TMI Blog2016 (5) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, 2012 issued by the Assistant Excise Commissioner, Ghaziabad demanding a sum of ₹ 5,92,20,339.94 paise towards penal interest for late deposit of excise duty for the period September, 1963 to March, 1973. The facts leading to the filing of the writ petition is that the petitioner is a Company engaged in the manufacture and sale of Beer and Indian made foreign liquor. The Excise Commissioner issued 10 orders between the period 28th June, 1963 to 24th November, 1973 levying an amount of ₹ 81,94,310/- as excise duty and fine on wastage of Beer in excess of 10% under Section 28A of the U.P. Excise Act, 1910 (hereinafter referred to as the Act). The petitioner, being aggrieved by the various orders, filed revisions before the State Government, which was dismissed on 12th April, 1978. The petitioner, thereafter, filed a bunch of writ petitions before the High Court, which was heard and allowed by a judgment dated 15th March, 2002. The writ Court held that the order of the Excise Commissioner demanding excise duty on wastage of Beer was unwarranted and, accordingly, quashed the demand notices. The State of U.P., being aggrieved by the judgment of the High Court, filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the learned Standing Counsel submitted that the principle of merger will apply. It was contended that the order of the High Court merged with the order of the Supreme Court, as a result, upon the setting aside the judgment of the High Court, the original demand revived. Since the amount was not paid as per the original demand within the stipulated period, interest became payable from 1963 onwards till the date it was actually paid and, therefore, the order of the Assistant Excise Commissioner imposing penal interest at the rate of 18% per annum did not suffer from any error of law. In order to find out as to whether penal interest was payable on the excise demand, it would be essential to peruse Section 38A of the Act, which is the charging section for realisation of interest upon failure to pay the excise revenue within the stipulated period. For facility, the said provision is extracted hereunder:- 38-A. Interest on arrears of excise revenue. - (1) Where any excise revenue has not been paid within three months from the date on which it becomes payable, interest at such rate not exceeding twenty-four per cent per annum, as may be prescribed, shall be pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue became payable. After the order of the Supreme Court, the excise revenue became payable afresh and, within the stipulated period of 3 months, the amount was paid. It was urged that interest was only payable if the amount was not paid within three months. It was also contended that pursuant to the decision of the Supreme Court, the demand made by the Excise Commissioner between 1963 to 1973 did not revive automatically and that a fresh demand could only be issued, and upon failure to pay the amount within the stipulated period, penal interest could be imposed thereafter. Having heard the learned counsel for the parties, we are of the opinion that the words becomes payable as stipulated under Section 38A of the Act means legally recoverable . The excise revenue becomes payable when it is determined. Once the Supreme Court decided the issue and held the excise revenue was legally recoverable, the same was required to be paid by the petitioner. Failure to pay thereafter within the stipulated period would invite penal interest but not before. Our view is fortified by a decision of the Supreme Court in the case of New Delhi Municipal Committee Vs. Kalu Ram and another, 1976 (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt in question was therefore irrecoverable. This being the position, the appeal fails and is dismissed with costs. In view of the aforesaid, the words becomes payable means legally recoverable. The excise demand became legally recoverable from the date of the decision of the Supreme Court. Prior to that the demand could not be legally recoverable as it was not payable since the demand had been quashed by the High Court. In Food Corporation of India Vs. State of Haryana and another, 2000 (3) SCC 495, the facts were that the State of Haryana imposed sales tax on levy transaction in the year 1973, which was challenged before the Punjab and Haryana High Court. The writ petition was allowed and the High Court held that the State of Haryana did not have the constitutional authority to impose sales tax on levy transaction. In the year 1982, the State of Haryana again issued a demand notice, which was again challenged and the levy of tax was again quashed. This time the matter travelled to the Supreme Court. The Supreme Court allowed the appeal and held that the State of Haryana was competent to levy sales/purchase tax on such transactions. Pursuant to the decision of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as contemplated under Section 59 of the Haryana Act, the assessee becomes liable to pay the interest also. 13. The further question, therefore, is whether on the demand now made by the respondents on the appellant, the State can also claim interest. We have noticed that the power of the State to collect interest arises under Section 59 if the Act. The said section authorises the State to collect interest on belated payment of tax demanded but this payment of interest can be levied on such belated payment of tax which is legally payable for which a valid demand is condition precedent. As has been notice by us, the demand notice of the year 1982 which was issued during the period when the State had no authority to levy sales tax cannot be said to be a valid demand, based on which interest could be claimed. A valid demand for Assessment Year 1975-76 could have been made by the State of Haryana only after the judgment of this Court i.e. from 6.1.1977 and on such a demand being made on 20.2.1977, the appellant has satisfied the said demand within the period available to it. If that be so, in our opinion, the State could not have demanded interest on the tax due for Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision cited by the respondents in Shiv Kumar and others Vs. Collector, Kanpur Nagar and others, 2005 ALJ 417 and Rampur Distillery and Chemical Co. Rampur Vs. State of U.P. and others, 2005 (1) AWC 334 is distinguishable and is not applicable in the instant case. In the said decisions, the demand was stayed by the High Court during the pendency of the writ petition. Upon dismissal of the writ petition, the amount became payable along with interest. The interest factor was again challenged by the petitioner. The writ Court upheld the demand for payment of interest holding that staying the recovery of tax does not prevent the running of interest. In this regard, the Supreme Court in Sri Chamundi Mopeds Ltd. Vs. Church of South India Trust Association, 1992 (3) SCC 1 has clearly distinguished and differentiated between a demand being stayed vis-a-vis a demand being quashed. The Supreme Court held:- While considering the effect of an interim order staying the operation of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order. Quashing of an order results in the restoration of the position as it stood on the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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