TaxTMI 
TaxTMI 
2019 (5) TMI 657
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....r referred to as "the Act"). 3. In this batch of appeals, we will treat C.A. No.2150/2012 as the leading case. We will refer to the said case as the SAIL Case. In the said case originally, the appellant company which is manufacturer of various products including rail sold the same to the Indian Railways. The products were cleared on sale from 1st January, 2005 to July 2006. The goods were cleared on the payment of excise duty on the payment of price which was fixed based on their circular dated 24.04.2005. Subsequently, the prices were enhanced by way of price circular dated 20.07.2006. The revision came into effect with retrospective effect. It is based on the same that SAIL deposited Rs. 142 crores by way of excise duty. This was done in August 2006. Thereupon, the officers of the department indulged in correspondence with SAIL seeking details regarding the clearances which were effected. On the basis of material made available, SAIL was called upon to remit interest under Section 11AB of the Act. SAIL filed its objections. It is after considering the objections, the authority found that SAIL was liable to pay interest on a sum of Rs. 142 crores calculated based on the date of....
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....tice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11-AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment of the duty. 17. We are unable to subscribe to the view taken by the High Court in Rucha Engg. [ First Appeal No. 42 of 2007 decided on 3-4-2007] It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short-payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. ....
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....le but the interest is not payable. The interest clock would start ticking from the date the differential duty is due, that is, the day on which the parties agree upon the escalated price and not before. The expression "ought to have been paid" found in Section 11AB was not considered by this Court in SKF case, it was pointed out. The Court felt that SKF Case runs contrary to the Constitution Bench decision in JK Synthetics and interest cannot be demanded by way of damages or compensation. 7. In our view, the following questions will fall to be decided by us: 1) Whether the decision in SKF case and also in International Auto lay down the correct law having regard to the decision of this Court in MRF case which was in fact rendered by a Bench of three Judges. 2) The effect of the judgment in JK Synthetics v. State of Rajathan as also the other judgments cited before us in regard to demand for interest under fiscal statutes. 3) Whether the determination of duty under Section 11A(2) is necessary to sustain the demand for interest under Section 11AB of the Act. 4) The impact of Rule 7 of the Central Excise rules which contemplates provisional asse....
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....e raised either before the Bench which referred the matter or before us by the learned counsel for the appellant that differential duty is indeed payable on the subsequently revised price which is to operate with retrospective effect. 9. At this juncture we think it apposite to refer to the facts in MRF case (MRF Limited v. Collector of Central Excise, Madras). MRF Case was decided on 12.3.1997 and it is reported in 1997 (5) SCC 104. The appeal was filed in this Court against the order passed by the Tribunal dated 24.9.1986. By the impugned order the assessee's claim for refund of excess duty paid on differential price on the date of removal and the reduced price was rejected. The case set up by the assessee was that the price list was approved on 14.5.1983. Subsequently, there was resistance by the consumers. The Ministry of Commerce, Government of India, thereupon directed the manufacturer- assessee pursuant to a decision taken in a meeting of Manufacturers to bring down the prices to the pre 14.5.1983 level. On the basis of the same a difference in the prices arose. This led to a claim for refund. The Tribunal was of the view that the prices at the time of removal alone matte....
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....irst category even according to the appellants. It could be said that the price was subject to variation based on the operation of the price escalation clause. Now the time is ripe for us to consider the statutory framework under the Act and the Rules made under the Act. Section 2(h) of the Act defines sale and purchase as follows: 2(h) "sale" and "purchase", with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration." 11. Interestingly, unlike under the definition of Sale of Goods Act, 1930, "sale" under the Act takes place on transfer of possession. However we need not say anything further as it is not necessary for the cases at hand. Section 3 is the charging section. With effect from 1.7.2000 under the Finance Act of 2000, Section 4 of the Act which is crucial for our case reads as follows: "4. Valuation of excisable goods for purpose of charging of duty of excise - (1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value,....
