Supreme Court of India
M/S STEEL AUTHORITY OF INDIA LTD.versusCOMMISSIONER OF CENTRAL EXCISE, RAIPUR
- Citation
- 2015 INSC 891
- Decided
- 8 May 2019
- Disposal
- Dismissed
- Bench
- RANJAN GOGOI
Holding
If any of the contingencies of non‑levy, non‑payment, short‑levy or short‑payment under Section 11A arise, Section 11AB is attracted and interest accrues from the first day of the month succeeding the month in which the duty ought to have been paid, as determined by Rule 8.
Summary
The Steel Authority of India Ltd (SAIL) cleared goods between January 2005 and July 2006 on a price fixed by a circular, later revised retrospectively by an escalation clause, leading SAIL to pay differential excise duty of Rs.142.78 crore. The Commissioner demanded interest under Section 11AB of the Central Excise Act, arguing that the duty was short‑paid/short‑levied. SAIL contended that the price at removal was provisional and that interest should not accrue from the date of removal. The Supreme Court examined the interplay of Sections 11A and 11AB with the Central Excise Rules, particularly Rule 8 and Rule 7 on provisional assessment. It held that any non‑levy, non‑payment, short‑levy or short‑payment triggers Section 11AB, and interest accrues from the first day of the month succeeding the month in which the duty ought to have been paid, as defined by Rule 8. Consequently, SAIL was liable to pay interest on the differential duty, and the appeals were dismissed.
Issues considered
- Whether interest under Section 11AB is payable on differential excise duty arising from a retrospective price escalation clause.
- How to interpret the phrase ‘the month in which the duty ought to have been paid’ in Section 11AB in relation to Rule 8 of the Central Excise Rules.
- Whether the occurrence of a short‑levy, short‑payment, non‑levy or non‑payment under Section 11A automatically attracts Section 11AB.
- Effect of provisional assessment under Rule 7 on the commencement of interest liability.
- Whether short‑levy and short‑payment are distinct concepts for the purpose of Section 11A and 11AB.
Legislation cited
- Central Excise Act, 1944s. 11A, s. 11AB, s. 4
- Central Excise Rules, 2002s. Rule 10, s. Rule 12, s. Rule 173-B, s. Rule 173-C, s. Rule 4, s. Rule 5, s. Rule 6, s. Rule 7, s. Rule 8
Subjects
Central ExciseSection 11ABInterest on delayed dutyEscalation clauseProvisional assessmentShort levyShort paymentSelf‑assessmentTax recovery
Judgment
400 SUPREME COURT REPORTS
[2019] 7 S.C.R. 400 [2019] 7 S.C.R.
A M/S STEEL AUTHORITY OF INDIA LTD.
v.
COMMISSIONER OF CENTRAL EXCISE, RAIPUR
(Civil Appeal No. 2150 of 2012)
MAY 8, 2019
B
[RANJAN GOGOI, CJI, UDAY UMESH LALIT AND
K. M. JOSEPH, JJ.]
Central Excise Act, 1944: s.11AB – Demand of interest under
s.11AB – Whether interest is payable under s.11AB of the Act on the
differential excise duty with retrospective effect that became payable
C on the basis of escalation clause – Held: If there is a non-levy, non-
payment, short-levy or short-payment, the same becomes recoverable
under s.11A – In any of the four contingencies namely, non-levy,
non-payment, short-levy or short-payment referred to in s.11A,
s.11AB is attracted – Thus, in any of the four contingencies, for
D any duty that is determined or paid as provided under s.11A,
necessarily the assessee becomes liable to pay interest under s.11AB
– The interest clock ticks from the date as provided in r.8 r/w s.11AB
– The expression “the month in which the duty ought to have been
paid” under s.11AB of the Act, when it is read alongwith r.8, which
declares that the duty on the goods removed from the factory or
E 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 r.8 –
Central Excise Rules, 2002 – r.8.
F Central Excise Act, 1944: s.11AB – 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
s.11AB from the first day of the month succeeding the month in
which the duty ought to have been paid under the Act – Held: Under
the Rules, goods become exigible to duty on removal – Assessment
G
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 – When the provisional assessment is
H
400
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 401
OF CENTRAL EXCISE, RAIPUR
finalized, the assessee becomes liable, however, to pay interest from A
the first date of the month succeeding the month for which the amount
is determined – Central Excise Rules, 2002 – r.8.
Dismissing the appeals, the Court
HELD : 1. The scheme of the Central Excise Act and the
Rules are a separate code. Section 11A is a provision for recovery. B
If there is a non-levy, non-payment, short-levy or short-payment,
the same becomes recoverable under Section 11A. If there is
any of the four contingencies referred to in Section 11A, then
Section 11AB is attracted. The working of the parent Act is
intricately intertwined with the rules. Therefore, if the value which C
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, at the time goods were removed the price D
was not fixed. The assessee was fully conscious of the fact that it
was subject to variation and had knowledge that the value it was
declaring was amenable to upward revision. The circumstances
were indeed clearly appropriate for the assessee to invoke the
provisions of Rule 7 and seek an order for provisional assessment. E
[Paras 35, 36] [440-A-D]
Rainbow Industries (P) Ltd. v. CCE (1994) 6 SCC
563 : [1994] 4 Suppl. SCR 135 ; Balarpur Industries
Ltd. v. Assistant Collector of Customs and Central
Excise & Ors. (1995) Suppl. (3) SCC 429 ; Collector F
of Central Excise, Baroda v. Cotspun Ltd. (1999) 7 SCC
633 : [1999] 3 Suppl. SCR 184 ; M/s. Eastland
Combines, Coimbatore v. Collector of Central Excise,
Coimbatore AIR 2003 SC 843 : [2003] 1 SCR 98 ; ITW
Signod India Limited v. Collector of Central Excise
(2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751 – referred G
to.
2. 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
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402 SUPREME COURT REPORTS [2019] 7 S.C.R.
A from the date of removal and not from the date on which show
cause was issued. Section 11A which was inserted by Act 26 of
1978 is substantially the reproduction of Rule 10 of 1944 Rules.
Section 11AB, it came to be inserted by Act 33 of 1996. Thereafter,
it was amended by Act 10 of 2000, Act 14 of 2001, Act 20 of 2002
and Act 49 of 2005. Section 11A must necessarily be read with
B
Section 11AB. This is for the reason that interest under Section
11AB is premised upon the duty of excise not being levied or
paid or short levied, short paid or erroneously refunded. Such
duty is either determined under sub-Section (2) of Section 11A
or without such determination it being paid under sub-Section
C (2B) of Section 11A. In any of the circumstances, namely, non-
levy, non-payment, 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. [Paras 43, 45-47] [448-G-H; 452-B; F-H;
D
453-A-B]
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) – referred
to.
E
3. 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
F 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 of March. In the case of provisional
assessment, the assessee entertains a doubt regarding the actual
value or the rate of duty. He applies and he is permitted under
G the order to remove goods on a provisional assessment. The
assessment is thereafter finalized. When the provisional
assessment is finalized, the assessee becomes liable however to
pay interest from the first date of the month succeeding the month
for which the amount is determined. Under Rule 7(4), the
expression “succeeding the month for which such amount” is
H determined refer to the month of removal of the goods. When
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 403
OF CENTRAL EXCISE, RAIPUR
the provisional assessment has such consequences, it would A
occasion an invidious discrimination to place an interpretation
on Section 11AB by which those assesses who go in for provisional
assessment under Rule 7 are called upon to pay interest upon
finalization of the assessment with reference to the date of
removal in a case where the value is fully determined as a result
B
of escalation clause being worked resulting in an upward revision
of prices and under Section 11AB payability arises with reference
to the date of decision to grant escalation. In other words, the
law will have to be interpreted in a manner that it is fair and equal
to similarly situated group of assessees. Legislative intention,
in this regard, also cannot be otherwise. Legislature has clearly C
in Section 11AB spelt out the time with reference to the Act and
the Rules. The expression “the month in which the duty ought to
have been paid” under this Act, when 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
D
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.
