1995 (1) TMI 79 - HC - Central Excise

Summary

Issues Involved
1. Levy of interest on delayed payment of Central Excise duty.
2. Validity of administrative instructions for levying interest.
3. Applicability of Article 265 of the Constitution of India.

Summary of Judgment

Issue 1: Levy of Interest on Delayed Payment of Central Excise Duty
In W.P. No. 17002 of 1989, the petitioner, Delta Paper Mills Limited, challenged the levy of interest on delayed payment of Excise duty. The Tribunal held that there was no provision for the levy of interest under the Central Excise Act and set aside the order of the Collector demanding interest. Similarly, in W.P. No. 5479 of 1992 and W.P. No. 7203 of 1992, the petitioners contested the demand for interest on delayed payments, arguing that the Central Excise Act does not provide for such a levy.

Issue 2: Validity of Administrative Instructions for Levying Interest
The respondents argued that Rule 233 of the Central Excise Rules empowered the Central Board of Excise and Customs and Collectors to issue instructions for levying interest. However, the court found that none of the provisions of the Central Excise Act or Rules specifically empowered the authorities to levy interest on delayed payments. The court emphasized that any provision for levying interest must be explicitly stated in the statute.

Issue 3: Applicability of Article 265 of the Constitution of India
The court referred to Article 265, which states, "No tax shall be levied or collected except by authority of law." The court held that the levy of interest is part of the collection process and, therefore, must be authorized by law. The court cited various judgments to support the view that interest on taxes can only be imposed by legislative enactment and not by executive orders or administrative instructions.

Conclusion
The court concluded that the Central Excise Act does not confer the power to levy interest on delayed payments of Central Excise duty. Consequently, the demands for interest made by the respondents were deemed illegal and in violation of Article 265 of the Constitution of India. The writ petitions were allowed, and the demands for interest were set aside.