TMI Blog2019 (5) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... d to. Therefore, if the value which is declared by way of self-assessment, by way of rule 6 and on which the duty is paid is not the full value then under the scheme of Section 11A read with Section 11AB and the Rules, the assessee incurs liability for interest when in a case where there is full value found and it dates back to the date of removal. In this case admittedly that at the time goods were removed the price was not fixed. The assessee was fully conscious of the fact that it was subject to variation. Assessee must be imputed with knowledge that the value it was declaring was amenable to upward revision. The circumstances were indeed clearly both apposite and appropriate for the assessee to invoke the provisions of Rule 7 and seek an order for provisional assessment. In fact, take the example of manufacturer A and manufacturer B. Both remove goods under contracts which contain escalation clauses. Manufacturer A invokes Rule 7. It seeks permission for removal of goods on provisional assessment. Though an order of final assessment has to be passed within a period of time it is capable of being extended without any time limit. Manufacturer-A on the basis of upward revision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly put, the question which we are called upon to consider and resolve is as to whether interest is payable on the differential excise duty with retrospective effect that become payable on the basis of escalation clause under Section 11AB of the Central Excise Act, 1944 (hereinafter referred to as the Act ). 3. In this batch of appeals, we will treat C.A. No.2150/2012 as the leading case. We will refer to the said case as the SAIL Case. In the said case originally, the appellant company which is manufacturer of various products including rail sold the same to the Indian Railways. The products were cleared on sale from 1st January, 2005 to July 2006. The goods were cleared on the payment of excise duty on the payment of price which was fixed based on their circular dated 24.04.2005. Subsequently, the prices were enhanced by way of price circular dated 20.07.2006. The revision came into effect with retrospective effect. It is based on the same that SAIL deposited ₹ 142 crores by way of excise duty. This was done in August 2006. Thereupon, the officers of the department indulged in correspondence with SAIL seeking details regarding the clearances which were effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort-payment, etc. of duty is by reason of fraud, collusion, etc. are dealt with under sub-section (1-A) of Section 11-A and the cases where the non-payment or short-payment of duty is not intentional under sub-section (2-B). 13. Sub-section (2-B) of Section 11-A provides that the assessee-in-default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11-AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment of the duty. 17. We are unable to subscribe to the view taken by the High Court in Rucha Engg. [ First Appeal No. 42 of 2007 decided on 3-4-2007] It is to be noted that the assessee was able to demand from its customers the bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have referred the cases felt that the MRF decision would continue to prevail, the value at the time of removal of the goods alone would govern the Situation which is a fundamental principle which continues to hold good till now. The additional duty to be paid in future cannot be treated as attracting the concept of short payment . Though the differential duty may be payable but the interest is not payable. The interest clock would start ticking from the date the differential duty is due, that is, the day on which the parties agree upon the escalated price and not before. The expression ought to have been paid found in Section 11AB was not considered by this Court in SKF case, it was pointed out. The Court felt that SKF Case runs contrary to the Constitution Bench decision in JK Synthetics and interest cannot be demanded by way of damages or compensation. 7. In our view, the following questions will fall to be decided by us: 1) Whether the decision in SKF case and also in International Auto lay down the correct law having regard to the decision of this Court in MRF case which was in fact rendered by a Bench of three Judges. 2) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time when revised price was agreed upon by the seller and the buyer. The question, however, is as to whether interest thereon is payable from the date of clearance of goods when duty was paid on the basis of invoice, till the date when differential duty was paid. Therefore, we proceed further in this matter on the basis that the price at the time of removal is not fixed. That is, the price is subject to revision under the escalation clause. There is also admittedly no dispute raised either before the Bench which referred the matter or before us by the learned counsel for the appellant that differential duty is indeed payable on the subsequently revised price which is to operate with retrospective effect. 