2005 (2) TMI 146 - HC - Central Excise

Summary

Issues:
Jurisdiction of respondent authorities to levy interest on delayed payment of cess under the Oil Industry (Development) Act, 1974.

Analysis:

1. The writ petition challenged the jurisdiction of the respondent authorities to levy interest on alleged delayed payment of cess under the Oil Industry (Development) Act, 1974. The petitioner contended that duty of excise in the form of cess should be collected on the quantity received in refineries, as per Section 15(2) of the Act. There was a fundamental difference highlighted between the payment of cess on crude oil under the OID Act and goods under the Central Excise Act, emphasizing the point at which the quantity is ascertained for payment of cess. The petitioner faced difficulties in obtaining authenticated receipt of quantities from refineries in time, leading to disputes with the authorities regarding the payment process.

2. The respondent authorities modified the payment procedure outlined in a Trade Notice and directed the petitioner to make payments based on the quantity despatched during the month, with reconciliation to be done upon receiving quantity data from refineries. The authorities prescribed a due date for payment based on Central Excise Rules, leading to disputes regarding the jurisdiction of the second respondent to determine the due date contrary to a specific government notification. The petitioner sought direction for authorities to follow the government's notification regarding payment of cess, raising questions of jurisdiction and applicability of relevant provisions of the Central Excise Act to cess under the OID Act.

3. The petitioner sought interim relief against the recovery of interest levied for delayed payment of cess based on Rule 8 of the Central Excise Rules. The petitioner relied on a Supreme Court judgment stating that interest can only be levied on delayed payment of tax if the statute provides for it. The respondent authorities justified the levy of interest by invoking the provisions of the Central Excise Act and rules made thereunder, which were made applicable to the OID Act for the levy and collection of duties.

4. The High Court, after considering the contentions, held that the Oil Industry (Development) Act, 1974, did not provide for the levy of interest for delayed payment of cess. While the provisions of the Central Excise Act were made applicable for procedural purposes, the substantive law applicable was the OID Act. As there was no substantive provision in the OID Act for the levy of interest, the court found a prima facie case in favor of the petitioner. Accordingly, the court issued interim directions preventing the coercive recovery of interest demanded by the authorities pending the disposal of the writ petition.