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....has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or shot-paid or erroneously refunded by reason of fraud, 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 by such person or his agent, the provisions of this sub-section shall have effect [as if, {***]] for the words [one year], the words "five years" were substituted. [Provided further that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is one crore rupees or less a notice under this sub-section shall be served by the Commissioner of Central Excise or with his prior approval by any officer subordinate to him: Provided also that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is more than one crore rupees, no notice ....
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....ct 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 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 and 2 are not extracted. 14. It is also now relevant to notice certain rules under the Central Excise Rules, 2002. Rules 4,5,6,7 and 8 read as under: "RULE 4. Duty payable on removal.- (1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided : Proviso and Explanation omitted. (1A) XXX XXX XXX (2) Notwithstanding anything contained i....
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....sed and the amount of duty provisionally assessed. (3) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall pass order for final assessment, as soon as may be, after the relevant information, as may be required for finalizing the assessment, is available, but within a period not exceeding six months from the date of the communication of the order issued under sub-rule (1): Provided that the period specified in this sub-rule may, on sufficient cause being shown and the reasons to be recorded in writing, be extended by the Commissioner of Central Excise for a further period not exceeding six months and by the Chief Commissioner of Central Excise or Chief Commissioner of Central Excise for such further period as he may deem fit. (4) The assessee shall be liable to pay interest on any amount payable to Central Government, consequent to order for final assessment under sub-rule(3), at the rate specified by the Central Government by notification under section 11AA or Section 11AB of the Act from the first day of the month succeeding the month for which such amount is determined, till the date of pa....
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....such time the amount of duty outstanding and the interest payable thereon are not paid, it shall be deemed that the goods in que3stion in respect of which the duty and interest are outstanding, have been charged without payment of duty, and where such duty and interest are not paid within a period of one month from the due date, the consequences and the penalties as provided in these rules shall follow. Illustrations - Not extracted (4) The provisions of Section 11 of the Act shall be applicable for recovery of the duty as assessed under rule 6 and the interest under sub-rule (3) in the same manner as they are applicable for recovery of any duty or other sums payable to the Central Government." 15. Excise duty is a duty on manufacture or production of goods. It is, however, collected at the point of removal of goods. When the duty of excise is chargeable with reference to the value of goods, Section 4 provides that on each removal of the goods, the value will be determined either under clause(a) or clause(b). We are in these cases governed by clause(a). Section (4) yields the following elements: - (i) when the goods are sold; (ii) for delivery....
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....assessment is to be done by the assessee itself by way of self-assessment and the duty paid by the due date (see Rule 6). What is to happen when the asssessee is confronted with a situation when it is unable to determine the value of the goods or find the rate of duty. Rule 7 provides the solution. The assessee can thereunder apply giving reasons and seeking permission to make a provisional assessment. The officer may, grant such permission. Thereupon, duty is payable on a provisional basis. The value or the rate would be indicated by the officer in the order permitting such provisional assessment. This is however made subject to the assessee executing a bond binding the assessee to pay the difference between the duty as payable under the final assessment and the provisional assessment. The final assessment is to be made within six months from the date of communication of the order permitting provisional assessment under Rule 7(1). The period can be extended by the Commissioner for six months and by the chief Commissioner for which there is no time limit. Sub-rule (4) of Rule 7 is very crucial. It provides as follows:- 1) The assessee shall be liable to pay intere....
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....Court in Associated Cement. The said decision was rendered by a Bench of three learned judges. There was a cleavage of opinion. Justice E.S. Venkataramiah, as His Lordship then was wrote the majority judgment. Justice P.N. Bhagwati as His Lordship then was dissented. The case arose under the Rajasthan Sales Tax Act. The two relevant provisions to be noticed under the statute considered by the said Bench are Sections 7 and Section 11B of the Act. They read as follows: "7. Submission of returns.-(1) Every registered dealer and such other dealer, as may be required to do so by the assessing authority by notice served in the prescribed manner, shall furnish prescribed returns, for the prescribed periods, in the prescribed forms, in the prescribed manner and within the prescribed time to the assessing authority: Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate. (2) Every such return shall be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the deposit....
