AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1275
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....ed in view of the Notification No. 20/2007- CE dated 25.04.2007 (Annexure II), and the order dated 29.09.2020 passed by the Assistant Commissioner of GST & Central Excise rejecting the representation dated 12.09.2017 submitted by the Petitioner and upholding the levy of interest and penalty on the delay in payment of duty. 3. In the Writ Petition No. being W.P (C) No. 3965/2021, the petitioner has challenged the order dated 21.09.2017 passed by the Assistant Commissioner of GST & CX, Division-I (Annexure-VII) levying interest and penalty on the late payment of duty, which was exempted in view of the Notification No. 20/2007- CE dated 25.04.2007 (Annexure-II), and the order dated 29.09.2020 passed by the Assistant Commissioner of GST & Central Excise rejecting the representation dated 12.09.2017 submitted by the Petitioner and upholding the levy of interest and penalty on the delay in payment of duty. 4. In the Writ Petition No. being W.P (C) No. 4025/2021, the petitioner has challenged the Order dated 17.03.2017(Annexure- VII) passed by the Deputy Commissioner, Central Excise and Service Tax Division-I, levying interest and penalty on the late payment of duty, which was exemp....
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....ay of April, 2007 but which had undertaken substantial expansion by way of increase by not less than 25% in the value of fixed capital investment in plant and machinery for the purposes of expansion of capacity/ modernization and diversification and have commenced commercial production from such expanded capacity on or after the 1st day of April, 2007 but not later than 31st day of March, 2017. 11. The aforesaid Notification No. 20/2007 dated 25.04.2007 was subsequently modified by Notification No. 20/2008-CE dated 27.03.2008 and Notification No. 38/2008-CE dated 10.06.2008, whereby it was provided that the excise duty exemption shall be available on the value addition and part only. The aforesaid Notifications were upheld by the Apex Court. 12. The petitioners relying on the promises and assurances made in the Industrial Policy, 2007 and the Notifications issued in pursuance thereto, set up its manufacturing unit at Ambe Compound, Pacharia Dolar Pathar, near CEPAT PWC, Hajo Changsari Chowkigate Road, Pub- Bongsar, Kamrup (R) -781104, Assam, for manufacture of excisable goods, viz. wire of iron or non-alloy steel falling under chapter sub-heading No.721710202171010 and wire n....
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....issioner of Central Excise vide order dated 22.09.2017 in respect of Writ Petition bearing W.P (C) No. 4068/2021 levied interest and penalty amounting to Rs.3,78,148/- for the months of April-2016, May-2016, June- 2016 and July-2016 for the delay in payment of the duty. 15. Dr. A. Saraf, learned Senior Counsel submits that the petitioner is entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008 and as such, the question of payment of any such duty and consequently the levy of interest for the purported delay in payment of duty does not arise and thereby the Assistant Commissioner committed a manifest error in law while imposing such interest and penalty vide order dated 17.03.2021 while sanctioning such refund and subsequently by order dated 29.09.2020. 16. He further submits that the respondents failed to appreciate that the exemption by way of refund of duty paid is also an exemption from payment of duty. Since in the present case, Notification Nos. 20/2007 and 20/2008 provided for that refund of duty paid after verification of the same by excise authority, the same will not make the duty leviable or payable under the Act so as to attract....
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...., 2016 5 GLR 403at paragraph 16 and 17. 3. Union of India VS V. V. F Limited, 2020 20 SCC 57 or 2020 0 Supreme (SC) 319. 21. I have heard the submissions made at the bar and I have perused the materials available on record. 22. The Notification No. 20/2007-CE dated 25.04.2007 and subsequent notifications amending the said notification were issued in exercise of powers under Section 5A of the Central Excise Act, 1944. Section 5A of the Central Excise Act is reproduced herein below: "5A. Power to grant exemption from duty of excise.- (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon: Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (i) in a 1 [free trade zone 2 [***]] and brought to....
