9911796707
TMI Blog2019 (5) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... batch of appeals, we will treat C.A. No.2150/2012 as the leading case. We will refer to the said case as the SAIL Case. In the said case originally, the appellant company which is manufacturer of various products including rail sold the same to the Indian Railways. The products were cleared on sale from 1st January, 2005 to July 2006. The goods were cleared on the payment of excise duty on the payment of price which was fixed based on their circular dated 24.04.2005. Subsequently, the prices were enhanced by way of price circular dated 20.07.2006. The revision came into effect with retrospective effect. It is based on the same that SAIL deposited Rs. 142 crores by way of excise duty. This was done in August 2006. Thereupon, the officers of the department indulged in correspondence with SAIL seeking details regarding the clearances which were effected. On the basis of material made available, SAIL was called upon to remit interest under Section 11AB of the Act. SAIL filed its objections. It is after considering the objections, the authority found that SAIL was liable to pay interest on a sum of Rs. 142 crores calculated based on the date of removal of the goods during the period fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11-AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment of the duty. 17. We are unable to subscribe to the view taken by the High Court in Rucha Engg. [ First Appeal No. 42 of 2007 decided on 3-4-2007] It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short-payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus, it was clearly a case of short-payment of duty though indeed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date the differential duty is due, that is, the day on which the parties agree upon the escalated price and not before. The expression "ought to have been paid" found in Section 11AB was not considered by this Court in SKF case, it was pointed out. The Court felt that SKF Case runs contrary to the Constitution Bench decision in JK Synthetics and interest cannot be demanded by way of damages or compensation. 7. In our view, the following questions will fall to be decided by us: 1) Whether the decision in SKF case and also in International Auto lay down the correct law having regard to the decision of this Court in MRF case which was in fact rendered by a Bench of three Judges. 2) The effect of the judgment in JK Synthetics v. State of Rajathan as also the other judgments cited before us in regard to demand for interest under fiscal statutes. 3) Whether the determination of duty under Section 11A(2) is necessary to sustain the demand for interest under Section 11AB of the Act. 4) The impact of Rule 7 of the Central Excise rules which contemplates provisional assessment. 5) Whether payment of differential duty can be treated as a case of payment of duty under the head "sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently revised price which is to operate with retrospective effect. 9. At this juncture we think it apposite to refer to the facts in MRF case (MRF Limited v. Collector of Central Excise, Madras). MRF Case was decided on 12.3.1997 and it is reported in 1997 (5) SCC 104. The appeal was filed in this Court against the order passed by the Tribunal dated 24.9.1986. By the impugned order the assessee's claim for refund of excess duty paid on differential price on the date of removal and the reduced price was rejected. The case set up by the assessee was that the price list was approved on 14.5.1983. Subsequently, there was resistance by the consumers. The Ministry of Commerce, Government of India, thereupon directed the manufacturer- assessee pursuant to a decision taken in a meeting of Manufacturers to bring down the prices to the pre 14.5.1983 level. On the basis of the same a difference in the prices arose. This led to a claim for refund. The Tribunal was of the view that the prices at the time of removal alone mattered. The subsequent reduction in the prices for whatever reason was totally irrelevant. Thereafter, the court proceeded to hold as follows: "2. We have heard the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipe for us to consider the statutory framework under the Act and the Rules made under the Act. Section 2(h) of the Act defines sale and purchase as follows: 2(h) "sale" and "purchase", with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration." 11. Interestingly, unlike under the definition of Sale of Goods Act, 1930, "sale" under the Act takes place on transfer of possession. However we need not say anything further as it is not necessary for the cases at hand. Section 3 is the charging section. With effect from 1.7.2000 under the Finance Act of 2000, Section 4 of the Act which is crucial for our case reads as follows: "4. Valuation of excisable goods for purpose of charging of duty of excise - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall - (a) In a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or shot-paid or erroneously refunded by reason of fraud, collusion or any wilful 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 sub-section shall have effect [as if, {***]] for the words [one year], the words "five years" were substituted. [Provided further that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is one crore rupees or less a notice under this sub-section shall be served by the Commissioner of Central Excise or with his prior approval by any officer subordinate to him: Provided also that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is more than one crore rupees, no notice under this sub-section shall be served without the prior approval of the Chief Commissioner of Central Excise.] (2) The [Central Excise Officer] shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the date on which the Finance (No.2) Bill, 1996 receives the assent of the President." Explanation 1 and 2 are not extracted. 