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TMI Blog2024 (5) TMI 1275X X X X Extracts X X X X X X X X Extracts X X X X ..... cise Act, 1944 are applicable in respect of goods which are excisable to Central Excise duty and the manufacturer is liable to pay such duty. The said provision cannot be made applicable in respect of duty which is exempted by issuance of Notifications under Section 5A of the Central Excise Act, 1944. Since in the present case, the petitioner was entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008, the question of payment of any such duty and consequently, the levy of interest for the purported delay in payment of duty does not arise. In the present case, the petitioner has no liability of payment of any duty because of Notification No. 20/2007 read with Notification No. 20/2008. Therefore, the petitioner cannot be saddled with the liability of payment of interest and penalty for delayed payment of duty which was exempted. Interpretation of taxing statutes and procedural rules - HELD THAT:- The Assistant Commissioner failed to consider that Rules are framed to carry out the purposes of an Act. Interest is a substantive provision of the taxing statute and unless there is any provision in the Act for levy and charge of interest, no interest can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. P. Baruah , Adv. Mr. Z. Islam , Adv. Mr. P. Das , Adv. Mr. S. P. Sharma , Adv. Mr. N. Dutta, Adv. Mr. S. Saikia , Adv For the Respondents : Mr. S. C. Keyal , SC , GST JUDGMENT Heard Dr. A. Saraf, learned Senior Counsel assisted by Mr. P. Baruah, learned counsel for the petitioner. Also heard Mr. S.C. Keyal, learned Standing Counsel for the GST. 2. The petitioner in the Writ Petition No. being W.P (C) No. 4068/2021, has challenged the order dated 22.09.2017 passed by the Assistant Commissioner of GST & CX Division-I (Annexure - VII) levying interest and penalty on the late payment of duty, which was exempted in view of the Notification No. 20/2007- CE dated 25.04.2007 (Annexure II), and the order dated 29.09.2020 passed by the Assistant Commissioner of GST & Central Excise rejecting the representation dated 12.09.2017 submitted by the Petitioner and upholding the levy of interest and penalty on the delay in payment of duty. 3. In the Writ Petition No. being W.P (C) No. 3965/2021, the petitioner has challenged the order dated 21.09.2017 passed by the Assistant Commissioner of GST & CX, Division-I (Annexure-VII) levying interest and penalty on the late payment of duty, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first schedule of the Central Excise Tariff Act, 1985 from so much of the duty of excise leviable thereon under the said Act as is equivalent to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2004. As per the said notification No. 20/2007 dated 25/4/2007, the exemption contained in the said Notification was to apply to a new Industrial Unit which commenced commercial production on or after 1stday of April, 2007 but not later that 31stday of March, 2017 or Industrial units existing before the 1stday of April, 2007 but which had undertaken substantial expansion by way of increase by not less than 25% in the value of fixed capital investment in plant and machinery for the purposes of expansion of capacity/ modernization and diversification and have commenced commercial production from such expanded capacity on or after the 1st day of April, 2007 but not later than 31st day of March, 2017. 11. The aforesaid Notification No. 20/2007 dated 25.04.2007 was subsequently modified by Notification No. 20/2008-CE dated 27.03.2008 and Notification No. 38/2008-CE dated 10.06.2008, whereby it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of Rule 8(3) and 8(3A) of the Central Excise Rules, 2002 which provides that interest and penalty is payable on late payment of duty. Therefore, in view of the above provisions of law, the submission of the petitioner does not merit consideration." 14. Similarly, the Assistant Commissioner of Central Excise vide order dated 17.03.2017 in respect of Writ Petition bearing W.P (C) No. 4025/2021 levied interest and penalty amounting to Rs. 6,75,593/- for the months of November- 2014, January-2015, February-2015 and March-2015 for the delay in payment of the duty, and the Assistant Commissioner of Central Excise vide order dated 22.09.2017 in respect of Writ Petition bearing W.P (C) No. 4068/2021 levied interest and penalty amounting to Rs.3,78,148/- for the months of April-2016, May-2016, June- 2016 and July-2016 for the delay in payment of the duty. 15. Dr. A. Saraf, learned Senior Counsel submits that the petitioner is entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008 and as such, the question of payment of any such duty and consequently the levy of interest for the purported delay in payment of duty does not arise and thereby th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority who after proper verification makes refund of the duty payable on value addition, the maximum of which could be the amount of duty paid in cash. He further submits that payment of duty is the foundation of refund as made available by Notification No. 20/2007-CE dated 25.04.2007. 20. In support of the aforesaid submission, he relied upon the following judgments:- 1. Amalgamated Plantations (P) Ltd. Vs Union of India, 2013 (2) GLR 732 2012 0 Supreme (Gau) 1243 at paragraph 24, 25, 26, 27, 28, 29, 30, 31. 2. Union of India Vs Amalgamated Plantations (P) Ltd., 2016 5 GLR 403at paragraph 16 and 17. 3. Union of India VS V. V. F Limited, 2020 20 SCC 57 or 2020 0 Supreme (SC) 319. 21. I have heard the submissions made at the bar and I have perused the materials available on record. 