9. At this juncture we think it apposite to refer to the facts in MRF case (MRF Limited v. Collector of Central Excise, Madras). MRF Case was decided on 12.3.1997 and it is reported in 1997 (5) SCC 104. The appeal was filed in this Court against the order passed by the Tribunal dated 24.9.1986. By the impugned order the assessee s claim for refund of excess duty paid on differential price on the date of removal and the reduced price was rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was absolutely no occasion for the assessee or the department to even contemplate a price revision either upwards or downwards. The price was not provisional. Therefore, we would think that out of the two situations which are noted in paragraph 21 of the Reference Order, the first situation would be comparable to the facts of the decision obtaining in MRF case. In case where the price is fixed there would be no occasion for the assessee to seek refund but here in the case before us, admittedly the case does not fall under the first category even according to the appellants. It could be said that the price was subject to variation based on the operation of the price escalation clause. Now the time is ripe for us to consider the statutory framework under the Act and the Rules made under the Act. Section 2(h) of the Act defines sale and purchase as follows: 2(h) sale and purchase , with their grammatical variations and cognate expressions, mean any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration. 11. Interestingly, unlike under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid or short-levied or shot-paid or erroneously refunded (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or [erroneously refunded, whether or not such non-levy or non-payment, short-levy or short payment or erroneous refund, as the case may be, was on the basis of any approval acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder], a Central Excise Officer may, within [one year] from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: Provided that where any duty of excise has not been levied or paid or has been short-levied or shot-paid or erroneously refunded by reason of fraud, 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 by such person or his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) Where any duty of excise has not been levied or paid or has been short-levied or shot-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, the person liable to pay duty as determined under sub-section (2) of section 11A shall, in addition to the duty, be liable to pay interest [at such rate not below eighteen per cent, and not exceeding thirty-six per cent, per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette], from the first day 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 sub-section (2) of section 11A, till the date of payment of such duty. (2) For the removal of doubts, it is hereby declared that the provisions of sub-section (1) shall not apply to cases where the duty became payable before the date on which the Finance (No.2) Bill, 1996 receives the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the value of excisable goods or determine the rate of duty applicable thereto, he may request the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, in writing giving reasons for payment of duty on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, may order allowing payment of duty on provisional basis at such rate or on such value as may be specified by him. (2) The payment of duty on provisional basis may be allowed, if the assessee executes a bond in the form prescribed by notification by the Board with such surety or security in such amount as the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, deem fit, binding the assessee for payment of difference between the amount of duty as may be finally assessed and the amount of duty provisionally assessed. (3) The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, shall pass order for final assessment, as soon as may be, after the relevant informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be paid by the 15th day of the following month except in case of goods removed during the month of March for which the duty shall be paid by the 31st day of March. Explanation Not extracted (1A) *** *** *** (2) The duty of excise shall be deemed to have been paid for the purposes of these rules on the excisable goods removed in the manner provided under sub-rule (1) and the credit of such duty allowed, as provided by or under any rule. (3) If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with an interest at the rate of two per cent per month or rupees one thousand per day, whichever is higher, for the period starting with the first day after due date till the date of actual payment of the outstanding amount: Provided that the total amount of interest payable in terms of this sub-rule shall not exceed the amount of duty which has not been paid by the due date: Provided further that till such time the amount of duty outstanding and the interest payable thereon are not paid, it shall be deemed that the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention as hereinbefore. 17. Now it is time to look at the effect of the rules relevant for the purpose of this case. Rule 4 falls under the heading duty payable on removal . It is contemplated that duty is to be paid on the goods in the manner provided under Rule 8 or under any law. No excisable good on which duty is payable can be removed without payment of excise duty unless otherwise provided. This would take us to Rule 8 as there is no case that any other law is applicable. Rule 8 under the heading manner of payment declares that duty on the goods removed from the factory etc. during a month shall be paid by the 5th day of the following month. Removal however in the month of March will entail liability to pay by 31st day of March. Sub-rule 3 of Rule 8 provides for liability with the assessee who fails to pay the amount by the due date. Sub rule 4 refers to liability to pay interest. It is amply clear that the expression due date would be 5th day of the month following the month during which the goods are removed except with regard to the goods removed during the month of March in which case the due date would be 31st day of March. 