14. It is also now relevant to notice certain rules under the Central Excise Rules, 2002. Rules 4,5,6,7 and 8 read as under: "RULE 4. Duty payable on removal.- (1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided : Proviso and Explanation omitted. (1A) XXX XXX XXX (2) Notwithstanding anything contained in sub-rule (1), where molasses are produced in a khandsari sugar factory, the person who procures such molasses, whether directly from such factory or otherwise, for use in the manufacture of any commodity, whether or not excisable, shall pay the duty leviable on such molasses, in the same manner as if such molasses have been produced by the procurer. (3) Omitted (4) XXX XXX XXX RULE 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this sub-rule may, on sufficient cause being shown and the reasons to be recorded in writing, be extended by the Commissioner of Central Excise for a further period not exceeding six months and by the Chief Commissioner of Central Excise or Chief Commissioner of Central Excise for such further period as he may deem fit. (4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub-rule(3), at the rate specified by the Central Government by notification under section 11AA or Section 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of payment thereof. (5) Where the assessee is entitled to a refund consequent to order for final assessment under sub-rule (3), subject to sub-rule (6), there shall be paid an interest on such refund as provided under section 11BB of the Act from the first day of the month succeeding the month for which such refund is determined, till the date of refund. (6). Any amount of refund determined under sub-rule (3) shall be credited to the Fund: Provided that the amount of refund, instead of being cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner as they are applicable for recovery of any duty or other sums payable to the Central Government." 15. Excise duty is a duty on manufacture or production of goods. It is, however, collected at the point of removal of goods. When the duty of excise is chargeable with reference to the value of goods, Section 4 provides that on each removal of the goods, the value will be determined either under clause(a) or clause(b). We are in these cases governed by clause(a). Section (4) yields the following elements: - (i) when the goods are sold; (ii) for delivery; (iii) at the time and place of removal; (iv) the assessee (appellants in these cases are the assesses) and the buyer not being related; (v) price is the sole consideration for the sale, then the transaction value will be the value for the determination of excise duty. The price may be what is actually paid or what is payable for the goods when sold. Apart from what is shown as the price the transaction value would include: (i) Any amount the buyer is liable to pay to the assessee by reason of or in connection with the sale whether at the time of the sale or any other time. (ii) Any amount payable on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to pay the difference between the duty as payable under the final assessment and the provisional assessment. The final assessment is to be made within six months from the date of communication of the order permitting provisional assessment under Rule 7(1). The period can be extended by the Commissioner for six months and by the chief Commissioner for which there is no time limit. Sub-rule (4) of Rule 7 is very crucial. It provides as follows:- 1) The assessee shall be liable to pay interest 2) On any amount payable based on a final assessment under Rule 7(3) 3) At the rate fixed under Section 11A or Section 11B of the Act 4) From the first date of the month succeeding the month for which the amount is determined till the date of payment thereof. Rule 7(5) contemplates interest on refund based on the final assessment. 19. Now it is important that we delve upon the case of SAIL before the Commissioner, its stand in the appeal and finally before this Court. As already noticed SAIL sold and cleared rails to Indian Railways based on the price circular dated 24/04/2005. The transaction in question related to the period 01/01/2005 to July, 2006. Later, based upon a rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed forms, in the prescribed manner and within the prescribed time to the assessing authority: Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate. (2) Every such return shall be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the deposit of the full amount of tax due on the basis of return in the State Government Treasury or bank concerned. (2A) Notwithstanding anything contained in sub-section (2), the State Government may by notification in the official Gazette require any dealer or class of dealers specified therein, to pay tax at intervals shorter than those prescribed under sub-section (1). In such cases, the proportionate tax on the basis of the last return shall be deposited at the intervals specified