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TMI Blog2008 (12) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... ce (issued much later) itself admits. The department invoked the provisions of Rule 8(3) (as amended with effect from 1-4-03) and demanded interest @ 2% per month, or Rs. 1000/- per day, whichever is higher, (subject to the maximum of duty in default). The details are as under : Amount of duty (Rs.) Due on Paid on Delay Interest paid (Rs.) Date of payment of interest Interest @ 2% per month (Rs.) 1,67,367 31-3-2003 27-6-2003 88 days 6,600 2-7-2003 9,684 1,54,440 31-3-2003 8-7-2003 99 days 6,500 8-7-2003 10,053 3,21,807 13,100 19,737 Interest @ Rs. 1000/- per day = 99,000 (99 days x 1000 per day) 2.2 Accordingly, the Department felt that the appellant assessee were liable to pay a total interest amount of Rs. 99,000/- (which is the greater of the two amounts shown in the above table i.e. 99,000 and 19,737; both being less than the duty in default) and issued them a show cause notice on 12-12-2006 (i.e. more than three years after the assessee had on their own pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 17-11-08 addressed to this office, the appellants stated that they have been saddled with a huge amount of duty (??) demand which prima facie is not sustainable in law and because of this huge demand they have been left in the realm of uncertainty . In view of this position as stated by them, they requested for an early hearing. Their request was granted and this office fixed an early hearing for them on 17-12-08 which was intimated to them vide this office letter dated 27-11-08, a copy of which was also sent to the respondent (ACCE, Cossipore Divn.). 3.3 When the case was taken up for hearing on 17-12-08, it was noted that neither side is present for the hearing. The office informed me that the appellants have sent a letter dated 15-12-08. I have seen the said letter which states as under : In this connection we are sorry to inform you that due to some unavoidable circumstance my lawyer Shri Dimal Kumar Munsi is not available to check up all the documents and to appear before your honour. Hence, you are kindly requested please fix another date. I have considered the above request but I am not able to see any reason as to why I should consider this to be suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rate of interest to be paid in terms of sub-rule 8(3) of the Central Excise Rules, 2002 ? In so far as the question of rate of interest is concerned, I find (after some research) that the sub-rule 8(3) as originally forming a part of the CER 2002 [which came into effect from 1-3-2002], read as under (emphasis mine) : If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under Section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount. The above sub-rule was substituted by the following, vide Notification No. 12/03-C.E. (N.T.), dated 1-3-03 w.e.f. 1-4-2003 (emphasis mine) : If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with an interest at the rate of two per cent per month or rupees one thousand per day, whichever is higher, for the period starting with the first day after due date till the date of actual payment of the outstanding amount : Provided tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , dated 13-5-2002 5. 13% 12-9-2003 To date Notification No. 66/2003-C.E. (N.T.), dated 12-9-2003 7.5 I further find that the aforesaid second version of the sub-rule 8(3) [in force for exactly one financial year 2003-04 from 1-4-2003 to 31-3-2004] had specified the rate of interest as 2% per month or Rs. 1000/- per day, whichever is higher (subject to the upper limit of duty-in-default vide the proviso thereto). I find that in respect of this version of the sub-rule, the judgment by the Hon ble Rajasthan High Court in the case of M/s. Lucid Colloids Ltd. v. UOI reported in 2006 (200) E.L.T. 377 which was delivered on 3-8-2005 [and which has been cited by the appellants before the adjudicating authority as also before me], is fully applicable. In the said judgment, after analysing the provisions of the said sub-rule 8(3) and the provisions of Section 11AB of the parent Act i.e. the Central Excise Act, 1944, the Hon ble Court held as under (emphasis mine): 9. The Legislature in its wisdom has instead of prescribing itself a fix rate, has left it to the Central Government to fix the rate at which such interest is to be charged so that wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be understood as 24% per annum on the amount of Duty in default is ultra vires to Section 11AB of the Act and cannot be sustained and is held inoperative. 15. Accordingly, the writ petition is allowed. The part of Rule 8(3) which includes expression at the rate of two per cent per month or rupees one thousand per day, whichever is higher is held to be invalid. Consequently, interest chargeable on delayed payment had to be only at the rate of 2% per month or for that matter 24% per annum as notified by the State Government in terms of the Section 11BC, which is between the permissible limits in terms of Section 11AB. Consequently, the demand notices are quashed and interest on delayed payment has to be recomputed only to the extent it is referred to the rate of interest @ 2% per month or 24% per annum under Rule 8(3). Accordingly, I find that it is very clear that interest can only be charged at the rate of 2% per month, or 24% per annum (subject to the interest not exceeding the duty amount itself) and not at the rate of Rs. 1000/- per day. It is clear from a holistic reading of the above judgment that the phrase or Rs. 1000/- per day, whichever is higher has been struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nicated the acceptance of the said Order of the Hon ble Rajasthan High Court. Therefore, the respondent Department concedes the position that the interest chargeable under Rule 8(3) of the Central Excise Rules, 2002 for the delayed payment of duty by the Petitioner is to be only at the rate of 2% per month. Accordingly, the department accepts that the Petitioner is liable to pay interest under Rule 8(3) only at the rate of 2% per month for the months of October, 2003, November, 2003, December, 2003 and January, 2004. 