1. In this petition filed under Article 226 of the Constitution of India, the petitioner has prayed for quashing of the notice Annexure P7 dated 5.10.1999 issued by the Superintendent, Central Excise, Moga for payment of interest at the rate of 20% per annum under Section 11AA of the Central Excise Act, 1944 (for short, 'the 1944 Act') on the delayed payment of cess on vegetable oil.
2. The petitioner is a manufacturer and dealer of vegetable oil. It is having an oil mill on Gandhi Road, Moga. By notice dated 5.12.1973 issued under the Produce Cess Act, 1966 (for short, 'the 1966 Act') the Superintendent, Central Excise, Range-II, Civil Lines, Ludhiana, called upon the petitioner to pay the arrears of cess with effect from 1.4.1966 and also file return under Section 16 of the 1966 Act. The petitioner filed reply dated 10.12.1973 questioning its liability to pay the cess. After some correspondence on the issue, it filed C.W.P. No. 1174 of 1974 for quashing of the demand of cess. Other manufacturers of vegetable oil also filed writ petitions challenging the levy of cess under the 1966 Act. All such petitions were dismissed by a Division Bench of the Court on 29.11.1978 - Dhanpat Oil and General Mills v. Union of India and Others. I.L.R. (1979) 2 Punjab and Haryana 321. The petitioner challenged the order of the High Court in S.L.P. No. 3271 of 1979, which was later on converted into Civil Appeal No. 2143 of 1979. While issuing notice of the S.L.P. on 4.5.1979, the Supreme Court stayed realisation of the amount of cess in dispute subject to furnishing of bank guarantee by the petitioner. The appeals filed by other manufacturers of vegetable oil were dismissed by the Supreme Court vide judgment dated 8.7.1985 - M/s. Dhanpat Oil & General Mills v. Union of India and Others, AIR 1985 Supreme Court 1255 = 1986 (6) ECR 121 (SC) = ECR C 840 SC. However, the appeal filed by the petitioner remained pending for another two years and over six months and the same was ultimately dismissed on 18.2.1998. Thereafter, the Superintendent, Central Excise, Moga Range, issued notice Annexure P5 dated 16.11.1998 to the petitioner to deposit the amount of Oil Cess with interest at the rate of 18% with effect from 26.5.1995 under the provisions of Section 11AA of the 1944 Act. He also asked the petitioner to submit month-wise details of the oil produced during the period covered by the stay granted by the Court and the amount of cess leviable thereon. The Managing Director of the petitioner responded to the said notice by writing letter Annexure P6 dated 21.12.1998 to the Superintendent, Central Excise, that he may get the bank guarantee released but no interest was payable because there was no such condition in the order of the Supreme Court. Thereafter, the impugned notice was issued to the petitioner to pay 20% interest on the delayed payment of cess.
3. During the pendency of litigation involving challenge to the levy of cess under the 1966 Act, the Parliament enacted Vegetable Oils Cess Act, 1983 (for short, 'the 1983 Act') which came into force with effect from 1.1.1984. The petitioner challenged the vires of the 1983 Act by filing C.W.P. No. 458 of 1985 and also applied for stay of the recovery of cess in accordance with the provisions of the 1983 Act. By an order dated 1.2.1985, a Division Bench passed the stay order in terms of the order dated 4.5.1979 passed by the Supreme Court in S.L.P. No. 3271 of 1979. It is said that after disposal of the appeal by the Supreme Court, the second writ petition was also dismissed by the High Court.
4. The petitioner has challenged the demand of interest on the ground that there is no provision under the 1966 Act and the 1983 Act for charging interest on the delayed payment of cess. Another ground on which it has challenged the impugned notice is that the collection of cess had remained stayed by the High Court and the Supreme Court, and, therefore, the provisions of Section 11AA of the 1944 Act cannot be invoked in its case.
5. In the written statement filed on behalf of the respondents, it has been averred that the stay orders passed by the High Court and the Supreme Court would not entitle the petitioner to claim immunity from payment of interest in terms of Section 11AA of the 1944 Act. According to the respondents, the petitioner will be deemed to have deliberately delayed the payment of cess and the mere fact that during the pendency of the proceedings before the High Court and the Supreme Court, it had avoided its liability to pay the amount of cess, they cannot be deprived their right to recover interest on the amount which could not be collected due to the stay orders passed by the High Court and the Supreme Court.
