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2016 (10) TMI 276 - GUJARAT HIGH COURT

2016 (10) TMI 276 - GUJARAT HIGH COURT - TM - Demand of interest - whether the petitioner's liability was to pay interest under section 11AA or section 11AB of the Act and if it was under the former, such liability would relate to the date of clearances - Held that:- the statute while creating a new provision for charging interest granted a moratorium of three months in cases where duty had remained unpaid on the date of introduction of the interest provision. If the duty is paid within such per .....

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ion(2) of section 11A took place after the introduction of section 11AA. - Surely, the legislature cannot be attributed the intention to bring about such an incongruent result. This in our opinion would be a strong indication that by necessary implication section 11AA was meant to apply to all cases where the duty remained unpaid after introduction of section 11AA to the statute. In cases where whether the liability to pay the duty arose before or after the introduction of section 11AA but .....

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introduction of section 11AA. This provision therefore has retroactive applicability. - Effect of the words “Subject to the provisions contained in Section 11AB” inserted in section 11AA - Held that:- by providing that section 11AA would be subject to section 11AB, the legislature made it amply clear that those cases of unpaid duty by the reason of fraud, willful misstatement, etc. would be covered by section 11AB only and in a case which is covered by section 11AB, section 11AA would yield .....

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one situation. - Decided against the appellant - SPECIAL CIVIL APPLICATION NO. 15735 of 2004 - Dated:- 30-9-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : M/S TRIVEDI & GUPTA, ADVOCATE FOR THE RESPONDENT : MS AVANI S MEHTA, ADVOCATE, MS TRUSHA K PATEL, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner - Gujarat Narmada Valley Fertilizers Co. Ltd. has filed this petition with multiple prayers. Barring the prayer for declaring section .....

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manufacturing fertilizers. For the purpose of its manufacturing activity, the petitioner would use Low Sulphur Heavy Stock ( LSHS for short) as a raw material. As long as such raw material is used for manufacturing fertilizers, it would invite concessional rate of duty. On the premise that the petitioner utilised the concessional rate of duty provision for purchase of such product but utilised part of it not for manufacturing of the fertilizers but for generation of steam, the department instit .....

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as under : He also submitted that interest was not recoverable since in the 13 Show Cause Notices covered by this order, there was no proposition to recover the interest, as demanded is for the period July 91 to May 95 as per Board's Circular No.655/46/2002CX, dated 26.8.2002. The interest cannot be recovered and requested for disposal of the appeal in this case. 3. In this context, the Tribunal provided as under : As regards interest on the amount of duty confirmed, the matter is remitted .....

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a judgement dated 18.11.2003 in Special Civil Application No.12194/2003, once again remanded the proceedings before the excise authorities on the question of charging interest. This time around the Commissioner took up the issue, heard the petitioner and passed the impugned order holding that the petitioner was liable to pay interest in terms of section 11AA of the Act. The petitioner's contention that when the duty liability arose, section 11AA of the Act was not in the statute book was no .....

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t liability would arise. The department contends that section 11AA would apply to all cases of unpaid duty, whether the liability arose before 26.5.1995 or whether the determination of the duty was made before or after the said date. 5. Before we address this central issue, we may also briefly refer to the CBEC circular dated 26.8.2002. Circular concerns applicability of section 11AB of the Act. Referring to the proviso to subsection( 1) of section 11AB inserted with effect from 11.5.2001, in th .....

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n section 11AA was vastly different. 6. Learned counsel Shri Kamal Trivedi appearing for the petitioner took us through the statutory provisions of section 11AA and section 11AB and the legislative changes made in these provisions from time to time to contend that : a) The liability to pay interest is a substantive liability and can arise only prospectively. Section 11AA does not have retrospective effect and therefore, would cover only those cases where duty liability arose after 26.5.1995 i.e .....

