TaxTMI 
TaxTMI 
2024 (5) TMI 1275
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.....04.2007 (Annexure II), and the order dated 29.09.2020 passed by the Assistant Commissioner of GST & Central Excise rejecting the representation dated 12.09.2017 submitted by the Petitioner and upholding the levy of interest and penalty on the delay in payment of duty. 3. In the Writ Petition No. being W.P (C) No. 3965/2021, the petitioner has challenged the order dated 21.09.2017 passed by the Assistant Commissioner of GST & CX, Division-I (Annexure-VII) levying interest and penalty on the late payment of duty, which was exempted in view of the Notification No. 20/2007- CE dated 25.04.2007 (Annexure-II), and the order dated 29.09.2020 passed by the Assistant Commissioner of GST & Central Excise rejecting the representation dated 12.09.2017 submitted by the Petitioner and upholding the levy of interest and penalty on the delay in payment of duty. 4. In the Writ Petition No. being W.P (C) No. 4025/2021, the petitioner has challenged the Order dated 17.03.2017(Annexure- VII) passed by the Deputy Commissioner, Central Excise and Service Tax Division-I, levying interest and penalty on the late payment of duty, which was exempted in view of the Notification No. 20/2007-CE dated 25.04.....
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.... of increase by not less than 25% in the value of fixed capital investment in plant and machinery for the purposes of expansion of capacity/ modernization and diversification and have commenced commercial production from such expanded capacity on or after the 1st day of April, 2007 but not later than 31st day of March, 2017. 11. The aforesaid Notification No. 20/2007 dated 25.04.2007 was subsequently modified by Notification No. 20/2008-CE dated 27.03.2008 and Notification No. 38/2008-CE dated 10.06.2008, whereby it was provided that the excise duty exemption shall be available on the value addition and part only. The aforesaid Notifications were upheld by the Apex Court. 12. The petitioners relying on the promises and assurances made in the Industrial Policy, 2007 and the Notifications issued in pursuance thereto, set up its manufacturing unit at Ambe Compound, Pacharia Dolar Pathar, near CEPAT PWC, Hajo Changsari Chowkigate Road, Pub- Bongsar, Kamrup (R) -781104, Assam, for manufacture of excisable goods, viz. wire of iron or non-alloy steel falling under chapter sub-heading No.721710202171010 and wire nails falling under chapter sub-heading No.73170013 of the Central Excise Ta....
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....ring W.P (C) No. 4068/2021 levied interest and penalty amounting to Rs.3,78,148/- for the months of April-2016, May-2016, June- 2016 and July-2016 for the delay in payment of the duty. 15. Dr. A. Saraf, learned Senior Counsel submits that the petitioner is entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008 and as such, the question of payment of any such duty and consequently the levy of interest for the purported delay in payment of duty does not arise and thereby the Assistant Commissioner committed a manifest error in law while imposing such interest and penalty vide order dated 17.03.2021 while sanctioning such refund and subsequently by order dated 29.09.2020. 16. He further submits that the respondents failed to appreciate that the exemption by way of refund of duty paid is also an exemption from payment of duty. Since in the present case, Notification Nos. 20/2007 and 20/2008 provided for that refund of duty paid after verification of the same by excise authority, the same will not make the duty leviable or payable under the Act so as to attract levy of interest and penalty for delay in making payment of the same. 17. Mr. S.C. Keyal....
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.... (SC) 319. 21. I have heard the submissions made at the bar and I have perused the materials available on record. 22. The Notification No. 20/2007-CE dated 25.04.2007 and subsequent notifications amending the said notification were issued in exercise of powers under Section 5A of the Central Excise Act, 1944. Section 5A of the Central Excise Act is reproduced herein below: "5A. Power to grant exemption from duty of excise.- (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon: Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (i) in a 1 [free trade zone 2 [***]] and brought to any other place in India; or (ii) (ii) by a hundred per cent export-oriented undertaking and 3 [brought to any other place in India]. 23. The relev....
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....f duty, in the manner specified under rule 8 of the Central Excise Rules, 2004, in subsequent months, and such payment shall be deemed to be payment in cash;" Para 2D(c) reads as "a manufacturer who intends to avail the option under clause (a) shall exercise his option in writing for availing such option before affecting the first clearance in any financial year and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year," 24. In the present case, the petitioner filed a refund claim of the central excise duty paid for the goods which has been exempted under the aforesaid notification dated 25.04.2007 for the subject month. The said refund claim was sanctioned. However due to late payment of duty in respect of the months for which refund was sanctioned, interest and penalty was appropriated and recovered from the sanctioned amount. 25. The issue which falls for determination is whether interest and penalty can be levied for late payment of duty on goods which is exempted for payment of duty. 26. Reading of the subject Notification dated 25.04.2007, as amended manifest that it only provides....
