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TMI Blog2024 (2) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 of the Cenvat Credit Rules 2004 read with Section 11 AB of the Central Excise Act, 1944. 2. I impose a penalty of Rs.49,30,589/- (Forty Nine lacs Thirty Thousands Five Hundred and Eighty Nine) only upon them under Rule 15 of the Cenvat Credit Rules.2004. The dues so adjudged be paid forthwith." 2.1 Appellant is registered with the Central Excise and engaged in the manufacture of Parts of Vehicles, Parts of Air Conditioners, etc. falling under Chapter Sub-hearing No.8714990 & 8714900, 8415900, 85229000 of first schedule to Central Excise Tariff Act. 1985. They are also availing the benefit of Cenvat credit as provided in the law. During the course of scrutiny of the ER-1 returns anomalies in the closing and opening balance in the abstract of Cenvat Credit Account were noticed. On being asked appellant informed that- (i) the difference of an amount of Rs.6,40,00,000/- found in the opening balance of June, 2010 (Rs.3,91,64,719/-) and the closing balance of May, 2010 (Rs. 10,31 64,719/-), was caused due to clerical/typographical error in December 2009 return submitted in January, 2010. They have corrected the mistake in the month of June, 2010 and they shall be submitting Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. 3.2 Arguing for the appellant learned Counsel submits that- * Show cause notice was issued beyond the normal period of limitation without alleging any evasion of tax by suppression of facts, fraud and in facts there cannot be any such factors exist. * Credit was never utilized and there was no case of demanding interest and imposition of penalties. Reliance is placed by the following rulings:- * M/s Steria India Ltd. Vs Commissioner of Customs, Central Excise & Service Tax, Noida, 2018 (11) TMI 758-CESTAT-Allahabad. * M/s Tirupati Structurals Ltd. Vs Commissioner of Central Excise & Service Tax, Ghaziabad 2019 (2) TMI 940 - CESTAT-Allahabad. * Credit before the utilization is in the existent of government hence there is no revenue loss to the government. Accordingly, the demand for interest of such excess credit cannot be sustained. * Rule 14, which was interpreted by the Hon'ble Supreme Court in the case of Union of India Vs Ind-Swift Laboratories Ltd. 2011 (265) ELT 3 (SC) amended vide Notification No.18/2012-CE(NT) dated 17.03.2012 by substitution of the words "taken or utilized wrongly" by the words "taken and utilized wrongly". Reliance is also placed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest, on credit taken or utilized wrongly, under Rule 14 of the CENVAT Credit Rules, 2004. The Apex Court has ruled that "if the aforesaid provision is read as a whole we find no reason to read the word "OR" in between the expressions taken or utilized wrongly or has been erroneously refunded' as the word "AND" On the happening of any of the three circumstances such credit becomes recoverable along with interest." In view of above statutory provisions and rulings of the Apex Court in the case of Ind-Swift Lab. Vs. UOI the appellants are liable to pay interest in question under Rule 14, ibid. Thus, in view of above discussed legal position, I find merits in the findings of the adjudicating authority for demand of interest on the CENVAT credit taken or utilized wrongly and the same are upheld. 6.6 Regarding orders for recovery of interest on the credit of Service Tax of Rs.7,16,523/- the appellants contested that the amount of credit of Rs. 7,16,523/- pertains to CENVAT credit of service tax paid on the service of land development consulting services procured by them and these expenses were initially recorded in the expense account and the benefit of CENVAT credit was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in which 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 payment of such duty:" 6.8 On a careful study of the Section 11 AB it has been observed that the person who is liable to pay duty as determined under sub-section (2) or has paid duty under sub- section (2B) of section 11A, shall in addition to the duty, be liable to pay interest at such rate fixed by the Government by the notification. I, further, observe that the said Section does prescribe any time limit for demand of such interest in addition to the duty, and prescribes that such interest shall be paid. On a comparative study of Section 11A and 11AB it has been observed that Section 11A prescribe that, "a Central Excise Officer may within one year from the relevant date, serve notice on the person chargeable duty which has not been levied or paid," whereas the Section 11AB prescribe that, "the person who is liable to pay duty as determined under sub-section (2) or has paid duty under sub-section (2B) of section 11A, shall in addition to the duty, be liable to pay i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovery of interest" (Para- 14). 