2. The appellants are said to have already paid interest at the rate of 2% per annum on the duty amount which was paid belatedly. Learned Consultant has produced copies of the relevant challans. It is up to the original authority to verify these documents and be satisfied. 3. In view of the above position, the impugned order demanding interest at the rate of Rs. 1,000/- per day is set aside and this appeal is allowed to the extent of setting aside the above demand and holding that the payment of interest already made at the rate of 24% per annum satisfies the Revenue s demand under Rule 8(3) as sustained by the Hon ble High Court of Rajasthan. 7.7 In summary, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rase or rupees one thousand per day, whichever is higher cannot operate, having been struck down by the Hon ble Rajasthan High Court in the cited judgment and the said judgment having been accepted by the CBEC. Therefore I find that the appellants are not liable to pay the differential interest amount of Rs. 85,900/- as demanded vide the impugned order. 9.1 If not, what is the differential interest amount that they are liable to pay under said Rule 8(3) under which the impugned SCN/order were issued ? I note that the SCN was issued proposing to demand the differential interest amount of Rs. 85900/- under the provisions of sub-rule 8(3), and the same was confirmed by the impugned order, after interpreting the relevant portion of the sub-rule 8(3)i.e. interest at the rate of two per cent per month or rupees one thousand per day, whichever is higher . However, as discussed earlier, the portion or rupees one thousand per day, whichever is higher is no longer valid in view of the cited judgments. It therefore becomes evident that the remaining portion i.e. interest at the rate of two per cent per month continues to operate, for the said period when the second version of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 11AB which was then in force was Notification No. 19/02-C.E. (N.T.), dated 13-5-02 under which rate of 15% p.a. was prescribed. However, as I have already discussed above in detail, leading upto the table in para 7.7, for the said second version of the sub-rule (which is the one applicable in this case), the notification rate is not relevant as the sub-rule itself specifies a rate i.e. 2% p.m. [=24% p.a.] and the said rate is within the range specified in the Section {except that the portion or rupees one thousand per day, whichever is higher will not operate, having been struck down]. 9.3 Their ground of appeal as reproduced above refers to judgments. I however find that the very judgments cited by them do not support their claim of 13%, and rather rule just to the contrary. 9.4 In the Lucid Colloids case supra, the last para (para 15) of the judgment as reproduced by me earlier, clearly ends by saying as under : ...........interest on delayed payment has to be recomputed only to the extent it is referred to the rate of interest @ 2% per month or 24% per annum under Rule 8(3). The above line does not support their plea for a rate of 13%. 9.5 Similarly, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India supra and Lucid Colloids supra, observed in para 6 as under (emphasis mine): ...........There is, therefore, no scope for the revenue authorities to work out the interest liability at the rate of Rs. 1000/- per day and interest as ordered, is required to be worked out on the basis of Rule 8(3) to the extent that it creates the liability to pay the outstanding amount with interest at the rate of 2% per month (i.e. 24% per annum)....... Thus, clearly, the above judgment also does not support their plea for a rate of 13%. 9.7 Thus, I find that the appellants were/are liable to pay interest @ 2% per month or 24% per annum, and since they have already paid an amount of Rs. 13,100/- towards interest, they are liable to pay an additional amount of Rs. 6,637/- towards interest (which they had in all fairness conceded before the lower authority). 9.8 Before proceeding to the next point, I may note, with regret, that the appellants have not correctly quoted (in the appeal) what they had stated before the lower authority. I say this for the following reason. I find that in the STATEMENT OF FACT forming a part of the appeal book, they have stated the facts under Sl. Nos. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marizing or reproducing, in the appeal, as to what they had stated before the lower authority, they are not expected to add material words which in fact were not there. I find that the addition of these words should be 13% per annum has created the risk of conveying the wrong impression to the appellate authority that they had taken the plea of 13% before the lower authority, but the lower authority had not considered the same. This could have been avoided. 