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....y, no interest and/or penalty can be charged for non-payment of such duty within time. The provisions for payment of duty and the time prescribed for such payment of duty in the Central Excise Act, 1944 are applicable in respect of goods which are excisable to Central Excise duty and the manufacturer is liable to pay such duty. The said provision cannot be made applicable in respect of duty which is exempted by issuance of Notifications under Section 5A of the Central Excise Act, 1944. 29. Pertinent, that in a taxing statute, there has to be first a charge and then levy and thereafter, the question of payment of any duty arises. Where, in respect of any goods, there is charge, levy and the liability of payment of said duty, then subsequently, the question of assessment and recovery of said demand arises. Interest and penalty are also measures for recovery of the demand payable under the Act. If there is no liability of payment of any duty under the Act, the question of levy of interest and penalty for non-payment of the demand within the prescribed time does not arise. 30. Section 11AA of the Central Excise Act, 1944 provides for interest on delayed payment of duty. The said Sect....
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....er Section 5A of the said Act, the provision of levy of interest cannot be made applicable to him. Since in the present case, the petitioner was entitled to exemption by virtue of Notification No. 20/2007 read with Notification 20/2008, the question of payment of any such duty and consequently, the levy of interest for the purported delay in payment of duty does not arise. 32. Section 11 AC of the Act provides for short levy or non-levy of duty in certain cases. Sub-section (1)(a) of Section 11 AC provides that where any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, for any reason other than the reason of fraud or collusion or any wilful misstatement 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, the person who is liable to pay duty as determined under sub- section (10) of Section 11A shall also be liable to pay a penalty not exceeding ten per cent of the duty so determined or Rupees five thousand, whichever is higher. 33. Section 11AC of the Central Excise Act, 1944, which is relevant in the present context is reproduce....
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....to date on which the Finance Bill, 2015 receives the assent of the President (both days inclusive), the penalty shall be fifty per cent. of the duty so determined. (d) where any duty demanded in a show cause notice and the interest payable thereon under section 11AA, issued in respect transactions referred to in clause (c), is paid within thirty days of the communication of show cause notice, the amount of penalty liable to be paid by such person shall be fifteen per cent. of the duty demanded, subject to the condition that such reduced penalty is also paid within the period so specified and all proceedings in respect of the said duty, interest and penalty shall be deemed to be concluded; (e) where any duty as determined under sub-section (10) of section 11A and the interest payable thereon under section 11A in respect of transactions referred to in clause (c) is paid within thirty days of the date of communication of the order of the Central Excise Officer who has determined such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent. of the duty so determined, subject to the condition that such reduced penalty is also paid within the period....
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....electronically through internet banking and by the 5th day of the following month, in any other case] : Provided that in case of goods removed during the month of March, the duty shall be paid by the 31st day of March : [Provided further that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the duty on goods cleared during a quarter of the financial year shall be paid by the 6th day of the month following that quarter, if the duty is paid electronically through internet banking and in any other case, by the 5th day of the month following that quarter, except in case of goods removed during the last quarter, starting from the 1st day of January and ending on the 31st day of March, for which the duty shall be paid by the 31st day of March. [Explanation-1. - For the removal of doubts, it is hereby clarified that, - [(a) ] * * * (b) an assessee, *] shall be eligible, if his aggregate value of clearances of all * [* excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees four hundred lakhs.] Explanation....
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....duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow." 37. Reading of the aforesaid rules indicates that if a manufacturer fails to pay an amount of duty by due date, he shall be liable to pay the outstanding amount along with interest in terms of Section 11AB of the Act. However, there is no provision in the Act for levy of interest in respect of goods which is exempted from payment of duty. Further, Rules 8(3) and 8(3)(c) are procedural and therefore the assessing authorities cannot levy interest or penalty for delayed payment of duty on exempted goods under the said Rules until and unless the Act provides. 38. It is well settled that interest cannot be levied without there being a substantive provision for levy of interest in the Act. The Apex Court in the case of India Carbon Ltd. &Ors. Vs. State of Assam reported in (1997) 6 SCC 479 at paragraph 12 while examining the provisions ....