[Paras 49-51] [453-C-H; 454-A-B; D]
Collector of Central Excise, Baroda v. Cotspun Ltd.
(1999) 7 SCC 633 : [1999] 3 Suppl. SCR 184 E
– referred to.
4.1 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, F
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 G
of assessment, namely, (1) rate of duty, (2) valuation and (3)
quantity removed, the components all or any are incorrectly
applied. As an instance if the full rate of duty applicable is not
applied though the valuation and the quantity is correctly arrived
at, it may fall under short-levy. In one sense it could be said that
H
404 SUPREME COURT REPORTS [2019] 7 S.C.R.
A there is short-payment also, as if payment could be understood
as the amount which ought to have been paid but it has not been
paid, it may be a case of short payment. But it may be more
appropriate to put it under short levy where the deficit in payment
is essentially in terms of a short-levy. [Para 58] [456-B-D]
B 4.2 If short- levy is to be understood as confined to cases
where the assessment is not the full assessment, taking into
account the parameters involved correctly, namely, rate of duty,
valuation and quantity it could be classified as a case of short
levy as one of the components of proper assessment namely,
valuation has been incorrectly arrived at. The payment in such a
C case is made in terms of the incorrectly assessed figure. The
payment matches the assessment under Rule 10 of 1944 Rules,
the expression “short-payment” is not used. Instead the words
“duty has not been paid in full”, has been used. No doubt, in a
case where in law though the amount which is paid is in harmony
D with the amount which is assessed, it is not the amount which
ought to have been paid by the assessee. The absence of full
payment of duty or short payment has indeed also in one sense
taken place. In a case where there is an escalation clause, goods
are cleared on a provisional price. Consequently, the value is
provisional. There is a subsequent escalation with retrospective
E effect. It will affect the valuation which was employed in the self-
assessment by the assessee which would necessarily be
provisional. Enhancement of the value will 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
F 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. [Para 59] [456-F-H; 457-A-C]
4.3 It is true that the statutory authority has found it to be
G a case of short payment. In the notice issued claiming interest it
is stated there is short levy. 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 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,
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 405
OF CENTRAL EXCISE, RAIPUR
it may also be treated as a case of short payment though juridically A
it may be true that it may strictly fall under short levy. [Para 60]
[457-C-E]
5. As far as the scope of the second explanation of Section
11A(2)(b) is concerned, it contemplates payment voluntarily by
the assessee. It is without any notice being issued under Section B
11A. There is also reference to liability on the part of the
assessee to pay interest under Section 11A(2)(b), not only on
the amount which is paid within the meaning of Section 11A(2)(b)
but on any short payment as may be determined by the excise
officer. This only means that payment can be by an assessee of
any of the four amounts namely, non-levy, non-payment, short- C
levy or short-payment. Since there is no notice under Section
11A and non-determination of the amount as such pursuant to
which the amount is paid it may happen that there may be shortfall
in the amount which is paid by the assessee in comparison to
what the assessee is legally required to pay. [Para 62] [457-G-H; D
458-A-C]
CCE v. SKF India Ltd. 2009 (13) SCC 461 : 2009] 10
SCR 714 ; CCE v. International Auto Ltd. 2010 (2) SCC
672 : [2010] 1 SCR 211 – relied on.
E.D. Sassoon & Co. Ltd. v. CIT AIR 1954 SC 470 : E
1955 SCR 599 ; Commissioner of Income Tax, Madras
v. A. Gajapathy Naidu, Madras AIR 1964 SC 1653 :
1964 SCR 767 ; Vikrant Tyres Ltd. v. First Income Tax
Officer, Mysore 2001 (3) SCC 76 ; V.V.S. Sugars v. Govt.
of A.P. and Others 1999 (4) SCC 192 (India Carbon F
vs. VBS Sugar): [1999] 2 SCR 925 ; P.G. & W. Sawoo
(P) Ltd. v. CIT & Ors. 2017 (13) SCC 284 – held
inapplicable.
MRF Ltd. v. Collector of Central Excise, Madras
1997 (5) SCC 104 ; J.K. Synthetics v. State of G
Rajasthan (1994) 4 SCC 276 ; Purolator India Limited
v. Commissioner of Central Excise 2015 (10) SCC
715 : [2015] 9 SCR 812 ; India Carbon Ltd. & Ors. v.
State of Assam 1997 (6) SCC 479 : [1997] 3 Suppl.
SCR 1 ; E.I.D. Parry (India) Ltd. v. CCT 2005 (4) SCC
779 : [2005] 3 SCR 1144 – referred to. H
406 SUPREME COURT REPORTS [2019] 7 S.C.R.
A Case Law Reference
2009] 10 SCR 714 relied on Para 1
[2010] 1 SCR 211 relied on Para 1
1997 (5) SCC 104 referred to Para 5
B (1994) 4 SCC 276 referred to Para 6
[2015] 9 SCR 812 referred to Para 23
[1997] 3 Suppl. SCR 1 referred to Para 25
1955 SCR 599 held inapplicable Para 26
C
1964 SCR 767 held inapplicable Para 27
2001(3) SCC 76 held inapplicable Para 28
[1999] 2 SCR 925 held inapplicable Para 28
2017(13) SCC 284 held inapplicable Para 28
D
[2005] 3 SCR 1144 referred to Para 31
[1994] 4 Suppl. SCR 135 referred to Para 41
(1995) Suppl. (3) SCC 429 referred to Para 41
[1999] 3 Suppl. SCR 184 referred to Para 41
E
[2003] 1 SCR 98 referred to Para 42
[2003] 5 Suppl. SCR 751 referred to Para 42
1978 E.L.T. (J 399) referred to Para 44
F CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2150
of 2012.
From the Judgment and Order dated 13.08.2010 of the
Customs, Excise & Service Tax Appellate Tribunal, New Delhi in Appeal
No. E/367/2008.
G With
Civil Appeal Nos. 2562 of 2012, 600, 1522-1523, 599 of 2013.
V. Sridharan, Sr. Adv., L. Badri Narayanan, Aditya Bhattacharya,
Victor Das, Ms. Apeksha Mehta, Manish Rastogi, Shrey Ashat, M. P.
Devanath, Vikas Singh Jangra, Advs. for the Appellants.
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 407
OF CENTRAL EXCISE, RAIPUR
Vikramjit Banerjee, ASG, K. Radhakrishnan, Sr. Adv., Arijit A
Prasad, Shekhar Vyas, B. Krishna Prasad, Advs. for the Respondent.
The Judgment of the Court was delivered by
K. M. JOSEPH, J.
1. A Bench of two judges doubted the correctness of the judgment B
rendered by a Bench of two learned judges of this Court in CCE v. SKF
India Ltd. 2009 (13) SCC 461 (hereinafter referred to as the “SKF Case”)
as also the another judgment rendered by the same Bench in CCE v.
International Auto Ltd. 2010 (2) SCC 672 and on the said basis to resolve
the controversy the matter stood posted before us.
C
2. Very briefly 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”).
D
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 E
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 Rs.142 crores by way of
excise duty. This was done in August 2006. Thereupon, the officers of F
the department indulged in correspondence with SAIL seeking details
regarding the clearances which were effected. On the basis of material
made available, SAIL was called upon to remit interest under Section
11AB of the Act. SAIL filed its objections. It is after considering the
objections, the authority found that SAIL was liable to pay interest on a
sum of Rs.142 crores calculated based on the date of removal of the G
goods during the period from January, 2005 to July,2006. Various
objections raised by the appellants were dealt with and they were found
merit less. An appeal was carried before the Tribunal. The Tribunal
relied upon the judgment of this Court in SKF India Ltd. Case (supra)
and accordingly dismissed the appeal. Thereafter when the matter came
H
408 SUPREME COURT REPORTS [2019] 7 S.C.R.
A up before this Court, a Bench of two learned judges after elaborately
hearing the matter doubted the correctness of the decision in SKF case
and also International Auto and hence the cases were referred to us in
the decision reported in 2015 (16) SCC 107. We heard learned counsel
for the parties.