6.9.3 In the case of Abhinav Industries vs. CCE Jaipur-1-2011(264) ELT 538 (Tri- Del)the Principal Bench of CESTAT, New Delhi held that, "On the other hand, I find that the interest liability arises in terms of provisions of Section 11AB. The said section is to the effect that 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 the duty as determined under sub-section (2) of Section 11A, shall in addition to the duty, being liable to pay interest at such rate............ till the date of payment of such duty. A reading of the above provision makes it clear that there is no time limit fixed by the legislation for payment of interest in respect of the duty confirmed against the assessee. In fact, the Hon'ble Bombay High Court in the case of CCE, Aurangabad v. Padmashri V.V. Patil S.S.K. Ltd. reported in 2007 (215) E.L.T. 23 (Bom.) has held that even if no notice is issued, interest is liable to be paid for the delayed payment of duty. Use of words 'shall' and 'be liable' appearing in the relevant section indicate absence of option a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Therefore, High Court on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is wrongly utilized. In our considered opinion, the High Court misread and misinterpreted the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as "AND" by way of reading it down as has been done by the High Court. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficial, penal or fiscal etc. Cumulatively it is to sub-serve the object of the legislation. Old golden rule is of respecting the wisdom of legislature that they are aware of the law and would never have intended for an invalid legislation. This also keeps courts within their track and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not static but dynamic. This infuses fertility in the field of interpretation. This equally helps to save an Act but also the cause of attack on the Act. Here the courts have to play a cautious role of weeding out the wild from the crop, of course, without infringing the Constitution. For doing this, the courts have taken help from the preamble, Objects, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt Ltd [2015 (318) ELT 240 (Kar)], holding as follows to argue that the effect of "substitution" done in Rule 14 by the Notification No had the impact to amend the provisions said rule retrospectively. 7. The contention of the revenue is, that the statutory provision of the notification referred to supra became effective from 31.12.2008 as per para 1(2) of the notification issued by the Government of India and therefore, the finding of the Tribunal that the notification is effective retrospectively from 10.9.2004 is beyond the scope of statutory provision and therefore, the impugned order is liable to be set-aside. 8. Per contra, the learned counsel appearing for the assessee supported the impugned order. 9. What is the effect of "substitution" of a provision in the place of an existing one is no more res-integra. The Constitution Bench of the Hon'ble Apex Court in the case of SHAMARAO V. PARULEKAR vs. THE DISTRICT MAGISTRATE, THANA, BOMBAY & Others reported in AIR 1952 SC page 324, dealing with the scope of substitution of a provision by way of amendment held as under:- "When a subsequent Act amends an earlier one in such a way as to incorporate itself or a part of itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermore be any doubt whatsoever that when a person is held to be eligible to obtain the benefits of an exemption notification, the same should be liberally construed." 13. The Parliament has enacted the Special Economic Zones Act 2005 (The SEZ Act for short) to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 53 of the Act declares that a special economic zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The word "export" has been defined under Act at section 2(m). According to the definition of the word export, vide Section 2(m) (ii) "export" means supplying goods or providing services, from the Domestic Tariff Area to a Unit or Developer. Such exports were exempted from duty of Central Excise under Section 26 of the SEZ Act, 2005 and consequently application of Cenvat Credit Rules. Section 151 of the Special Economic Zones Act 2005, overrides the provision of all other laws for the time being in force, notwithstanding anything in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely : - 1. (1) These rules may be called the CENVAT Credit (Third Amendment) Rules, 2012. (2) Save as otherwise provided in these rules, they shall come into force on the 1st day of April, 2012. 11. In rule 14 of the said rules, with effect from the 17th day of March, 2012,- (a) for the words "taken or utilised wrongly", the words "taken and utilised wrongly" shall be substituted; (b) for the word, figures and letters "and 11AB", the word, figures and letters "and 11AA" shall be substituted" From the perusal of the above notification it is quite evident that the Notification clearly provides the date from which the word "or" has been substituted in Rule 14 of The CENVAT Credit Rules, 2004. It is unambiguously provided that the substitution is being made from 17th March 2012, and no retrospective effect has been given to the said amendment/ substitution. 4.6 Section 38 A of the Central Excise Act, 1944 provides as follows: "Section 38A. Effect of amendments, etc., of rules, notifications or orders. - Where any rule, notification or order made or issued under this Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 6A. Repeal of Act making textual amendment in Act or Regulation.-Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 4.7 The Supreme Court in Bhagat Ram Sharma v. Union of India [1988 Supp SCC 30] held: "17. It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centering around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal's case (supra) this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar's case (supra) a three-Judges Bench of this Court emphasized the distinction between "supersession" of a rule and "substitution" of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place." 