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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 ..... under the provisions of the Act and the demand for interest and seeks refund of amounts collected in excess by the Respondents. The Petitioners also impugn notification No.68/63-CE dated 4th May, 1963 to the extent it makes section 142(1)(c)(ii) of the Central Excise Act, 1944 applicable to the Petitioners, as illegal, without jurisdiction and ultra vires of the Central Excise Act, 1944. The Petitioners also seek refund of sum of Rs. 49.28 crores, a sum of Rs. 2,72,73,685/- other amounts recovered by the Respondents. 3. In Writ Petition No.3901 of 2013 the Petitioners question validity of letter dated 5.9.2012 issued by the Assistant Commissioner of Central Excise, Kurla Division, Mumbai-I and the letter demanding a sum of Rs. 311,16,49,260/- along with interest thereon. 4. At the request of Mr.Sridharan, learned Senior Counsel appearing 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 Rs. 49.28 crores due to the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned the method of valuation. The replies were considered and the adjudicating authority vide order dated 31st January, 2002 concluded that the assessee's main consideration was to penetrate the market therefore the price at which they were selling the cars in the market could not be considered to be the normal price as per section 4 of the Act since the cost of production was much higher than the price at which the cars are sold to the general public. He adopted an average price of Rs. 4,53,739/- for different models of cars. 8. Being aggrieved by the order passed by Respondent No.5, the Petitioners filed an appeal before the Commissioner of Central Excise (Appeals). Vide order dated 11th September, 2009 the Commissioner of Central Excise (Appeals) rejected the appeal of the Petitioners and confirmed the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 13. In the meantime an application filed by the Petitioners for modification of the order of the Hon'ble Supreme Court was dismissed as withdrawn and the office of the Superintendent of Central Excise once again demanded the amount due to department along with accrued interest vide letter dated 19th October, 2012. The Petitioners responded with a letter of 23rd October, 2012. This time around, the Petitioners submitted that they had filed review petition before the Supreme Court seeking review of the order dated 29th August, 2012 and therefore 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 Nove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Central Excise accepted the schedule of demand but insisted on demand of interest at the rate of 18% per annum in accordance with Notification No.5/2011 Central Excise (NT) dated 1st March, 2011 read with CBEC circular No.208/42/96-CX dated 2nd May, 1996 with effect from 29th August, 2012 being the date of the order of the Supreme Court. It is therefore seen that demand for interest is made only after the order of the Supreme Court, namely, when the order of adjudicating authority attained finality. It is useful to mention here that circular No.208/42/96-CX clearly specifies that the board had decided that delayed payment as per circular No.21/95, however, the demand made in the present case was restricted to 18% per annum. In the 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 provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads thus : "SECTION 11A : Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non- payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within [one year] from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 and not to past cases of provisional assessment even if the assessments are finalised on or after 1st July, 2001. The Petitioners have relied upon this to submit that there cannot be interest liability foisted upon them in the present case. 25. Mr.Sridharan further submitted that the Respondents on the contrary have relied upon circular No.208/42/96-CX dated 2nd May, 1996 which states that with the introduction of section 11AA in the Central Excise Act and with issuance of Notification No.21/95-CE (N.T.) dated 29th May, 1995, a doubt had arisen about the rate of interest to be charged on delayed payments of the Central Excise dues. It is notified that the board has decided that the rate of interest on 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest on central sales tax under the Central Sales Tax Act. 28. Mr.Sridharan, then, relied upon the decision of VVS Sugar vs. Government of A.P. (1999) 4 SCC 192 and submitted that interest being substantive provision, can be levied only where the Act makes a substantive provision in that behalf and not otherwise. He also relied upon the Hon'ble Supreme Court's decision in the case of Modi Industries vs. CIT (1995) 6 SCC 396 wherein the Supreme Court held that there is no right to get interest on refundable advances which finding arose out of a contention that it will be inequitable if the assessee does not get interest on advance tax paid pursuant to an earlier order. The Court held that there 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 deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no provision before coming into force of section 11AA of the Central Excise Act. The said application was rejected. Writ petition filed was dismissed. While dismissing the writ petition, the learned Single Judge held as under:- "May be that the interest of 17.5% was charged on the basis of the Circular of the Board but the fact remains that it was on the application of the Petitioner that such an interest was charged. As such it has become a contract between the parties. The Petitioner has to make the payment for which he has agreed. If any dispute arises that could be examined only by the Civil Court and not by this Court. Learned Counsel for the Petitioner pointed out that the 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 avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011. He therefore submitted that in all cases where the interest paid is not specified, the assessee would be liable to pay the aforesaid rate of 18% percent. Mr.Jetly also relied upon the communication dated 5th December, 2012 from the Ministry of Finance to the Chief Commissioner of Customs, Central Excise and Service Tax, Meerut Zone, wherein it was recorded that in all cases where facility was granted to pay amount of duty in instalments on the usual terms and conditions parties like the Petitioners would be liable to pay simple interest at 17.5% compounded at the end of each month chargeable from the date of confirmation of the demand. He therefore submits that the demand 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 Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "AA" which inter alia recorded that sum of Rs. 85 crores has been paid without any instalments being approved and that the balance is payable along with interest. 39. Vide its reply dated 23rd January, 2013 the Petitioners did not make offer to pay instalments upon waiver of interest by the Respondents but merely reiterated their submissions in the letter dated 17th September, 2012. The fact that the Respondents did not accept the condition or grant waiver is evident from the letter dated 1st February, 2013 wherein once again the balance principal sum was demanded along with interest at 18% per annum. It is relevant to mention here that the power to grant instalments 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the Notification dated 2nd May, 1996 as stated above the grant of interest free instalments would not have been authorized at all and therefore there is no justification in the Petitioners seeking quashing of the impugned notice. 42. In view of the fact that the interest was not demanded under section 11AA the fundamental challenge in the petition must be rejected. The gravamen of the Petitioners' case is that by the virtue of circular No.354/66/2001/TRU dated 21.6.2001 any amount due subject to provisional assessment resorted to on or after 1.7.2001 alone would attract interest liability under Central Excise Rules prospectively 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 46. In the circumstances we have no hesitation in holding that the 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. In the circumstances the Petition fails. 47. In view of the order passed in Writ Petition No.3901 of 2013, Writ Petition No.1915 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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