2012 (9) TMI 565 - HC - Central Excise

Demand of interest on delayed payment of duty - demand has been raised after coming into force of Section 11-A and 11-B of the Central Excise Act Held that - Once the assessment was completed on 22-7-1994, the provision brought in force by the Act, 1996 will have no application to already adjudicated assessments - Once under law the tax is not recoverable, it cannot be justified merely because the party has paid some amount to avoid penal action in favor of assessee

Summary

Issues:
Challenge to notice demanding interest on delayed payment of duty assessed under the Central Excise Act and order attaching property for recovery of the demanded amount.

Analysis:
The petitioner invoked the writ jurisdiction of the Madras High Court seeking to quash a notice dated 18-10-2004 and 5-10-2005 demanding interest on delayed payment of duty assessed under the Central Excise Act. Additionally, the petitioner challenged the order dated 1-2-2006 attaching the property for recovery of the demanded amount. The impugned notices and order were contested on the grounds that the provisions of Sections 11-A and 11-B were enforced post the completion of assessment on 22-7-1994. The petitioner contended that the adjudicated amount had been paid before the relevant legislative amendments. Citing a judgment of the Division Bench of the Court, the petitioner argued that the impugned notices and order lacked jurisdiction due to the absence of retrospective effect of Sections 11-A and 11-B.

In a related judgment by another judge, it was held that the imposition of penal interest under Section 11AB of the Central Excise Act was not applicable to clearances made before the enactment of the relevant amendment. The Tribunal's decision emphasized that penal interest could not be levied if it was not in force at the time of the clearances. The judgment highlighted the importance of applying the law that existed at the time of the transactions unless expressly provided otherwise by subsequent amendments with retrospective effect.

The Court, after considering the arguments, found merit in the petitioner's contention that the provisions introduced by the Act in 1996 had no application to assessments already finalized in 1994. The Court referred to a previous decision in a similar case to support the petitioner's claim. The respondents contended that the demand was valid post the enforcement of Sections 11-A and 11-B; however, the Court disagreed, emphasizing that once an assessment was completed under the previous law, subsequent amendments did not apply retrospectively.

Furthermore, the respondents argued that the petitioner, having paid a portion of the amount, was estopped from challenging the impugned orders. The Court rejected this argument, asserting that there is no estoppel against the law, and if the tax is not recoverable under the law, payment to avoid penal action does not justify the demand. Consequently, the Court allowed the Writ Petition, quashed the impugned notices and attachment order, and directed the refund of the amount already paid by the petitioner within a specified timeline. The Court ordered no costs to be incurred in this matter.