18. The sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that this is not a case of short payment of duty as the price at the time of actual removal of goods formed the basis for which duty was duly paid. It was not liable to pay the differential duty. Rebutting the case of the department, it was contended that it was not liable to resort to provisional assessment under Rule 7. The Commissioner however, took the view that the price which were shown originally by SAIL was itself provisional. It was a case where the assessee should have invoked Rule 7 and proceeded to make the provisional assessment. In appeal before the Tribunal, the assessee-SAIL continued with its contention that it actually was not liable to pay the differential duty. The Tribunal as already noticed following the judgment of this Court in SKF case (supra) which came to be delivered by that time dismissed the appeal of the assessee. Before the Bench which referred the matters to this Bench however, the appellants have made it clear that they are indeed liable to pay the differential duty. We have noticed that stand which has been expressly recorded by this Court in paragraphs 21-22 of the reference order. 20. Much reliance has been placed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed for the submission of the next return but not later. (4) Every deposit of tax made under sub-section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of the final assessment of tax made for any year under section 10. 11-B. Interest on failure to pay tax, fee or penalty (a) If the amount of any tax payable under sub-sections (2) and (2-A) of Section 7 is not paid within the period allowed, or (b)If the amount specified in any notice of demand, whether for tax, fee or penalty, is not paid within the period specified in such notice, or in the absence of such specification, within 30 days from the date of service of such notice, the dealer shall be liable to pay simple interest on such amount at one per cent per month from the day commencing after the end of the said period for a period of three months and at one and a half per cent per month thereafter during the time he continues to make default in the payments; Provided that, where, as a result, of any order under this Act, the amount, on which interest was payable under this section, has been reduced, the interest s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. Provision is also made for charging interest on delayed payments, etc. Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (See Whitney v. IRC [1926 AC 37 : 42 TLR 58] , CIT v. Mahaliram Ramjidas [(1940) 8 ITR 442 : AIR 1940 PC 124 : 67 IA 239], India United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay [(1955) 1 SCR 810 : AIR 1955 SC 79 : (1955) 27 ITR 20] and GursahaiSaigal v. CIT, Punjab [(1963) 3 SCR 893 : AIR 1963 SC 1062 : (1963) 48 ITR 1] ). But it must also be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law for the simple reason that in the absence of contract or usage interest can be levied under law and it cannot be recovered by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) and (2-A) of Section 7 , that must be understood in the context of the aforesaid expressions employed in the two sub-sections. Therefore, the expression tax payable under the said two sub-sections is the full amount of tax due and tax due is that amount which becomes due ex hypothesi on the turnover and taxable turnover shown in or based on the return . The word payable is a descriptive word, which ordinarily means that which must be paid or is due, or may be paid but its correct meaning can only be determined if the context in which it is used is kept in view. The word has been frequently understood to mean that which may, can or should be paid and is held equivalent to due . Therefore, the conjoint reading of Sections 7(1), (2) and (2-A) and 11-B of the Act leaves no room for doubt that the expression tax payable in Section 11-B can only mean the full amount of tax which becomes due under sub-sections (2) and (2-A) of the Act when assessed on the basis of the information regarding turnover and taxable turnover furnished or shown in the return. Therefore, so long as the assessee pays the tax which according to him is due on the basis of information supplied in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f removal is not known, and the value thereof is determined with reference to the price for delivery at a place other than the place of removal, the cost of transportation from the place of removal to the place of delivery is to be excluded from such price. This is because the value of excisable goods under the section is to be determined only at the time and place of removal. Even after the amendment of Section 4 in 2000, the same scheme continues. Only, Section 4(2) is in terms replaced by Rule 5 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000. * * * * * 18. It can be seen that Section 4 as amended introduces the concept of transaction value so that on each removal of excisable goods, the transaction value of such goods becomes determinable. Whereas previously, the value of such excisable goods was the price at which such goods were ordinarily sold in the course of wholesale trade, post-amendment each transaction is looked at by itself. However, transaction value as defined in sub-section (3)(d) of Section 4 has to be read along with the expression for delivery at the time and place of removal . It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellants were called upon to pay interest of 24% per annum by the sale tax authorities of the state of Assam under the Assam Sales Tax Act. Following the judgment of the Constitution Bench in J.K. Synthetics v. CCE (supra) among other judgments, the court inter alia went on to hold that there is no substantive provision in the Central Act requiring payment of interest under the Central Sales Tax