Issue of Show Cause Notice for demanding interest and power of adjudication of such cases - CBEC relies on a non existent letter
It has been noticed that there is a practice in certain industries, especially those manufacturing motor vehicle parts, that many a time vendors raise supplementary invoices on account of revision of prices. The differential duty is paid by the vendor on the value of such supplementary invoices but interest is not paid on said differential duty.
This is the issue and Board says it had examined the issue and by letter F.No.574/CE/5/Misc.2003, dated 28.07.2003 clarified that interest under section 11AB of the Central Excise Act, 1944 is payable on such differential duty.
The fact is Board had never issued such a letter. DDT is well aware that a couple of years ago there was an effort to trace this mysterious letter and they could not find it. Strangely, Board now relies on this non existent letter to advise the field on how to recover interest.
There is no equity in taxation. If for any reason, the assessee has to refund some money to his customer, he will not get a refund from the department, but if his customer pays him some money after some time, he has to pay duty as well as interest.
Now how is this interest recovered? We had carried an article three years ago, SECTION 11AB : WHETHER RECOVERY PROVISIONS NEEDED
So now Board clarifies
(i) It has been decided that where differential duty is paid without interest, in such cases, Show Cause Notices demanding interest and levy of penalty should be issued.
(ii) In the Show Cause Notice, the reference of duty already paid should also be given.
(iii) These cases should be decided by the proper officer based on the monetary limits fixed for the duty amount involved and not on the basis of the amount of interest.
(iv) The amount of duty on which interest has been paid, should be the monetary criterion for deciding the authority to decide such cases.
These are contained in Board’s instructions in F.No. -6 dated 18 December 2006.