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....uch amount and for such period in respect of which interest is paid under the provisions of Sections 11 and 14." 21. In Associated Cement Ltd., the majority was dealing with the case falling under Section 11B(a). After analyzing the various provisions the majority took the view that not only the assessee should have paid the tax on the basis of the return but the return must be a return which it ought to have filed in law and on facts. Justice Bhagwati who dissented however, took exception to this reasoning and found that such an interpretation would raise conflicts between the provisions contained in clause (a) and clause(b) of Rule 11B. Justice Bhagwati in his dissent pointed out the anomaly behind the reasoning of the majority. In particular, we may point out that it was noticed by the learned Judge that if the reasoning of the majority is accepted, different rates of interest would apply at different stages. Furthermore, it was reasoned that an assessee cannot do beyond paying the tax according to the return. He cannot possibly divine what the assessing officer will finally assess him to. In fact, in the later judgment in JK Synthetics, the Constitution Bench subscribed to t....
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....R 164, 185-90 : AIR 1963 SC 1685] ). Our attention was, however, drawn by Mr Sen to two cases. Even in those cases, CIT v. M. Chandra Sekhar [(1985) 1 SCC 283 : 1985 SCC (Tax) 85 : (1985) 151 ITR 433] and Central Provinces Manganese Ore Co. Ltd. v. CIT [(1986) 3 SCC 461 : 1986 SCC (Tax) 601 : (1986) 160 ITR 961] , all that the Court pointed out was that provision for charging interest was, it seems, introduced in order to compensate for the loss occasioned to the Revenue due to delay. But then interest was charged on the strength of a statutory provision, may be its objective was to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest, the Court must give that meaning to it as is conveyed by the language used and the purpose to be achieved. Therefore, any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law. So construed and applying the normal rule of interpretation of statutes, we find, as pointed out by us earlier and by Bhagwati, J. in the Associated Cement Co. case [(1981) 4 SCC 578 : 1982 SC....
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....paid' to visit him with the liability to pay interest under clause (a) of Section 11-B. It would be a different matter if the return is not approved by the authority but that is not the case here. It is difficult on the plain language of the section to hold that the law envisages the assessee to predicate the final assessment and expect him to pay the tax on that basis to avoid the liability to pay interest. That would be asking him to do the near impossible." 22. In short, therefore, the principle may be taken to be established that while levy of interest is a part of the adjective law, yet to levy interest there must be substantive provision. Demand for interest can be made only if the legislature has specifically intended collection of interest. We must look at the statutory provisions. 23. In Purolator India Limited Vs. Commissioner of Central Excise 2015 (10) SCC 715, a Bench of two learned Judges was called upon to decide the question as to whether cash discount and trade discount are to be deducted for arriving at the transaction value. The Bench went on to consider section 4 of the Act prior to its amendment in 1973, after the amendment in 1973 and also still further ....
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....the case may be. The expression "actually paid or payable for the goods, when sold" only means that whatever is agreed to as the price for the goods forms the basis of value, whether such price has been paid, has been paid in part, or has not been paid at all. The basis of "transaction value" is therefore the agreed contractual price. Further, the expression "when sold" is not meant to indicate the time at which such goods are sold, but is meant to indicate that goods are the subject-matter of an agreement of sale. Once this becomes clear, what the learned counsel for the assessee has argued must necessarily be accepted inasmuch as cash discount is something which is "known" at or prior to the clearance of the goods, being contained in the agreement of sale between the assessee and its buyers, and must therefore be deducted from the sale price in order to arrive at the value of excisable goods "at the time of removal". 24. No doubt, there are decisions of the High Court which followed in MRF Ltd. [see 2007 (207) ELT 31, Punjab and Haryana] to the effect that a subsequent reduction in prices would not entitle the assessee to lay a claim for refund. In 2010(257) ELT 369, Karnataka....
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....tioned on the proportionate basis and they were to be assessed on the commission earned during the period they had worked as managing agents of the respective companies. Proceedings were commenced against the appellant who were transferors' of the commission agency in regard to the amounts of the commission earned prior to the date of the respective transfers. The case of the transferor inter alia was that no part of the commission for the broken period of 1943 was earned by them. The contract of employment was an entire indivisible contract. The Court had to consider the connotation of the word "earned" which was used in Section 4 of the Income Tax Act which fell for consideration. The majority judgment inter alia held as follows: "35. If therefore on the construction of the Managing Agency Agreements we cannot come to the conclusion that the Sassoons had created any debt in their favour or had acquired a right to receive the payments from the Companies as at the date of the transfers of the Managing Agencies in favour of the transferees no income can be said to have accrued to them. They had no doubt rendered services as Managing Agents of the Companies for the broken pe....