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....ined in terms of the Excise Manual of Supplementary Instructions issued by the Central Board of Excise and Customs. Such amount credited in the account current may be utilized by the manufacturer for payment of duty, in the manner specified under rule 8 of the Central Excise Rules, 2004, in subsequent months, and such payment shall be deemed to be payment in cash;" Para 2D(c) reads as "a manufacturer who intends to avail the option under clause (a) shall exercise his option in writing for availing such option before affecting the first clearance in any financial year and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year," 24. In the present case, the petitioner filed a refund claim of the central excise duty paid for the goods which has been exempted under the aforesaid notification dated 25.04.2007 for the subject month. The said refund claim was sanctioned. However due to late payment of duty in respect of the months for which refund was sanctioned, interest and penalty was appropriated and recovered from the sanctioned amount. 25. The issue which falls for determination....
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.... by an eligible industrial unit have been exempted from payment of duty subject to the limitation specified in the Notification, the question of payment of any duty by an eligible industrial unit does not arise and consequently, no interest and/or penalty can be charged for non-payment of such duty within time. The provisions for payment of duty and the time prescribed for such payment of duty in the Central Excise Act, 1944 are applicable in respect of goods which are excisable to Central Excise duty and the manufacturer is liable to pay such duty. The said provision cannot be made applicable in respect of duty which is exempted by issuance of Notifications under Section 5A of the Central Excise Act, 1944. 29. Pertinent, that in a taxing statute, there has to be first a charge and then levy and thereafter, the question of payment of any duty arises. Where, in respect of any goods, there is charge, levy and the liability of payment of said duty, then subsequently, the question of assessment and recovery of said demand arises. Interest and penalty are also measures for recovery of the demand payable under the Act. If there is no liability of payment of any duty under the Act, the....
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....comes due up to the date of actual payment of the amount due. Thus, it is clear that interest can be levied when a person is liable to pay duty within a specific period. When an assessee is not liable to pay duty because he is exempted by way of issuance of notification under Section 5A of the said Act, the provision of levy of interest cannot be made applicable to him. Since in the present case, the petitioner was entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008, the question of payment of any such duty and consequently, the levy of interest for the purported delay in payment of duty does not arise. 32. Section 11 AC of the Act provides for short levy or non-levy of duty in certain cases. Sub-section (1)(a) of Section 11 AC provides that where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, for any reason other than the reason of fraud or collusion or any wilful misstatement 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, the person who is liable to pay duty as determined unde....
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....o is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined: Provided that in respect of the cases where the details relating to such transactions are recorded in the specified record for the period beginning with 8th April 2011 up to date on which the Finance Bill, 2015 receives the assent of the President (both days inclusive), the penalty shall be fifty per cent. of the duty so determined. (d) where any duty demanded in a show cause notice and the interest payable thereon under section 11AA, issued in respect transactions referred to in clause (c), is paid within thirty days of the communication of show cause notice, the amount of penalty liable to be paid by such person shall be fifteen per cent. of the duty demanded, subject to the condition that such reduced penalty is also paid within the period so specified and all proceedings in respect of the said duty, interest and penalty shall be deemed to be concluded; (e) where any duty as determined under sub-section (10) of section 11A and the interest payable thereon under section 11A in respect of transactions referred....
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....le upholding the levy of interest and penalty referred to Rules 8(3) and 8(3A) of the Central Excise Rules, 2002. Relevant provisions of Rule 8 are reproduced herein below for the sake of convenience- "(1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by [the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case] : Provided that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March : [Provided further that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the duty on goods cleared during a quarter of the financial year shall be paid by the 6th day of the month following that quarter, if the duty is paid electronically through internet banking and in any other case, by the 5th day of the month following that quarter, except in case of goods removed during the last quarter, starting from the 1st day of January and ending on the 31st day of March, for which the duty shall be paid by the 31s....
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.... Government vide notification under section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount. (3A) If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow." 37. Reading of the aforesaid rules indicates that if a manufacturer fails to pay an amount of duty by due date, he shall be liable to pay the outstanding amount along with interest in terms of Section 11AB of the Act. However, there is no provision in the Act for levy of interest in respect of goods which is exempted from payment of duty. Further, Rules 8(3) ....
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....thin the procedural part. The Apex Court further held that penalty is not merely a sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. A penalty is a statutory liability. 42. As per Section 11AC of the Central Excise Act, 1944, penalty can be imposed only on a person who is liable to pay duty. Section 11AC of the Act clearly provides that where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, for any reason other than the reason of fraud or 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, the person who is liable to pay duty as determined under sub-section (10) of Section 11A shall also be liable to pay a penalty not exceeding ten per cent of the duty so determined or rupees five thousand, whichever is higher. 43. Though the procedure for granting the exemption as prescribed in Notification No. 20/2007 CE dated 25.04.2007 is that the eligible indu....