B 4. In SKF case also the assessee on the basis of revision of prices
with retrospective effect paid the differential duty on being called upon
to pay the said amount. Thereafter the Revenue called upon the assesee
to pay interest under Section 11AB of the Act. A Bench of two learned
judges after considering Sections 11A and 11AB disapproved the
judgment of the Bombay High Court in CCE v. Rucha Engineering P.Ltd.
C holding inter alia as follows:
“11. Section 11-A puts the cases of non-levy or short-levy, non-
payment or short-payment or erroneous refund of duty in two
categories. One in which the non-payment or short-payment, etc.
of duty is for a reason other than deceit; the default is due to
D oversight or some mistake and it is not intentional. The second in
which the non-payment or short-payment, etc. of duty is “by reason
of fraud, collusion or any wilful misstatement or suppression of
facts, or contravention of any of the provisions of the Act or of
Rules made thereunder with intent to evade payment of duty”;
E that is to say, it is intentional, deliberate and/or by deceitful means.
Naturally, the cases falling in the two groups lead to different
consequences and are dealt with differently.
12. Section 11-A, however allow the assessees-in-default in
both kinds of cases to make amends, subject of course to certain
F terms and conditions. The cases where the non-payment or short-
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).
G 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
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 409
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
given the demand notice under sub-section (1). But Explanation 2 A
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.
B
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 balance of the higher prices by virtue of
retrospective revision of the prices. It, therefore, follows that at
the time of sale the goods carried a higher value and those were C
cleared on short-payment of duty. The differential duty was paid
only later when the assessee issued supplementary invoices to its
customers demanding the balance amounts. Seen thus, it was
clearly a case of short-payment of duty though indeed completely
unintended and without any element of deceit, etc. The payment D
of differential duty thus clearly came under sub-section (2-B) of
Section 11-A and attracted levy of interest under Section 11-AB
of the Act.”
5. The same Bench in International Auto case came to reiterate
the same view in the latter decision. The Bench also proceeded to E
distinguish the decision in MRF Ltd. v. Collector of Central Excise,
Madras 1997 (5) SCC 104. This is what the court has laid down in
regard to MRF case in paragraph 9.
“9. In our view, with the entire change in the scheme of recovery
of duty under the Act, particularly after insertion of Act 14 of F
2001 and Act 32 of 2003, the judgment of this Court in MRF
Ltd. [(1997) 5 SCC 104 : (1997) 92 ELT 309] would not apply.
That judgment was on interpretation of Section 11-B of the Act,
which concerns claim for refund of duty by the assessee. That
judgment was in the context of the price list approved on 14-5-
1983. In that case, the assessee had made a claim for refund of G
excise duty on the differential between the price on the date of
removal and the reduced price at which tyres were sold. The
price was approved by the Government. In that case, the assessee
submitted that its price list was approved by the Government on
14-5-1983, but subsequent thereto, on account of consumer H
410 SUPREME COURT REPORTS [2019] 7 S.C.R.
A resistance, the Government of India directed the assessee to roll
back the prices to pre-14-5-1983 level and on that account, price
differential arose on the basis of which the assessee claimed refund
of excise duty which stood rejected by this Court on the ground
that once the assessee had cleared the goods on classification,
the assessee became liable to payment of duty on the date of
B
removal and subsequent reduction in the prices for whatever
reason cannot be made a matter of concern to the Department
insofar as the liability to pay excise duty was concerned.”
6. A Bench of two learned judges who have referred the cases
felt that the MRF decision would continue to prevail, the value at the
C 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
D 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.
E
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
F Bench of three Judges.
2) The effect of the judgment in JK Synthetics v. State of
Rajathan as also the other judgments cited before us in regard
to demand for interest under fiscal statutes.
3) Whether the determination of duty under Section 11A(2) is
G necessary to sustain the demand for interest under Section
11AB of the Act.
4) The impact of Rule 7 of the Central Excise rules which
contemplates provisional assessment.
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M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 411
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
5) Whether payment of differential duty can be treated as a A
case of payment of duty under the head “short paid”.
6) The effect of decisions under the Income Tax Act relating to
accrual of income and the impact of accrual of income under
the Income Tax Act on the liability under Section 11AB of
the Act having regard to the statutory scheme under the Act B
and the Rules.
8. Before we proceed to deal with the matter in greater detail, we
must at once notice the following finding in the reference order passed
by this Court in Steel Authority of India vs. CCE (supra):
“21. In the first instance, he pointed out that in these appeals, C
there can be two distinct types of transactions:
(a) where the price of the goods is “fixed” at the time and place
of removal, and as a result of subsequent negotiations (often
protracted) the price is retrospectively revised by the buyer;
D
(b) where the price at the time and place of removal is “not
fixed” (price subject to escalation clause), and the final price is
agreed between the seller and buyer subsequently.
According to him in the cases falling in the first category, even
the differential duty is not payable. However, all these appeals
E
fall in the second category and, therefore, we are not indulging in
any discussion pertaining to the first category. We may also point
out that in all these appeals, the period in dispute (i.e. the period in
which supplementary invoices on account of price revision were
raised) is post the introduction of the “transaction value” definition
in Section 4 of the 1944 Act but before 2010. F
22. It is a common case of the parties and even the learned counsel
for the assessee admits that in non-fixed price scenario, differential
duty is liable to be paid on subsequent revision of price which the
assessee had already paid the differential duty at or about the
time when revised price was agreed upon by the seller and the G
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.”
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412 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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
B
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
C 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 rejected. The case set up by the assessee was that
the price list was approved on 14.5.1983. Subsequently, there was
resistance by the consumers. The Ministry of Commerce, Government
D of India, thereupon directed the manufacturer- assessee pursuant to a
decision taken in a meeting of Manufacturers to bring down the prices
to the pre 14.5.1983 level. On the basis of the same a difference in the
prices arose. This led to a claim for refund. The Tribunal was of the
view that the prices at the time of removal alone mattered. The
subsequent reduction in the prices for whatever reason was totally
E irrelevant. Thereafter, the court proceeded to hold as follows:
“2. We have heard the learned counsel for the assessee. Once
the assessee has cleared the goods on the classification and price
indicated by him at the time of the removal of the goods from the
factory gate, the assessee becomes liable to payment of duty on
F that date and time and subsequent reduction in prices for whatever
reason cannot be a matter of concern to the Central Excise
Department insofar as the liability to payment of excise duty was
concerned. This is the view which was taken by the Tribunal in
the case of Indo Hacks Ltd. V. CCE (1986) 25 ELT 69 (Trib)and
G it seems to us that the Tribunal’s view that the duty is chargeable
at the rate and price when the commodity is cleared at the factory
gate and not on the price reduced at a subsequent date is
unexceptionable. Besides as rightly observed by the Tribunal the
subsequent fluctuation in the prices of the commodity can have
no relevance whatsoever so far as the liability to pay excise duty
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 413
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
is concerned. That being so, even if we assume that the roll back A
in the price of tyres manufactured by the appellant Company was
occasioned on account of the directive issued by the Central
Government, that by itself, without anything more, would not entitle
the appellant to claim a refund on the price differential unless it is
shown that there was some agreement in this behalf with the
B
Government and the latter had agreed to refund the excise duty
to the extent of the reduced price. That being so, we see no merit
in this appeal brought by the assessee and dismiss the same with
no order as to costs.”