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....t of the sale proceeds belongs to them. Nor is there any ground for saying that the Company are the trustees for the business or any of the assets for the Managing Agents. The Managing Agents cannot therefore be said to have acquired a right to receive any commission unless and until the accounts are made up at the end of the year, the net profits ascertained and the amount of commission due by the Company to the Managing Agents thus determined. (See Commissioners of Inland Revenue v. Lebus) [(1946) 1 AER 476 (Z3)". 55. The whole difficulty has arisen because the High Court could not reconcile itself to the situation that the transferees had not worked for the whole calendar year and yet they would be held entitled to the whole income of the year of account; whereas the transferors had worked for the broken periods and yet they would be held disentitled to any share in the income for the year. If the work done by the transferors as well as the transferees during the respective periods of the year were taken to be the criterion the result would certainly be anomalous. But the true test under Section 4(1)(a) of the Income Tax Act is not whether the transferors and the transf....
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....fits and gains of a business-, one is the cash basis and the other, the mercantile basis. The latter system of accountancy "brings into credit what is due immediately it becomes legally due and before it is actually received; and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed." The book profits are taken for the purpose of assessment of tax, though the credit amount is not realized or the debit amount is not actually disbursed. If an income accrues within a particular year, it is liable to be-,assessed in the succeeding year. When does the right to receive an amount under a contract accrue or arise to the assessee i.e., come into existence? That depends upon the terms of a particular contract. No other relevant provision of the Act has been brought to our notice-for there is none- which provides an exception that though an assessee does not acquire a right to receive an income under a contract in a particular accounting year, by some fiction the amount received by him in a subsequent year in connection with the contract, though not arising out of a right accrued to him in the earlier year, could be related b....
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....ny relevancy of the question of reopening of accounts in considering the question when an assessee acquired a right to receive an amount. The Court also held inter alia as follows: "9......We would prefer to base our conclusion on the ground that we cannot extend the meaning of the word "accrue" -or "arise" in s. 4(1)(b)(i) of the Act so as to take in amounts received by the assessee in a later year, though the receipt was not on the basis of the right accrued in the earlier year. Such amounts are in law received by the assessee only in the year when they are paid. We cannot apply the English decisions in the matter of construction of the provisions of the Indian Act, particularly when they have received an authoritative interpretation from this Court...". 28. In Vikrant Tyres Ltd. v. First Income Tax Officer, Mysore 2001(3) SCC 76 under an assessment order under the Income Tax Act, 1961 the appellant assessee paid the tax. On his appeal being allowed the tax was refunded. The High Court reversed the Appellate order. On fresh demands being made the assessee repaid the tax as assessed and demanded. The revenue demanded payment of interest under Section 220(2) of In....
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....asis that party agreed to escalation in price on a date which is after the date of the removal of goods rendering it exigible to income tax on a later date, it would be irrelevant for the purpose of deciding the liability to pay interest in terms of the clear provisions of the Act. 31. Now we may advert to the judgment of this Court in E.I.D. Parry (India) Ltd. v. CCT 2005 (4) SCC 779. The appellant therein was a manufacturer of sugar. The minimum price of sugarcane which they purchased from farmers was payable immediately. Under Clause 5A of the Sugarcane (Control) Order 1966, additional price was payable which would be determined only at the end of the year. On the advice of the Government the manufacturer paid the additional price as advance at the time of purchase from the farmers and it was subsequently adjusted under Clause 5A. In proceedings under the Tamil Nadu General Sales Tax Act 1959, the assessee showed the turnover on the basis of minimum price and paid tax thereon. It did not pay tax on the additional price which has been paid but it was included in the turnover. When the price was fixed under Clause 5A, the appellant filed revised return and paid tax. Interest wa....