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....urnishing the statement of duty paid, the same will imply that there was liability of payment of duty and thereby, if any such duty has not been paid within the time prescribed under the Acts which is applicable only in respect of duty leviable and chargeable and which is liable to be paid by an assessee, interest and penalty can be imposed on an industrial unit which is exempted from payment of duty. 46. Reference is made to the case of Commercial Taxes Officer, Special Circle, Jodhpur Vs. Gadia Textiles and Anr., wherein the Rajasthan High Court held as under: "........the Board ignored the distinction and difference between the two expressions "liable to pay tax" and "tax shall be payable", for, a manufacturer may be liable for payment of tax but on account of exemption, tax is not payable by him. We have already given reasons that "liable to pay tax" does not mean that tax is payable by the dealer/manufacturer under the Act. From a manufacturer tax may not be payable because of exemption under the Act " 47. Reference is also made to the case of Commercial Taxes Officer, Special Circle, Jodhpur (Supra), wherein the Rajasthan High Court further held as under: ....
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.... same as liability to pay tax. The former depends on charge created by the Statute and latter on computation in accordance with the provisions of the Statute and rules framed thereunder if any. It is to be noted that liability to pay tax chargeable under Section 3 of the Act is different from quantification of tax payable on assessment. Liability to pay tax and actual payment of tax are conceptually different. But for the exemption the dealer would be required to pay tax in terms of Section 3. In other words, exemption presupposes a liability. Unless there is liability question of exemption does not arise. Liability arises in term of Section 3 and tax become payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessional rate." 50. Reference is also made to the case of CCE Vs. National Tobacco Co. of India Ltd. reported in (1972)2 SCC 560 wherein the Apex Court in paragraph 19 held as under: "19. The term 'levy' appears to us to be wider in its import than the term 'assessment. It may include both 'imposition' of a tax as well as 'assessment. The term 'imposition' is gene rally used for the....
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....ollection", in our opinion the logic or ratio of that case cannot be extended so far as to say that every "levy" must include collection and without such collection no levy can be said to have been made." 53. It is a well settled law that taxing statutes are to be interpreted strictly and while interpreting the taxing statue, one must have argued to the strict letter of law and not merely to the spirit of law and one cannot be taxed by inference or by analogy. 54. Reference is made to the case of M/s. Polestar Electronic (Pvt) Ltd. Vs. Additional Commissioner, Sales Tax &Anr., reported in (1978) 1 SCC 363, wherein the Apex Court in paragraph 12 held as under: "12. ..........it is well-settled rule of interpretation that in constructing a taxing statute "one must have regard to the strict letter of the law and not merely to spirit of the statute or the substance of the law " 55. The aforesaid law was reiterated in the case of H.H. Lakshmi Bai &Anr. Vs. Commissioner of Wealth Tax & Ors, reported in (1994) 2 SCC 534. The Apex Court at paragraph 10 of the said judgement held that taxation statute in particular has to be strictly construed and that there is no equity i....
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....that even if there is any doubt as to interpretation, it must be resolved in favour of the subject. 59. In the present case, the provision of Sections 11AA and 11AC of the Central Excise Act, 1944 are very clear and there is no ambiguity in the provisions of the Act. However, even for the sake of argument, if there is an ambiguity, the benefit of the same must be extended to the tax payer. 60. Rule 8(3) and 8(3A) of the Central Excise Rules, 2002 cannot be made applicable in support of the levy of the interest and penalty, for delayed payment of duty which is exempted in terms of notification issued under Section 5A of the Act. As discussed above, Rules are framed to carry out the purposes of the Act. If there is no substantive provision in the Act for levy of interest and penalty, the interest and penalty cannot be levied on the basis of any provisions of Rules. The submissions of Mr. S.C. Keyal, learned Standing Counsel GST, is to the contrary and as such, is of no substance and hence rejected. The three authorities as referred earlier, relied by the respondent are in different context and therefore does not fit in the context of the present case and hence not relevant. ....