in the said notification in advance of the return. The difference, if any, of the tax payable according to the return and the advance tax paid shall be deposited with the return and the return shall be accompanied by the treasury receipt, or receipts, of any Bank aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iced by the learned Judge that if the reasoning of the majority is accepted, different rates of interest would apply at different stages. Furthermore, it was reasoned that an assessee cannot do beyond paying the tax according to the return. He cannot possibly divine what the assessing officer will finally assess him to. In fact, in the later judgment in JK Synthetics, the Constitution Bench subscribed to the view expressed in the dissenting judgment in ACC Ltd. case which it accepted as laying down the correct position in law and overruled the majority in Associated Cement Co. case. In the JK Synthetics judgment also the case arose under the Rajasthan Sales Tax Act though it arose under Section 7(2)(A). The case in Associated Cement case fell under under Section 7(2) of the Act. What is relevant for our purpose are two aspects. One is we must bear in mind the actual provisions of the Rajasthan tax law which fell for consideration that we have already set forth. We must advert to the law which has been laid down in JK Synthetics. Following is the discussion: "16. It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anguage used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case [(1981) 4 SCC 578 : 1982 SCC (Tax) 3 : (1981) 48 STC 466] , that if the Revenue's contention is accepted it leads to conflicts and creates certain anomalies which could never have been intended by the Legislature. 17. Let us look at the question from a slightly different angle. Section 7(1) enjoins on every dealer that he shall furnish prescribed returns for the prescribed period within the prescribed time to the assessing authority. By the proviso the time can be extended by not more than 15 days. The requirement of Section 7(1) is undoubtedly a statutory requirement. The prescribed return must be accompanied by a receipt evidencing the deposit of full amount of 'tax due' in the State Government on the basis of the return. That is the requirement of Section 7(2). Section 7(2-A), no doubt, permits payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. In Purolator India Limited Vs. Commissioner of Central Excise 2015 (10) SCC 715, a Bench of two learned Judges was called upon to decide the question as to whether cash discount and trade discount are to be deducted for arriving at the transaction value. The Bench went on to consider section 4 of the Act prior to its amendment in 1973, after the amendment in 1973 and also still further after the amendment in the year 2000. After elaborate consideration of the matter, the Bench speaking through Justice Rohinton Fali Nariman held as follows: "14. It can be seen that the common thread running through Section 4, whether it is prior to 1973, after the amendment in 1973, or after the amendment of 2000, is that excisable goods have to have a determination of "price" only "at the time of removal". This basic feature of Section 4 has never changed even after two amendments. The "place of removal" has been amended from time to time so that it could be expanded from a factory or any other premises of manufacture or production, to warehouses or depots wherein the excisable goods have been permitted to be deposited either with payment of duty, or from which such excisable goods are to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educted from the sale price in order to arrive at the value of excisable goods "at the time of removal". 24. No doubt, there are decisions of the High Court which followed in MRF Ltd. [see 2007 (207) ELT 31, Punjab and Haryana] to the effect that a subsequent reduction in prices would not entitle the assessee to lay a claim for refund. In 2010(257) ELT 369, Karnataka, the Division Bench of Karnataka High Court distinguished the judgment of this Court in SKF India Ltd.(supra) by noting that in the said case after the goods were initially cleared and appropriate duty had been paid, subsequently the price escalation was due to the increase in input labour and other costs which was determined by the All India Industrial Prices Indices and by the Reserve Bank of India nominated by All India Electrical Manufacturer Association. In terms of the said direction, the court noted that supplementary invoices were issued. It was noted that the assessee had also paid differential price. It is undoubtedly the case of the appellant that the SLP carried against the said judgment has been dismissed. We notice that this Court has given no reasons while dismissing the SLP. 25. In India Carbon Ltd. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conclusion that the Sassoons had created any debt in their favour or had acquired a right to receive the payments from the Companies as at the date of the transfers of the Managing Agencies in favour of the transferees no income can be said to have accrued to them. They had no doubt rendered services as Managing Agents of the Companies for the broken periods. But unless and until they completed their performance viz. the completion of the definite period of service of a year which was a condition precedent to their being entitled to receive the remuneration or commission stipulated thereunder no debt payable by the Companies was created in their favour and they had no right to receive any payment from the Companies. No remuneration or commission could therefore be said to have accrued to them at the dates of the respective transfers. 