TaxTMI 
TaxTMI 
2016 (10) TMI 276
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....tioner is engaged in manufacturing fertilizers. For the purpose of its manufacturing activity, the petitioner would use Low Sulphur Heavy Stock ("LSHS" for short) as a raw material. As long as such raw material is used for manufacturing fertilizers, it would invite concessional rate of duty. On the premise that the petitioner utilised the concessional rate of duty provision for purchase of such product but utilised part of it not for manufacturing of the fertilizers but for generation of steam, the department instituted proceedings for recovery of unpaid excise duty. We are not concerned directly with this litigation since upto the level of Supreme Court, the issue was decided against the petitioner. To a limited extent, our interest would be in an order dated 26.6.2003 passed by the Customs Excise and Service Tax Appellate Tribunal ("CESTAT" for short) in which while confirming the duty demand, the Tribunal recorded the contention of the counsel for the petitioner on the question of interest on unpaid duty as under : "He also submitted that interest was not recoverable since in the 13 Show Cause Notices covered by this order, there was no proposition to recover the intere....
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....would apply only in respect of clearances effected after 28.9.1996 (i.e. the date on which section 11AB was inserted) irrespective of the date of passing of adjudication order. The Commissioner in the impugned order was of the opinion that this circular would not apply since it covers the case under section 11AB of the Act in which the legislature had clarified the position by introduction of proviso to subsection( 1). In his opinion language used in section 11AA was vastly different. 6. Learned counsel Shri Kamal Trivedi appearing for the petitioner took us through the statutory provisions of section 11AA and section 11AB and the legislative changes made in these provisions from time to time to contend that : a) The liability to pay interest is a substantive liability and can arise only prospectively. Section 11AA does not have retrospective effect and therefore, would cover only those cases where duty liability arose after 26.5.1995 i.e the date on which section 11AA was inserted in the said Act. In support of this contention, counsel relied on the decision of Supreme Court in case of J.K. Synthetics Limited v. Commercial Taxes Officer reported in (1994) 4 Supreme Cou....
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....of Section 31" are either ornamental or inconsequential nor do we have any hesitation in holding that right of appeal under Section 30 can be exercised only in the manner and to the extent it is provided for in Section 31 to which the said right is made subject." 2) In case of Commissioner of C. Ex. & Customs v. Saurashtra Cement Ltd reported in 2010 (260) ELT 71 (Guj.), where the Division Bench of this Court in context of rule 25 of the Central Excise Rules carrying the expression "subject to the provisions of section 11AC of the Act", observed that "Since Rule 25 can be invoked subject to the provisions of section 11AC of the Act, as a natural corollary, the ingredients mentioned in section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules." 7. On the other hand, learned counsel Ms. Trusha Patel for the Union of India submitted that once the petitioners have given up the challenge to the vires of the statutory provisions, her role would be limited. Learned counsel Ms. Avni Mehta for the department opposed the petition contending that statutory provisions are sufficiently clear. The pe....
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....to cases where the duty became payable before the date on which the Finance (No.2) Bill, 1996 receives the assent of the President." 11. Simultaneously, under the same Finance Act with effect from 28.9.1996, the legislature added the following words in the beginning of section 11AA : "Subject to the provisions contained in Section 11AB" 12. With effect from 11.5.2001 under the Finance Act, 2001, subsection( 2) was inserted in section 11AA as under: "(2) The provisions of subsection (1) shall not apply to cases where the duty becomes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President." 13. Simultaneously from the same date, i.e 11.5.2001, under the Finance Act, 2001, subsections (1) and (2) of section 11AB were recast, relevant portion of which read as under: "(1) Where any duty of excise has not been levied or paid or has been shortlevied or shortpaid or erroneously refunded, the person who is liable to pay the duty as determined under subsection (2), or has paid the duty under subsection( 2B), of Section 11A shall, in addition to the duty, be liable to pay interest at such rate not below eighteen p....
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....eceived the assent of the President till the date of payment of such duty. This proviso would come up for further discussion at a later stage. 16. In contrast to these provisions contained in section 11AA of the Act, Section 11AB which was introduced in the next Finance Act provided for charging of interest in cases where the duty of excise was not levied or paid or short levied or short paid or erroneously refunded by reason of fraud, collusion, willful misstatement or suppression of facts or contravention of the provisions of the Act or the Rules, with intent to evade payment of duty, as determined under subsection( 2) of section 11A. In such a case in addition to the duty, there would be liability to pay interest at the rates that may be specified by the Board from the first date of the month succeeding the month in which the duty ought to have been paid or from the date such erroneous refund was granted till the date of payment of such duty. Subsection( 2) of section 11AB was meant to remove doubts and provided that the proviso to subsection( 1) would not apply to cases where the duty become payable before the date when the Finance Bill, 1996, received the President's as....
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.... is well known, the statute which creates new rights or liabilities, is ordinarily to be applied prospectively unless either expressly or by necessary implication, it is given retrospective effect. The fact that section 11AB was made expressly prospective is clear from the language used in subsection( 2) of section 11AB. In contrast, there are inbuilt indications in section 11AA that the said section would have a retroactive effect. The main body of section 11AA in its original form did not limit the liability to pay interest in cases where duty liability arose after introduction of the said section. It only provided that the interest would be payable when a person charged with duty by determination under subsection( 2) of section 11A failed to pay the same within three months from the date of such determination. It may however, be open to a person to contend that interest liability being a substantive liability, the statute would not cover the past cases before its introduction. However, the proviso to section 11AA would change the entire situation. Under such proviso, even in cases where the duty liability not only arose prior to the introduction of section 11AA but was also dete....
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....rom 28.9.1996. Prior to this date, there was only one provision for charging the interest namely, section 11AA, which as noted, would cover all cases of unpaid duty whether on account of fraud, willful misstatement, collusion etc. or otherwise. Section 11AB however, created a separate class and charged interest only in cases where non payment, short payment of erroneous refund of duty was by reason of fraud, collusion, etc. With introduction of section 11AB of the Act, thus the statute contained two provisions both charging interest. In absence of any further clarification, section 11AA would cover all cases of unpaid duty and would not exclude those which were for the reason of fraud, collusion, etc. Section 11AB was confined to a small class of cases of unpaid duty and it may be possible, in absence of any further clarification, to apply both the provisions in cases where the non payment of duty was on account of fraud, collusion, etc. To make the matters beyond any debate, the legislature inserted words "Subject to the provisions contained in Section 11AB" in Section 11AA. 20. The expression "subject to" is a well known legislative device used in similarly but not always iden....
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....on, the former would yield to the latter and in other words, in case of a conflict, the provisions of the latter would prevail. It is sometimes seen as the reverse of the latter provision carrying a non obstante clause. In context of section 11AA and section 11AB of the Act, therefore, the plain intention of the legislature while making section 11AA subject to section 11AB was to avoid any conflict between the two statutory provisions. The former would encompass all cases of unpaid duty except those covered by the latter which is confined to cases where such duty remained unpaid on account of fraud, misstatement, collusion, etc. By providing that section 11AA would be subject to section 11AB, the legislature made it amply clear that those cases of unpaid duty by the reason of fraud, willful misstatement, etc. would be covered by section 11AB only and in a case which is covered by section 11AB, section 11AA would yield to the said provision. The contention therefore, that for applying section 11AA, all conditions provided in section 11AB must be satisfied, is devoid of any merits. The absurd results this contention would lead are plain to see. If for application of section 11AA, all....