Act. Though Section 9(2) was pressed into service by the Revenue and the said provision did refer to the power to recover interest under the State Act noticing the absence of any power to recover interest under the Central Act in respect of tax due under the Central Act, the Court took the view that interest could not be demanded from the appellant. CASE LAW UNDER THE INCOME TAX ACT. 26. Appellants have sought to derive support from certain judgments rendered by this Court under the Income Tax Act. In E.D. Sassoon Co. Ltd. v. CIT AIR 1954 SC 470, the appellant company which was the managing agent of certain companies agreed to transfer their agencies to two companies. Amounts were received on formal deeds of conveyance and transfer being executed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade up. But when the accounts are thus made up the income, profits or gains ascertained as the result of the account are referred back to the chargeable accounting period during which they have accrued or arisen and the assessee is liable to tax in respect of the same during that chargeable accounting period. The computation of the profits whenever it may take place cannot possibly be allowed to suspend their accrual . The quantification of the commission is not a condition precedent to its accrual . (Per Ghulam Hassan, J. in CIT v. K.R.M.T.T. Thiagaraja Chetty and Co. [24 ITR 525 at p. 534] See also Isaac Holden and Sons, Ltd. v. Commissioners of Inland Revenue[12 TC 768], and Commissioners of Inland Revenue v. Newcastle Breweries Ltd.[12 TC 927] What has however got to be determined is whether the income, profits or gains accrued to the assessee and in order that the same may accrue to him it is necessary that he must have acquired a right to receive the same or that a right to the income, profits or gains has become vested in him though its valuation may be postponed or though its materialisation may depend on the contingency that the making up of the accounts would show inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy Naidu, Madras AIR 1964 SC 1653, a Bench of three learned Judges had to deal with the following factual scenario. The respondent had entered into a contract with the government for supplying bread. He was maintaining his accounts on mercantile basis. Amount due was credited to his account sometime later. The respondent represented to the Government complaining that he was supplying bread at a loss. Therefore, Government directed payment of compensation for the loss which was supplied in 1948-1949. He received a certain sum during the year 1950-1951. This amount was included by the officer in the assessment year 1951-1952. One of the contentions of the appellant assessee was that he had received sum in respect of the contract which was executed in the year 1948-1949 and therefore it could not be included in the assessment year 1951-1952. This Court proceeded on the basis that amount received by way of compensation was taxable. It went on to consider the question whether the assessee had been assessed correctly in the year 1951-1952. This Court allowed the appeal and took the view that the respondent-assessee was correctly assessed in the year 1951-1952. It referred the case of E.D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em of accountancy, subject to the deemed provisions, when has the right to receive that amount accrued? If he comes to the conclusion that such a right accrued or arose to the assessee in a particular accounting year, he shall include the said income in the assessment of the succeeding assessment year. No power is conferred on the Income-tax Officer under the Act, to relate back an income that accrued or arose in a subsequent year to another earlier year on the ground that the said income arose out of an earlier transaction. Nor is the question of reopening of accounts relevant in the matter of as certaining when a particular income accrued or arose. Section 34 of the Act empowers the Income-tax Officer to assess the income which escaped assessment or was under- assessed in the relevant assessment year. Subject to the provisions of the section and following the procedure prescribed thereunder, he can include the escaped income and re-assess the assessee on the basis of which the earlier assessment was made. So too, under s. 35 of the Act the officers mentioned therein can rectify mistakes either of their own motion or when such mistakes are brought to their notice by a party to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had let out its premises to the Government. The rent was enhanced with effect from 01.9.1987. The factum of enhancement was communicated to the assessee by letter dated 29.3.1994. The Income Tax Officer purported to reopen the assessment for the year 1989-1990. The Court relying upon the judgment in E.D. Sassoon Co. Ltd. v. CIT (Supra) inter alia held as follows: 7. Viewed from the aforesaid perspective, it is clear that no such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in the year 1994. The contention of the Revenue that the enhancement was with retrospective effect, in our considered view, does not alter the situation as retrospectivity is with regard to the right to receive rent with effect from an anterior date. The right, however, came to be vested only in the year 1994. 29. It was accordingly found that the notice to reopen the assessment for the assessment year 1989-1990 was without jurisdiction. 