40. It is no doubt true that the accrual of income does not much later depend upon its ascertainment or the accounts cast by assessee. The accounts may be made up at a much later date. That depends upon the convenience of the assessee and also upon the exigencies of the situation. The amount of the income, profits or gains may thus be ascertained l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held disentitled to any share in the income for the year. If the work done by the transferors as well as the transferees during the respective periods of the year were taken to be the criterion the result would certainly be anomalous. But the true test under Section 4(1)(a) of the Income Tax Act is not whether the transferors and the transferees had worked for any particular periods of the year but whether any income had accrued to the transferors and the transferees within the chargeable accounting period. It is not the work done or the services rendered by the person but the income received or the income which has accrued to the person within the chargeable accounting period that is the subject-matter of taxation. That is the proper method of approach while considering the taxability or otherwise of income and no considerations of the work done for broken periods or contribution made towards the ultimate income derived from the source of income nor any equitable considerations can make any difference to the position which rests entirely on a strict interpretation of the provisions of Section 4(1)(a) of the Income Tax Act." 27. In Commissioner of Income Tax, Madras v. A. Gajapat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which provides an exception that though an assessee does not acquire a right to receive an income under a contract in a particular accounting year, by some fiction the amount received by him in a subsequent year in connection with the contract, though not arising out of a right accrued to him in the earlier year, could be related back to the earlier year and made taxable along with the income of that year. But that legal position is sought to be reached by a process of reasoning found favour with English courts. It is said that on the basis of proper commercial accounting practice, if a transaction takes place in a particular year, all that has accrued in respect of it, irrespective of the year when it accrues, should belong to the year of transaction and for the purpose of reaching that result closed accounts could be reopened. Whether this principle is justified in the English law, it has no place under the Indian Income tax Act. When an Income-tax Officer proceeds to include a particular income in the assessment, he should ask himself inter alia, two questions, namely, (i) what is the system of accountancy adopted by the assessee? and (ii) if it is mercantile system of accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order under the Income Tax Act, 1961 the appellant assessee paid the tax. On his appeal being allowed the tax was refunded. The High Court reversed the Appellate order. On fresh demands being made the assessee repaid the tax as assessed and demanded. The revenue demanded payment of interest under Section 220(2) of Income Tax Act, 1961 for the period commencing with the refund of the tax. This Court allowed the appeal filed by the assessee and took the view that no tax could be levied or imposed by an act of Parliament without the words "clearly disclosing such an intention". Finding there was no default in payment within the time by the assessee it was found that invocation of Section 220 was misplaced. This Court purported to follow the decision in V.V.S. Sugars vs. Govt. of A.P. and Others 1999(4) SCC 192 (India Carbon vs. VBS Sugar). The last judgment we would advert to under the Income Tax Act was rendered by one among us (Chief Justice Ranjan Gogoi) and the decision is P.G. & W. Sawoo (P) Ltd. v. CIT & Ors. 2017(13) SCC 284. The facts of the said case in a nutshell was as follows: The assessee had let out its premises to the Government. The rent was enhanced with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Tax Act 1959, the assessee showed the turnover on the basis of minimum price and paid tax thereon. It did not pay tax on the additional price which has been paid but it was included in the turnover. When the price was fixed under Clause 5A, the appellant filed revised return and paid tax. Interest was sought to be charged under Section 24(3) on the price fixed under Clause 5A from the date of purchase of sugarcane till the payment of tax. The appellants contended before this Court that the price determined under Clause 5A would be known only after it was determined. Only then the same would be includable in the returns. The advances given on advice from Government were merely ad hoc payments and did not constitute the price. 