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....appeal or revision, as the case may be, and shall be calculated on the amount that becomes due in accordance with the final order passed on the appeal or revision as if such amount had been specified in the order of assessment or revision of assessment, as the case may be." 33. Thereafter, the Court in E.I.D. Parry (India)Ltd. V. Asst. Commercial of Commercial Taxes, Chennai held as follows: "....Under Section 24(1) if the tax has been assessed or has become payable under the Act, then the payment has to be made within the said time as may be specified in the notice of assessment and tax under Section 13(2) has to be paid without any notice of demand. However, as seen above, the tax under Section 13(2), in the absence of any determination by the assessing authority, is tax as per the returns. If default is made in payment of such tax then interest becomes payable under the Act. In the present case, it is an admitted position that tax as per the monthly return had been paid within time. It is also an admitted position that there was no assessment, even provisional, by the assessing authority prior to the final assessment made after the revised returns had been filed. Int....
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....We are of the view that the scheme of the Central Excise Act and the Rules are a separate code. Section 11A is a provision for recovery. If there is a non-levy, non-payment, short-levy or short-payment, the same becomes recoverable under Section 11A. If there is any of the four contingencies referred to in Section 11A, then Section 11AB is attracted. The working of the parent Act is intricately intertwined with the rules, the scope of which we have already referred to. Therefore, if the value which is declared by way of self-assessment, by way of rule 6 and on which the duty is paid is not the full value then under the scheme of Section 11A read with Section 11AB and the Rules, the assessee incurs liability for interest when in a case where there is full value found and it dates back to the date of removal. 36. We have noticed that in this case admittedly that at the time goods were removed the price was not fixed. The assessee was fully conscious of the fact that it was subject to variation. Assessee must be imputed with knowledge that the value it was declaring was amenable to upward revision. The circumstances were indeed clearly both apposite and appropriate for the assessee....
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.... not been levied or paid, or which has been short-levied, or to whom the refund has erroneously been made, or which has not been paid in full, requiring him to show cause why he should not pay the amount specified in the notice: Provided that- (a) where any duty has not been levied or paid or has been short-levied or has not been paid in full, by reason of fraud, collusion or any wilful misstatement or suppression of facts by such person or his agent, or (b) where any person or his agent, contravenes any of the provisions of these rules with intent to evade payment of duty and has not paid the duty in full, or (c) where any duty has been erroneously refunded by reason of collusion or any wilful misstatement or suppression of facts by such person or his agent, the provisions of this sub-section shall, in any of the cases referred to above, have effect as if for the words 'six months', the words 'five years' were substituted. Explanation.-Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the period of six months, or five years, as the case may be. (2) The Assis....
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....his warehouse; (b) the Chapter, Heading No. and Sub-Heading No., if any, of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) under which each such goods fall; (c) the rate of duty leviable on each such goods; and (d) such other particulars as the Collector may direct. (2) The proper officer shall, after such inquiry as he deems fit, approve the list with such modifications as are considered necessary and return one copy of the approved list to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payable on the goods intended to be removed in accordance with such list. (2-A) All clearances shall, subject to the provisions of Rule 173-CC, be made only after the approval of the list by the proper officer. If the proper officer is of the opinion that on account of any inquiry to be made in the matter or for any other reason to be recorded in writing, there is likely to be delay in according the approval, he shall, either on a written request made by the assessee or on his own accord, allow such assessee to avail himself of the procedure prescribed under Rule 9-B for provisional assessment....
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....ce list filed by an assessee under sub- rule(1) shall be necessary only, where the assessee- (i) sells goods to or through a related person as defined in Section 4 of the Act; or (ii) uses such goods for manufacture or production of other goods in his factory; or (iii) clears such goods for free distribution; or (iv) clears such goods in any other manner which does not involve sale to a non-related person; or (v) clears the goods of the same kind and quality from his factories located in the jurisdiction of different Collectors of Central Excise or Assistant Collectors of Central Excise; or (vi) submits a fresh price list or an amendment of the price list already filed with the proper officer and which has the effect of lowering the existing value of the goods. *** *** *** (5) Subject to the provisions of Rule 173-CC, an assessee specified in sub-rule (2) shall not clear any goods from a factory, warehouse or other approved place of storage unless the price list has been approved by the proper officer. In case the proper officer is of the opinion that on account of any enquiry to be made in the matter or for an....
