Charging of interest

[Amresh kumar]

Sir,

A SCN was issued and adjudication order was passed before the interest clause was enacted in the year 1975. No demand of interest is there either in SCN or Order in original.

The company was in litigation. Now can the department insist for payment of interest. Interestingly the company was in BIFR also and in between department raised huge interest which was quashed by BIFR.

Any board circular in this regard will be very help full.

Thanks& regards

Amresh Kumar

[KASTURI SETHI]

The department cannot take coercive measure to recover after the order of BIFR. The department can file appeal with Appellate Authority of BIFR.

[KASTURI SETHI]

As per Board's circular F. No. 96/85/2015-CX.I, dated 7-12-2015 recovery of admitted liability (here interest which is unpaid) can be made without issue of SCN and adjudication proceedings.

PARA NO.B 40

The conference after due discussion did not agree with the proposal to amend the rule and provide for escalation in penalty for continued default. With regard to implementation of the rule as it exists, it was noted that non-payment of duty duly reflected in a Return is a case of admitted liability. Provisions of section 11A(16) introduced in the budget of 2015 are relevant in this regard wherein it has been provided that provisions of section 11A do not apply for duty which has been self assessed, reflected as payable in the Return but has not been paid. The implication of this sub-section is that for admitted liabilities no show cause notice and adjudication proceedings need to be undertaken. For such liability, provisions of rule 8(4) of the CER, 2002 apply. This rule provides that provisions of section 11 of the Act shall be applicable for recovery of duty, interest and penalty in case of default. The conference concluded that recovery of admitted liability thus can be initiated forthwith once the return has been filed and duty shown payable has not been paid. As the legal empowerment is available, necessary recovery can be made forthwith.

[DR.MARIAPPAN GOVINDARAJAN]

In my view the Department cannot insist for payment of interest.

[KASTURI SETHI]

DR.MARIAPPAN GOVINDARAJAN,

Sir, I agree with you. Interest cannot demanded for the period prior to the date of enactment/insertion of Interest Clause in Central Excise Act, 1944. The querist wants Board's circular in his favour. There are case laws of various courts in his favour but not specifically on interest-issue. The analogy of the other judgements can be applied to the present case. Case laws are available. He will have to labour hard to trace case laws in his favour.

[KASTURI SETHI]

Mr.Amresh Kumar Ji,

The following case laws are in your favour :-

(1) Interest for delayed payment can be levied and charged only if statute makes a substantive provision in this behalf--Supreme Court in the case VVS Sugars Vs. Govt. of AP reported as AIR 1999 SC.2124 =1999 AIR SCW 1871 = 1999 (4) TMI 519 - SUPREME COURT (5-member Bench)

(2) India Carbon Vs. State Vs. State of Asam (1997) 6 SCC 479 = 106 STC 460(SC) = 1997 (7) TMI 566 - SUPREME COURT

(3) Shree Bhagwati Steel Rolling Mills Vs. CCE (2015) 326 ELT 209 (SC) = 2015 (11) TMI 1172 - SUPREME COURT

(4) Levy of Interest is substantive provision and can only be prospective Supreme Court reported as Jaswal Neco Ltd. Vs. CCE (2015) 322.ELT.561 (SC) = 2015 (8) TMI 243 - SUPREME COURT

AI Summary

Interest charging limited to statutory prospective application; recovery of admitted unpaid liabilities may proceed without adjudication.
Administrative guidance and a Board circular treat duty disclosed in returns but unpaid as an admitted liability, permitting recovery of duty, interest and penalty without issuing a show cause notice or conducting fresh adjudication. Separately, principle authorities indicate that levy of interest is a substantive provision that must be grounded in statute and applies prospectively, so interest cannot be demanded for periods before the statutory insertion of an interest clause.