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....xcise has not been levied or paid or has been short-levied or short paid or erroneously refunded, for any reason other than the reason of fraud or 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, the person who is liable to pay duty as determined under sub-section (10) of Section 11A shall also be liable to pay a penalty not exceeding ten per cent of the duty so determined or rupees five thousand, whichever is higher. 43. Though the procedure for granting the exemption as prescribed in Notification No. 20/2007 CE dated 25.04.2007 is that the eligible industries has to first pay the duty after utilization of the CENVAT Rules, 2004 and after verification of the same, the same is refunded back to the eligible unit, the aforesaid procedure is only for the purpose of verification of the exemption claimed by the eligible industrial unit and even though the same is being granted by way of refund, the same will still be an exemption. 44. Reference is made to the decision of the Apex Court in Assistant Commissioner of Commercial Taxes (Asst.) Dharwar & O....
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....and Anr., wherein the Rajasthan High Court held as under: "........the Board ignored the distinction and difference between the two expressions "liable to pay tax" and "tax shall be payable", for, a manufacturer may be liable for payment of tax but on account of exemption, tax is not payable by him. We have already given reasons that "liable to pay tax" does not mean that tax is payable by the dealer/manufacturer under the Act. From a manufacturer tax may not be payable because of exemption under the Act " 47. Reference is also made to the case of Commercial Taxes Officer, Special Circle, Jodhpur (Supra), wherein the Rajasthan High Court further held as under: "On a careful perusal of the various provisions of the Act and the Rules referred to hereinabove the two expressions "liable to pay tax under the Act" and "tax shall be payable" deserve our pointed attention. In Rule 42 the words used in both the Sub- rules (1) and (2) are "liable to pay tax under the Act". We shall first examine the connotation of the word "liable". The word "liable" is generally/normally interpreted to mean, "exposed to a certain contingency or casualty, i.e., it means a future possibility, probability....
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..... Unless there is liability question of exemption does not arise. Liability arises in term of Section 3 and tax become payable at the rate as provided in Section 12. Section 11 deals with the point of levy and rate and concessional rate." 50. Reference is also made to the case of CCE Vs. National Tobacco Co. of India Ltd. reported in (1972)2 SCC 560 wherein the Apex Court in paragraph 19 held as under: "19. The term 'levy' appears to us to be wider in its import than the term 'assessment. It may include both 'imposition' of a tax as well as 'assessment. The term 'imposition' is gene rally used for the, levy of a tax or duty by legislative provision indicating the subject matter of the tax and the rates at which it has to be taxed. The term 'assessment, on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate levy' with an 'assessment' as well as with the collection of a tax when it. held that '....
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....r., reported in (1978) 1 SCC 363, wherein the Apex Court in paragraph 12 held as under: "12. ..........it is well-settled rule of interpretation that in constructing a taxing statute "one must have regard to the strict letter of the law and not merely to spirit of the statute or the substance of the law " 55. The aforesaid law was reiterated in the case of H.H. Lakshmi Bai &Anr. Vs. Commissioner of Wealth Tax & Ors, reported in (1994) 2 SCC 534. The Apex Court at paragraph 10 of the said judgement held that taxation statute in particular has to be strictly construed and that there is no equity in a taxing provision. In Federation of A.P. Chambers of Commerce & Industry and Ors. Vs. State of A.P. and Ors, reported in (2000) 6 SCC 550 at paragraph 7 the Apex Court held that it is trite law that a taxing statute has to be strictly construed and nothing can be read into it. In Ajmera Housing Corporation & Anr. Vs. Commissioner of Income Tax, reported in (2010) 8 SCC 739 at paragraph 36 it was held as under: "36. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumptio....
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....Section 5A of the Act. As discussed above, Rules are framed to carry out the purposes of the Act. If there is no substantive provision in the Act for levy of interest and penalty, the interest and penalty cannot be levied on the basis of any provisions of Rules. The submissions of Mr. S.C. Keyal, learned Standing Counsel GST, is to the contrary and as such, is of no substance and hence rejected. The three authorities as referred earlier, relied by the respondent are in different context and therefore does not fit in the context of the present case and hence not relevant. 61. In view of the aforesaid, the Respondent Authorities committed a manifest error in law in levying penalty and interest relying on the provisions of Rules 8(3) and 8(3A) of the Central Excise Rules, 2002 in the absence of a substantive provisions of the Act. 62. Accordingly, this Court is of the opinion that interest and penalty cannot be levied for late payment of duty on goods which is exempted from payment of duty. 63. As such, the impugned orders passed by the Assistant Commissioner of GST & CX levying interest and penalty on the late payment of duty, which was exempted in view of the Notification No. 20/....