2013 (2) TMI 37 - HC - Central Excise

Levy of interest for delayed payment of cess - Whether in the absence of levy provisions under the Oil Industry (Development) Act, 1974,(OID) the Revenue can apply the provisions of Section 11-AB of the Central Excise and Salt Act, 1944 and demand interest? - Held that - As decided in Khemka & Co. s case (1975 (2) TMI 91 - SUPREME COURT OF INDIA) the provision in the State Act imposing penalty for non-payment of income-tax within the prescribed time is not attracted to impose penalty on dealers under the Central Act in respect of tax and penalty payable under the Central Act. There is no lack of sanction for payment of tax. Any dealer who would not comply with the provisions for payment of tax, would be subjected to recovery proceedings under the Public Demands Recovery Act. A penalty is a statutory liability. The Central Act contains specific provisions for penalty. Those are the only provisions for penalty available against the dealers under the Central Act. Each State Sales Tax Act contains provisions for penalties. It is rightly said that those provisions cannot apply to dealers under the Central Act because the Central Act makes similar provisions. The Central Act is a self-contained code which by charging section creates liablity for tax and which by other sections creates a liability for penalty and impose penalty. Section 9(2) of the Central Act creates the State authorities as agencies to carry out the assessment, reassessment, collection and enforcement of tax and penalty by a dealer under the Act. Thus respectfully follow the decisions of in Khemka & Co. s case (supra) and India Carbon s case 1997 (7) TMI 566 - SUPREME COURT OF INDIA) hold that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf. Since the provisions of the OID Act do not contain any provision for levy of interest on delayed payments of cess, the respondents are not entitled to demand that the petitioner pays interest on the alleged delayed payments of cess. Also in complete agreement with the decision in Devi Dass Gopal Krishan s case (2000 (12) TMI 108 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH) there is nothing in the language of Section 15(4) of the OID Act from which it can be inferred that it authorises the Central Government to charge interest on the delayed payment of cess. Section 11AA & AB was inserted in the 1944 Act with effect from 26.5.1995 by amending Act No. 22 of 1995. However, no corresponding amendment was made in Section 15(4) of the OID Act so as to empower the Central Government to charge interest in the case of default in the payment of cess.Therefore, Section 11AA/11AB of the 1944 Act cannot be invoked by the respondents for charging interest on the delayed payment of cess by the petitioner - in favour of assessee.

Summary

Issues Involved:
1. Whether the Revenue can apply the provisions of Section 11-AB of the Central Excise and Salt Act, 1944, to demand interest for delayed payment of cess under the Oil Industry (Development) Act, 1974.
2. Determination of the due date for payment of cess on crude oil.
3. The applicability of the Central Excise Rules to the payment of cess under the OID Act.
4. The authority of the respondents to levy interest on delayed payments of cess.

Issue-wise Detailed Analysis:

1. Applicability of Section 11-AB of the Central Excise and Salt Act, 1944:
The central issue was whether interest could be demanded for delayed payment of cess under the Oil Industry (Development) Act, 1974 (OID Act), using Section 11-AB of the Central Excise and Salt Act, 1944. The court noted that the OID Act did not provide for an independent mechanism for collecting cess and relied on the provisions of the Central Excise and Salt Act, 1944. However, the court held that interest could only be levied if the statute specifically provided for it. Since the OID Act did not contain any provision for the levy of interest on delayed payments of cess, the respondents could not demand interest based on the provisions of the Central Excise Act.

2. Determination of the Due Date for Payment of Cess:
The petitioner contended that the due date for payment of cess was not explicitly provided in the OID Act, and the cess was payable on the quantities received at the refineries. The Government of India had issued Circular No.18/88 prescribing the procedure for payment of cess, which allowed filing returns and payment of cess by the 20th of the following month. The respondents, however, insisted that the due date was the 5th of the following month as per Rule 8 of the Central Excise Rules. The court did not need to decide this issue conclusively because it held that no interest could be charged for delayed payment of cess, regardless of the due date.

3. Applicability of the Central Excise Rules:
The court examined whether the provisions of the Central Excise Act and Rules, including those relating to interest on delayed payments, applied to the cess under the OID Act. The court concluded that while the OID Act made the provisions of the Central Excise Act applicable "as far as may be," this did not extend to substantive provisions like the levy of interest, which required explicit inclusion in the OID Act. The court relied on precedents to assert that procedural provisions could not be used to impose substantive liabilities like interest without clear statutory authority.

4. Authority of Respondents to Levy Interest:
The court addressed the respondents' authority to levy interest on delayed payments of cess. It held that since the OID Act did not authorize the levy of interest and no corresponding amendments were made to include such provisions, the respondents lacked the authority to demand interest. The court cited previous rulings, emphasizing that penalties and interest must be explicitly provided for in the statute that imposes the tax or cess.

Conclusion:
The court allowed the writ petition, holding that the respondents were not entitled to demand interest on the alleged delayed payments of cess by the petitioner. The court emphasized that interest could only be levied if the statute specifically provided for it, and in the absence of such a provision in the OID Act, the demands for interest were invalid. The judgment reinforced the principle that substantive liabilities like interest must be clearly authorized by the statute imposing the tax or cess.