53. However, this Court is unable to accept that the PC (Amendment) Act, 2018 seeks to repeal the provisions of Section 13(1)(d) of the Act, as it existed prior to 26.07.2018 ab initio. Mens rea is an integral part of the offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvey one's thought or that the assembly of Legislatures consisting of persons of various shades of opinion purport to convey a meaning which may be obscure. It is impossible even for the most imaginative Legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. Nonetheless, the function of the Courts is only to expound and not to legislate. Legislation in a modern State is actuated with some policy to curb some public evil or to effectuate some public benefit. The legislation is primarily directed to the problems before the Legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be levied or collected except by authority of law.] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the Legislature. 22. At the outset, we must clarify the position of 'plain meaning rule or clear and unambiguous rule' with respect of tax law. 'The plain meaning rule' suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase "cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio". Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals case (Infra para 37).], though strict interpretation is used in the precise sense. To say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , may not be sustainable in all contexts and situations. There is certainly scope to sustain an argument that all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation. The decision of this Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh v. Presiding Officer, Labour Court Chandigarh and Ors., (1990) 3 SCC 682, made the said distinction, and explained the literal rule- "The literal rules of construction require the wording of the Act to be construed according to its literal and grammatical meaning whatever the result may be. Unless otherwise provided, the same word must normally be construed throughout the Act in the same sense, and in the case of old statutes regard must be had to its contemporary meaning if there has been no change with the passage of time." That strict interpretation does not encompass strict - literalism into its fold. It may be relevant to note that simply juxtaposing 'strict interpretation' with literal rule' would result in ignoring an important aspect that is 'apparent legislative intent'. We are alive to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S stated the principle thus : "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute. VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words : "In a taxing Act one has to look merely at what is clearly said. This is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." It was further observed : "In all tax matters one has to interpret the taxation statute strictly. Simply because one class of legal entities is given a benefit which is specifically stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self with the intention of the Legislature when the language expressing such intention is plain and unambiguous [State of Madhya Pradesh v. Rakesh Kohli & Anr., (2012) 6 SCC 312]. But just as reliance upon equity does not avail an assesse, so it does not avail the Revenue." The passages extracted above, were quoted with approval by this Court in at least two decisions being Commissioner of Income Tax v. Kasturi Sons Ltd., (1999) 3 SCC 346 and State of West Bengal v. Kesoram Industries Limited, (2004) 10 SCC 201 [hereinafter referred as 'Kesoram Industries case' for brevity]. In the later decision, a Bench of seven-Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute : "(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed : it cannot imply anything which is not expressed : it cannot import provisions in the statute so as to supply any deficiency : (ii) Before taxing any person, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of India & Ors. vs. Wood Papers Ltd. & Anr., (1998) 4 SCC 256]. Thus, distinction can be made between the substantive requirements that require strict compliance - non-compliance of which would render the assessee ineligible to claim exemption, and the procedural or compliance provision which can be interpreted liberally [See paragraphs 64 to 65 in Dilip Kumar & Company]. 9.2 Essar Steel India Ltd. & Anr. was a case relating to grant of exemption under Section 3(2)(vii)(a) from payment of electricity duty under the 1958 Act. The court relied on several decisions on interpretation of notification in nature of exemption, to hold that the statutory conditions for grant of exemption can neither be tinkered with nor diluted. The exemption notification must be interpreted by their own wordings, and where the wordings of notification with regard the construction is clear, it has to be given effect to. If on the wordings of the notification benefit is not available, then the court would not grant benefit by stretching the words of the notification or by adding words to the notification. To interpret the exemption notification one should go by the clear, unambiguous wordings thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction. If the contention of Mr Jain