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Judgment
Manindra Mohan Shrivastava, J.—By this petition under Article 226 of the Constitution of India, the petitioner has assailed correctness and validity of notice dated 18-12-2003, by which, the petitioner has been required to pay Rs. 1,69,768/- towards interest of delayed payment of duty u/s 11AA of the Central Excise Act, 1944. The petitioner is the manufacturer of steel products. When the premises of the petitioner was inspected on 3-10-1990, the Excise Authorities found that the petitioner had removed certain manufactured goods without payment of excise duty as required under the law. This led to issuance of show cause notice to the petitioner which was replied. Thereafter, the Collector, Central Excise passed an order on 12-12-1991 confirming duty payment of Rs. 43,909/- on 69.695 MT of CTD Bars removed under Gate Passes No. 511 to 517 of dated 1-10-1991 as also confirming a duty demand of Rs. 1,37,846.62 and Rs. 6,80,207.47 on 218.720 MT of CTD bars/channels/flats and angles and 1504.765 MT of CTD bars/rounds/angles and 96.240 MT of M.S. Flats, said to be cleared by the petitioner without issue of gate pass without payment of duty. In addition, confiscation also took place and penalty was also imposed.
Aggrieved by the order, the petitioner preferred an appeal before the Customs, Excise and Gold (Control) Appellate Tribunal, New Delhi, registered as Appeal No. E/1730 of 1992. The appeal of the petitioner was finally decided vide order dated 22-5-1998 (Annexure P-1) 1998 (104) ELT 674 . By this order, the total duty payment was reduced to Rs. 43,909/- as indicated in Para. 4 of the appellate order. Thereafter, the respondents initiated proceedings for recovery of interest on delayed payment and demand notice was issued to the petitioner vide Annexure P-12. Aggrieved by this demand notice, the petitioner has approached this Court.
Submission of learned counsel for the petitioner is that the liability to make payment of interest on delayed payment of duty was imposed u/s 11AA of the Act which was inserted vide Section 73 of the Finance Act of 1995 (22 of 1995) w.e.f. 26-5-1995. Under this provision, the petitioner, in whose case, determination had already taken place, was required to pay the duty within a period of three months from the date, on which, Finance Bill, 1995 receives the assent of the President. However, by virtue of Explanation-1 appended to Section 11AA of the Act, in the present case, as duty was reduced by the Tribunal, the date of such determination shall be treated as date on which amount of duty is first determined to be payable. Therefore, the liability for payment of interest on delayed payment of duty u/s 11AA of the Act arose only on 22-5-1998 and not before that. Therefore, the respondents had authority to recover interest on delayed payment, only for the period from 22-8-1998 and not earlier.
On the other hand, learned counsel for the respondent No. 1 submitted that determination had already taken place by the Collector when he passed the order on 12-12-1991. Out of total amount of Rs. 8,18,054.09, the petitioner had paid only Rs. 5,50,000/- on 28-6-1993 and the balance amount of Rs. 2,68,054.09 was paid as late as on 24-10-1998. Therefore, the delay occurred in paying the balance amount for a period of more than five years. He further submits that the petitioner is not entitled to benefit of Explanation-1 because as far as duty demand of Rs. 1,37,846.62 and Rs. 6,80,207.47 is concerned, that was confirmed by the Tribunal. In respect of another demand of Rs. 43,909/-, relief was granted to the petitioner. Therefore, the said explanation would not come to the aid of the petitioner. Second submission of learned counsel for respondent No. 1 is that in view of Explanation-2, for the purpose of calculating interest, the date of first determination would be relevant.
Provision requiring payment of interest on delayed payment of duty was inserted as Section 11AA in the Act of 1944 by way of Section 73 of the Amendment Act of 1995 with effect from 26-5-1995. The relevant provision reads as under:-
11AA. Interest on delayed payment of duty. - (1) Subject to the provisions contained in Section 11AB, where a person, chargeable with duty determined under sub-section (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-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, 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:
Provided that where a person chargeable with duty determined under sub-section (2) of Section 11A before the date on which the Finance Bill, 1995 receives the assent of the President, fails to pay such duty within three months from such date, then, such person shall be liable to pay interest under this section from the date immediately after three months from such date, till the date of payment of such duty.
Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the date of such determination shall be the date on which an amount of duty is first determined to be payable.
Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the date of such determination shall be,-
(a) for the amount of duty first determined to be payable, the date on which the duty is so determined;
(b) for the amount of increased duty, the date of order by which the increased amount of duty is first determined to be payable;
(c) for the amount of further increase of duty, the date of order on which the duty is so further increased.
(2) The provisions of sub-section (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.
A close reading of the aforesaid provision shows that in first part, liability for payment of interest on delayed payment of duty has been imposed where a person chargeable with duty determined under sub-section (2) of Section 11A, fails to pay such duty within three months from the date of such determination. The proviso, however, makes such provision in case of those, who are chargeable with duty determined under sub-section (2) of Section 11A before the date on which Finance Bill, 1995, receives the assent of the President, failed to pay such duty within three months from such date. The Explanation 1, however, stipulates that where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate Tribunal, National Tax Tribunal or, as the case may be, the court, the date of such determination shall be the date on which an amount of duty is first determined to be payable.
Applying the aforesaid provision in the manner as indicated above, this Court finds that though at the first instance, the Collector passed order on 12-12-1991, confirming the duty, the order was assailed in appeal. Finally, the Tribunal vide its order dated 22-5-1998 allowed the appeal partly, by which the duty was reduced by an amount of Rs. 43,909/- as indicated in Para. 4 of the appellate order. Therefore, in the present case, provisions contained in Explanation 1 would be attracted, according to which, the date of such determination shall be the date on which amount of duty is first determined to be payable. The legislative intention is clear that in cases, where payment of duty is subjected to challenge before appellate authorities or the Court, resulting in reduction of duty by taking recourse to the remedy of appeal before the appellate authorities or the Tribunal or the Court as the case may be, as a result of which, duty is reduced, the date of such final determination shall have to be reckoned for the purposes of imposing interest.
Though learned counsel for the respondents/Revenue strenuously urged that the provision in Explanation 1 will not apply because duty was demanded and confirmed under different heads, the contention is liable to be rejected, because liability to pay duty arose on the basis of order dated 12-12-1991 passed by the Collector. Merely because, the duty was determined under different heads, the sweep of provision contained in Explanation 1 cannot be excluded from its operation. The provision does not make any such distinction. If the contention of learned counsel for the respondents/Revenue were to be accepted, this would amount to re-writing the provision. In case of any ambiguity, an interpretation which favours the assessee has to be adopted. Please see The Central India Spinning and Weaving and Manufacturing Company, Limited, The Empress Mills, Nagpur Vs. The Municipal Committee, Wardha, .
Explanation 2 will have no application at all. That provision will apply in a case, where the appellate authority or the Tribunal or the Court passes an order resulting in increase or further increase in the duty.
In view of above analysis, the date with reference to which petitioner''s liability for payment of interest on delayed payment of duty has to be reckoned would be the date on which the appellate Tribunal passed the order reducing the duty i.e. on 22-5-1998 and not the 12-12-1991.
If that be so, proviso to sub-section (1) of Section 11AA of the Act of 1944 on its application shows that the petitioner failed to pay duty within three months from the date of determination by the Tribunal. The order of the Tribunal passed on 22-5-1998. The petitioner was, therefore, under an obligation to pay the amount of duty within a period of three months thereof. However, the petitioner admittedly paid the remaining amount of duty only on 24-10-1998 whereas period of three months expired on 22-8-1998. Thus, there was a delay in payment of duty by a period of a little less than two months. For this period i.e. from 22-8-1998 to 24-10-1998, the petitioner is liable to make payment of interest on delayed payment of duly as required u/s 11AA of the Act of 1944. In the result, the impugned demand notice dated 22-12-2003 (Annexure P-12) is held illegal and set aside. The petitioner shall, however, be liable to make payment of interest only for the period with effect from 22-8-1998 till the actual date of payment of balance amount of duty. The petition is accordingly allowed. No order as to costs.