TaxTMI 
TaxTMI 
2018 (2) TMI 918
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.... of which the appropriate amount of the duty of excise or countervailing duty as the case may be is already paid. Appellants filed classification list No.1/76 dated 3.3.1976 claiming exemption under Notification No. 25/70. On5.3.1976, the Assistant Collector approved the classification and allowed the availment of exemption subject to condition thereon. While so, a show cause notice dated 7.6.1976 was issued to the appellant proposing to withdraw the approval given for availing the exemption under the Notification 25/70 and also to show cause why they should not be required to pay duty on the products cleared from 5.3.1976. After adjudication of the show cause notice, the Assistant Collector passed Order-in-Original dated 7.1.1977 denying the benefit of the notification. The operative portion of the said order is noticed as under:- "I, accordingly, hold that the complex fertilizer, viz. NPK complex fertilizer (Vijay 17:17:17) manufactured by M/s Madras Fertilizers Ltd., Manali, Madras, is not eligible for the exemption contemplated in the Notification No. 25/70-CE dated 1.3.70 I, therefore, order that the exemption granted to M/s Madras Fertilizers Ltd., Madras, is withdra....
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..... The order was silent as to any demand of interest. During the relevant period of dispute, i.e. from 5.3.1976 to 29.7.1977, there was no provision in the Central Excise and Salt Act, 1944 for levy of interest. Therefore, demand of interest is unsustainable. 6.2 The Revenue has merely issued letter demanding interest. There was no show cause notice issued to the appellant demanding interest. The findings in the impugned order is that the appellant is liable to pay interest as per section 11AA of Central Excise Act, 1944 for the delayed payment of duty. The provision of section 11AA will not be applicable as the duty liability pertains to a period much prior to the introduction of the said provision. Section 11AA was introduced with effect from 26.5.1995 and the amendment under section 11AB in regard to levy of interest was brought forth with effect from 28.9.1996. When there is no statutory provision for levy of interest during the relevant period of dispute, the department cannot demand interest. To support this point, she relied upon the decision of the Hon'ble High Court of Bombay in the case of Ballarpur Industries Ltd. & Another Vs. Union of India and Others 1987 (30) ELT 2....
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....der section 11A of Central Excise Act, 1944 would equally apply to the demand of interest. She relied on the decisions in the cases of Collector Vs. TVS Whirlpool Ltd. 1996 (86) ELT 144 and Hindustan Insecticides ltd. Vs. Commissioner of Central Excise 2013 (297) ELT 332 (Del.). 7. The ld. AR shri A. Cletus reiterated the findings in the impugned order. He submitted that the appellant is liable to pay interest as per section 11AA of Central Excise Act, 1944. His submissions were mainly two fold. (i) Payment of interest is automatic and (ii) No separate show cause notice is required to be issued for demand of interest. He relied on the following case laws:- a. Dodsal Engineering & Construction P. Ltd. vs. Commissioner of Central Excise, Bangalore - 2010 (262) ELT 706 (Tri. Bang.) b. Commissioner of Central Excise Vs. International Auto - 2010 (250) ELT 3 (SC) c. Commissioner of Central Excise, Pune Vs. SKF India Ltd. - 2009 (239) ELT 385 (SC) 7. Heard both sides. 8.1 The issue is whether the appellant is liable to pay the interest demand of Rs. 4,99,48,695/-. As noticed in the narration of facts, neither the show cause notice nor the Order-in-Orig....
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....tral Excise and Salt Act empowers levy of interest on delayed payment on central excise duty. In para 24, the Hon'ble High Court discussed as under:- "24. It emerges from the above that under Article 265 of the Constitution of India no tax shall be levied or collected without an authority of law and that Article 265 contemplates two stages - one is levy of tax and other is collection of tax and that levy of tax includes declaration of liability and assessment, namely, quantification of the liabilities. After the quantification of the liability follows the collection of tax and it should be only by an authority of law. The authority of law should be only by a legislative fiat but not by an executive fiat. Levying of interest is one of the modes of recovery of tax or collection of tax to compel the assessee to pay the tax in time. In other words levy of interest is a part of collection of tax and, therefore, it is covered by the second limb of Article 265. If it forms part of collection of tax under Article 265, it should be by an authority of law. The delinquent taxes do not bear interest as such or by way of penalty, in the absence of express provision of law imposing liab....