10. We may at once notice a feature which stands out. In the
MRF case at the time when the goods were removed, the prices were C
fixed and there 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 D
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 E
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 F
for cash or deferred payment or other valuable consideration.”
11. Interestingly, unlike under the definition of Sale of Goods Act,
1930, “sale” under the Act takes place on transfer of possession. However
we need not say anything further as it is not necessary for the cases at
hand. Section 3 is the charging section. With effect from 1.7.2000 under G
the Finance Act of 2000, Section 4 of the Act which is crucial for our
case reads as follows:
“4. Valuation of excisable goods for purpose of charging of duty
of excise –
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414 SUPREME COURT REPORTS [2019] 7 S.C.R.
A (1) Where under this Act, the duty of excise is chargeable on any
excisable goods with reference to their value, then, on each removal
of the goods, such value shall –
(a) In a case where the goods are sold by the assessee, for
delivery at the time and place of the removal, the assessee and
B the buyer of the goods are not related and the price is the sole
consideration for the sale, be the tansaction value;
(b) In any other case, including the case where the goods are
not sold, be the value determined in such manner as may be
prescribed
C (2) The provisions of this section shall not apply in respect of any
excisable goods for which a tariff value has been fixed under
sub-section (2) of section 3.
(3) For the purpose of this section,-
D (a) “assessee” means the person who is liable to pay the duty
of excise under this Act and includes his agent;
(b) xxx xxx xxx
(c) xxx xxx xxx
(d) “transaction value” means the price actually paid or payable
E for the goods, when sold, and includes in addition to the amount
charged as price, any amount that the buyer is liable to pay to,
or on behalf of, the assessee, by reason of, or in connection
with the sale, whether payable at the time of the sale or at any
other time, including, but not limited to, any amount charged
F for, or to make provision for, advertising or publicity, marketing
and selling organization expenses, storage, outward handling,
servicing, warranty, commission or any other matter; but does
not include the amount of duty of excise, sales tax and other
taxes, if any, actually paid or actually payable on such goods.”
G 12. Section 11A was inserted in the year 1980 and it underwent
changes. Section 11A of the Act as it stood at the relevant time read as
follows:
“11A. Recovery of duties not levied or not paid or short-levied or
shot-paid or erroneously refunded – (1) When any duty of excise
H has not been levied or paid or has been short-levied or short-paid
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 415
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
or [erroneously refunded, whether or not such non-levy or non- A
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
B
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 C
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 agent, the provisions of this D
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 rupees or less a notice under E
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 F
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.]
(2) The [Central Excise Officer] shall, after considering the
representation, if any, made by the person on whom notice is served G
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.
(3) For the purposes of this section,-
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416 SUPREME COURT REPORTS [2019] 7 S.C.R.
A (i) “refund” includes rebate of duty of excise on excisable goods
exported out of India or on excisable materials used in the
manufacture of goods which are exported out of India;
(ii) “relevant date” means,-
[(a) in the case of excisable goods on which duty of excise has
B not been levied or paid or has been short-levied or short-paid -
(A) where under the rules made under this Act a periodical
return, showing particulars of the duty paid on the
excisable goods removed during the period to which
the said return relates, is to be filed by a manufacturer
C or a producer or a licensee of a warehouse, as the
case may be, the date on which such return is so filed;
(B) where no periodical return as aforesaid is filed, the
last date on which such return is to be filed under the
said rules;
D
(C) in any other case, the date on which the duty is to be
paid under this Act or the rules made thereunder;]”
13. Section 11AB is undoubtedly the most crucial Section as far
as this case is concerned. Section 11AB read as follows:
E “11AB. Interest on delayed payment of duty,– (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
F
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
G 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.
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 417
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
(2) For the removal of doubts, it is hereby declared that the A
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 assent of the President.”
Explanation 1 and 2 are not extracted.
14. It is also now relevant to notice certain rules under the Central B
Excise Rules, 2002. Rules 4,5,6,7 and 8 read as under:
“RULE 4. Duty payable on removal.-
(1) Every person who produces or manufactures any excisable
goods, or who stores such goods in a warehouse, shall pay the C
duty leviable on such goods in the manner provided in rule 8 or
under any other law, and no excisable goods, on which any duty is
payable, shall be removed without payment of duty from any place,
where they are produced or manufactured, or from a warehouse,
unless otherwise provided :
D
Proviso and Explanation omitted.
(1A) XXX XXX XXX
(2) Notwithstanding anything contained in sub-rule (1), where
molasses are produced in a khandsari sugar factory, the person
who procures such molasses, whether directly from such factory E
or otherwise, for use in the manufacture of any commodity, whether
or not excisable, shall pay the duty leviable on such molasses, in
the same manner as if such molasses have been produced by the
procurer.
(3) Omitted F
(4) XXX XXX XXX
RULE 5. Date of determination of duty and tariff valuation. —
(1) The rate of duty or tariff value applicable to any excisable
goods, other than khandsari molasses, shall be the rate or value in G
force on the date when such goods are removed from a factory
or a warehouse, as the case may be.
(2) The rate of duty in the case of khandsari molasses, shall be
the rate in force on the date of receipt of such molasses in the
factory of the procurer of such molasses.
H
418 SUPREME COURT REPORTS [2019] 7 S.C.R.
A Explanation. - If any excisable goods are used within the factory,
the date of removal of such goods‘ shall mean the date on which
the goods are issued for such use.
(3) omitted.
RULE 6. Assessment of duty.- The assessee shall himself assess
B the duty payable on any excisable goods:
Provided that in case of cigarettes, the Superintendent or Inspector
of Central Excise shall assess the duty payable before removal
by the assessee. Provisional assessment.
C RULE 7. Provisional assessment.-
(1) Where the assessee is unable to determine 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,
D 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
E
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
F 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
G information, as may be required for finalizing the assessment, is
available, but within a period not exceeding six months from the
date of the communication of the order issued under sub-rule (1):
Provided that the period specified in this sub-rule may, on sufficient
cause being shown and the reasons to be recorded in writing, be
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 419
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
extended by the Commissioner of Central Excise for a further A
period not exceeding six months and by the Chief Commissioner
of Central Excise or Chief Commissioner of Central Excise for
such further period as he may deem fit.
(4) The assessee shall be liable to pay interest on any amount
payable to Central Government, consequent to order for final B
assessment under sub-rule(3), at the rate specified by the Central
Government by notification under section 11AA or Section 11AB
of the Act from the first day of the month succeeding the month
for which such amount is determined, till the date of payment
thereof.
C
(5) Where the assessee is entitled to a refund consequent to order
for final assessment under sub-rule (3), subject to sub-rule (6),
there shall be paid an interest on such refund as provided under
section 11BB of the Act from the first day of the month succeeding
the month for which such refund is determined, till the date of
refund. D
(6). Any amount of refund determined under sub-rule (3) shall be
credited to the Fund:
Provided that the amount of refund, instead of being credited to
the Fund, be paid to the applicant, if such amount is relatable to – E
(a) the duty of excise paid by the manufacturer, if he had not
passed on the incidence of such duty to any other person; or
(b) the duty of excise borne by the buyer, if he had not passed on
the incidence of such duty to any other person.
F
RULE 8. Manner of payment .-
(1) The duty on the goods removed from the factory or the
warehouse during a month shall be paid by the 5th day of the
following month:
Provided that in case of goods removed during the month of March, G
the duty shall be paid by the 31st day of March :
Provided further that where an assessee is availing of the
exemption under a notification based on the value of clearances
in a financial year, the duty on goods cleared during a calender
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420 SUPREME COURT REPORTS [2019] 7 S.C.R.
A month shall 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) *** *** ***
B
(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.