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ming part of the machinery provisions, is substantive law for the reason that in the absence of contract or usage interest that cannot be levied under law and cannot be recovered by way of damages for wrongful detention of the amount. It was further observed that interest was charged on the strength of a statutory provision, may be with the objective to compensate the Revenue for delay in payment of tax. But regardless of the reason which impelled the Legislature to provide for charging interest .....

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tc. If such provision is made prospective, it is difficult to appreciate that the legislature would have meant to apply section 11AA with retrospective effect which provides for interest on delayed payment of duty which is not on account of any of the elements such as fraud, misrepresentation, etc. referred to in section 11AB of the Act. c) Counsel pointed out that by virtue of section 75 of the Finance Act with effect from 28.9.1996, section 11AA was made subject to section 11AB. Therefore, all .....

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g the submission of Mr. Tankha that the expression "subject to the provisions of Section 31 are either ornamental or inconsequential nor do we have any hesitation in holding that right of appeal under Section 30 can be exercised only in the manner and to the extent it is provided for in Section 31 to which the said right is made subject. 2) In case of Commissioner of C. Ex. & Customs v. Saurashtra Cement Ltd reported in 2010 (260) ELT 71 (Guj.), where the Division Bench of this Court in .....

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ubmitted that once the petitioners have given up the challenge to the vires of the statutory provisions, her role would be limited. Learned counsel Ms. Avni Mehta for the department opposed the petition contending that statutory provisions are sufficiently clear. The petitioner was liable to pay interest in terms of section 11AA of the Act. The Commissioner has therefore, passed an order which calls for no interference. 8. In facts of the case, two issues therefore, arise. One whether the petiti .....

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chargeable with duty determined under subsection( 2) of section 11A, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent and not exceeding thirty percent per annum, as is for the time being fixed by the Board, on such duty from the date immediately after the expiry of the said period of three months till the date of payment of such duty 10. Section 11AB was inserted under the Finance .....

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subsection (2), of Section 11A shall, in addition to the duty, be liable to pay interest at such rate not below ten per cent and not exceeding thirty per cent per annum, as is for the time being fixed by the Board, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act or the rules made thereunder or from the date of such erroneous refund, as the case may be, but for the provisions contained in subsection ( 2) of section 11A till the date o .....

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der the Finance Act, 2001, subsection( 2) was inserted in section 11AA as under: (2) The provisions of subsection (1) shall not apply to cases where the duty becomes payable on and after the date on which the Finance Bill, 2001 receives the assent of the President. 13. Simultaneously from the same date, i.e 11.5.2001, under the Finance Act, 2001, subsections (1) and (2) of section 11AB were recast, relevant portion of which read as under: (1) Where any duty of excise has not been levied or paid .....

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which the duty ought to have been paid under this Act or from the date of such erroneous refund, as the case may be, but for the provisions contained in subsection (2), or subsection( 2B), of section 11A, till the date of payment of such duty: Provided that .... (2) The provisions of subsection (1) shall not apply to cases where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President. 14. Before focusing our att .....

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ty per cent per annum, as may be fixed by the Board, on such duty, from the date immediately after expiry of said period of three months till the date of payment of such duty. In other words, whenever a person is charged with duty determined under subsection( 2) of section 11A, he would pay interest at the specified rate on the duty which remained unpaid after three months of determination, till actual payment. 15. At this stage, we may also briefly refer to proviso to section 11AA which provide .....

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ce before the introduction of section 11AA. In such a case, the liability to pay interest would begin after three months from the date when the Finance Bill, 1995 received the assent of the President till the date of payment of such duty. This proviso would come up for further discussion at a later stage. 16. In contrast to these provisions contained in section 11AA of the Act, Section 11AB which was introduced in the next Finance Act provided for charging of interest in cases where the duty of .....

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the duty ought to have been paid or from the date such erroneous refund was granted till the date of payment of such duty. Subsection( 2) of section 11AB was meant to remove doubts and provided that the proviso to subsection( 1) would not apply to cases where the duty become payable before the date when the Finance Bill, 1996, received the President's assent. 17. Under subsection( 1) of section 11AB thus the liability to pay interest would arise only if short payment or non payment of duty .....

