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TMI Blog2006 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... availing the facility of payment of Central Excise duty on monthly basis as per Rule 8(1) of Central Excise (No.2) Rules, 2001 (now Central Excise Rules, 2002). The assessee was claiming SSI exemption under the Notification No. 9/2002-CE. (N.T) dated 1-3-2002 passed on the value of such clearances in a financial year of the goods manufactured by the assessee, of the nature falling under Chapter Heading Nos. 73 and 79 of the Tariff. 3. It appeared that the assessee did not pay the duty on due dates as required by Rule 8(1) during the months of February 2002, April 2002 and March 2003. The assessee defaulted more than thirty days twice in the financial year 2002-03 and once in the financial year 2001-02 in the payment of the duty. There fore, a show cause notice was issued for withdrawing the facility of payment by instalments, imposing penalty under Rule 27 and recovering interest under Rule 8(3) of the said Rules. 4. Thereafter, in reply to the show cause notice it was pleaded that the assessee had already paid the duty amount through PLA on receipt of letter from the range office for payment of duty of Rs. 1,80,043/- on 9-7-2003 i.e. before the issuance of the show cause noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of Rule 8 of the said Rules. Therefore, the interest was worked out, at the level of the total duty, at Rs. 1, 80,043/- which according to the Commissioner (Appeals) was leviable from the appellant. The Commissioner (Appeals) did not find any substance in the contention that the show cause notice was time-barred, and concluded that it was not time-barred since it was not a demand of duty under Section 11A of the Act for which period of limitation was fixed thereunder. 6. When the matter was called for final hearing, none was present for the appellant both on 14-8-2006 and today and the matter has been heard with the assistance of the learned authorized representative for the department who has referred to the relevant material on record and the impugned orders. 7. As per the grounds of appeal, the appellant has contended that the Commissioner (Appeals) has given retrospective effect to the provisions of Rule 8 wherein interest at the rate of Rs. 1000/- per day has been stipulated. It has been contended that when the provision itself was not in force, it could not have been given a retrospective effect, since no specific retrospective was expressed or necessarily implied. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Act or the Rules, was punishable with a penalty, which may extend to Rs. 5,000/- and with confiscation of the goods in respect of which the offence is committed. The authorities below, however, have imposed a penalty of Rs. 10,000/- under Rule 27 in the context of which the liability to pay penalty was alleged in the show cause notice, though the maximum penalty was prescribed at Rs. 5,000/-. Therefore, the penalty will have to be reduced to Rs. 5,000/- from Rs. 10,000/-. The rest of the findings on the question of for feiting the facility for two months, of the authorities below are based on reliable material on record and given for cogent reasons, deserving to be upheld. 9. The only question that now remains for consideration is as to the in-terpietation of Rule 8(3) on the basis of which penalty at the rate of Rs. 1,000/- per day has been imposed on the default committed after 1-4-2003 in payment of the due amount. Rule 8(3) reads asunder: "Rule 8(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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which will be within the parameters indicated by sub-section (1) of Section 11AB which provides for interest on delayed payment of duty. As per Section 11AB(1), where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who is liable to pay duty as determined under sub-section (2) or has paid the duty under sub-section (2B) of Section 11A, shall in addition to the duty, be liable to pay interest at such rate not below 10% and not exceeding 36% per annum, as is for the time being fixed by the Central Government by notification in the Official Gazette. Accordingly, the notifications were issued, and the duty was calculated for the periods covered by such notifications. However, in the substituted sub-rule (3) of Rule 8 itself the interest rate of 2% per month has now been prescribed, w.e.f. 1-4-2003 with a rider that if the amount of interest, worked out at the rate of 2% per month falls short of Rs. 1,000/-, then, interest would be charged at Rs. 1,000/- per month. This situation does not appear to have been contemplated by Section 11AB (1) of the Act and this portion of the rule providing for an amount to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 11AB (l), of prescribing interest rate not below 10% and not exceeding 36% per annum. That part of Rule 8(3), being inconsistent with Section 11AB cannot therefore be sustained. To be more specific, the words "or Rs. 1,000/- per day, whichever is higher" occurring in sub-rule (3) of rule 8 are ultra vires the provisions of Section 11AB (1) of the said Act, and, therefore, cannot be enforced. This view is fortified by a recent decision of Hon'ble the Rajasthan High Court in Lucid Cabids Ltd. v. Union of India rendered on 3-8-2005 in DB C.W. No. 1192/2005, in which while considering the validity of the phrase "or Rs. 1,000/- per day or whichever is higher" in Rule 8(3) of the Rules, has, in terms, struck down the said provision as being beyond the enabling provisions of the parent Act. It has been held that the prescription of limit of rate of interest at 10% per annum and 36% per annum in the parent provision of Section 11AB(1) made it clear that the base of charge of interest was rate per annum and not on any other basis. It was held that the alternative mode of levy of interest of Rs. 1,000/- per day resulted in altering the nature of charge of interest from compensato ..... X X X X Extracts X X X X X X X X Extracts X X X X
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