.
I asked a Lawyer friend of mine as to what would happen to the Five Member Bench decision (yet to be pronounced) of the CESTAT. He said, “even if it is a Fifteen Member Bench, its decision is irrelevant, once the Supreme Court has given its decision”.