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.... Bench in the case of Collector of Central Excise, Baroda v. Cotspun Ltd. reported in (1999) 7 SCC 633. This Court approved the view taken in Rainbow Industries (supra) and it disapproved of Balarpur Industries noticing that it did not advert to Rule 173-B. In the course of judgment, the Court inter alia held as follows: "12. Rule 173-B deals with classification lists. It entitles the proper officer of Excise to make such enquiry thereon as he deems fit and requires him to approve the list only thereafter, and that with such modifications as are considered necessary. The assessee must determine the excise duty that is payable by him on the goods he intends to remove in accordance with the approved classification list. Sub-rule (5) provides for modification of an approved classification list. 13. Rule 10 is a provision for recovery of duties that have not been levied or paid in full or part. So far as is relevant for our purposes, it provides that where any duty has been short-levied, the Excise Officer may, within six months from the relevant date, serve notice on the assessee requiring him to show cause why he should not pay the amount that had been short-levied.....
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.... the word "such" indicates only such short-levy which has been held to be non-existent in Cotspun [(1999) 7 SCC 633] having regard to Rule 173-B. Such short-levy or non-levy may be on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods. Thus, any approval made in terms of Rule 10 (sic 173-B), in the event, any mistake therein is detected, would also come within the purview of the expression "such short-levy or short payment". Such notice is to be served on the person chargeable with the duty which inter alia has been short-levied or short-paid." 57. The procedure laid down under Rule 173-B of the Rules has specifically been included in the Act. Furthermore, by reason of the amended Act a provision has been made for reopening the approved classification lists. It is a procedural provision, in terms whereof statutory authorities are required to determine as to whether the earlier classification was correctly done or not. The said authority upon giving an opportunity of hearing to the parties may come to the conclusion that decision on the approval granted need not be reopened and even if the same is reopened, th....
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....ve power to issue notice either under Rule 10A or Rule 9(2), the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground as has been held by this Court in J.K. Steel Ltd. v. Union of India (1969) 2 SCR 418 = (AIR 1970 SC 1173). "If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in B. Balakotaiah v. The Union of India: [1958]SCR 1052 = (AIR 1958 SC 232); and Afzal Ullah v. State of U.P. [1964]4SCR 991 = (AIR 1964 SC 264). The Court further proceeded to held as follows:- "18. This now takes us to the question of proper interpretation to be placed on the expression "short-levied" and "paid" in Rule 10. Does the expression "short-levied" mean that some amount should have been levied as duty as contended by Dr. Syed Mohammad or will that expression cover even cases where the assessment is of 'nil duty'....
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.... the Indian Income-tax Act, 1922, an assessee was charged with interest Under Sub-section (8) of Section 18A of that Act Under that Sub-section interest calculated in the manner laid down in Sub-section (6) of Section 18A was to be added to the tax assessed. Sub-section 3 of Section 18A dealt with cases of a person who has not been assessed before and he was required to make his own estimate of the tax payable by him and pay accordingly. Sub-section (3) of Section 18A was applicable to the assessee in that case. However, he neither submitted any estimate nor did he pay any advance tax. Under Sub-section (6) of Section 18A it was provided: "Where in any year an assessee has paid tax Under Sub-section(2) or Sub-section (3) on the basis of his own estimate, and the tax so paid is less than eighty percent of the tax determined on the basis of regular assessment simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty percent." "25. We may point out....
