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TMI Blog2015 (6) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... er preferred to follow the cenvat method from 16th November, 2000, onwards. Thereafter, a Corrigendum was issued making it clear that the petitioner will have to make payment by debiting to the credit account only. That is how thereafter the petitioners made payment from the personal ledger account. - claim ought to be adjudicated and such communications were held to be untenable in law. We are not in any manner doubting this proposition but its application must depend on facts and circumstances in each case. The claim for interest could arise in various situations. The demand may also arise if the admitted and adjudicated sum is not remitted and paid within the time stipulated by law or within a reasonable period. The party being deprived of its legitimate dues and without any cause can seek to compensate itself by raising a demand for interest and which demand could be based on the undisputed facts. Then there is nothing required to be adjudicated or decided. Once an advantage of an interim order has been taken and the Revenue is deprived of the amount of tax, then, the recovery of public dues is deferred and delayed. The advantage cannot continue after such interim orders are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Importance) Act, 1957 on cotton fabrics and man-made fabrics processed and manufactured by the petitioners in their processing house. The petitioners filed a Miscellaneous Petition before this Court being Misc. Petition No.1604 of 1979 on 24th July, 1979, challenging the validity and legality of the above imposition and levy. This writ petition was admitted by this Court and an interim order was passed by which the Revenue / Central Excise Department was restrained from recovering the above duties from the petitioners on the condition that the petitioners furnish bank guarantees to the satisfaction of the Prothonotary Senior Master of this Court. It is the case of the petitioners that pursuant to this order dated 26th July, 1979, copy of which is at Annexure B, they furnished the bank guarantees to the satisfaction of the Prothonotary Senior Master of this Court. 3. Eventually this writ petition was dismissed by this Court on 17th November, 1983 along with several other petitions involving identical challenge. Against the order and judgment dated 17th November, 1983, the Special Leave Petition was filed in the Hon'ble Supreme Court of India. The petitioners applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad expired. Once again another letter was addressed on 10th June, 1992 by the Prothonotary Senior Master of this Court. Thereafter, the second respondent - the present petitioner moved a Contempt Notice of Motion No. 432 of 1994 in Misc. Petition No.1604 of 1979 alleging contempt of this Court's order and undertaking. This Notice of Motion was dismissed by this Court on 2nd September, 1994. Thereafter, the respondent No.3 to this writ petition directed the petitioners to pay the dues of ₹ 96,20,511/-. The petitioners requested the third respondent to return them the original bank guarantees to enable them to encash and pay off the dues as the said bank guarantees were not only in the safe custody of the Prothonotary Senior Master of this Court, but the Prothonotary Senior Master was directed to encash the bank guarantees in terms of the Division Bench order of this Court. Since the compliance was not made with this direction, the third respondent passed an order attaching the immovable properties of the petitioner. The order in that behalf is dated 13th October, 1999 (Annexure J). In response to this detention order, the petitioners approached the Addl. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st sight of. If the relevant period was 1979 to 1984, but the litigation was pending in the Hon'ble Supreme Court of India, then also the petitioner cannot be faulted or held responsible. After the proceedings concluded and the demand was raised, the money was paid on 7th October, 2004. There is no justification for demanding interest and by a communication issued on 18th October, 2006. That is also claiming interest for a past period. The demand is thus time barred. In these circumstances, the petitioner be granted the reliefs as prayed in terms of the prayer clauses. Mr. Patil has handed over a compilation containing copies of Rule 10, 10A of the Central Excise Rules, 1944 and Section 11A, 11AA and 11AB of the Central Excise Act, 1944. He has also relied upon the following judgments of the Hon'ble Supreme Court, other High Court and this Court in support of his contention. (1) Commissioner of Trade Tax, Lucknow vs. Kanhai Ram Thekedar, 2005 (185) Excise Law Times, 3 (SC). (2) Collector of Customs, Madras vs. T.V.S. Whirlpool Ltd. , 1996 (86) Excise Law Times, 144. (3) Government of India vs. Citedal Fine Pharmaceuticals, 1989 (42) Excise Law Times, 515. (4) Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for recovery thereof is admitted. The list of dates and events would itself disclose as to how having lost the litigation right upto the Hon'ble Supreme Court the bank guarantees could not be encashed for they were not kept