6. Shri R. L. Batta, Senior Advocate, counsel for the petitioner, argued that the levy of interest on the arrears of cess could be declared ultra vires to Section 11AA of the 1944 Act because the provisions of that section have not been engrafted in the provisions of 1966 Act and the 1983 Act. Learned counsel referred to Section 15 of the 1966 Act and Section 3 of the 1983 Act, and argued that the provisions of Section 11AA of the 1944 Act cannot be held applicable to the recoveries sought to be made under those enactments because after 26.5.1995, i.e. the date with effect from which Section 11AA was inserted in the 1944 Act, no corresponding amendment had not (sic) been made in the 1966 Act and the 1983 Act. Learned counsel then argued that in the absence of a statutory provision entitling the respondents to charge interest on the arrears of cess, the respondents cannot recover interest at the rate of 20% under Section 11AA, more so, because no determination of the cess was made in terms of Section 11A(2) of the 1944 Act. In support of his arguments, Shri Batta relied on the decisions of the Supreme Court in J. K. Synthetics Ltd. v. Commercial Taxes Officer (1994) 94 STC 422 = 1994 (53) ECR 329 (SC) and India Carbon Ltd. v. State of Assam (1997) 106 STC 460.
7. Shri D. D. Sharma, learned counsel for the respondents, argued that the petitioner cannot escape its liability to pay interest because it had deliberately avoided payment of the cess. Learned counsel submitted that the stay order passed by the Court cannot enure to the advantage of the petitioner because the interim arrangement made by the Court could not create a right in its favour and after the dismissal of the writ petitions, the respondents are entitled to recover the amount of cess with interest.
8. We have thoughtfully considered the respective submissions. Extracts of Section 11A (1), (2) and Section 11AA of the 1944 Act, Section 15(2) of the 1966 Act and Section 3(4) of the 1983 Act, which have direct bearing on the determination of the issue raised by the petitioner read as under :-
The 1944 Act 11A. Recovery of duties not levied or not paid or short-levied or short-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 short-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 agent, the provisions of this sub-section shall have effect, as if for the words "one year" the words "five years" were substituted :
Provided further that where the amount of duty which has not been levied or paid or has been short-levied or short paid or erroneously refunded is one crore of rupees or less a notice under this sub-section shall be served by the Commissioner of Central Excise or with his prior approval by any officer subordinate to him :
Provided also that where the amount of duty which has not been levied or paid or has been short-levied or short-paid or erroneously refunded is more than one crore rupees, no notice under this sub-section shall be served without the prior approval of the Chief Commissioner of Central Excise.
9. Explanation. - Where the service of notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be.
(2) Central Excise Officer shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
xx xx xx xx xx xx xx xx xx xx xx xx xx xx 11AA. Interest on delayed payment of duty. - 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 determination, he shall pay, in addition to the duty 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 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.
10. Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), Appellate 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.
11. Explanation 2. - Where the duty determined to be payable is increased or further increased by the Commissioner (Appeals), Appellate 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.
xxx xxx xxx 12. The 1966 Act "15. Provisions of certain Acts to apply. - (1) xx xx xx
(2) The provisions of the Central Excises and Salt Act, 1944, and the rules made thereunder, including those relating to refunds and exemptions from duty, shall, so far as may be, apply in relation to the levy and collection of duties of excise on any produce specified in the Second Schedule as they apply in relation to the levy and collection of duty payable to the Central Government under that Act."
xxx xxx xxx 13. The 1983 Act "3. Levy and collection of Cess on vegetable oils, - (1) xx xx (2) xx xx xx xx (3) xx xx xx xx
(4) The provisions of the Central Excises and Salt Act, 1944, and the rules made thereunder, including those relating to refunds and exemptions from duty shall, so far as may be, apply in relation to the levy and collection of the said duty of excise as they apply in relation to the levy and collection of duty of excise on vegetable oils under that Act."