30. We are of the view that the appellants are not justified in seeking to derive su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y determine the amount, payable in advance and intimate the dealer to pay the tax. Sub-section (2) of Section 13 provided that the dealer may at his option pay tax in advance on the basis of his actual turnover for each month or for such other period as prescribed. Tax under this provision was to be paid on the basis of return to be filed by him. It was also to become due without any notice of demand to the dealer inter alia. The Court proceeded to take the view that in the monthly returns, the advance which was received by the assessee should have been included as part of the turnover. When it came to the question relating to liability to interest, the Court referred to Section 24 of the Act. Section 24(3) provided for interest. It read as follows: (3) On any amount remaining unpaid after the date specified for its payment as referred to in sub-section (1) or in the order permitting payment in instalments, the dealer or person shall pay, in addition to the amount due, interest at one-and-half per cent per month of such amount for the first three months of default and at two per cent per month of such amount for the subsequent period of default: Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of demand no interest would be payable under Section 24(3). 34. Section 24(1) incidentally provided for a notice of assessment save as it was otherwise provided in Section 13(2). The tax under Section 13(2) was to be paid without any notice of demand. The Court drew support from the decision in JK Synthetics Ltd. (supra). We may also notice the following discussion: ..In this respect the principles laid down in J.K. Synthetics Ltd. case [(1994) 4 SCC 276] fully apply even though the provisions of the Tamil Nadu General Sales Tax Act and the Rajasthan Act may not be identical. The principle to be kept in mind is, that, when the levy of interest emanates as a statutory consequence and such liability is a direct consequence of non-payment of tax, be it under Section 215 of the Income Tax Act or under Sections 7(2)/7(2-A) read with Section 11-B(a) of the Rajasthan Sales Tax Act, 1954 (as discussed in the decision of this Court in J.K. Synthetics Ltd. case [(1994) 4 SCC 276] ) or under Sections 13(2)/24(3) read with Rule 18(3) under the Tamil Nadu General Sales Tax Act, 1959, then such a levy is different from the levy of interest which is dependent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alation clause pays the duty when the escalation comes into effect on the difference in the value under Rule 7. Apart from payment of the differential excise duty manufacturer A becomes also liable to pay interest from the date when the escalation would come into play on the arrival at the higher price having retrospective operation. Manufacturer B in identical facts clears the goods on the basis of self-assessment even though he is fully aware that the value of the goods which is paid is not fixed and is amenable to upward revision. He deliberately chooses not to go in for provisional assessment. Thereafter, he pleads that though he was aware that the value is not fixed and the prices on removal was tentative and was amenable to change since he has paid duty on the tentative value he is not liable to pay interest on the value of the goods on the differential duty which he is admittedly liable to pay. Is it contemplated? 37. It was by Act No.26 of 1978 that Sections 11A, 11B and 11C were inserted in the Act. Though it was inserted by Act 26 of 1978, it was brought into force only in 1980. The words levy, not paid, short levy and erroneously refunded were not expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not been levied or paid or on which duty has been short-levied or has not been paid in full, the date on which the duty was required to be paid under these rules; (b) in the case of excisable goods on which the value or the rate of duty has been provisionally determined under these rules, the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be; (c) in the case of excisable goods on which duty has been erroneously refunded, the date of such refund. 38. Thus, Rule 10 did provide for recovery of duties which were not levied or not paid or short levied or erroneously refunded. What is the position as far as the expression short paid to be found in Section 11A of the Act is concerned? Was there a counterpart in Rule 10? A perusal of Rule 10 would show that the expression short paid as such was not used in Rule 10 as it is used in Section 11A. However, we notice that Rule 10 did contemplate recovery of duties which was assessed but have not been paid in full. 39. Before we proceed to pronounce on the scope of the expression short paid in Section 11A, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture or warehousing of goods not mentioned in that list, or (b) the assessee intending to remove from the factory any non-excisable goods not mentioned in that list, or (c) a change in the rate or rates of duty in respect of the goods mentioned in that list or, by reason of any amendment to the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), a change in the Chapter, Heading No. and Sub-Heading No. the assessee shall likewise file a fresh list or an amendment of the list already filed for the approval of such officer in the same manner as is provided in sub-rule (1). (5) When the dispute about the rate of duty has been finalized or for any other reasons affecting rate or rates of duty, a modification of the rate or rates of duty is necessitated, the proper officer shall make such modification and inform the assessee accordingly. (6) The Collector may exempt by a general order any class of assessees, who manufacture wholly goods which, for the time being, are exempt from paying duty, from filing the list under sub-rule (1): Provided that as and when duty exemption is withdrawn or mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave already noticed that the new Central Excise Rules have come into force known as Central Excise