32. Under the Tamilnadu Sales Tax Act, the dealers were given an option to pay tax in advance on the basis of monthly return. Under Section 13(1) which provided for advance payment of tax, the tax could be collected in advance in monthly or prescribed instalment. The assessing authority could provisionally determine the amount, payable in advance and intimate the dealer to pay the tax. Sub-section (2) of Section 13 provided that the dealer may at his op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is an admitted position that tax as per the monthly return had been paid within time. It is also an admitted position that there was no assessment, even provisional, by the assessing authority prior to the final assessment made after the revised returns had been filed. Interest becomes payable under Section 24(3) on an amount remaining unpaid after the date specified for its payment under sub-section (1) of Section 24. As seen above, sub-section (1) of Section 24 deals with an assessed tax or tax which has become payable under the Act. In cases covered by Section 13(2) tax must be paid without any notice of demand. But as stated above, under Section 13(2) tax is to be paid "on the basis of such returns". Tax as per the returns has admittedly been paid. If the returns were incomplete or incorrect as now claimed the assessing authority had to determine the tax payable and issue a notice of demand. In the absence of any assessment, even provisional, and a notice of demand no interest would be payable under Section 24(3). ..." 34. Section 24(1) incidentally provided for a notice of assessment save as it was otherwise provided in Section 13(2). The tax under Section 13(2) was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was fully conscious of the fact that it was subject to variation. Assessee must be imputed with knowledge that the value it was declaring was amenable to upward revision. The circumstances were indeed clearly both apposite and appropriate for the assessee to invoke the provisions of Rule 7 and seek an order for provisional assessment. In fact, take the example of manufacturer A and manufacturer B. Both remove goods under contracts which contain escalation clauses. Manufacturer A invokes Rule 7. It seeks permission for removal of goods on provisional assessment. Though an order of final assessment has to be passed within a period of time it is capable of being extended without any time limit. Manufacturer-A on the basis of upward revision of the price with retrospective effect and acknowledging the value to be the value as provisionally assessed and as enhanced by the escalation arrived at under the escalation clause pays the duty when the escalation comes into effect on the difference in the value under Rule 7. Apart from payment of the differential excise duty manufacturer A becomes also liable to pay interest from the date when the escalation would come into play on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Explanation.-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the period of six months, or five years, as the case may be. (2) The Assistant Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), determine the amount of duty due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. (3) For the purposes of this rule,- (i) 'refund' includes rebate referred to in Rules 12 and 12-A; (ii) 'relevant date' means,- (a) in the case of excisable goods on which duty of excise has not been levied or paid or on which duty has been short-levied or has not been paid in full, the date on which the duty was required to be paid under these rules; (b) in the case of excisable goods on which the value or the rate of duty has been provisionally determined under these rules, the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be; (c) in the case of excisable goods on which duty h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord, allow such assessee to avail himself of the procedure prescribed under Rule 9-B for provisional assessment of the goods. (3) Where the assessee disputes the rate of duty approved by the proper officer in respect of any goods, he may, after giving an intimation to that effect to such officer, pay duty under protest at the rate approved by such officer. (4) If in the list approved by the proper officer under sub-rule (2), any alteration becomes necessary because of- (a) the assessee commencing production, manufacture or warehousing of goods not mentioned in that list, or (b) the assessee intending to remove from the factory any non-excisable goods not mentioned in that list, or (c) a change in the rate or rates of duty in respect of the goods mentioned in that list or, by reason of any amendment to the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), a change in the Chapter, Heading No. and Sub-Heading No. the assessee shall likewise file a fresh list or an amendment of the list already filed for the approval of such officer in the same manner as is provided in sub-rule (1). (5) When the dispute about the rate of duty has been finalized or for any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reasons to be recorded in writing, there is likely to be delay in according approval, he shall either on a written request made by the assessee or of his own accord allow such assessee to avail himself of the procedure prescribed under Rule 9-B for provisional assessment of the goods." 