10.1 Are the appellants liable to any penalty as imposed by the impugned order ? This is the next issue for my consideration. I find that the lower authority s order is as under : I further impose an amount of Rs. 10,000.00 towards penalty under the provisions of Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944 immediately. Against this, the appellants have mentioned only one ground of appeal (which is ground no. 5 on page 7 of their appeal book) which is as under : Since there was no payability of any differential amount of interest in view of the above position of law, the part of the Order-in-Original imposing penalty under Rule 25 cannot but be assailed being void. I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of this case. The 5th ingredient of Section 11AC is contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty . In this case it is seen that though there was a contravention of the procedure prescribed in Rule 8 (as will be discussed later) but it cannot be said that the said contravention was with the intent to evade payment of duty, since there is no allegation that the transactions relating to removal in March had not been disclosed and since, admittedly, they paid the duty/interest on their own, much, much, much before the SCN was issued. 10.6 As regards Rule 25, I find that under the said rule a penalty not exceeding the duty on the goods involved (or Rs. 10,000/-, whichever is greater) can be imposed in the situations mentioned in its four sub-clauses which read as under : (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him; or (c) engages in the manufacture, production or storage of any excisable goods without having applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month except in case of goods removed during the month of March for which the duty shall be paid by the 31st day of March. Explanation. - For the purposes of this rule,- (a) the duty liability shall be deemed to have been discharged only if the amount payable is credited to the account of the Central Government by the specified date; (b) if the assessee deposits the duty by cheque, the date of presentation of the cheque in the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which the duty has been paid subject to realization of that cheque. ; (2) The duty of excise shall be deemed to have been paid for the purposes of these rules on the excisable goods removed in the manner provided under sub-rule (1) and the credit of such duty allowed, as provided by or under any rule. (3) If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with an interest at the rate of two per cent per month or rupees one thousand per day, whichever is higher, for the period starting with the first day after due date till the date of actual payment of the outstanding amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be met by imposing a penalty of Rs. 1000/- only, under Rule 25 clause (a). 11.1 Is the impugned order unlawful, biased, partisan and was it passed violating the principles of judicial discipline causing avoidable harassment to the trade as well as to the Government , as alleged? This is the last issue for my consideration. I find that the appellants have claimed that the impugned order is unlawful, biased, partisan as it was passed without considering their submissions and without distinguishing any of the case laws cited in the reply to the impugned notice . They have also alleged that the impugned order was passed violating the principles of judicial discipline causing avoidable harassment to the trade as well as to the Government . I now proceed to examine these submissions. 11.2 On perusal of the appellants reply before the lower authority and the impugned order passed by him, I find that they had contested the correctness of Department s calculation of interest insofar as it was based on or Rs. 1000/- per day, whichever is greater as being invalid in view of the judgments in Lucid Colloids, Condor Power Products and Automotive India, supra. This is duly acknow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough.....the written reply submitted by the assessee... , the learned Assistant Commissioner comes to the following conclusion (emphasis mine): B It is beyond my comprehension as to how (B) follows from (A). To say the least, I am amazed as to how the adjudicating authority can so conveniently mis-understand and misinterpret the simple admission made before him by the assessee in simple English. The only conclusion to be reached is that the learned adjudicating authority has neither read the party s reply nor, indeed, the Order that he is signing. Nothing else can explain the aforesaid conspicuous and glaring contradiction. 11.4 This is what the CBEC Excise Manual of Supplementary Instructions 2005 envisages, in Chapter 13 Part-II dealing with Adjudication (emphasis mine): Para 1.1 .........The adjudication ........ is an important function....... and casts heavy responsibility on the officers..........to use it with utmost care and caution, free from any prejudice or bias. It is important to know and understand the facts of the case, process them properly and to apply correctly the sections and rules of Central Excise law or Notifications that may be relevant to the fact ..... 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