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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 ..... On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest. It is quite evident that the N/N. 18/2012-CE (NT) 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 - It is settled position in law that physical statute need to be interpreted in a literal sense on the basis of what have been stated in the law or statute. There is no room for indictment or according to any beneficial construction to the appellant/assessee. It is also settled law that interest is a statutory/ contractual liability for the wrongly taken credit or is equivalent to the time value of the money/credit. It is an absolute liability as has been held by the courts in the various decisions for the same no person could claim the benefit and claim that interest as provided by the statute could not have been recovered as has been held the same is barred by limitation. It was for the appellant to have paid the interest along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Cenvat Account in support of their claim. (ii) the above said mistake occurred due to clerical / typographical error and therefore they are not liable to pay interest on such amount. (iii) the amount of Rs.7.16 523.00 of Cenvat -input service was reversed due to management decision of capitalization of service fee paid to the contractor into land account, accordingly the said amount stand reversed without being utilized. 2.2 Further, party vide letter dated 29.10.2010 submitted copy of RG-23 C Part-II for 2009-10 and Journal Vouchers for the credit of service tax which was subsequently reversed as the same was steadily capitalized. Appellant submitted a computer generated copy of RG23 C Part-II for the period Dec 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the decision of Hon ble Karnataka High Court in the case of Commissioner of Central Excise Service Tax, Bangalore Vs Fosroc Chemicals (India) Pvt. Ltd. 2015 (318) ELT 240 (Kar.). Reliance is also placed on the decision of Hon ble Supreme Court in the case of Government of India Vs Indian Tobacco Association, 2005 (187) ELT 162 (SC), when and incentive scheme was introduced, as the amendment was brought to the said rule through substitution, thus the same would mean that the words taken and utilized wrongly were present in the Rule 14 since beginning and as the appellant has reversed the credit without utilizing the same, thus there was not occasion to issue the show cause notice to the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 on the portion of service tax paid on these amounts, subsequently, there was a managerial decision to capitalize these expenses and consequently the appellants reversed the credit availed on the service tax portion of the expenses so incurred. The adjudicating authority ordered for recovery of interest by holding that the appellants had not submitted any such material evidence on record to show that when such decision was taken by them. In this context, I observe that the appellants have not submitted any such evidences at this stage. I, therefore, uphold the impugned order for recovery of interest on the said amount of credit of service tax taken wrongly and subsequently reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 interest. The Section 11A uses word may and prescribes time limit of one year or five year for demand of duty whereas Section 11AB uses word shall be liable to pay interest and does not prescribe any time limit for demand and recovery of interest. Thus, legislature does not provide any time limit for recovery of interest under Section 11B, ibid. 6.9 The adjudicating authority in the support of his findings placed reliance upon the following: (i) Prem Cables (P) Ltd Vs CCE, Jaipur-2012 (278) ELT 397 (Tri-Del); (ii) SKH Auto Components Ltd Vs CCE, Delhi-IV-2011 (274) ELT 273(Tri-Del); (iii) Abhinav Industries Vs CCE Jaipur-1-2011 (264) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and chargeable of interest in all cases of non-payment or short payment. (Para-6). 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 ast is to be paid automatically without any notice and as such, the question of limitation does not arise (Para-7). 6.10 Therefore, in view of abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciating 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 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 aforesaid circumstances such credit becomes recoverable along with interest. 13. We do not feel that any other harmonious construction is required to be given to the aforesaid expression/provision which is clear and unambiguous as it exists all by itself. So far as Section 11AB is concerned, the same becomes relevant and applicable for the purpose of making recovery of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution. 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 scheme of the Act, its historical background, the purpose for enacting such a provision, the mischief, if any which existed, which is sought to be eliminated This principle of reading down, however, will not be available where the plain and literal meaning from a bare reading of any impugned provisions clearly shows that it confers arbitrary, uncanalised or unbridled power. (emphasis supplied) 14. A taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In support of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 itself into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that there is no need to refer to the amending Act at all. 10. Yet another Constitution Bench of the Hon ble Supreme Court in the case of SHYAM SUNDER Others vs. RAM KUMAR Another reported in AIR 2001 SC page 2472, while dealing with the question whether a substituted provision necessarily means the amended provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 inconsistent therein with the provision of the Special Economic Zones Act, 2005. This section therefore overreaches and eclipses the provisions of any other law containing provisions contrary to the SEZ Act, 2005. Though the definition of the word export in the SEZ Act, in Sec.2(m) included supply of goods to a Unit or Developer , in clause (i) of sub-rule (6) of Rule 6 of the Cenvat Credit Rules, 2004 the word Developer was conspicuously missing and only unit was included before the 2008 amendment. It is in that context the aforesaid amendment by No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not (a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or (b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered there unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual 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 repeal of the existing provision. There is no real distinction between repeal and an amendment . 4.8 In the case of Ramkanali Colliery of BCCL v. Workmen by Secy., Rashtriya Colliery Mazdoor Sangh[(2001) 4 SCC 236,] explaining the impact of substitution Hon ble Apex Court held: If there is both repeal and introduction of another provision in place thereof by a single exercise, the expression substituted is used. Such deletion has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstitution 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 under Sub-clause (ii) of Section 13(1)(d) of the PC Act. The use of the word abuse in the said Sub-clause indicates so. Thus, there is no reason to assume that the legislative intent of repealing Section 13 of the PC Act was to exclude the said offence from the scope of PC Act with retrospective effect. 54. In view of the above, Section 6(d) of the General Clauses Act is applicable and persons convi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 both literal and purposive approaches. In other words the legislative intention, i.e., the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed... 19. The well-settled principle is that when the words in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjects 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 that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self-contradictory. 23. Next, we may consider the meaning and scope of strict interpretation , as evolved in Indian law and how the higher Courts have made a distinction while interpreting a taxation statute on one hand and tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fact that there may be overlapping in some cases between the aforesaid two rules. With certainty, we can observe that, strict interpretation does not encompass such literalism, which lead to absurdity and go against the legislative intent. As noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in the Act, does not mean that the benefit can be extended to legal entities not referred to in the Act as there is no equity in matters of taxation.... Yet again, it was observed : It may thus be taken as a maxim of tax law, which although not to be overstressed ought not to be forgotten that, the subject is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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. These principles were applied in Essar Steel India Ltd. Anr. to deny benefit of Section 3(2)(vii)(a) of the 1958 Act, as the condition of generating energy jointly with another undertaking was not fulfilled. 9.3 In case of Star Industries, it was held that the eligibility criteria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituation, 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 exemption provision is to be accorded, which is the case at hand. (iii) The purposive interpretation can be given only when there is some ambiguity in the language of the statutory provision or it leads to absurd results. We do not find it to be so in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption 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., credit taking credit, utilizing it wrongly or erroneously refunding the credit, becomes recoverable along with interest. In paragraph Nos.16 and 17 of the said Judgment, the Hon'ble Apex Court has observed as follows:- 16.A bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004 (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 contention that the assessee has not taken credit, does not merit consideration, particularly so, in the background of Rule 14. As it stands today, one has to go only by the provisions contained in Rule 14 and nothing beyond. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson, 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 11AB togetherwith Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Customs Act and in that context it was observed that The position being similar we hold that the same logic will apply in respect of the recovery to be made under the Customs A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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