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TMI Blog2014 (10) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on behalf of the Petitioners in second petition and that the issue involved is common in both the Petitions, we took up Writ Petition No.3901 of 2013 for hearing first. At this stage it is appropriate to mention that the controversy in these two Petitions involves the challenge to levy of interest on the amounts of ₹ 49.28 crores due to the Respondents from the Petitioners in the first petition, namely, M/s.Premier Ltd. and ₹ 311,16,49,260/- crores from the second Petitioners - New Holland Fiat (India) Pvt. Ltd. 5. The facts in brief leading up to the present challenge are as follows : The Petitioners were manufacturers of motor cars, namely, Fiat Uno (petrol or diesel) and Fiat Siena (petrol or diesel) cars and the goods were excisable under Heading 8703.90 of the First Schedule of the Central Excise Tariff Act, 1985. Initially the business was managed by the Petitioners in companion petition which then surrendered excise registration thereto in M/s. Fiat (India) Pvt. Ltd. and carried on business with fresh registration. The liability of New Holland Fiat India Ltd. (Fiat) to pay the sum of ₹ 311,16,49,260/- ( the duty ) towards principal sum is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 31st January, 2002. Being aggrieved by the order in appeal dated 11th September, 2009 passed by the Commissioner of Central Excise (Appeals) the Petitioners filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal ( Tribunal ) which vide final order dated 21st November, 2003 allowed the appeal and set aside the order dated 11th September, 2002 and Order-in-original dated 31st January, 2002. Respondent No.2, namely, the Commissioner of Central Excise, Mumbai-II then filed Civil Appeal No.1648 and 1649 of 2004 in the Supreme Court which by its judgment dated 29th August, 2012 allowed the appeal and set aside the order passed by the Tribunal dated 21st November, 2003. Thus, the order directing the Petitioners to pay an amount determined by the Commissioner of Central Excise (Appeals) became final. 9. The Supreme Court held that since the assessing authority could not do the valuation with the help of the other rules, he had resorted to best judgment method and while doing so has taken the assistance of a Cost Accountant, who was asked to conduct a special audit. The order of the Hon'ble Supreme Court directing the Petitioners to pay duty does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requested that the demand be kept in abeyance. 14. Vide letter dated 25th October, 2012 the Petitioners once again requested that the demand be kept in abeyance but the letter did not contain any denial of interest liability. Vide letter dated 4th November, 2012 the Petitioners contended that a calculation error occurred while working out the duty demand in computing the assessable value. On 8th November, 2012 the Respondents issued notice of demand to defaulter for recovery of ₹ 311,16,49,260/- including demand for interest in accordance with section 11AB of the Central Excise Act, 1944. Vide letter dated 12th November, 2012 they requested for further time till the Hon'ble Supreme Court heard review petition and in the meanwhile as interim measure a sum of ₹ 10 crores was proposed to be paid till 16th November, 2012 and to further pay monthly instalment of ₹ 10 crores by 15th of every month under protest. The Petitioners once again denied the liability to pay interest. 15. ₹ 10 crores was paid on 15th November, 2012. In the meanwhile on 27th November, 2012 the review petitions were considered and were dismissed. The final demand was then made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he meanwhile the Petitioners filed curative petitions which came to be dismissed on 20th February, 2013. 19. It is the Petitioners' case that the demand for interest is unsustainable under section 11A. According to the Petitioners the duty confirmed by the Supreme Court is neither an amount determined under section 11A nor an amount being paid voluntarily, since the demand for duty has been confirmed pursuant to the finalisation of the provisional assessment under under Rule 9B of the erstwhile rule of Central Excise Rules, 1944. 20. It is the Petitioners' case that the provision for charging interest and duty on finalisation of the provisional assessment came into effect on 1st July, 2001. The Petitioners contend that under Central Excise Rules, 2001 the proper officer may allow clearance of goods on payment of the duty on provisional basis. Sub-rule (4) of Rule 7 provides for interest on payments by the assessee. It is the Petitioners' contention that prior to 1st July, 2001 there was no specific provision for recovery of duty arising out of finalisation of assessment. 21. The relevant portion of circular No.354/66//2001/TRU dated 21st June, 2001 is set out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this subsection shall have effect, [as if, for the words [one year], the words five years were substituted. Section 11AA deals with interest on delayed payment, which is reproduced for reference : SECTION 11AA. Interest on delayed payment of duty. (1) Subject to the provisions contained in section 11AB, where a person chargeable with duty determined under sub-section (2) of section 11A, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delayed payments of central excise dues would be 20% as notified in Notification No.21/95-CE (N.T.) dated 29th May, 1995, even in cases where instalment facilities is allowed. In the old cases also where instalment facility was granted in accordance with instructions the rate of interest would be the statutory rate of 20% per annum. 