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....pensatory in character and not penal. The payment of interest in case of default in payment of tax is a means of compelling an assessee to pay tax by a prescribed date. Interest is made payable on that amount of tax which ought to have been paid earlier, i.e., within the prescribed time or the specified period and which has not been paid; that interest is made payable because Government to that extent is deprived of the use of money which otherwise it could have got at an early point of time and that on the contrary, provision for payment of interest being a method for collecting or recovering its revenue, it is for the State to decide what is most efficacious for this purpose, and the defaulter has no moral right to make any grievance in this behalf. The provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be recovered under law and it cannot be recovered by way of damages for wrongful detention of the amount. Any provision made in a statute for charging or levying interest on delayed payment of tax mus....
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....num, as is for the time being fixed by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty: Provided that where a person chargeable with duty determined under sub-section (2) of section 11A before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty. Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the date of such determination shall be the date on which an amount of duty is first determined to be payable. Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the date of such determination shall be, ....
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....e and consequently no interest would be payable. As noted earlier interest is compensatory. It is to recompensate a party. In the instant case the State for not recovering its monies (duties) on time. At the point of time interest becomes due the interest there must be an ascertained amount of duty which a party needs to pay. If there is no ascertained duty, there is no question of compensating the State by way of interest. The fact that duty subsequently has been ascertained and becomes payable from the date when it was due, does not make a party liable for interest from that date. That situation is covered by the explanations to the Section." 8.8 In the case before us, there has been no such determination of duty. The Order-in-Original dated 7.1.1977 does not make any determination of duty. It merely decides the classification dispute and the eligibility of exemption notification. After such order, the Revenue ought to have issued a show cause notice demanding duty for the period 5.3.1976 to 29.7.1977. No such show cause notice was issued. The facts reveal that after the issue of classification was settled by Hon'ble Supreme Court, a series of letters have been issued to the a....
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....was issued raising the demand of interest. Fourthly, the period pertaining to the duty liability is from 1.4.2000 to 6.1.2003 which is after the introduction of section 11AA and section 11AB as well as the amendments to these sections in 2001. The case therefore is purely distinguishable on facts and will be of no assistance to the Revenue. It needs to be mentioned that in para 13.10 of the said decision, the Tribunal has observed that the decision in the case of Commissioner of Central Excise, Noida Vs. Prisma Polyfabs Pvt. Ltd. 2003 (162) ELT 381 (Tri. Del.), held that interest could not have been demanded without invoking provisions of section 11AB in the show cause notice if the period is prior to 1998. 8.10 The ld. AR has also relied upon the decisions of Apex Court in the case of SKF India Ltd. (supra) and International Auto Ltd. (supra). The issue in these cases was whether the assessees are liable to pay interest on the differential duty which was paid by the assessee due to revision of prices retrospectively. The facts in the judgment of International Auto Ltd. (supra), though not forthcoming, facts in SKF India Ltd. reveals that the assessee was issued show cause notic....
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....reason of fraud, collusion or any wilful misconduct or suppression of facts, or contravention of any of the provisions of this Act or Rules made thereunder with intent to evade payment of duty, then, there is larger period of limitation and as provided by law. Whatever may be the case, eventually, if a representation is made by a person against whom a notice under Section 11A(1) is served, the Central Excise Officer can determine the amount of duty of excise due from such person to whom notice is issued and thereupon, he shall pay the amount so determined. It is that amount, which is determined but not paid within three months from the date of such determination, which attracts interest under Section 11AA. In the present case, the petitioners had challenged the duty, namely, the additional duty of excise on the goods of special importance contemplated by the Act, namely, the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The High Court of Delhi dismissed that Petition, but from the period from its institution, namely, 9th August, 1982 till the final judgment therein in the year 1995, there was a stay against recovery of this additional duty of excise. There wa....
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....ral law. As per the general law and prevailing then, the proceedings for recovery of interest for wrongful withholding of the sum is independent of the action under the Central Excise Act, 1944. There is no provision in the Central Excise Act, 1944 and then prevailing, enabling recovery of such interest. For all these reasons, we hold that the demand for interest in terms of the Central Excise Act, 1944 was not tenable. All coercive measures to recover the amount were improper in law. The writ petition succeeds accordingly. The amount of interest which is deposited in this Court with accrued interest shall be paid over to the petitioners after a period of four weeks from the date of receipt of a copy of this order." 8.12 Similar view was taken by the Hon'ble High Court of Madras in the case of Commissioner of Central Excise Vs. Lucas TVS - 2016 (333) ELT 259 (Mad.) which would assist the contentions of the appellant. The facts are that there was a classification dispute pursuant to which Order-in-Original No. 7/95 dated 9.1.1995 was passed directing the assessee to pay duty for the different periods 1.1.1994 to 31.1.1994; 1.2.1994 to 30.6.1994 and 1.7.1994 to 30.12.1994. This or....