C (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:
D
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
E
that the goods in que3stion in respect of which the duty and interest
are outstanding, have been charged without payment of duty, and
where such duty and interest are not paid within a period of one
month from the due date, the consequences and the penalties as
provided in these rules shall follow.
F
Illustrations – Not extracted
(4) The provisions of Section 11 of the Act shall be applicable for
recovery of the duty as assessed under rule 6 and the interest
under sub-rule (3) in the same manner as they are applicable for
recovery of any duty or other sums payable to the Central
G Government.”
15. Excise duty is a duty on manufacture or production of goods.
It is, however, collected at the point of removal of goods. When the duty
of excise is chargeable with reference to the value of goods, Section 4
provides that on each removal of the goods, the value will be determined
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 421
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
either under clause(a) or clause(b). We are in these cases governed by A
clause(a). Section (4) yields the following elements: -
(i) when the goods are sold;
(ii) for delivery;
(iii) at the time and place of removal; B
(iv) the assessee (appellants in these cases are the assesses)
and the buyer not being related;
(v) price is the sole consideration for the sale, then the transaction
value will be the value for the determination of excise duty.
C
The price may be what is actually paid or what is payable for
the goods when sold.
Apart from what is shown as the price the transaction value
would include:
(i) Any amount the buyer is liable to pay to the assessee by D
reason of or in connection with the sale whether at the time
of the sale or any other time.
(ii) Any amount payable on behalf of the assessee by reason of
or in connection with the sale whether at the time of sale or
any other time. E
(iii) The aforesaid amounts encompass certain amounts which
are specifically enumerated namely, advertising, publicity,
marketing and selling, organizational expenses, storage,
outward handling serving, warranty, commission or any other
matter. F
16. Thus, the intent is to determine the value by not only including
the actual price paid or payable but all amounts which are separately
enumerated and found 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 G
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
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422 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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’
B
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 scheme of the rules further is that assessment is to be
done by the assessee itself by way of self-assessment and the duty paid
C by the due date (see Rule 6). What is to happen when the asssessee is
confronted with a situation when it is unable to determine the value of
the goods or find the rate of duty. Rule 7 provides the solution. The
assessee can thereunder apply giving reasons and seeking permission to
make a provisional assessment. The officer may, grant such permission.
D Thereupon, duty is payable on a provisional basis. The value or the rate
would be indicated by the officer in the order permitting such provisional
assessment. This is however made subject to the assessee executing a
bond binding the assessee to pay the difference between the duty as
payable under the final assessment and the provisional assessment. The
final assessment is to be made within six months from the date of
E communication of the order permitting provisional assessment under Rule
7(1). The period can be extended by the Commissioner for six months
and by the chief Commissioner for which there is no time limit.
Sub-rule (4) of Rule 7 is very crucial. It provides as follows:-
F 1) The assessee shall be liable to pay interest
2) On any amount payable based on a final assessment under
Rule 7(3)
3) At the rate fixed under Section 11A or Section 11B of the
Act
G
4) From the first date of the month succeeding the month for
which the amount is determined till the date of payment
thereof.
Rule 7(5) contemplates interest on refund based on the final
assessment.
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 423
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
19. Now it is important that we delve upon the case of SAIL A
before the Commissioner, its stand in the appeal and finally before this
Court. As already noticed SAIL sold and cleared rails to Indian Railways
based on the price circular dated 24/04/2005. The transaction in question
related to the period 01/01/2005 to July, 2006. Later, based upon a revised
price circular dated 20/07/2006, the prices were revised and it took effect
B
from 01/01/2005. The excise duty undoubtedly in a sum of Rs. 142.78
crores came to be paid by SAIL in August 2006. However, upon receipt
of notice under Section 11AB of the Act calling upon it to pay more than
Rs. 15 crores as interest under Section 11AB. SAIL raised various
objections. It, in fact, contended that this is not a case of short payment
of duty as the price at the time of actual removal of goods formed the C
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
D
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 E
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 appellants on the decision F
of this Court in J K Synthetics. The first decision is the decision of this
Court in Associated Cement. The said decision was rendered by a Bench
of three learned judges. There was a cleavage of opinion. Justice E.S.
Venkataramiah, as His Lordship then was wrote the majority judgment.
Justice P.N. Bhagwati as His Lordship then was dissented. The case
arose under the Rajasthan Sales Tax Act. The two relevant provisions G
to be noticed under the statute considered by the said Bench are Sections
7 and Section 11B of the Act. They read as follows:
“7. Submission of returns.-(1) Every registered dealer and such
other dealer, as may be required to do so by the assessing authority
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424 SUPREME COURT REPORTS [2019] 7 S.C.R.
A by notice served in the prescribed manner, shall furnish prescribed
returns, for the prescribed periods, in the prescribed forms, in the
prescribed manner and within the prescribed time to the assessing
authority:
Provided that the assessing authority may extend the date for the
B submission of such returns by any dealer or class of dealers by a
period not exceeding fifteen days in the aggregate.
(2) Every such return shall be accompanied by a Treasury receipt
or receipt of any bank authorised to receive money on behalf of
the State Government, showing the deposit of the full amount of
C tax due on the basis of return in the State Government Treasury
or bank concerned. (2A) Notwithstanding anything contained in
sub-section (2), the State Government may by notification in the
official Gazette require any dealer or class of dealers specified
therein, to pay tax at intervals shorter than those prescribed under
sub-section (1). In such cases, the proportionate tax on the basis
D of the last return shall be deposited at the intervals specified in the
said notification in advance of the return. The difference, if any,
of the tax payable according to the return and the advance tax
paid shall be deposited with the return and the return shall be
accompanied by the treasury receipt, or receipts, of any Bank
E authorised to receive money on behalf of the State Government,
for the full amount of tax due shown in the return
(3) If any dealer discovers any omission, error, or wrong statement
in any returns furnished by him under sub-section (1), he may
furnish a revised return in the prescribed manner before the time
F prescribed 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.”
G “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
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 425
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
notice, or in the absence of such specification, within 30 days A
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
B
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 shall be reduced accordingly and the
excess interest paid, if any, shall be refunded;
C
Provided further that no interest shall be payable under this
section on such amount and for such period in respect of which
interest is paid under the provisions of Sections 11 and 14.”
21. In Associated Cement Ltd., the majority was dealing with the
case falling under Section 11B(a). After analyzing the various provisions D
the majority took the view that not only the assessee should have paid
the tax on the basis of the return but the return must be a return which it
ought to have filed in law and on facts. Justice Bhagwati who dissented
however, took exception to this reasoning and found that such an
interpretation would raise conflicts between the provisions contained in
clause (a) and clause(b) of Rule 11B. Justice Bhagwati in his dissent E
pointed out the anomaly behind the reasoning of the majority. In particular,
we may point out that it was noticed by the learned Judge that if the
reasoning of the majority is accepted, different rates of interest would
apply at different stages. Furthermore, it was reasoned that an assessee
cannot do beyond paying the tax according to the return. He cannot F
possibly divine what the assessing officer will finally assess him to. In
fact, in the later judgment in JK Synthetics, the Constitution Bench
subscribed to the view expressed in the dissenting judgment in ACC Ltd.
case which it accepted as laying down the correct position in law and
overruled the majority in Associated Cement Co. case. In the JK
Synthetics judgment also the case arose under the Rajasthan Sales Tax G
Act though it arose under Section 7(2)(A). The case in Associated
Cement case fell under under Section 7(2) of the Act. What is relevant
for our purpose are two aspects. One is we must bear in mind the
actual provisions of the Rajasthan tax law which fell for consideration
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426 SUPREME COURT REPORTS [2019] 7 S.C.R.