22. The Notification No. 20/2007-CE dated 25.04.2007 and subsequent notifications amending the said notification were issued in exercise of powers under Section 5A of the Central Excise Act, 1944. Section 5A of the Central Excise Act is reproduced herein below: "5A. Power to grant exemption from duty of excise.-- (1) If the Central Government is satisfied that it is necessary in the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise, as the case may be, after such verification as may be deemed necessary, shall refund the duty payable on value addition, computed in the manner as specified in paragraph 2A above to the manufacturer by the 15th of the month following the one in which the statement as at clause (a) above has been submitted. Para 2D(a) provides that "manufacturer at his own option, may take credit of the amount calculated in the manner specified in paragraph 2A in his account current, maintained in terms of the Excise Manual of Supplementary Instructions issued by the Central Board of Excise and Customs. Such amount credited in the account current may be utilized by the manufacturer for payment of duty, in the manner specified under rule 8 of the Central Excise Rules, 2004, in subsequent months, and such payment shall be deemed to be payment in cash;" Para 2D(c) reads as "a manufacturer who intends to avail the option under clause (a) shall exercise his option in writing for availing such option before affecting the first clearance in any financial year and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notification No. 20/2008, to make payment of exempted duty within a particular date. Since no liability of payment of duty within a particular time has been fastened on an industrial unit entitled to exemption as per Notification No. 20/2007 read with Notification No. 20/2008 issued in exercise of powers under Section 5A of the Central Excise Act, 1944, no interest or penalty can be imposed for any purported delay in making payment of such duty. 28. Apparent, that once the goods cleared by an eligible industrial unit have been exempted from payment of duty subject to the limitation specified in the Notification, the question of payment of any duty by an eligible industrial unit does not arise and consequently, no interest and/or penalty can be charged for non-payment of such duty within time. The provisions for payment of duty and the time prescribed for such payment of duty in the Central Excise Act, 1944 are applicable in respect of goods which are excisable to Central Excise duty and the manufacturer is liable to pay such duty. The said provision cannot be made applicable in respect of duty which is exempted by issuance of Notifications under Section 5A of the Central Excise Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voluntarily or after determination of the amount of duty under Section 11A. Sub- section (2) of Section 11 AA provides that interest at the rate not below ten percent and not exceeding thirty-six percent per annum, as the Central Government may, by notification in the Official Gazette fix, shall be paid in terms of Section 11A after the due date by the person liable to pay duty and such interest shall be calculated from the date on which such duty becomes due up to the date of actual payment of the amount due. Thus, it is clear that interest can be levied when a person is liable to pay duty within a specific period. When an assessee is not liable to pay duty because he is exempted by way of issuance of notification under Section 5A of the said Act, the provision of levy of interest cannot be made applicable to him. Since in the present case, the petitioner was entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008, the question of payment of any such duty and consequently, the levy of interest for the purported delay in payment of duty does not arise. 32. Section 11 AC of the Act provides for short levy or non-levy of duty in certain cases. Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such reduced penalty is also paid within the period so specified. (c) where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of fraud or collusion or any willful 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, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined: Provided that in respect of the cases where the details relating to such transactions are recorded in the specified record for the period beginning with 8th April 2011 up to date on which the Finance Bill, 2015 receives the assent of the President (both days inclusive), the penalty shall be fifty per cent. of the duty so determined. (d) where any duty demanded in a show cause notice and the interest payable thereon under section 11AA, issued in respect transactions referred to in clause (c), is paid within thirty days of the communication of show cause notice, the amount of penalty liable to be paid by such person shall be fifte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid duty also cannot arise. 35. In the present case, the petitioner has no liability of payment of any duty because of Notification No. 20/2007 read with Notification No. 20/2008. Therefore, the petitioner cannot be saddled with the liability of payment of interest and penalty for delayed payment of duty which was exempted. 