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M/s Mohan Meakin Limited Versus State of U.P. And Others

2016 (5) TMI 1234 - ALLAHABAD HIGH COURT

Penal interest for late deposit of excise duty on wastage of Beer in excess of 10% - sale of Beer and Indian made foreign liquor - Held that:- When the High Court quashed the demand notice, it was wiped out from the face of the earth. Once the demand order was quashed, it was no longer in existence and, therefore, there was no valid demand for payment of excise duty during the period when the order of the High Court prevailed. It is only when the Supreme Court reversed the decision of the High C .....

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this writ petition, the petitioner has challenged the order dated 1st June, 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 .....

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t 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 special leave petition before the Supreme Court, which was entertained and was converted into a civil appeal. The Supreme Court while admitting the appeal, rejected the application for stay of the judgment of the High Court. The Su .....

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ing penal interest amounting to ₹ 5,92,20,339.94 calculating penal interest at the rate of 18% per annum. The petitioner, being aggrieved by the said demand, has filed the present writ petition. We have heard Sri Dhruv Agarwal, the learned Senior Counsel assisted by Ms. Himadri Batra, the learned counsel for the petitioner and Sri Avinash Chandra Tripathi, the learned Standing Counsel for the State. The learned Senior Counsel contended that there is no provision for imposition of penal int .....

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ed that the demand of the Excise Commissioner was quashed by the High Court and, consequently, no interest was payable from the date of the demand till the date of the order passed by the High Court and even, thereafter till the date of the order of the Supreme Court. The learned Senior Counsel contended that immediately after the decision of the Supreme Court and within the stipulated period as provided under Section 38A of the Act, the amount was paid within three months and, consequently, no .....

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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 w .....

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interest will be eighteen per cent per annum; Provided further that in respect of an excise revenue which became payable before the commencement of the Uttar Pradesh Excise (Amendment) Act, 1985 interest at the said rate shall be payable from the date of such commencement if the excise revenue is not paid within 3 months of the said date." The aforesaid provision was inserted by U.P. Act No.7 of 1985 with effect from 28th March, 1985. It is apparently clear from a perusal of the aforesaid .....

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ct No.7 of 1985. In the light of this proviso, the department is justifying their action in contending that penal interest became payable since the excise department issued a demand between the period 1963 to 1973 and which was not paid by the petitioner within the stipulated period. This leads to the question as to whether excise revenue as demanded by the Excise Commissioner by its various orders issued between the year 1963 to 1973 became payable or not. The words "becomes payable" .....

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roviso to Section 38A of the Act. On the other hand, it was submitted by the learned Senior Counsel for the petitioner that the order of the Excise Commissioner was quashed, which was wiped out from the face of the earth. There was no demand on the basis of which any excise revenue 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 amo .....

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on 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) SCC .....

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lling upon the defaulter to show cause way such order should not he made and, if he raised any objection, the Estate Officer must consider the same and the evidence produced in support of it. Thus the Estate Officer has to determine upon hearing the objection the amount of rent in arrears which is 'payable.' The word 'payable' is somewhat indefinite in import and its meaning must he gathered from the context in which it occurs. 'Payable' generally means that which should .....

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ation of rent in arrears and does not constitute a source or foundation of a right to claim a debt otherwise time-barred. Construing the expression "any money due" in Section 186 of the Indian Companies Act, 1913 the Privy Council held in Hans Raj Gupta and others v. Official Liquidators of the Dehradun Mussorie Electric Tramway Company Ltd.(1) that this meant moneys due and recoverable in suit by the company, and observed: "it is a section which creates a special procedure for ob .....

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tion, 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 .....

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appeal and held that the State of Haryana was competent to levy sales/purchase tax on such transactions. Pursuant to the decision of the Supreme Court, fresh demand notices were again issued for the assessment year 1975-76 onwards, which the assessee paid but subsequently, interest was imposed. The Supreme Court held that interest was not payable as there was no valid demand levying sales tax in existence. The Supreme Court held that the demand for payment of sales tax was quashed by the High C .....

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made by the High Court, therefore, until the position of law stood changed from 6.1.1997, the State of Haryana could not have made a demand for the payment of sales tax on levy transactions. The demand notice by which the State claimed the tax for Assessment Year 1975-76 was of the year 1982 which fell within the period when the law did not permit the State of Haryana to impose sales tax on levy transactions. Therefore, on that day when the notice of demand was issued for payment of sales tax fo .....

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, as stated above, during the period between 1975-77, the State's authority to make a demand was eclipsed because of the law declared by the High Court. The declaration of law made by this Court now empowers the State to raise a demand even for Assessment Year 1975-76 and the appellant is bound to satisfy the said demand, but the duty of the assessee to satisfy that demand would arise only when a fresh and valid demand after the judgment of this Court is made by the State. If the assessee fa .....

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ayment 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 .....

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valid demand for payment of excise revenue on wastage of beer during the period when the judgment of the High Court ruled the roost. So long as the decision of the High Court stood, there was no valid demand for payment of excise revenue on wastage of beer. Only after the judgment of the Supreme Court, which was delivered on 23rd September, 2011 that the excise department could raise a fresh demand. No doubt, the right of the excise department to collect the excise revenue would date back to th .....

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eriod 1963 to 1973. The petitioner was bound to satisfy the demand, which would arise only when a fresh and valid demand is made after the judgment passed by the Supreme Court. The contention that the principle of merger would apply and that the demand raised by the excise department would automatically revive pursuant to the quashing of the judgment of the High Court is wholly erroneous. There is no quarrel with the decision cited by the department Kunhayammed and others Vs. State of Kerala and .....

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instant case, the payment was made within the stipulated period, as a result, no penal interest became payable by the petitioner. The 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 pet .....

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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 date of passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has be .....

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s it stood on the date of the passing of the order, which had been quashed. It was urged by the learned Standing Counsel that at the time when the writ petition was entertained, the learned counsel for the petitioner conceded that interest was payable from the date when Section 38A of the Act was enforced i.e. from the year 1985. This concession was recorded by the Court in its interim order dated 8th June, 2012. The learned Standing Counsel urged that in view of the concession given by the lear .....

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