2014 (6) TMI 519 - HC - Central Excise

Demand of interest on delayed payment of additional duty on TEA - additional duty of excise payable under Section 157(1) of the Finance Act 2003 - applicability of provision of Central Excise Act 1994 toward demand of interest - Held that - there is no substantive provision contained in the Finance Act 2003 to charge/levy interest on delayed payment of additional excise duty payable under Section 157(1) - liability to pay additional duty of excise on tea is created for the first time by Section 157(1) of the Finance Act 2003. However the Finance Act of 2003 does not contain any substantive provision to charge/levy interest from the assessee in case if payment of additional duty of excise is not made or made late. So far as Section 157(3) is concerned it does not mention the word interest but only mentions the words imposition of penalty refund and exemption . In other words by virtue of Section 157(3) only provisions relating to imposition of penalty refund and exemption from Central Excise Act are made applicable to Finance Act 2003. This therefore clearly suggests that so far as levy of additional duty of excise on tea is concerned no provision is made applicable to the levy relating to payment of interest for its delayed / short / non-payment. To put it differently firstly there is no provision made to levy/ charge interest in the Finance Act 2003 secondly substantive provision relating to levy/ charging of interest from Central Excise Act is not made applicable to Finance Act 2003 and thirdly by virtue of Section 157(3) only provisions relating to penalty refund and exemption contained in Central Excise Act are made applicable to Finance Act 2003. Revenue may have power to charge interest from the assessee for non-payment/ short payment/ delayed payment of excise duty on the excisable goods but there is a distinction between additional duty of excise and excise duty . The former is paid under the Finance Act 2003 whereas the later is paid under the Central Excise Act. Since the Finance Act 2003 does not contain any substantive provision to charge interest a fortiorari - no demand for interest could be raised for non-payment/ short payment/ delayed payment of additional excise duty under the Finance Act 2003. Such is not the case of non-payment /short payment /delayed payment of excise duty because it is paid under the Central Excise Act which contains a specific substantive provision to charge the interest. If the intention of legislature was to levy interest also on non-payment/short payment of additional duty of excise then it would have made separate specific substantive provision in the Finance Act 2003 itself. However it was not done. Impugned demand raised by respondent is without jurisdiction as it was issued by the department without there being any substantive provision to levy/charge interest in the Finance Act 2003. It is therefore not legally sustainable and has to be quashed. - Following decisions of J.K.Synthetics Ltd Vs CTO 1994 (5) TMI 233 - SUPREME COURT and India Carbon Ltd vs State of Assam 1997 (7) TMI 566 - SUPREME COURT OF INDIA - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of demand for interest on delayed payment of additional duty of excise.
2. Applicability of substantive law for levying interest.
3. Interpretation of Finance Act 2003 and Central Excise Act provisions.

Detailed Analysis:

1. Legality of Demand for Interest on Delayed Payment of Additional Duty of Excise:
The petitioner challenged the demand dated 27.4.2005 for Rs. 6,96,000 raised by the Superintendent of Central Excise towards interest on delayed payment of additional duty of excise, cess under the Tea Act, and education cess under the Finance Act on tea produced and sold during April 2003 to December 2005. The petitioner contended that the demand was without jurisdiction due to the absence of any legal authority empowering the Revenue to charge such interest.

2. Applicability of Substantive Law for Levying Interest:
The petitioner argued that the liability to pay interest must be based on a substantive law enacted by the Parliament or State. The Finance Act 2003 did not contain any provision authorizing the levy of interest on delayed payment of additional duty of excise. The petitioner relied on Supreme Court decisions in J.K. Synthetics Ltd. v. CTO and India Carbon Ltd. v. State of Assam, which established that interest could only be levied if there was a specific statutory provision to that effect.

3. Interpretation of Finance Act 2003 and Central Excise Act Provisions:
Section 157 of the Finance Act 2003 imposed an additional duty of excise on tea but did not include any provision for charging interest on delayed payments. Subsection (3) of Section 157 applied provisions of the Central Excise Act related to refunds, exemptions, and penalties but did not mention interest. The court found that the absence of a specific provision for interest in the Finance Act 2003 meant that no interest could be levied for delayed payment of the additional duty of excise.

Judgment:
The court, after hearing both parties, held that there was no substantive provision in the Finance Act 2003 authorizing the Revenue to charge interest on delayed payment of the additional duty of excise. The court relied on the Supreme Court's interpretation in J.K. Synthetics Ltd. and India Carbon Ltd., which emphasized that interest could only be levied if there was an explicit statutory provision. The court concluded that the impugned demand for interest was without jurisdiction and legally unsustainable. Consequently, the demand dated 27.4.2005 was quashed, and any amount paid by the petitioner pursuant to the impugned demand was to be refunded.

Conclusion:
The writ petition was allowed, and the impugned demand was quashed. The court emphasized the necessity of a substantive provision for charging interest, which was absent in the Finance Act 2003. The decision reinforced the principle that interest could only be levied if explicitly provided for by law.