A that we have already set forth. We must advert to the law which has
been laid down in JK Synthetics. Following is the discussion:
“16. It is well-known that when a statute levies a tax it does so by
inserting a charging section by which a liability is created or fixed
and then proceeds to provide the machinery to make the liability
B effective. It, therefore, provides the machinery for the assessment
of the liability already fixed by the charging section, and 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
C 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]
D , 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 Gursahai Saigal 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
E 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 way of
damages for wrongful detention of the amount. (See Bengal
F Nagpur Railway Co. Ltd. v. Ruttanji Ramji [AIR 1938 PC 67
: 65 IA 66 : 67 CLJ 153] and Union of India v. A.L. Rallia
Ram [(1964) 3 SCR 164, 185-90 : AIR 1963 SC 1685] ). Our
attention was, however, drawn by Mr Sen to two cases. Even in
those cases, CIT v. M. Chandra Sekhar [(1985) 1 SCC 283 :
1985 SCC (Tax) 85 : (1985) 151 ITR 433] and Central Provinces
G Manganese Ore Co. Ltd. v. CIT [(1986) 3 SCC 461 : 1986 SCC
(Tax) 601 : (1986) 160 ITR 961] , all that the Court pointed out
was that provision for charging interest was, it seems, introduced
in order to compensate for the loss occasioned to the Revenue
due to delay. But then interest was charged on the strength of a
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 427
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
statutory provision, may be its objective was to compensate the A
Revenue for delay in payment of tax. But regardless of the reason
which impelled the Legislature to provide for charging interest,
the Court must give that meaning to it as is conveyed by the
language used and the purpose to be achieved. Therefore, any
provision made in a statute for charging or levying interest on
B
delayed payment of tax must be construed as a substantive law
and not adjectival law. So construed and applying the normal rule
of interpretation of statutes, we find, as pointed out by us earlier
and by Bhagwati, J. in the Associated Cement Co. case [(1981)
4 SCC 578 : 1982 SCC (Tax) 3 : (1981) 48 STC 466] , that if the
Revenue’s contention is accepted it leads to conflicts and creates C
certain anomalies which could never have been intended by the
Legislature.
17. Let us look at the question from a slightly different angle.
Section 7(1) enjoins on every dealer that he shall furnish prescribed
returns for the prescribed period within the prescribed time to the D
assessing authority. By the proviso the time can be extended by
not more than 15 days. The requirement of Section 7(1) is
undoubtedly a statutory requirement. The prescribed return must
be accompanied by a receipt evidencing the deposit of full amount
of ‘tax due’ in the State Government on the basis of the return.
That is the requirement of Section 7(2). Section 7(2-A), no doubt, E
permits payment of tax at shorter intervals but the ultimate
requirement is deposit of the full amount of ‘tax due’ shown in the
return. When Section 11-B(a) uses the expression “tax payable
under sub-sections (2) and (2-A) of Section 7”, that must be
understood in the context of the aforesaid expressions employed F
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 G
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
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428 SUPREME COURT REPORTS [2019] 7 S.C.R.
A (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
B
according to him is due on the basis of information supplied in the
return filed by him, there would be no default on his part to meet
his statutory obligation under Section 7 of the Act and, therefore,
it would be difficult to hold that the ‘tax payable’ by him ‘is not
paid’ to visit him with the liability to pay interest under clause (a)
C of Section 11-B. It would be a different matter if the return is not
approved by the authority but that is not the case here. It is difficult
on the plain language of the section to hold that the law envisages
the assessee to predicate the final assessment and expect him to
pay the tax on that basis to avoid the liability to pay interest. That
would be asking him to do the near impossible.”
D
22. In short, therefore, the principle may be taken to be established
that while levy of interest is a part of the adjective law, yet to levy
interest there must be substantive provision. Demand for interest can be
made only if the legislature has specifically intended collection of interest.
We must look at the statutory provisions.
E
23. In Purolator India Limited Vs. Commissioner of Central
Excise 2015 (10) SCC 715, a Bench of two learned Judges was called
upon to decide the question as to whether cash discount and trade discount
are to be deducted for arriving at the transaction value. The Bench
went on to consider section 4 of the Act prior to its amendment in 1973,
F after the amendment in 1973 and also still further after the amendment
in the year 2000. After elaborate consideration of the matter, the Bench
speaking through Justice Rohinton Fali Nariman held as follows:
“14. It can be seen that the common thread running through Section
4, whether it is prior to 1973, after the amendment in 1973, or
G after the amendment of 2000, is that excisable goods have to
have a determination of “price” only “at the time of removal”.
This basic feature of Section 4 has never changed even after two
amendments. The “place of removal” has been amended from
time to time so that it could be expanded from a factory or any
H other premises of manufacture or production, to warehouses or
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 429
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
depots wherein the excisable goods have been permitted to be A
deposited either with payment of duty, or from which such
excisable goods are to be sold after clearance from a factory. In
fact, Section 4(2) pre-2000 made it clear that where the price of
excisable goods for delivery at the place of removal is not known,
and the value thereof is determined with reference to the price
B
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 C
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, D
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 E
(3)(d) of Section 4 has to be read along with the expression “for
delivery at the time and place of removal”. It is clear, therefore,
that what is paramount is that the value of the excisable goods
even on the basis of “transaction value” has only to be at the time
of removal, that is, the time of clearance of the goods from the
appellant’s factory or depot as the case may be. The expression F
“actually paid or payable for the goods, when sold” only means
that whatever is agreed to as the price for the goods forms the
basis of value, whether such price has been paid, has been paid in
part, or has not been paid at all. The basis of “transaction value”
is therefore the agreed contractual price. Further, the expression G
“when sold” is not meant to indicate the time at which such goods
are sold, but is meant to indicate that goods are the subject-matter
of an agreement of sale. Once this becomes clear, what the learned
counsel for the assessee has argued must necessarily be accepted
inasmuch as cash discount is something which is “known” at or
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430 SUPREME COURT REPORTS [2019] 7 S.C.R.
A prior to the clearance of the goods, being contained in the
agreement of sale between the assessee and its buyers, and must
therefore be deducted from the sale price in order to arrive at the
value of excisable goods “at the time of removal”.
24. No doubt, there are decisions of the High Court which followed
B in MRF Ltd. [see 2007 (207) ELT 31, Punjab and Haryana] to the effect
that a subsequent reduction in prices would not entitle the assessee to
lay a claim for refund. In 2010(257) ELT 369, Karnataka, the Division
Bench of Karnataka High Court distinguished the judgment of this Court
in SKF India Ltd.(supra) by noting that in the said case after the goods
were initially cleared and appropriate duty had been paid, subsequently
C the price escalation was due to the increase in input labour and other
costs which was determined by the All India Industrial Prices Indices
and by the Reserve Bank of India nominated by All India Electrical
Manufacturer Association. In terms of the said direction, the court noted
that supplementary invoices were issued. It was noted that the assessee
D had also paid differential price. It is undoubtedly the case of the appellant
that the SLP carried against the said judgment has been dismissed. We
notice that this Court has given no reasons while dismissing the SLP.
25. In India Carbon Ltd. & Ors. vs. State of Assam 1997 (6) SCC
479 there was delay in payment of central sale tax. The appellants
E 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
F 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.
G 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
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 431
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
their agencies to two companies. Amounts were received on formal A
deeds of conveyance and transfer being executed in the year 1944. The
entire amount of the managing agency commission received by the
transferees were assessed by the officers as income of the transferees
for the year 1945-1946. In appeal the contention of the transferees was
accepted, in that it was found that commission received by them should
B
be apportioned on the proportionate basis and they were to be assessed
on the commission earned during the period they had worked as managing
agents of the respective companies. Proceedings were commenced
against the appellant who were transferors’ of the commission agency
in regard to the amounts of the commission earned prior to the date of
the respective transfers. The case of the transferor inter alia was that C
no part of the commission for the broken period of 1943 was earned by
them. The contract of employment was an entire indivisible contract.