36. The Assistant Commissioner of Central Excise while upholding the levy of interest and penalty referred to Rules 8(3) and 8(3A) of the Central Excise Rules, 2002. Relevant provisions of Rule 8 are reproduced herein below for the sake of convenience- "(1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by [the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case] : Provided that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March : [Provided further that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the duty on goods cleared during a quarter of the financial year shall be pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recorded in writing, allow an assessee payment of duty by any mode other than internet banking.] (3) If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount. (3A) If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow." 37. Reading of the aforesaid rules indicates that if a manufacturer fails to pay an amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty. The Apex Court in the case of Khemka & Co. (Agencies) Pvt. Ltd. Vs. State of Maharashtra, reported in (1975) 2 SCC 22 held that a rebate can be included in the procedural part but a penalty being an imposition like imposition of tax cannot be included within the procedural part. The Apex Court further held that penalty is not merely a sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. A penalty is a statutory liability. 42. As per Section 11AC of the Central Excise Act, 1944, penalty can be imposed only on a person who is liable to pay duty. Section 11AC of the Act clearly provides that where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, for any reason other than the reason of fraud or 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, the person who is liable to pay duty as determined under sub-section (10) of Section 11A shall also be liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and only provides that the manufacturer shall submit statement of duty paid by the 7th of the next month in which the duty has been paid other than the amount of duty paid. Under such circumstances, it cannot be said that since the Notifications provide for refund of duty on furnishing the statement of duty paid, the same will imply that there was liability of payment of duty and thereby, if any such duty has not been paid within the time prescribed under the Acts which is applicable only in respect of duty leviable and chargeable and which is liable to be paid by an assessee, interest and penalty can be imposed on an industrial unit which is exempted from payment of duty. 46. Reference is made to the case of Commercial Taxes Officer, Special Circle, Jodhpur Vs. Gadia Textiles and Anr., wherein the Rajasthan High Court held as under: "........the Board ignored the distinction and difference between the two expressions "liable to pay tax" and "tax shall be payable", for, a manufacturer may be liable for payment of tax but on account of exemption, tax is not payable by him. We have already given reasons that "liable to pay tax" does not mean that ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which sales tax can be levied or imposed." 49. Reference is made to the case of Associated Cement Companies Ltd. Vs. State of Bihar, reported in (2004) 7 SCC 642, wherein the Apex Court in paragraph 17 held as under: "17. Crucial question, therefore, is whether the appellant …had any "liability" under the Act. The question of exemption arises only when there is a liability. Eligibility to tax is not the same as liability to pay tax. The former depends on charge created by the Statute and latter on computation in accordance with the provisions of the Statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability question of exemption does not arise. Liability arises in term of Section 3 and tax become payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion it does not logically follow that absence of collection means an absence of liability. We are also of the opinion that the reliance on Town Municipal Committee by the Division Bench which involved an interpretation of "continued to be levied" and "to be applied to the same purposes" in Article 277 of the Constitution was misplaced. While that case did hold that in the circumstances before them "levy" was intended to include "collection", in our opinion the logic or ratio of that case cannot be extended so far as to say that every "levy" must include collection and without such collection no levy can be said to have been made." 53. It is a well settled law that taxing statutes are to be interpreted strictly and while interpreting the taxing statue, one must have argued to the strict letter of law and not merely to the spirit of law and one cannot be taxed by inference or by analogy. 54. Reference is made to the case of M/s. Polestar Electronic (Pvt) Ltd. Vs. Additional Commissioner, Sales Tax &Anr., reported in (1978) 1 SCC 363, wherein the Apex Court in paragraph 12 held as under: "12. ..........it is well-settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambiguity. But equally, courts ought not to be astute to hunt out ambiguities by an unnatural construction of a taxing section. " 58. Reference is also made to the case of M/s. Polestar Electronic (Pvt) Ltd. (supra), the Apex Court held at paragraph 12 that the words of a taxing statute must never be stretched against a tax-payer and if the legislature has failed to clarify its meaning by use of appropriate language, the benefit must go to the tax-payer. The Apex Court held that even if there is any doubt as to interpretation, it must be resolved in favour of the subject. 59. In the present case, the provision of Sections 11AA and 11AC of the Central Excise Act, 1944 are very clear and there is no ambiguity in the provisions of the Act. However, even for the sake of argument, if there is an ambiguity, the benefit of the same must be extended to the tax payer. 60. Rule 8(3) and 8(3A) of the Central Excise Rules, 2002 cannot be made applicable in support of the levy of the interest and penalty, for delayed payment of duty which is exempted in terms of notification issued under Section 5A of the Act. As discussed above, Rules are framed to carry out the purposes of the Act. I ..... 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