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TMI Blog2018 (2) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (2) of section 11A, the assessee is liable to pay interest at the specified rate on the date which remained unpaid after three months of determination till actual payment. Determination of duty means the duty ascertained after adjudication as per sub-section (2) of Section 11A. For the interest to be payable, there must be an ascertained amount of duty - In the present case, there has been no such determination of duty - In the absence of determination of duty under sub-section (2) of section 11A, the provisions of section 11AA is not attracted. The demand of interest therefore cannot sustain. There is no determination of duty under sub-section (2) of section 11A and therefore the ingredients of Section 11AA are not attracted. Further, there is no show cause notice issued for demand of interest. The demand of interest has been made by issuing a letter. Demand of interest not sustainable - appeal allowed - decided in favor of appellant. - Appeal No. E/378/2011 - Final Order No. 40388 / 2018 - Dated:- 13-2-2018 - Ms. Sulekha Beevi C.S., Member (Judicial) And Shri B. Ravichandran, Member (Technical) Ms. Minchu Mariam Punnoose, Advocate for the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a Writ Petition before the Hon ble High Court of Madras and by judgment dated 19.11.1979 as reported in 1981 (8) ELT 194 (Mad.), the Hon ble single Judge held the issue in favour of appellants. The Revenue filed Writ Appeal No. 2794/2002. The Hon ble Division Bench vide judgment dated 1.3.2005 allowed the writ appeal holding the issue in favour of Revenue. Though appellants filed civil appeal before the Hon ble Supreme Court, vide judgment dated 20.1.1994 [reported in 1994 (69) ELT 625 (SC)] the Apex Court held that appellants are not eligible for the benefit of notification No. 25/70. The issue regarding eligibility of notification thus attained finality. 5. Based on the decision of Apex Court, department issued letters to the appellant to pay duty. On 31.12.1996, a letter was issued from the Ministry of Finance calling upon the appellants to pay an amount of ₹ 5.47 crores being the excise dues quantified. Various litigations were field before the High Court and before Commissioner (Appeals), the narration of which is avoided not being germane to the issue for consideration in this appeal. The Assistant Commissioner vide letter dated 22.1.2007 directed the appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of liability and assessment, namely, quantification of the liabilities. After quantification of liability, follows the collection of tax and it should be only by an authority of law. The authority of law should be only by a legislative fiat but not by an executive fiat. In other words, levy of interest is a part of collection of tax and therefore it is covered by the second limb of Article 265. The department has sought to collect interest by issuing a letter and not by an order of adjudication. It is further contended that section 11AA is not attracted as the appellant has already paid the duty and there is no failure to pay duty. 6.4 The decision in the case of Commissioner of Central Excise and Customs, Daman Vs. Nirmala Dyechem reported in 2012 (281) ELT 677 (Guj.) was relied by the counsel to contend that to invoke section 11AB, as it stood prior to its amendment on 11.5.2001, the allegations of fraud, mis-statement collusion etc. has to be established. These words were deleted vide amendment dated 11.5.2001. That there is no allegation of fraud, collusion or mis-representation in the show cause notice issued by the department and therefore the demand upheld under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After this issue was settled against the appellant by the Hon ble Supreme Court, a series of letters have been issued to the appellant for payment of duty. The appellant is seen to have made some payments also. According to the appellant, during the period (5.3.1976 to 29.7.1977) when the appellant cleared the goods availing exemption under Notification, they had paid duty of ₹ 3.10 crores being duty on Urea (1.59 crores) and credit forgone on CVD on Murate of Potash (1.51 crores). That though department issued several letters demanding duty on various dates, the appellant had paid more than 12 crores towards duty including the invocation and adjustment of Bank Guarantee. However, we are not concerned with the duty liability in this appeal and restrict ourselves to the liability of the appellant to pay interest. 8.2 The Assistant Commissioner vide letter dated 22.1.2007, called upon the appellant to pay the disputed interest demand. In the said letter, Revenue has stated that the interest amount has accrued under section 11A and the demand is made under section 11AA of the Act ibid. Interestingly, the Commissioner (Appeals) has applied both sections 11AA as well as 11AB to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched the manner of collection must be authorised by law and the State is prohibited from adopting illegal or arbitrary methods of collecting tax already levied and assessed. The word `levy is used to include both first two stages involved in the process of taxation, viz., the levy properly so-called and the determination of the amount of the tax and the words levy and collection are used in Article 265 of the Constitution in a comprehensive manner and that they are intended to include and envelop the entire process of taxation commencing from the taxing Statute to the taking away of the money from the pocket of the citizen. And, what Article 265 enjoins is that every stage in this entire process must be authorised by the law. The term levy includes assessment but not collection. The taxing power of the State will also comprehend within it the power to provide for quantification of the liability of persons made liable to pay the tax. It also comprehends within it the power to provide for collection of tax including prescribing the methods of recovery of the amount of tax due if the person liable to pay the tax does not voluntarily pay it. The power to make a law with respect to a ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est for the delayed payment of tax. 8.4 Further, in para 42 of the said decision, the Court held that the contentions of the Standing counsel for the Revenue that appellant having taken advantage of the payment of duty to be made in installments cannot go back and deny the liability to pay interest. This argument was not accepted by the Court observing that there cannot be any estoppel against a statute. The Court held as under:- The contention of the learned Standing Counsel for the respondents that having taken the advantage of the payment of tax in instalments in some cases, they cannot go back and deny their liability to pay interest also cannot be countenanced as there cannot be any estoppel against a statute. When the statute does not empower the authorities to collect interest on delayed payment of Central Excise Duty, the petitioners cannot be clothed with the liability of interest on the ground that they have asked for installments for payment of Central Excise Duty. 8.5 However, it needs to be stated that though facts are identical, the said decision did not discuss the application of section 11AA as the decision was rendered on 27.1.1995 before the introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apply to cases where the duty becomes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President. 8.7 As seen above, section 11AA provides for charging of interest 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. In such a case, a person would be liable to pay interest at such rate not below 10% and not exceeding 30% per annum as may be fixed by the Central Government on such date from the date immediately after expiry of said three months till the date of payment of such duty. Thus, when the duty is determined under sub-section (2) of section 11A, the assessee is liable to pay interest at the specified rate on the date which remained unpaid after three months of determination till actual payment. Determination of duty means the duty ascertained after adjudication as per sub-section (2) of Section 11A. For the interest to be payable, there must be an ascertained amount of duty. In the case of Blue Star Limited Vs. Union of India 2010 (250) ELT 179 (Bom.), the Hon ble High Court considered the question of liability to pay i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c and therefore there is no requirement to issue show cause notice demanding interest. Whenever there is demand to pay duty, the failure to pay makes the liability to pay interest automatic. He has relied upon the decision in the case of Dodsal Engineering and Construction P. Ltd. (supra). The facts of the said case reveal that show cause notices were adjudicated and Order-in-Original dated 31.12.2001, 24.2.2003 and 29.12.2003 for the period involved from 1.4.2001 to 6.1.2003 were passed. The Tribunal as well as the Apex Court upheld the confirmation of duty. Pursuant to the order of the Apex Court, the jurisdictional Superintendent demanded the unpaid duty along with interest under section 11AA and 11AB of the Central Excise Act. On appeal, the Commissioner (Appeals) directed the assessee to obtain orders from Assistant Commissioner. Accordingly, the jurisdictional Assistant Commissioner issued notice seeking demand of interest under section 11AA on the differential duty confirmed vide order dated 30.12.2001 as well as under section 11AB on the duty confirmed vide order dated 29.12.2003 and 24.2.2003. There upon Order-in-Originals were passed confirming the interest liability and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 2017 (357) ELT 119 (Bom.), identical issue came up for consideration before the Hon ble High Court of Bombay. The facts in the said case are similar to the facts of the case before us since the period pertaining to duty demand is prior to 26.5.1995 (date of introduction of section 11AA). The assessee initially filed writ petition challenging levy of additional duty of excise on fabrics under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 claiming eligibility for exemption under Notification No. 78/82dated 28.2.1982. Eventually, the writ petition was dismissed on 25.5.1995. The Range Superintendent issued communication dated 16.10.1995 calling upon them to pay duty. The petitioners paid duty and intimated the particulars of payment on 7.11.1995. Thereafter, a letter was issued to pay interest under section 11AA. The assessee therein contended that section 1AA has no application. Under the said section, the payment of interest is contemplated for delayed payment of duty. There should be determination of duty under section 11A(2) and if that duty determined is not paid within three months, then it carries interest at the rate specified under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 4th September, 1997 but it was paid. Once we are only concerned with the order passed on 4th September, 1997 that may be determining the sum due and payable, but it records that the sum has already been paid. Therefore, the ingredients or the first part of sub-section (1) of Section 11AA are not attracted to the facts of the present case. There was no determination by the order passed on 4th September, 1997 and in any event the sum due and payable post- such determination was already paid within any time limit but in instalments and prior to 4th September, 1997. It is only when an eventuality within the meaning of Section 11AA occurs that the interest under Section 11AA becomes payable. Such is not the case from the facts and records before us. Rather, this is a case where duty came to be determined even when there was a legal proceeding pending in the Delhi High Court with an interim order in favour of the petitioners. After the dismissal of that writ petition before Delhi High Court, the demand was made, but straightaway of interest. We are not concerned with that amount because for recovery of that amount of interest Section 11AA was not invoked and rightly. Section 11AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 29.11.2001 was passed confirming the demand of interest payable on the duty determined as per order dated 9.1.1995. On appeal, Commissioner (Appeals) set