Rules 2002. Under Rule 173-B of the erstwhile Rules, the method of assessment and payment of tax was essentially by the assessee filing a classification list under Rule 173-B which inter alia was to contain the rate of duty leviable. The Rule further contemplated approval of the said list with any modification as may be considered necessary. The clearance was, subject to the provision of Rule 173-CC, to be made only after the approval by the competent officer. Equally under rule 173(C), the assessee, the manufacturer or producer or one who warehoused goods chargeable with duty on the value of goods was to file a price list. Prior approval was necessary only in certain circumstances which included sale to or through related person as defined in Section 4 of the Act. Under Sub-rule 5 of Section 173-C again subject to the provisions of Rule 173CC, the assessee covered by Rule 173C(2) could not clear any goods from a factory, warehouse or other approved place of storage unless the price list was approved. Under the new dispensation namely, Excise Rule 2002, we have noticed that assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t until such time as to the correctness of the approval is questioned by the issuance to the assessee of a show-cause notice. It is only when the correctness of the approval is challenged that an approved classification list ceases to be such. 15. The levy of excise duty on the basis of an approved classification list is not a short levy. Differential duty cannot be recovered on the ground that it is a short levy. Rule 10 has then no application. (Emphasis supplied) 42. A Bench of two learned Judges in the case of M/s. Eastland Combines, Coimbatore v. Collector of Central Excise, Coimbatore reported in AIR 2003 SC 843 after noticing the judgment in Ballarpur Industries, Rainbow and also noticing the change brought about by the Finance Act 10 of 2000 in Section 11A, proceeded to take the view that in view of the amendment, the basis for arriving at the conclusion that Rule 10 does not deal with classification list or relate to the reopening of classification list is altered and the conditions on which Cotspun (supra) judgment was rendered in (1999)7 SCC 633 was fundamentally altered. The view taken in M/s. Eastland Combines, Coimbat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had merely provided that an approval on the basis of a classification list inter alia in case of a short-levy can be recovered if a finding is arrived at that the goods had undergone a short-levy. For the aforementioned purpose, Section 110 of the Finance Act, validating actions taken under Section 11-A can be taken into consideration whereby and whereunder a legal fiction is created. (Emphasis supplied) 43. Section 11A, thus, was held to be a recovery provision as regards non-levy, non-paid, short-levy, short-paid or erroneously refunded duty. Levy of excise duty under Rule 10 of the Excise Rules, 1944 on the basis of approved classification list or price list was found to be correct levy. It did not give rise to short-levy. Undoubtedly, the amended provisions of Section 11A empowered recovery of duty even in a case where the classification list has been approved earlier and it would operate from the date of removal and not from the date on which show cause was issued. 44. In the case of N.B. Sanjana, Assistant Collector of Central Excise, Bombay Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd.; 1978 E.L.T. (J 399), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas, according to the respondents, it means ought to have been paid . Taken literally, the word paid does mean actually paid in cash. That means that a party or an assessee must have paid some amount of duty whatever may be the quantum. If this literal interpretation is placed on the expression paid in rule it is needless to state that it will support in a large measure the contention of Dr. Syed Mohammad that Rule 10 contemplates a short-levy in the sense that the amount which falls short of the correct amount has been assessed and actually paid. In our opinion, the expression paid should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid. That word will have to be understood and Interpreted in the context in which it appears in order to discover its appropriate meaning. If this is appreciated and the context is considered it is apparent that there is an ambiguity in the meaning of the word paid . It must be remembered that Rule 10 deals with recovery of duties or charges short levied or erroneously refunded. The expression paid has been used to denote the starting point of limitation of three months for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty so as to make Rule 10 applicable, is accented the result will be rather anomalous. For instance if due to collusion (which means collusion between a party and an officer of the Department) a sum of ₹ 2/-is managed to be assessed by way of duty when really more than thousand times that amount is payable and if the smaller amount of duty so assessed has been paid, the Department will have to take action within three months for payment of the proper amount of duty. On the other hand, if due to collusion again an order of nil assessment is passed, in which case no duty would have been paid, according to the appellants Rule 10A will apply. We do not see any reason to distinguish the above two cases one from the other. Both are cases of collusion and if an assessee in collusion manages to have a petty amount of duty assessed and paid he can effectively plead limitation of three months under Rule 10. Whereas in the same case of collusion where no duty has been levied there will be no period of limitation. In our opinion, that will not be a proper interpretation to be placed on Rule 10A by