26. He then relied upon the observations of the Supreme Court in J.K.Synthetic Limited vs. CTO reported in (1994) 4 SCC 276. It would be useful to reproduce the relevant paragraphs which the Petitioners rely upon : 16. Provisions are also made for charging interest on delayed payments etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so constru12ed as would effectuate the object and purpose of the statute and not defeat the same. But it must be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no right to get interest except as provided by the statute. Interest on excess amount of advance tax paid under section 214 is not paid from the date of payment of the tax nor from the date of refund but only paid upto the date of the regular assessment. No interest is paid on excess amount of tax collected by deduction at source. 29. The Petitioners also relied upon the decision in the case of Union of India vs. Orient Enterprises reported in (1998) 3 SCC 501 and an earlier decision followed in the case of Suganmal vs. State of Madhya Pradesh reported in AIR 1965 SC 1740 which held that no right accrued entitling the assessee to get interest on delayed refund unless the statute provides for it. It is submitted that since the insertion of section 27-A in the Act by Act 22 of 1995 there was no right entitling payment of interest on delayed refund under the Act. Relying upon the provisions, it is submitted that the claim for interest was in the name of compensation for wrongful retention. The Petitioner then relied upon the judgment of O. RM. M. SP. SV. P. Panchanathan Chettiar vs. Commissioner of Income Tax, Madras (1975) 3 SCC 834, wherein the question before the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest could have been charged only from the date of entering into contract and not from the date of the adjudication order. Neither the contract nor the order passed are before me and therefore this contention cannot be gone into. So far as the interest charged which is only a simple interest the same cannot be examined in a proceedings under Article 226 of the Constitution of India. 32. The Division Bench agreed with the decision of the learned Single Judge and found that having been availed the benefit of making payment in instalments, the Appellant could not repudiate the remaining part of the order. The Appellant in that case had not challenged the conditional order of the authority permitting the payment of instalment subject to payment of interest. The aforesaid decision of the Karnataka High Court was carried in appeal before the Hon'ble Supreme Court which dismissed the Civil Appeal No.4096 of 2000 filed by Triton Valves and held as follows:- We are of the view that the High Court was right in the view that it took in the order under challenge. The appellant took advantage of the order of the authority in respect of the instalments that were offered thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand for interest in the present case is legitimate and sustainable. 36. Our attention was drawn to the fact that after judgment of the Hon'ble Supreme Court dated 29th August, 2012 the Petitioners were liable to discharge their liability forthwith but sought indulgence to pay the same in instalments. Vide order dated 29th August, 2012 the Hon'ble Supreme Court restored the order passed by the Adjudicating Authority thus crystalising the liability. 37. In our view there is no substance in the Petitioners' contentions. The Petitioners have ventured to seek quashing of the impugned letter on the basis that the order in original of the adjudicating authority did not provide for payment of interest. The fact remains that the claim for interest has been made only upon the instalments being proposed and which were agreed upon subject to payment of interest. This is evident from the letter dated 5th December, 2012 Exhibit W and the reply dated 16th January, 2013 Exhibit Z wherein the Commissioner of Central Excise made it clear that the complete payment will have to be made along with interest before 13th December, 2013. Thereafter a revised payment schedule was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... talments was delegated to the Commissioner of Central Excise subject to payment of statutory rate of interest vide Notification No.289/50/97/CX-9 dated 17th November, 1997 which specified that power to grant instalments were subject to payment of statutory rate of interest as provided for under section 11 of the Central Excise Act read with Notification 21/95 dated 25th May, 1995. 40. The Petitioners were no babes in the wood and while applying for instalments would have been aware about this provision and therefore sought instalments from the Commissionerate. We will assume they were unaware of this notification. Even if they were so unaware, the fact remains that interest was not demanded under Section 11A. As we have already seen circular No.289/96/CX-9 which specifies that the interest on delayed payment have to be collected at the rate of 20% per annum from the date of new section 11A came into force and that such interest would be payable only on the actual amount in balance and not on the original amount payable. 41. In the instant case an application for seeking instalments was obviously made to the Commissioner of Central Excise apparently with full knowledge that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and not past cases even if provisional assessment were to be finalized after 1st July, 2001. Absent applicability of sections 11A and 11AA, the circular dated 21st June, 2001 is of no avail. The judgment referred in DGP Hinoday cited by Mr.Sridharan concerns interest liability under section 11AA so also the observations of the Hon ble Supreme Court in JK Synthetics Ltd. dealt with a case based on substantive law provisions. The other cases relied upon by Mr.Sridharan also deal with cases some of which were under Central Sales Tax Act and the ratio of the judgments contained a common factor, viz there is no right to get interest except the right provided by the statute. 43. In the facts of the present case it cannot be disputed that the 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 cu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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