14. A perusal of the provisions quoted above shows that when the 1966 Act was enacted by the Parliament, the Central Excise and Salt Act (now known as Central Excise Act, 1944) was in force. Therefore, instead of separately incorporating the provisions relating to levy and recovery of duty under the 1944 Act and the rules made thereunder, including those relating to the refund and exemption from duty, the provisions of the 1944 Act were made applicable for levy and collection of duties of excise on any produce specified in the second schedule to the 1966 Act. A similar provision was embodied in the 1983 Act in the form of Section 3(4). However, there is nothing in the language of Section 15(2) of the 1966 Act or Section 3(4) of the 1983 Act from which it can be inferred that it authorises the Central Government to charge interest on the delayed payment of cess. Section 11AA was inserted in the 1944 Act with effect from 26.5.1995 by amending Act No. 22 of 1995. However, no corresponding amendment was made in Section 15(2) of the 1966 Act or Section 3(4) of the 1983 Act so as to empower the Central Government to charge interest in the case of default in the payment of cess. Therefore, we are inclined to agree with Shri Batta that Section 11AA of the 1944 Act cannot be invoked by the respondents for charging interest on the delayed payment of cess by the petitioner.
15. In J. K. Synthetics Ltd. v. Commercial Taxes Officer (supra), a Constitution Bench of the Supreme Court held that the appellant was not liable to pay interest under Section 11B of the Rajasthan Sales Tax Act (as it stood prior to its substitution in 1979) on the additional sales tax from the date on which the original returns were filed but interest had to be paid only for the period subsequent to determination of sales tax. Their Lordships further held as under :-
"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. But any provision made in a statute for charging or levying interest on delayed payment of tax must be construed as a substantive law and not adjectival law."
16. In India Carbon Ltd. v. State of Assam (supra), their Lordships of the Supreme Court interpreted Section 35A of the Assam Sales Tax Act, 1947, and Section 9(2A) of the Central Sales Tax Act, 1956, and held as under :-
"Interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf."
"Section 9(2A) of the Central Sales Tax Act, 1956, makes applicable to the assessment, reassessment, collection and enforcement on Central sales tax the provisions relating to offences and penalties contained in the State Acts as if the Central sales tax was a State sales tax : but section 9(2A) makes no reference to interest. There is no substantive provision requiring the payment of interest on Central sales tax. There is, therefore, no substantive provision in the Central Sales Tax Act which obliges the assessee to pay interest on delayed payment of Central Sales Tax."
17. In view of the above discussion and the law laid down by the Supreme Court, we hold that the respondents cannot charge interest from the petitioner on the delayed payment of cess by invoking Section 11AA of the 1944 Act.
18. We also agree with the learned counsel for the petitioner that Section 11AA of the 1944 Act cannot in terms be applied for recovery of the interest because no determination of the duty payable by the petitioner had been made in accordance with Section 11A(2) of the 1944 Act.
19. However, we are unable to agree with the learned counsel for the petitioner that in view of the stay orders passed by the Supreme Court and the High Court, the respondents are not entitled to charge interest even under the common law. In the two decisions relied upon by Shri R. L. Batta, their Lordships did not consider the question as to whether interest can be claimed in a case in which the collection of duty or tax has been deferred or held in abeyance due to the interim order passed by the Court. In our opinion, a person, who avoids the payment of duty or tax on the basis of stay order passed by the Court, can always be held liable to pay interest. In an appropriate case the Court can, while finally deciding the matter, direct the payment of interest. In M/s Style (Dress Land) v. Union Territory, Chandigarh & Anr. JT 1999 (2) S.C. 67, their Lordships of the Supreme Court upheld the order passed by this Court for levy of interest though with some modification about the rate of interest. The facts of that case show that the appellant had avoided payment of enhanced rent due to the respondents on the pretext of the stay order passed by the High Court. While dismissing the writ petitions filed by them against the enhancement of the rent, the High Court directed them to pay interest at the rate of 18% per annum.
20. For the reasons mentioned above, the writ petition is allowed. Notice Annexure P7 is declared illegal and quashed. However, we give liberty to the respondents to recover interest on the amount of cess from the petitioner by filing suit or by availing any other appropriate legal remedy.