us. By the interpretation placed by us on Rule 10, the position will be that an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, short-levy and short-paid, any duty has been determined or paid as has been provided under Section 11A, necessarily the assessee becomes liable to pay interest from the first date of the month succeeding the month in which duty ought to have been paid. 48. The question which we are necessarily called upon to decide is when price is revised upward with retrospective effect and the excise duty on the same is paid immediately on a future date whether interest is payable under Section 11AB from the first day of the month succeeding the month in which the duty ought to have been paid under the Act. To keep the matter in focus, the exact question is which is the month in which the duty ought to have been paid. 49. Under the Rules, goods become exigible to duty on removal. Assessment is to be done by assessee itself by way of self-assessment. In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the goods takes place. Undoubtedly, if the removal takes place in March, the payment is to be made by 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is read alongwith Rule 8, which declares that the duty on the goods removed from the factory or warehouse during a month is to be paid on the 6th day of the following month would mean that the Legislature has understood the expression the month in which the duty ought to have been paid under the Act in the same sense as it is declared in Rule 8. 52. In this regard it is also pertinent to notice the finding in the order of the original authority that perusal of the Circular dated 01/07/2004 makes it unambiguously clear that the price was understood as provisional price. This belies quite clearly the case of the appellant that the price was final. Could the assessee in the light of the Circular even for a moment in the same breath contend that the assessee was unhesitatingly ready and able to determine the price and hence the value. We would think that it certainly presented a situation where the assessee should have resorted to Rule 7. 53. As we have already noted, SAIL has paid the differential duty of ₹ 142.78 crores even without waiting for any notice under Section 11A(1). The assessee volunteered and made payment in October 2006. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f non-payment, it would not be a case of non-levy? Do they overlap? If there is non-levy, will there by short levy at the same time. Finally, in a case of short levy, can there also be short payment? 57. What is levy? We have already noticed that in the decision of this Court in N.B. Sanjana (supra), this Court rejected the argument of the Revenue that levy in Rule 10 means collection of some amount. The Court went on to hold that levy has not been used in the Act or the rules as meaning actual collection. 58. In a case where goods are removed clandestinely, there would be no levy. Equally, there will be non-payment. Thus, a case of non-levy can overlap with non-payment. No doubt, there can be cases where despite full levy there can be no payment, may be by mistake or otherwise. Equally thus, if there is no non-levy, there can be partial payment. That would make it a case of short payment as the payment does not match the amount of duty levied as per the self-assessment carried out by the assessee. A short levy ordinarily would be a case where out of the ingredients of assessment, namely, (1) rate of duty, (2) valuation and (3) quantity removed, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill date back to the dates of removal in view of the retrospective operation. Admittedly the liability for payment of differential duty has arisen. Upon the true value, in a case of retrospective escalation of price though later agreed being received and consequential differential duty being admittedly payable, it would result in Section 11A read with Section 11AB applying. 60. It is true that the statutory authority has found it to be a case of short payment. In the notice issued claiming interest it is stated there is short levy (see page 89 Vol.II SLP paper book). Proceeding on the basis that it is a case of short levy, Section 11A read with Section 11AB is attracted and the interest clock ticks from the date as we have found namely as provided in Rule 8 read with Section 11AB. If the concept of short payment is stretched to include all amounts which ought to have been paid, it may also be treated as a case of short payment though juridically it may be true that it may strictly fall under short levy. 61. While it may be true that interest cannot be demanded by way of damages or compensation and it is also further true that unless there is a substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which referred the matter would result in doing violence to the provisions of the Act and the Rules which we have interpreted. We have already noted that when an assessee in similar circumstances resorts to provisional assessment upon a final determination of the value consequently, the duty and interest dates back to the month for which the duty is determined. Duty and interest is not paid with reference to the month in which final assessment is made. In fact, any other interpretation placed on Rule 8 would not only be opposed to the plain meaning of the words used but also defeat the clear object underlining the provisions. It may be true that the differential duty becomes crystalised only after the escalation is finalized under the escalation clause but it is not a case where escalation is to have only prospective operation. It is to have retrospective operation admittedly. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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