alive. Similarly, the Revenue was forced to move a Motion in contempt. Thereafter from 1997, there was detailed correspondence. The sum due towards taxes was demanded but in response to each of these letters, neither the payment was forthcoming nor the petitioner came forward to discharge the liability. The petitioner bought time and it was only after the detention order was issued that a good five years from the issuance of the said order dated 13th October, 1999, payment was made on 7th October, 2004. Thus, the Revenue could have earned the moneys in 1989 itself. That was not possible because of the writ petitions being filed in this Court by the petitioner. The petitioner was fully aware of the outcome of the litigation as it lost the battle in the Hon'ble Supreme Court in the first round on legality and validity of the levy. Yet it commenced the second round and with an intention to delay the recovery. That was visible and apparent. Thereafter the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of India. It is in these circumstances that the rival contentions were noted and considered by the Division Bench and it found that none of the grounds raised in the petition by the petitioner herein in the second round deserves acceptance. The Division Bench, therefore, rightly held that the bank guarantees ought to be encashed and with expedition. That order of the Division Bench dated 27th April, 1989, was also challenged in the Hon'ble Supreme Court of India but the petitioner failed. Thus, legal proceedings and which were utterly frivolous and vexatious were pursued with vigor and impunity thereby depriving the Revenue of its legitimate dues. Eventually, in matters of payment of taxes, interest of public is at stake. The public interest immensely suffers when recovery of Revenue is blocked and by assesses who admit their liability otherwise. Prolonged legal proceedings frustrate and defeat recovery and are intended in such cases to achieve that object and purpose. Therefore, when the bank guarantees were not kept alive as is clear from the communication of Bank of Baroda dated 24th July,1992 pages 48 to 50 and pages 51 to 52, then, we do not think that the petitioner can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court found that absence of a legal provision will not affect the demand for interest and rather it must be read as a power implicit and inherent in the power to render justice. In Sovintorg India Ltd. (supra), the Hon'ble Supreme Court held as under : ... There was no contract between the parties regarding payment of interest on delayed deposit or on account of delay on the part of the opposite party to render the services. Interest cannot be claimed under Section 34 of the Civil Procedure Code as its provisions have not been specifically made applicable to the proceedings under the Act. We, however, find that the general provision of the Section 34 being based upon justice, equity and good conscious (conscience) would authorise the Redressal Forums and Commissions to also grant interest appropriately under the circumstance of each case. Interest may also be awarded in lieu of compensation or damages in appropriate cases. The interest can also be awarded on equitable grounds as was held by this Court in Satinder Singh v. Umrao Singh, [1961] 3 SCR 676 : (AIR 1961 SC 908). Referring to the province of the Interest Act of 1839, in relation to the compulsory acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same have far reaching consequences in law. We are bound by the following observations : 19. Interest is also payable in equity in certain circumstances. The rule in equity is that interest is payable even in the absence of any agreement or custom to that effect though subject, of course, to a contrary agreement (see Chitty on Contracts, Addition 1999, Vol. II, Part 38-248, at page 712). Interest in equity has been held to be payable on a market rate even though the deed contains no mention of interest. Applicability of the rule to award interest in equity is attracted on the existence of a state of circumstances being established which justify the exercise of such equitable jurisdiction and such circumstances can be many. 20. We may refer to the decision of this Court in Excutive Engineer, Dhenkanal Minor Irrigation Division, Orissa Ors. v. Lrs Ors. [2001] 2 SCC 721, wherein the controversy relating to the power of an arbitrator (under the Arbitration Act, 1940) to award interest of pre-reference period has been settled at rest by the Constitution Bench. The majority speaking through Doraiswamy Raju, J. has opined that the basic proposition of law that a person depri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which they would have been had the Court not intervened by its interim order when at the end of the proceedings the Court pronounces its judicial verdict which does not match with and countenance its own interim verdict. Whenever called upon to adjudicate, the Court would act in conjunction with what is the real and substantial justice. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be resorted to or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. ... 