Extended Limitation Cannot Claimed by Department, In Absence Of Fraud, Mis-Statement, Contumacious Conduct Of Taxpayer: CESTAT

The appellant/assessee is in the business of manufacturing galvanised towers and structures, which are dutiable. The appellants supplied their goods, which were subject to a price escalation clause as per the purchase agreement, and deposited the differential excise duty, if any, upon finalisation of the price between the parties.

During the audit, it was observed that the appellant has issued supplementary invoices on the price variation finalisation in respect of the clearances made in the previous months. The appellant has paid the differential excise duty, including cess, against the price variation bills regularised for the goods cleared in the past on payment of duty. The Revenue issued show cause notices. As the appellants had not paid the amount of interest for the period from the date of the original invoice till the date of payment of differential duty, upon raising of the price variation bills/supplementary invoices, a show cause notice was issued demanding the amount of interest under Section 11 AB of the Central Excise Act read with Section 11 A (2B) of the Central Excise Act and a further penalty was also proposed.

Counsel for the appellant relied on the decision of Supreme Court in favour of Revenue in the matter of Steel Authority of India Limited in which the issue of chargeability of interest for the period from the date of the original invoice when the goods were cleared to the date of the supplementary invoice or price variation invoice, and payment of differential duty was raised.

Counsel for the appellant further urged that the challenge has been made to the levy of interest on the ground of limitation, urging that for want of condition precedent, the extended period of limitation is not available to Revenue. The transaction was duly recorded in the books of accounts maintained in the ordinary course of business and proper vouchers have been maintained. The appellant has been filing regular returns and paying the admitted taxes. Thus, the invocation of an extended period of limitation was bad as there was no element of fraud, misstatement, or contumacious conduct on the part of the appellant.

The Tribunal relied on a decision of the Delhi High Court in the case of Hindustan Insecticides Ltd., which was based on the ruling of the Supreme Court in the case of Commissioner Vs. T.V.S. Whirlpool Ltd., in which it was held that the benefit of the extended period of limitation was not available to the revenue as there was no element of fraud, mis-statement or contumacious conduct on the part of the appellant. Thus, the demand for interest is hit by a limitation.

Case Title: M/s. KEC International Ltd. Versus Commissioner of Central Excise

Citation: Excise Appeal No.742 of 2008 –SM

Dated: 15.03.2022

Counsel For Appellant: Advocate Alok Kothari

Counsel For Respondent: Authorised Representative Pradeep Gupta

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