aside the Order-in-Original dated 29.11.2001 which confirmed the demand of interest. This was upheld by the Tribunal following the decision in the case of Blue Star Ltd. (supra) as there was no show cause notice issued for demand of interest. The view of the Tribunal was maintained by the Hon ble jurisdictional High Court. The relevant portion of the judgment is reproduced as under:- 8. So far as this case is concerned, the contention of the learned counsel for the assessee is that, Section 11AA of the Act providing for charging of interest, came into effect only from 26-5-1995 (as per Finance Act, 1995) and as the tax liability of the assessee was pertaining to the periods, 1-1-1994 to 31-1-1994 and 1-7-1994 to 30-12-1994, and that the amount of duty payable was remaining undetermined till the Order-in-Original was confirmed by the Order-in-Appeal, dated 26-12-2000 (which was communicated later) and that within three months, as the duty has been paid by the assessee, the question of payment of interest does not arise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 11-5-2001 relating to the period 5/2000 to 6/2000 was issued and the same resulted in an Order-in-Original No. 43/2001, dated 15-10-2001 confirming a demand of ₹ 2,34,292/-. This order was confirmed on the same appeal Bearing No. 178/2003, dated 28-11-2003. 8. The last show cause notice Bearing No. 479/2001, dated 11-5-2001 for the period from 7/2000 to 10/2000 resulted in an Order-in-Original No. 42/2001, dated 15-10-2001, confirming the demand of ₹ 2,16,720/-. 9. As against one common order passed in Order-in-Appeal No. 178/2003 arising out of four different Orders-in-Original Bearing Nos. 18/2000, 54/2000, 43/2001 and 42/2001, the assessee filed four appeals in E/462 to 465/2004. These appeals were dismissed by the Customs, Excise and Service Tax Appellate Tribunal by a final order dated 9-7-2013 [2014 (301) E.L.T. 403 (Tri.-Chen.)]. As against the said common order passed in four appeals, the assessee has come up with C.M.A. Nos. 1949 to 1952 of 2015. 8.14 The distinction between the two provisions of law and liability to pay interest under section 11AA and 11AB is discussed by the High Court in para 21 to 25, which is as under:- 21. Now, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President. Interest on delayed payment of duty : (1) Notwithstanding anything contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, the person, who is liable to pay duty, shall, in addition to the duty, be liable to pay interest at the rate specified in sub-section (2), whether such payment is made voluntarily or after determination of the amount of duty under Section 11A. (2) Interest, at such rate not below ten per cent. and not exceeding thirty-six per cent. per annum, as the Central Government may, by notification in the Official Gazette, fix, shall be paid in terms of Section 11A after the due date by the person liable to pay duty and such interest shall be calculated from the date on which such duty becomes due up to the date of actual payment of the amount due. (3) Notwithstanding anything contained in sub-section (1), no interest shall be payable where - (a) the duty becomes payable consequent to the issue of an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (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 ten per cent. and not exceeding thirty-six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2), or sub-section (2B), of Section 11A till the date of payment of such duty : Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under Section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid. (2) The provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2001 and 43/2001 were exactly dated 11-5-2001. 25. Hence, out of the four cases on hand, two relate to the show cause notices issued on the date, on which, the amendment to Sections 11AB and 11AA came into force. In respect of the remaining two cases, they cannot be covered by the amendment introduced with effect from 11-5-2001. Insofar as the cases where show cause notices were issued before 11-5-2001, it is seen from all the show cause notices, the Orders-in-Original and the orders of the Appellate Authority that there was no allegation of fraud, collusion, misrepresentation, etc. Even the communication of the Superintendent dated 12-11-2013 does not categorise the case of the assessee as one where there was fraud, collusion, etc. But, the communication of the Superintendent dated 12-11-2013 refers to Section 11AB. Therefore, it is obvious that the amendment dated 11-5-2001 is what is sought to be taken advantage of. This cannot be done at least in respect of two cases that arise out of the Orders-in-Original Bearing Nos. 18/2000 and 54/2000 respectively dated 29-2-2000 and 30-10-2000. Hence, the questions of law in respect of the appeals arising out of these orders in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of section 11A and therefore the ingredients of Section 11AA are not attracted. Further, there is no show cause notice issued for demand of interest. The demand of interest has been made by issuing a letter. The Hon ble High Court of Andhra Pradesh in Delta Paper Mills (supra) has held any provision made in statute for charging or levying interest on delayed payment of tax must be construed as a substantive law. On perusal of records, the appellants have made payment of the sums demanded through the letters and at times have disputed their liability to pay such sums. However, there has been no order passed ascertaining the liability. In other words, there has been no determination of duty as provided under the Central Excise Act, 1944. In Vijay Synthetics Prints Ltd. (supra), it is clearly held that the ingredients of section 11AA is not attracted when there is no determination of duty under sub-section (2) of section 11AA. In Lucas TVS Ltd. (supra), the demand of interest without issuing a show cause notice proposing levy of interest was held to be unsustainable. Further, after a letter issued by the Ministry of Finance in 1996, the demand of interest is raised by is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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