9911796707
TMI Blog2005 (8) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... - is not paid in time, the interest chargeable under the Rules remains Rs. 1,000/- per day. Such a device is not permitted by Parent Act. Therefore, to the extent rule provides other than the rate of interest as an alternative mode of levy of interest per day not connected with the amount of duty in default is beyond enabling power of the Parent Act. The Rule 8(3) to the extent it provides after providing the rate of interest chargeable on delayed payment of duty, an alternative mode to provide higher ceiling limit is clearly in violation of Rule 11AB and cannot be sustained. Since the alternative mode is severable from the other part of the provision without affecting its efficacy, it does not require that the entire rule is to be struck d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 may be declared ultra vires Section 11AB of the Central Excise Act, 1944? (ii) The offending phrase "Rs. 1,000/- per day or whichever is higher may be declared arbitrary, confiscatory and violative of Articles 19(1)(g) and 265 of the Constitution of India. Consequential relief is for setting aside the demand founded on the aforesaid rule to the extent it levied interest @ Rs. 1,000/- per day. 2. The provision in the parent Act which authorises charge of interest on delayed payment of duty reads as under: Section 11AB Interest on delayed payment of duty :- 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t payment of duty and the consequences and the penalties as provided in these rules shall follow. 4. The contention of the learned counsel for the petitioner is that the parent Act does not authorise the Central Government to lay the procedure and method for levy of quantification of interest but merely authorises to notify the rate of interest per annum which is to be levied on delayed payment of Duty, or wrongful receipt of refund as the case may be, and therefore, to the extent it provides levy of collecting interest chargeable on delayed payment of duty by fixing Rs. 1,000/- per day to the minimum penalty if it does not exceed the amount chargeable as interest at the rate of 2% per month cannot be sustained. The rule in effect amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to different rate of interests. In the case of delayed payment, the interest has to be charged at uniform rate as may be fixed by the Central Government within a span of 10% to 36%. It does not necessarily mean that in a given case, the interest may be, at X per cent and in another case, it is @ Y per cent. The direct effect of providing alternative ceiling of the interest makes it a fluctuating rate of interest to be charged on delayed payment of duty from assessee to assessee which would bring into existence highly unjust, arbitrary and discriminatory state of affairs that for the same default, different rate of interest is charged for delayed payment of duty/erroneous refund. 7. Moreover, prescribing the higher of the two ceilings tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to fix the rate at which such interest is to be charged so that with charging rates of interest, every time Statute is not to be amended but within the limit prescribed, the Central Government may adjust the rate of interest chargeable on delayed payments, making it sure that delayed payment not become profitable on account of charge of interest at rate lower than market rate of interest. 10. The prescription of limit of rate of interest at 10% per annum and 36% per annum respectively also makes it clear that basic base of charge of interest is rate per annum and not on any other basis. The provision made in Rules results in altering the nature of charge of interest from compensatory to penalty. By providing rate of interest @ 2% p.m. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be struck down. 14. We therefore, hold that Rule 8(3) to the extent it provides levy of interest at the rate of Rs. 1,000/- which is higher as alternative to charge of interest @ 2% on the amount of Duty means to be understood as 24% per annum on the amount of Duty in default is ultra vires to Section 11AB of the Act and cannot be sustained and is held inoperative. 15. Accordingly, the writ petition is allowed. The part of Rule 8(3) which includes expression "at the rate of two per cent, per month or rupees one thousand per day, whichever is higher" is held to be invalid. Consequently, interest chargeable on delayed payment had to be only at the rate of 2% per month or for that matter 24% per annum as notified by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X
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