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the duty not being paid by the reason of fraud, collusion,etc. Second, under section 11AA, the liability to pay interest would commence after three months of determination of duty under subsection( 2) of section 11A or three months after introduction of section 11AA if the determination was made earlier, whereas under subsection( 1) of section 11AB, such liability would arise immediately upon the end of the month during which the duty ought to have been paid. Third, under section 11AA, there wa .....

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n of duty under subsection( 2) of section 11A was done before the section was introduced but provided for a period of three clear months after the introduction of the section for payment of such duty, failing which, the interest liability post such period of three months would arise, in contrast to subsection( 2) of section 11AB. Thus, the proviso to section 11AA carried a clear indication that the section was meant to apply even in cases where liability to pay the duty might have arisen earlier .....

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rospective is clear from the language used in subsection( 2) of section 11AB. In contrast, there are inbuilt indications in section 11AA that the said section would have a retroactive effect. The main body of section 11AA in its original form did not limit the liability to pay interest in cases where duty liability arose after introduction of the said section. It only provided that the interest would be payable when a person charged with duty by determination under subsection( 2) of section 11A .....

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d in which cases, the liability to pay interest would commence after three months of the introduction of section 11AA to the Act on the component of duty which remained unpaid after such date. In other words, the statute while creating a new provision for charging interest granted a moratorium of three months in cases where duty had remained unpaid on the date of introduction of the interest provision. If the duty is paid within such period, there would be no interest liability. If even after co .....

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2) of section 11A took place after the introduction of section 11AA. Surely, the legislature cannot be attributed the intention to bring about such an incongruent result. This in our opinion would be a strong indication that by necessary implication section 11AA was meant to apply to all cases where the duty remained unpaid after introduction of section 11AA to the statute. In cases where whether the liability to pay the duty arose before or after the introduction of section 11AA but determinati .....

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n of section 11AA. This provision therefore has retroactive applicability. 19. We may now advert to the counsel's contention regarding the effect of the words Subject to the provisions contained in Section 11AB inserted in section 11AA. To recall, these words were added to section 11AA simultaneously with insertion of section 11AB with effect from 28.9.1996. Prior to this date, there was only one provision for charging the interest namely, section 11AA, which as noted, would cover all cases .....

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de those which were for the reason of fraud, collusion, etc. Section 11AB was confined to a small class of cases of unpaid duty and it may be possible, in absence of any further clarification, to apply both the provisions in cases where the non payment of duty was on account of fraud, collusion, etc. To make the matters beyond any debate, the legislature inserted words Subject to the provisions contained in Section 11AB in Section 11AA. 20. The expression subject to is a well known legislative d .....

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nch of the Supreme Court, in context of the terms subject to observed as under : The only purpose of the words "subject to" occurring in Entry 36 is to indicate that legislation under Entry 36 should be subject to any law made by Parliament in exercise of its legislative power under Entry 42 of the Concurrent List. Both legislatures can legislate under Entry 42 but the Parliamentary statute made in exercise of powers under this entry would have preference over a State law in case of re .....

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f Madras reported in AIR 1961 Supreme Court 1152, the three Bench Judge of the Supreme Court observed that use of words subject to has reference to effectuating the intention of the law and the correct meaning is conditional upon. In case of Ashok Leyland Ltd. v. State of T.N. and another reported in (2004) 3 Supreme Court Cases 1, the Supreme Court referred to the dictionary meaning of term subject to' as liable, subordinate, subservient, inferior, obedient to, governed or effected by. In c .....

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of a conflict, the provisions of the latter would prevail. It is sometimes seen as the reverse of the latter provision carrying a non obstante clause. In context of section 11AA and section 11AB of the Act, therefore, the plain intention of the legislature while making section 11AA subject to section 11AB was to avoid any conflict between the two statutory provisions. The former would encompass all cases of unpaid duty except those covered by the latter which is confined to cases where such duty .....

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