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....8.13 In Archana Spinners Ltd. vs. Deputy Commissioner of Central Excise, Tuticorin 2016 (336) ELT 485 (Mad.), the Hon'ble High Court has discussed in detail the distinction between section 11AA and 1AB, the amendments brought forth in 2001. The facts relevant are narrated in para 4 to 9 of the judgment, which is as under:- "4. By show cause notices Bearing Nos. 541/98, 1092/98, 216/98, 273/99, 685/99 and 1094/99 respectively dated 2-4-1998, 1-7-1998, 18-11-1998, 1-4-1999, 30-7-1999 and 1-12-1999 relating to various periods namely 9/97 to 12/97, 1/98 to 4/98, 5/98 to 8/98, 9/98 to 12/98, 1/99 to 4/99 and 5/99 to 8/99, the appellant/assessee was called upon to show cause as to why a demand for additional duty of excise to the total extent of Rs. 20,27,588/- should not be demanded for adopting a lower assessable value at the time of removal of the goods. 5. All these six show cause notices resulted in an Order in Original Bearing No. 18/2000, dated 29-2-2000, confirming the demand of duty to the tune of Rs. 20,27,588/-. No interest was demanded, but a penalty of Rs. 500/- was imposed. This Order-in-Original was confirmed in an Order-in-Appeal No. 178/2003, dated 28-1....
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.... by the Central Government, by notification in the Official Gazette, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty : Provided that where a person chargeable with duty determined under sub-section (2) of Section 11A before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty. Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the date of such determination shall be the date on which an amount of duty is first determined to be payable. Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the Court, the date of such determination shall be, - (a) for the amount of duty fi....
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....he duty be liable to pay interest at such rate not below eighteen per cent. and not exceeding thirty six per cent. per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first day of the month succeeding the month in which the duty ought to have been paid under this Act or the Rules made thereunder or from the date of such erroneous refund, as the case may be, but for the provisions contained in sub-section (2) of Section 11A, till the date of payment of such duty. (2) For the removal of the doubts, it is hereby declared that the provisions of sub-section (1) shall not apply to cases where the duty became payable before the date on which the Finance (No. 2) Bill, 1996 receives the assent of the President. Explanation 1 - Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, the interest shall be payable on such reduced amount of duty. Explanation 2 - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Cour....
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....d upto 11-5-2001 disappeared to some extent by the amendment inserted from 11-5-2001. Though a small distinction was still retained, the liability to pay interest became common for both categories of cases and a distinction was retained only in respect of the minimum ratio of interest and the date of commencement of liability post 11-5-2001. In cases where the payment was made voluntarily after determination of the amount of duty under Section 11A, the amendment stipulated a minimum rate of interest at 10% per annum and a maximum rate of interest at 36% per annum. But, in other cases, the minimum rate of interest was maintained at 18% per annum. Except this, the distinction between the two categories of cases was diluted. 23. After amendment with effect from 8-4-2011, Section 11AA itself is removed. Therefore, all types of cases where there is a determination under Section 11A(2) are treated alike irrespective of the presence or absence of fraud, collusion, etc. 24. Having seen the manner, in which, the amendments were brought forth in 2001 and 2011, if we get back to the cases on hand, it could be seen that the periods, in respect of which, the show cause notices were issued....
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.... "11. The appellants also pleaded against interest liability for differential duty. It is submitted that none of the demand notices issued for demanding differential duties referred to any interest liability. We have perused the demand notices. The appellant is correct in this regard. In fact, the Board vide master circular dated 10.3.2017 (para 3.8) also states that the interest needs to be demanded and recovered following due process of demand and adjudication. As such interest liability without due notice and adjudication is not sustainable". 8.16 The ld. counsel for appellant has also argued that the interest demand is barred by limitation. In TVS Whirlpool India Ltd. (supra), the Tribunal held that the demand of interest made beyond the period of one year is clearly hit by the principles of limitation. The Hon'ble Apex Court maintained the view of the Tribunal and observed that the demand of interest should be made within a reasonable period. Similar view was taken in the case of Kwality Ice Cream Company Vs. Union of India 2012 (281) ELT 507 (Del.). An amendment is brought forth in section 11A by introducing sub-section (15) wherein it is provided that sub-section (1) to ....