The Court had to consider the connotation of the word “earned” which
was used in Section 4 of the Income Tax Act which fell for consideration.
The majority judgment inter alia held as follows:
D
“35. If therefore on the construction of the Managing Agency
Agreements we cannot come to the conclusion that the Sassoons
had created any debt in their favour or had acquired a right to
receive the payments from the Companies as at the date of the
transfers of the Managing Agencies in favour of the transferees
no income can be said to have accrued to them. They had no E
doubt rendered services as Managing Agents of the Companies
for the broken periods. But unless and until they completed their
performance viz. the completion of the definite period of service
of a year which was a condition precedent to their being entitled
to receive the remuneration or commission stipulated thereunder F
no debt payable by the Companies was created in their favour
and they had no right to receive any payment from the Companies.
No remuneration or commission could therefore be said to have
accrued to them at the dates of the respective transfers.
40. It is no doubt true that the accrual of income does not much G
later depend upon its ascertainment or the accounts cast by
assessee. The accounts may be made up at a much later date.
That depends upon the convenience of the assessee and also upon
the exigencies of the situation. The amount of the income, profits
or gains may thus be ascertained later on the accounts being made
H
432 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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
B
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
C 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
D
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 income, profits or gains. The
argument that the income, profits or gains are embedded in the
sale proceeds as and when received by the Company also does
E not help the transferees, because the Managing Agents have no
share or interest in the sale proceeds received as such. They are
not co-sharers with the Company and no part of the sale proceeds
belongs to them. Nor is there any ground for saying that the
Company are the trustees for the business or any of the assets
for the Managing Agents. The Managing Agents cannot therefore
F
be said to have acquired a right to receive any commission unless
and until the accounts are made up at the end of the year, the net
profits ascertained and the amount of commission due by the
Company to the Managing Agents thus determined.
(See Commissioners of Inland Revenue v. Lebus) [(1946) 1 AER
G 476 (Z3)”.
55. The whole difficulty has arisen because the High Court could
not reconcile itself to the situation that the transferees had not
worked for the whole calendar year and yet they would be held
entitled to the whole income of the year of account; whereas the
H transferors had worked for the broken periods and yet they would
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 433
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
be held disentitled to any share in the income for the year. If the A
work done by the transferors as well as the transferees during
the respective periods of the year were taken to be the criterion
the result would certainly be anomalous. But the true test under
Section 4(1)(a) of the Income Tax Act is not whether the
transferors and the transferees had worked for any particular
B
periods of the year but whether any income had accrued to the
transferors and the transferees within the chargeable accounting
period. It is not the work done or the services rendered by the
person but the income received or the income which has accrued
to the person within the chargeable accounting period that is the
subject-matter of taxation. That is the proper method of approach C
while considering the taxability or otherwise of income and no
considerations of the work done for broken periods or contribution
made towards the ultimate income derived from the source of
income nor any equitable considerations can make any difference
to the position which rests entirely on a strict interpretation of the
D
provisions of Section 4(1)(a) of the Income Tax Act.”
27. In Commissioner of Income Tax, Madras v. A. Gajapathy
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 E
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 F
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 G
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. Sassoon & Co. Ltd. v.
CIT (supra) which we have already referred to. The Court held inter
alia as follows: H
434 SUPREME COURT REPORTS [2019] 7 S.C.R.
A “8. Under this definition accepted by this Court, an income accrues
or arises when the assessee acquires a right to receive the same.
It is common place that there are two principal methods of
accounting for the income, profits and gains of a business-, one is
the cash basis and the other, the mercantile basis. The latter system
of accountancy “brings into credit what is due immediately it
B
becomes legally due and before it is actually received; and it brings
into debit expenditure the amount for which a legal liability has
been incurred before it is actually disbursed.” The book profits
are taken for the purpose of assessment of tax, though the credit
amount is not realized or the debit amount is not actually disbursed.
C If an income accrues within a particular year, it is liable to be-
,assessed in the succeeding year. When does the right to receive
an amount under a contract accrue or arise to the assessee i.e.,
come into existence? That depends upon the terms of a particular
contract. No other relevant provision of the Act has been brought
to our notice-for there is none- which provides an exception that
D
though an assessee does not acquire a right to receive an income
under a contract in a particular accounting year, by some fiction
the amount received by him in a subsequent year in connection
with the contract, though not arising out of a right accrued to him
in the earlier year, could be related back to the earlier year and
E made taxable along with the income of that year. But that legal
position is sought to be reached by a process of reasoning found
favour with English courts. It is said that on the basis of proper
commercial accounting practice, if a transaction takes place in a
particular year, all that has accrued in respect of it, irrespective of
the year when it accrues, should belong to the year of transaction
F
and for the purpose of reaching that result closed accounts could
be reopened. Whether this principle is justified in the English law,
it has no place under the Indian Income tax Act. When an Income-
tax Officer proceeds to include a particular income in the
assessment, he should ask himself inter alia, two questions, namely,
G (i) what is the system of accountancy adopted by the assessee?
and (ii) if it is mercantile system 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
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 435
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
assessment year. No power is conferred on the Income-tax Officer A
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
B
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 C
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 proceedings. For that purpose the correct item may
be taken into consideration in the matter of assessment. But strictly
speaking even in those cases there is no reopening of the accounts
D
of the assessee, but a re-assessment is made or the mistake is
corrected on the basis of the actual income accrued or received
by the assessee. We do not see any relevancy of the question of
reopening of accounts in considering the question when an
assessee acquired a right to receive an amount.
The Court also held inter alia as follows: E
“9……We would prefer to base our conclusion on the ground
that we cannot extend the meaning of the word “accrue” -or
“arise” in s. 4(1)(b)(i) of the Act so as to take in amounts received
by the assessee in a later year, though the receipt was not on the
basis of the right accrued in the earlier year. Such amounts are in F
law received by the assessee only in the year when they are paid.
We cannot apply the English decisions in the matter of construction
of the provisions of the Indian Act, particularly when they have
received an authoritative interpretation from this Court…”.
28. In Vikrant Tyres Ltd. v. First Income Tax Officer, Mysore G
2001(3) SCC 76 under an assessment order under the Income Tax Act,
1961 the appellant assessee paid the tax. On his appeal being allowed
the tax was refunded. The High Court reversed the Appellate order.
On fresh demands being made the assessee repaid the tax as assessed
and demanded. The revenue demanded payment of interest under Section H
436 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 220(2) of Income Tax Act, 1961 for the period commencing with the
refund of the tax. This Court allowed the appeal filed by the assessee
and took the view that no tax could be levied or imposed by an act of
Parliament without the words “clearly disclosing such an intention”.
Finding there was no default in payment within the time by the assessee
it was found that invocation of Section 220 was misplaced. This Court
B
purported to follow the decision in V.V.S. Sugars vs. Govt. of A.P. and
Others 1999(4) SCC 192 (India Carbon vs. VBS Sugar). The last
judgment we would advert to under the Income Tax Act was rendered
by one among us (Chief Justice Ranjan Gogoi) and the decision is P.G.
& W. Sawoo (P) Ltd. v. CIT & Ors. 2017(13) SCC 284. The facts of
C the said case in a nutshell was as follows:
The assessee 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
D 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
E 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.”
F
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 support from the judgments rendered by this Court
G under the Income Tax Act. The impact of taxing of income under the
Income Tax Act would not be apposite for considering the question which
arises in these cases which is whether interest can be levied under Section
11AB of the Act in respect of the amounts which are short paid or short
levied inter alia. Even it be that for the purpose of the Income Tax Act,
it is only when on the basis that party agreed to escalation in price on a
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 437
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
date which is after the date of the removal of goods rendering it exigible A
to income tax on a later date, it would be irrelevant for the purpose of
deciding the liability to pay interest in terms of the clear provisions of the
Act.