is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid. It would be too far-fetched, in such a situation, to say that the land stands occupied by a building that has been constructed thereon. Even Mr Jain was candid in accepting that when the construction of building is still going on and is not completed, literally speaking, it cannot be said that the building "has been constructed". It is for this reason that he wanted us to give the benefit of this provision even in such cases by reading the expression to mean the same as "is being constructed". His submission was that the moment construction starts the urban land is put to "productive use" and that entitles the land from exemption of wealth tax. This argument of giving so-called purposive interpretation has to be rejected for more than one reasons. These are: (i) In taxing statute, it is the plain language of the provision that has to be preferred where language is plain and is capable of one definite meaning. (ii) Strict interpretation to the exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee claimed benefit of an exemption notification. The question which fell for consideration in those cases is as to whether reversal of credit after the removal of the final product would entitle the assessee therein to the benefits of exemption notification, which states that the reversal of the credit should be done before the removal of the products. In such circumstances, the Courts considered the issue and said that for the purpose of extending the benefits of exemption notification, the time of reversal was not the material and reversal of the credit would amount to "no credit" being taken. In these decisions, Rule 14 or Section 11AB was not the subject matter for consideration. Therefore, these decisions relied upon by the learned counsel for the assessee are clearly distinguishable by facts, while read in the context of the facts and relevant notification which are applicable to the facts of the case. 11. The one and only decision which concerns about Rule 14 is the decision reported in 2011 (265) ELT 3 (SC) (2011-TIOL-21-SC-CX)., where the Hon'ble Supreme Court in paragraph No.17 has clearly pointed out that on the happening of any of the three situations viz., c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly with regard to Rule 14 of the Act, we do not find any justifiable ground to accept the plea of the assessee based on the decisions relied on by the assessee reported in 1996 (81) ELT 3 (SC) = (2002-TIOL-41-SC-CX), 2004 (174) ELT 422 (All.) = (2004-TIOL-57-HC-ALL-CX), and 2012 (279) ELT 209 ( Kar .) = 2011-TIOL-799-HC-KAR-CX. 13. The learned counsel for the assessee submitted his notes on the contention that interest being compensatory and that question of payment of interest would arise only where the principal is due. To that contention, by placing reliance on the decision reported in 1996 (88) ELT 12 (SC) = (2002-TIOL-273-SC-CUS) ( Prathiba Processors vs. Union of India as well as the decision reported in 2007 (215) ELT 3 = 2007-TIOL-141-SC-CX (CCE v s. Bombay Dyeing) , the learned counsel for the assessee contended that, when credit has been reversed before utilization, the same did not amount to taking credit. 14. We reject the arguments of the assessee. In the said decisions, it has been no doubt held that interest is compensatory and the question arises only where principal is due. If one gets into the background of the scheme of Modvat Credit, his contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11AB are declared. The second aspect would be whether there is any discretion not to charge the interest Under Section 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied / short paid / non levied / unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of Sub-section (1) of Section 11, which runs thus: 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.... The terminal part in the quotation above, which is couched with the words "shall" and "be liable" clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the Page 1612 pockets of the Central Government much earlier. Upon reading Section 11A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even if no notice is issued, interest is liable to be paid for the delayed payment of duty. Use of words shall' and be liable' appearing in the relevant section indicate absence of option and chargeable of interest in all cases of nonpayment or short payment." 7. It is well settled that interest being appending to the principal amount and when the principal amount is to be paid by the assessee to the exchequer, as confirmed in terms of Section 11A, interest liability would arise automatically. In the absence of any provision, laying down any time limit for raising of interest demand and in the light of the Bombay High Court judgment liability of interest is to be paid automatically without any notice and as such, the question of limitation does not arise." 4.16 In the case of SKH Auto Components Ltd. [2011 (274) ELT 273 (T-Del)], Delhi Bench has held as follows: "12. As far as the decision of the Tribunal in T.V.S. Whirlpool case is concerned, the Tribunal was not dealing with the issue as to whether law of limitation will apply to the recovery of interest as such. The issue was whether the interest was not paid in terms of Section 47 read with Section 61(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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