Interest On Supplementary Invoices
A point raised in the RAC Meeting of Mysore Central Excise Zone on 06.04.2016:
Due to the fluctuations in the Raw Material Market final products prices are changed on the quarterly basis with retrospective effect. Ultimately we have to demand through supplementary invoices for additional difference of price. However, department charges us Interest on delayed invoices& delayed payment, this is un-justice to the MSME units.
The Department explained:
It is an undisputed fact that where any duty of excise has not been paid or levied or has been short levied or short paid or erroneously refunded or the differential duty has to be paid when supplementary invoices are issued by the assessee, then all such duty would have to be paid along with interest u/s 11AA. Show Cause Notices are being issued to various assesses, on the issue of non-payment of Interest on the differential duty paid on the Supplementary invoices raised for price escalation after the initial clearance of goods from the factory in view of Section 11AA of the Central Excise Act, 1944 and the case law of M/s SKF India Ltd., 2009-TIOL-82-SC-CX.
The apex court has clearly stated that·
"It is to be noted that 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, follows that at the time of sale the goods carried a higher value and those 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. Seen thus it was clearly a case of short payment of duty though indeed completely unintended and without any element of deceit etc. The payment of differential duty thus clearly came under sub-section (2B) of section 11A and attracted levy of interest under section 11AB of the Act."
However now the Hon'ble Supreme Court of India has doubted the correctness of the case law of M/s SKF India Ltd., on the aforesaid issue and has referred the case relating to M/s Steel Authority of India Vs. CCE, Raipur, , to the Larger Bench of the Apex Court.
The Department concluded:
As per the existing provisions if there was a delayed payment, interest has to be paid but as the issue has been reopened by the Hon'ble Supreme Court, the final decision is awaited.