40. We have already noticed that the new Central Excise Rules have come into force known as Central Excise Rules 2002. Under Rule 173-B of the erstwhile Rules, the method of assessment and payment of tax was essentially by the assessee filing a classification list under Rule 173-B which inter alia was to contain the rate of duty leviable. The Rule further contemplated approval of the said list with any modification as may be considered necessary. The clearance was, subject to the provision of Rule 173-CC, to be made only after the approval by the competent officer. Equally under rule 173(C), the assessee, the manufacturer or producer or one who warehoused goods chargeable with duty on the value of goods was to file a price list. Prior approval was necessary only in certain circumstances which included sale to or through related person as defined in Section 4 of the Act. Under Sub-rule 5 of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith classification lists or relate to the reopening of approved classification lists. That is exclusively provided for by Rule 173-B. 14. The levy of excise duty on the basis of an approved classification list is the correct levy, at least until such time as to the correctness of the approval is questioned by the issuance to the assessee of a show-cause notice. It is only when the correctness of the approval is challenged that an approved classification list ceases to be such. 15. The levy of excise duty on the basis of an approved classification list is not a short levy. Differential duty cannot be recovered on the ground that it is a short levy. Rule 10 has then no application." (Emphasis supplied) 42. A Bench of two learned Judges in the case of M/s. Eastland Combines, Coimbatore v. Collector of Central Excise, Coimbatore reported in AIR 2003 SC 843 after noticing the judgment in Ballarpur Industries, Rainbow and also noticing the change brought about by the Finance Act 10 of 2000 in Section 11A, proceeded to take the view that in view of the amendment, the basis for arriving at the conclusion that Rule 10 does not deal with classification list or relate to the reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 11-A is a recovery provision as regards non-levy or non-paid or short-levy or short-paid or erroneously refunded duties by reason of the said amendment, Parliament had merely provided that an approval on the basis of a classification list inter alia in case of a short-levy can be recovered if a finding is arrived at that the goods had undergone a short-levy. For the aforementioned purpose, Section 110 of the Finance Act, validating actions taken under Section 11-A can be taken into consideration whereby and whereunder a legal fiction is created." (Emphasis supplied) 43. Section 11A, thus, was held to be a recovery provision as regards non-levy, non-paid, short-levy, short-paid or erroneously refunded duty. Levy of excise duty under Rule 10 of the Excise Rules, 1944 on the basis of approved classification list or price list was found to be correct levy. It did not give rise to short-levy. Undoubtedly, the amended provisions of Section 11A empowered recovery of duty even in a case where the classification list has been approved earlier and it would operate from the date of removal and not from the date on which show cause was issued. 44. In the case of N.B. Sanjana, Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded on behalf of the appellants that it means "actually paid", whereas, according to the respondents, it means "ought to have been paid". Taken literally, the word "paid" does mean actually paid in cash. That means that a party or an assessee must have paid some amount of duty whatever may be the quantum. If this literal interpretation is placed on the expression "paid" in rule it is needless to state that it will support in a large measure the contention of Dr. Syed Mohammad that Rule 10 contemplates a short-levy in the sense that the amount which falls short of the correct amount has been assessed and actually paid. In our opinion, the expression "paid" should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid. That word will have to be understood and Interpreted in the context in which it appears in order to discover its appropriate meaning. If this is appreciated and the context is considered it is apparent that there is an ambiguity in the meaning of the word "paid". It must be remembered that Rule 10 deals with recovery of duties or charges short levied or erroneously refunded. The expression "paid" has been used t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been assessed as payable by way of duty so as to make Rule 10 applicable, is accented the result will be rather anomalous. For instance if due to collusion (which means collusion between a party and an officer of the Department) a sum of Rs. 2/-is managed to be assessed by way of duty when really more than thousand times that amount is payable and if the smaller amount of duty so assessed has been paid, the Department will have to take action within three months for payment of the proper amount of duty. On the other hand, if due to collusion again an order of nil assessment is passed, in which case no duty would have been paid, according to the appellants Rule 10A will apply. We do not see any reason to distinguish the above two cases one from the other. Both are cases of collusion and if an assessee in collusion manages to have a petty amount of duty assessed and paid he can effectively plead limitation of three months under Rule 10. Whereas in the same case of collusion where no duty has been levied there will be no period of limitation. In our opinion, that will not be a proper interpretation to be placed on Rule 10A by us. By the interpretation placed by us on Rule 10, the posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een determined or paid as has been provided under Section 11A, necessarily the assessee becomes liable to pay interest from the first date of the month succeeding the month in which duty ought to have been paid. 48. The question which we are necessarily called upon to decide is when price is revised upward with retrospective effect and the excise duty on the same is paid immediately on a future date whether interest is payable under Section 11AB from the first day of the month succeeding the month in which the duty ought to have been paid under the Act. To keep the matter in focus, the exact question is which is the month in which the duty ought to have been paid. 49. Under the Rules, goods become exigible to duty on removal. Assessment is to be done by assessee itself by way of self-assessment. In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the goods takes place. Undoubtedly, if the removal takes place in March, the payment is to be made by 31st of March. 