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....ed. When we limited the period to five years, the Committee on Subordinate Legislation recommended that instead of incorporating such an important provision in the rules it should find a place in the Act itself. That is why we have brought in this amendment to the Act. Otherwise, since those rules were laid on the Table of the House by implication they were approved by the House without any amendment. So, that is more or less the law now. We are only incorporating it in the Act, as recommended by the Committee on Subordinate Legislation." 46. It is apparently thus that Section 11A came to be inserted. 47. Coming to Section 11AB, it came to be inserted by Act 33 of 1996. Thereafter, it was amended by Act 10 of 2000, Act 14 of 2001, Act 20 of 2002 and Act 49 of 2005. We have already extracted the relevant provisions of the said section. Section 11A must necessarily be read with Section 11AB. This is for the reason that interest under Section 11AB is premised upon the duty of excise not being levied or paid or short levied, short paid or erroneously refunded. Such duty is either determined under sub-Section(2) of Section 11A or without such determination it being paid under Sect....
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....f prices and under Section 11AB payability arises with reference to the date of decision to grant escalation. In other words, the law will have to be interpreted in a manner that it is fair and equal to similarly situated group of assessees. Legislative intention, in this regard, also cannot be otherwise. Legislature has clearly in Section 11AB spelt out the time with reference to the Act and the Rules. Under Section 11AB in the case of short levy or short payment inter alia, the expression "month in which the duty has become payable" under the Act and the rules must be understood as the month in which the duty is payable under the Rules made under the Act. Thus, if goods are removed in the month of January ordinarily payment must be made by the 6th of February. If the duty is not paid by the 6th of February, Section 11AB must be understood as mulcting the assessee with liability to pay interest from the first day of March in the example we have given. If the assessee went in for provisional assessment under rule 7, it becomes liable from the 1st day of the month following the month for which the amount is determined. 51. The expression "the month in which the duty ought to have....
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....yond the same. Power under Section 11A to recover the duty which has not been levied or not been paid or short-levied or short-paid will be available inter alia irrespective of, whether the aforesaid contingency was or was not the result of any approval, acceptance or assessment either relating to the rate of duty or the valuation under the Act and the Rules. Thus, even when there has been an assessment or acceptance in relation to the rate of duty or valuation, it does not stand in the way of invoking power under Section 11A. 55. Rule 12 declares that every assessee is to file monthly returns. There is no provision in the rule which contemplates an assessment as such based on the return by the authorities. Assessment is self-assessment by the assessee under Rule (6). No doubt, in the case covered by Rule 7 there is a provisional assessment followed by a final assessment. The main ingredients for self-assessment would appear to be (1) the rate of duty (2) valuation (3) quantity of removal. 56. Are cases of non-levy, non-payment, short-levy and short-payment mutually exclusive?. In other words, can it be said that in a case of non-payment, it would not be a case of non-levy? D....
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....d quantity it could be classified as a case of short levy as one of the components of proper assessment namely, valuation has been incorrectly arrived at. The payment in such a case is made in terms of the incorrectly assessed figure. The payment matches the assessment. In fact, it is worthwhile to recall that under Rule 10 of 1944 Rules which we have adverted to., the expression "short-payment" is not used. Instead the words duty has not been paid in full, has been used. No doubt, in a case where in law though the amount which is paid is in harmony with the amount which is assessed, it is not the amount which ought to have been paid by the assessee. The absence of full payment of duty or short payment has indeed also in one sense taken place. In a case where there is an escalation clause goods are cleared on a provisional price. Consequently, the value is provisional. There is a subsequent escalation with retrospective effect. It will affect the valuation which was employed in the self-assessment by the assessee which would necessarily be provisional. Enhancement of the value will date back to the dates of removal in view of the retrospective operation. Admittedly the liability....
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....ayment, short-levy or short-payment. Since there is no notice under Section 11A and non-determination of the amount as such pursuant to which the amount is paid it may happen that there may be shortfall in the amount which is paid by the assessee in comparison to what the assessee is legally required to pay. The short payment which is therefore referred to in the second Explanation to Section 11A(2)(B) can only be the aforesaid short payment and it is not referring to the short payment of duty which was originally occasioned and which is the subject matter of Section 11A(2)(b) and Section 11AB. 63. We are of the view that the reasoning of this Court in the order referring the cases to us (to this Bench) that for the purpose of Section 11AB, the expression "ought to have been paid" would mean the time when the price was agreed upon by the seller and the buyer does not square with our understanding of the clear words used in Section 11AB and as the rules proclaim otherwise and it provides for the duty to be paid for every removal of goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which referred the matter would....