19. Recently in the case of Raymond Ltd. v. Union of India Central Excise Appeal Nos.101 to 104 of 2014, dated 5-3-2015, we applied this very principle to uphold the demand of interest. 20. We are of the view that these principles squarely apply to the present facts and circumstances. The Revenue was engaged in prolonged litigation and had to move a Notice o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untenable. We are unable to accept these contentions because interest is not demanded strictly in terms of the legal provisions though the letter of the respondents and impugned in the writ petition may be making such a reference. In the circumstances, we are unable to uphold his arguments that absent a provision like section 11AA at the relevant time, interest cannot be demanded. The impugned letter reads as under : OFFICE OF THE SUPDT. OF C. EX. RANGE 05, CHEMBUR - II DIVISION, 110, GANGES INK BLDG., LAL BAHADUR SHASTRI MARG, VIKHROLI (WEST), MUMBAI - 400 083 F.No.C.EX/R 05/Ch-II/Swan/2005/363 Vikhroli, the 18th October, 2006. MOST URGENT To, The Director, M/s. Swan Mills Ltd, Free Press House, 2nd Floor, 215, Nariman Point, Mumai 400 021 Sir, Sub: Interest on duty of ₹ 96,20,511/- paid reg. Kindly refer this office letter dated 8.6.2006 and your reply dated 27.06.2006 on subject matter. In this connection, it is to inform you that the views expressed in your above referred letter dated 27.6.2006 are not acceptable to the Department. Hence, you are once again directed to pay the interest amount a per applicable rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable law. That the Notifications referred above were in the field is not disputed and the demand is in terms of the same is also clear. 22. In all the decisions that Mr. Patil brings to our notice, the issue was of claim of interest and either in terms of the allegations in the show cause notice or absent a show cause notice. Such is not the case before us. Therefore, the decisions cited are distinguishable on facts. Mr. Patil relying upon the position in law, particularly regarding insertion of provisions enabling recovery of interest on delayed payment of duty submitted that unless there is any such provision, the interest is not leviable. He has also relied upon judgments where recovery of interest without a notice to show cause was held to be unsustainable. 23. However, the reliance placed by Mr. Patil on these judgments is entirely misplaced. In the first decision of the Hon'ble Supreme Court in the case of Metal Forgings v. Union of India 2002 (146) ELT 241, the facts were that the manufacturers viz. appellants before the Supreme Court were assessable to central excise duty under certain tariff items. On the introduction of Tariff Head 68 in the First Schedule to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall give a notice calling upon it to show cause why it should not be made liable for paying the same. That order was challenged in the Supreme Court and that is how the observations in paragraphs 2 and 4 have been made. They must be, therefore, seen in the peculiar facts and not by ignoring the same. In both these decisions, the interest as demanded in the present case was never an issue. Similarly, in the case of Union of India. v. Madhumilan Syntex (P.) Ltd. 1988 (35) ELT 349 (SC) a show cause notice was issued and raising the demand on ground of short-levy or non-levy of excise duty. Therefore, the observations and which are to be found in paragraphs 4 and 6 have been made. We must at once note that duty demand is a matter which has been dealt with in these decisions. The demand to be confirmed and granted must precede a show cause notice being issued, an opportunity to the assessee to meet and reply the same and thereafter an order following the same. More so, when the extended period is sought to be invoked. Such is not the case before us. 25. In the case of a Division Bench judgment of this Court in the case of Nirlon Ltd. v. Union of India 2007 (209) ELT 12 the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emand for interest in this case cannot be termed as time-barred. We have referred to the correspondence in that regard extensively. In the circumstances, the decisions and particularly of the Hon'ble Supreme Court in the case of Kanhai Ram Thekedar (supra) can have no application. The Hon'ble Supreme Court has held that demand for interest must be made within a reasonable period. What could be said to be a reasonable period must depend upon facts and circumstances of each case. We do not find that in this case the demand was hopelessly time-barred or said to be unreasonable. Yet again, we find that the decision of the High Court was reversed by the Supreme Court also on the ground that no notice was served. Thus there was no demand for interest in the assessment order and that was raised after nearly four years. Therefore, the principle of reasonable time or period was invoked and applied. The same is the position with regard to the demand of interest in the case of Collector of TVS Whirlpool Ltd. (supra). Thus, these are all orders and judgments based on the settled principle that a demand for interest should be made within a reasonable period, if at all it is not made dur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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