50. We have also noticed what happens if there is provisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehouse during a month is to be paid on the 6th day of the following month would mean that the Legislature has understood the expression "the month in which the duty ought to have been paid" under the Act in the same sense as it is declared in Rule 8. 52. In this regard it is also pertinent to notice the finding in the order of the original authority that perusal of the Circular dated 01/07/2004 makes it unambiguously clear that the price was understood as provisional price. This belies quite clearly the case of the appellant that the price was final. Could the assessee in the light of the Circular even for a moment in the same breath contend that the assessee was unhesitatingly ready and able to determine the price and hence the value. We would think that it certainly presented a situation where the assessee should have resorted to Rule 7. 53. As we have already noted, SAIL has paid the differential duty of Rs. 142.78 crores even without waiting for any notice under Section 11A(1). The assessee volunteered and made payment in October 2006. We find merit in the finding by the authority that this is a case where therefore the payment made by the assessee is to be treated as one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . What is levy? We have already noticed that in the decision of this Court in N.B. Sanjana (supra), this Court rejected the argument of the Revenue that levy in Rule 10 means collection of some amount. The Court went on to hold that levy has not been used in the Act or the rules as meaning actual collection. 58. In a case where goods are removed clandestinely, there would be no levy. Equally, there will be non-payment. Thus, a case of non-levy can overlap with non-payment. No doubt, there can be cases where despite full levy there can be no payment, may be by mistake or otherwise. Equally thus, if there is no non-levy, there can be partial payment. That would make it a case of short payment as the payment does not match the amount of duty levied as per the self-assessment carried out by the assessee. A short levy ordinarily would be a case where out of the ingredients of assessment, namely, (1) rate of duty, (2) valuation and (3) quantity removed, the components all or any are incorrectly applied. As an instance if the full rate of duty applicable is not applied though the valuation and the quantity is correctly arrived at, it may fall under short-levy. In one sense it could be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equential differential duty being admittedly payable, it would result in Section 11A read with Section 11AB applying. 60. It is true that the statutory authority has found it to be a case of short payment. In the notice issued claiming interest it is stated there is short levy (see page 89 Vol.II SLP paper book). Proceeding on the basis that it is a case of short levy, Section 11A read with Section 11AB is attracted and the interest clock ticks from the date as we have found namely as provided in Rule 8 read with Section 11AB. If the concept of short payment is stretched to include all amounts which ought to have been paid, it may also be treated as a case of short payment though juridically it may be true that it may strictly fall under short levy. 61. While it may be true that interest cannot be demanded by way of damages or compensation and it is also further true that unless there is a substantive provision providing for payment of interest in a fiscal statute, interest cannot be demanded, we would think in the context of the Act and the Rules in question, under Section 11AB, particularly, when there is no dispute relating to liability to pay the differential duty and we not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resorts to provisional assessment upon a final determination of the value consequently, the duty and interest dates back to the month "for which" the duty is determined. Duty and interest is not paid with reference to the month in which final assessment is made. In fact, any other interpretation placed on Rule 8 would not only be opposed to the plain meaning of the words used but also defeat the clear object underlining the provisions. It may be true that the differential duty becomes crystalised only after the escalation is finalized under the escalation clause but it is not a case where escalation is to have only prospective operation. It is to have retrospective operation admittedly. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly that differential duty is paid. We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
