2014 (10) TMI 445 - HC - Central Excise

Challenge to levy of interest - finalization of provisionsal assessment - differential duty - period from June 1996 to February 2000 - Notification No.68/63-CE dated 4th May, 1963 - Liability for interest - Petitioners contend that circular of 21st June, 2001 clarifies that the interest is chargeable under Rule 7 only when the provisional assessment is finalised after 1st July, 2001. In the present case, the Petitioners contend that for the period April 1998 to June 2001 being prior to 1st July, 2001, no interest is payable. - Held that - Petitioner has retained money owing to the Respondents without authority of law and engaged the Respondents in a series of litigations. They then filed Civil Appeals before the Supreme Court which were disposed of on 16th October, 2012 with liberty to file Review Petition. The Review Petition was filed on 19th October, 2012. The review petition came to be dismissed on 27th November, 2012. The Petitioners did not stop there. They then filed a curative petition on or about 2nd January, 2013 which came to be dismissed on 20th February, 2013. Thus, at every opportunity the Petitioners sought to defeat the Revenue s right to amount of duty and there is no reason for the Petitioners to be excused from paying interest. - it is matter of record that the demand for interest in the present case does not emanate purely from the statute but from negotiated demand for instalments pursuant to the final order of the Hon ble Supreme Court fixing liability to pay the principal amount. Had the Petitioners paid the entire sum as on the date of the order of the Supreme Court they may have been in position to contend in the facts of the present case that no interest is liable to be paid. However, we clarify that this observation is made specifically in the facts and circumstances of the present case and not to be considered as precedent of any kind. Liability to pay interest being reiterated in the acceptance of the proposal for instalments and the Petitioners having acted upon the same, the Petitioners are bound to pay interest at the rate of 18% per annum from the date of the order of the Supreme Court dated 29th August, 2012 till the date of realisation as demanded pursuant to Notification No.5/2011 Central Excise (NT) dated 1st March, 2011 read with CBEC circular No.208/42/96-CX dated 2nd May, 1996. While computing the interest the Respondents shall consider whether or not the payments were made towards principal sum and following the rules of appropriation of payments in this behalf by crediting the instalments to principal amounts and charging interest on the balance amount after each instalments was paid and appropriated and arriving at interest amount of the liability - Decided against assessee.

Issues Involved:
1. Legality of the recovery of Rs. 49.28 crores and the demand notice dated 29th October 2012.
2. Validity of notification No.68/63-CE dated 4th May 1963.
3. Validity of the letter dated 5th September 2012 demanding Rs. 311,16,49,260/- along with interest.
4. Applicability of interest on the amounts due under the Central Excise Act, 1944.
5. Legality of the demand for interest on the finalised provisional assessment.

Issue-wise Detailed Analysis:

1. Legality of the recovery of Rs. 49.28 crores and the demand notice dated 29th October 2012:
The Petitioners challenged the recovery of Rs. 49.28 crores and the demand notice dated 29th October 2012 as ultra vires of the Central Excise Act, 1944, and violative of Articles 14 and 19(1)(g) of the Constitution of India. They argued that no interest is chargeable under the provisions of the Act and sought a refund of amounts collected in excess by the Respondents. The court, however, found that the Petitioners were liable to pay the amount as directed by the Supreme Court and that the demand for interest was legitimate and sustainable.

2. Validity of notification No.68/63-CE dated 4th May 1963:
The Petitioners contended that notification No.68/63-CE dated 4th May 1963, which made section 142(1)(c)(ii) of the Central Excise Act, 1944 applicable to them, was illegal, without jurisdiction, and ultra vires of the Central Excise Act, 1944. The court did not find merit in this contention and upheld the validity of the notification.

3. Validity of the letter dated 5th September 2012 demanding Rs. 311,16,49,260/- along with interest:
The Petitioners questioned the validity of the letter dated 5th September 2012 issued by the Assistant Commissioner of Central Excise, Kurla Division, Mumbai-I, demanding Rs. 311,16,49,260/- along with interest. The court found that the demand for interest was made only after the order of the Supreme Court, which crystallized the liability. The court held that the demand for interest was legitimate and sustainable.

4. Applicability of interest on the amounts due under the Central Excise Act, 1944:
The Petitioners contended that no interest was payable on the amounts due as the provisional assessment was finalized before the introduction of the provision for charging interest on 1st July 2001. The court, however, held that the demand for interest was legitimate as the liability to pay interest was reiterated in the acceptance of the proposal for instalments and the Petitioners had acted upon the same. The court directed that interest be paid from the date on which it was first demanded by the Respondents, namely 5th September 2012.

5. Legality of the demand for interest on the finalised provisional assessment:
The Petitioners argued that the demand for interest was unsustainable under section 11A as the duty confirmed by the Supreme Court was not an amount determined under section 11A nor an amount being paid voluntarily. The court, however, held that the interest was not demanded under section 11AA but pursuant to the instalments facility granted in accordance with the Notification dated 2nd May 1996. The court found that the Petitioners were liable to pay interest at the rate of 18% per annum from the date of the order of the Supreme Court dated 29th August 2012 till the date of realization.

Conclusion:
The court dismissed both writ petitions, holding that the Petitioners were liable to pay the amounts due along with interest. The court directed the Petitioners to pay costs to the Respondents quantified at Rs. 50,000/- within four weeks from the date of receipt of a copy of the judgment.

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