31. Now we may advert to the judgment of this Court in E.I.D.
Parry (India) Ltd. v. CCT 2005 (4) SCC 779. The appellant therein B
was a manufacturer of sugar. The minimum price of sugarcane which
they purchased from farmers was payable immediately. Under Clause
5A of the Sugarcane (Control) Order 1966, additional price was payable
which would be determined only at the end of the year. On the advice
of the Government the manufacturer paid the additional price as advance
at the time of purchase from the farmers and it was subsequently adjusted C
under Clause 5A. In proceedings under the Tamil Nadu General Sales
Tax Act 1959, the assessee showed the turnover on the basis of minimum
price and paid tax thereon. It did not pay tax on the additional price
which has been paid but it was included in the turnover. When the price
was fixed under Clause 5A, the appellant filed revised return and paid D
tax. Interest was sought to be charged under Section 24(3) on the price
fixed under Clause 5A from the date of purchase of sugarcane till the
payment of tax. The appellants contended before this Court that the
price determined under Clause 5A would be known only after it was
determined. Only then the same would be includable in the returns.
The advances given on advice from Government were merely ad hoc E
payments and did not constitute the price.
32. Under the Tamilnadu Sales Tax Act, the dealers were given
an option to pay tax in advance on the basis of monthly return. Under
Section 13(1) which provided for advance payment of tax, the tax could
be collected in advance in monthly or prescribed instalment. The F
assessing authority could provisionally 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 G
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
H
438 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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,
B 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:
Provided that if the amount remaining unpaid is less than one
C hundred rupees and the period of default is not more than a month,
no interest shall be paid:
Provided further that where a dealer or person has preferred an
appeal or revision against any order of assessment or revision of
assessment under this Act, the interest payable under this sub-
D section, in respect of the amount in dispute in the appeal or revision,
shall be postponed till the disposal of the appeal or revision, as the
case may be, and shall be calculated on the amount that becomes
due in accordance with the final order passed on the appeal or
revision as if such amount had been specified in the order of
assessment or revision of assessment, as the case may be.”
E
33. Thereafter, the Court in E.I.D. Parry (India)Ltd. V. Asst.
Commercial of Commercial Taxes, Chennai held as follows:
“….Under Section 24(1) if the tax has been assessed or has
become payable under the Act, then the payment has to be made
F within the said time as may be specified in the notice of assessment
and tax under Section 13(2) has to be paid without any notice of
demand. However, as seen above, the tax under Section 13(2), in
the absence of any determination by the assessing authority, is
tax as per the returns. If default is made in payment of such tax
then interest becomes payable under the Act. In the present case,
G it is an admitted position that tax as per the monthly return had
been paid within time. It is also an admitted position that there
was no assessment, even provisional, by the assessing authority
prior to the final assessment made after the revised returns had
been filed. Interest becomes payable under Section 24(3) on an
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 439
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
amount remaining unpaid after the date specified for its payment A
under sub-section (1) of Section 24. As seen above, sub-section
(1) of Section 24 deals with an assessed tax or tax which has
become payable under the Act. In cases covered by Section 13(2)
tax must be paid without any notice of demand. But as stated
above, under Section 13(2) tax is to be paid “on the basis of such
B
returns”. Tax as per the returns has admittedly been paid. If the
returns were incomplete or incorrect as now claimed the assessing
authority had to determine the tax payable and issue a notice of
demand. In the absence of any assessment, even provisional, and
a notice of demand no interest would be payable under Section
24(3). …” C
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: D
“..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 E
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 F
Sales Tax Act, 1959, then such a levy is different from the levy of
interest which is dependent on the discretion of the assessing
officer. The default arising on non-payment of tax on an admitted
liability in the case of self-assessment falls under Section 24(3)
read with Rule 18(3) which attracts automatic levy of interest G
whereas the default in filing incomplete and incorrect return falls
under Rule 18(4) which attracts best-judgment assessment in
which the levy of interest is based on the adjudication by the
assessing officer. Therefore, Rule 18(3) and Rule 18(4) operate
in different spheres…”
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440 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 35. We are of the view that the scheme of the Central Excise Act
and the Rules are a separate code. Section 11A is a provision for
recovery. If there is a non-levy, non-payment, short-levy or short-
payment, the same becomes recoverable under Section 11A. If there is
any of the four contingencies referred to in Section 11A, then Section
11AB is attracted. The working of the parent Act is intricately intertwined
B
with the rules, the scope of which we have already referred 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
C value found and it dates back to the date of removal.
36. We have noticed that 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
D 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.
E 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 of the price with retrospective effect
and acknowledging the value to be the value as provisionally assessed
and as enhanced by the escalation arrived at under the escalation clause
F 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
G 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
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 441
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
is not liable to pay interest on the value of the goods on the differential A
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 expressions which were B
however introduced for the first time through Section 11A. Rule 10 of
the Central Excise Rules 1944 made under the Act as it read was as
follows:
“10. Recovery of duties not levied or not paid, or short-levied
or not paid in full or erroneously refunded.—(1) Where any C
duty has not been levied or paid or has been short-levied or
erroneously refunded or any duty assessed has not been paid in
full, the proper officer may, within six months 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 to
whom the refund has erroneously been made, or which has not D
been paid in full, requiring him to show cause why he should not
pay the amount specified in the notice:
Provided that—
(a) where any duty has not been levied or paid or has been short- E
levied or has not been paid in full, by reason of fraud, collusion or
any wilful misstatement or suppression of facts by such person or
his agent, or
(b) where any person or his agent, contravenes any of the
provisions of these rules with intent to evade payment of duty and F
has not paid the duty in full, or
(c) where any duty has been erroneously refunded by reason of
collusion or any wilful misstatement or suppression of facts by
such person or his agent, the provisions of this sub-section shall,
in any of the cases referred to above, have effect as if for the
G
words ‘six months’, the words ‘five years’ were substituted.
Explanation.—Where the service of the notice is stayed by an
order of a court, the period of such stay shall be excluded in
computing the period of six months, or five years, as the case
may be.
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442 SUPREME COURT REPORTS [2019] 7 S.C.R.
A (2) The Assistant Collector of Central Excise shall, after
considering the representation, if any, made by the person on whom
notice is served under sub-rule (1), determine the amount of duty
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.
B
(3) For the purposes of this rule,—
(i) ‘refund’ includes rebate referred to in Rules 12 and 12-A;
(ii) ‘relevant date’ means,—
C (a) in the case of excisable goods on which duty of excise 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
D 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.”
E 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
F
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, we deem it appropriate also to refer to Rules
173-B and 173-C of the Central Excise Rules, 1944. The relevant
G provisions thereof read as follows:
“173-B. Assessee to file list of goods for approval of the proper
officer.—(1) Every assessee shall file with the proper officer for
approval a list in such form as the Collector may direct, in
quintuplicate, showing—
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M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 443
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
(a) the full description of — (i) all excisable goods produced or A
manufactured by him, (ii) all other goods produced or
manufactured by him and intended to be removed from his factory,
and (iii) all the excisable goods already deposited or likely to be
deposited from time to time without payment of duty in his
warehouse;
B
(b) the Chapter, Heading No. and Sub-Heading No., if any, of the
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) under
which each such goods fall;
(c) the rate of duty leviable on each such goods; and
(d) such other particulars as the Collector may direct. C
(2) The proper officer shall, after such inquiry as he deems fit,
approve the list with such modifications as are considered
necessary and return one copy of the approved list to the assessee
who shall, unless otherwise directed by the proper officer,
determine the duty payable on the goods intended to be removed D
in accordance with such list.
(2-A) All clearances shall, subject to the provisions of Rule 173-
CC, be made only after the approval of the list by the proper
officer. If the proper officer is of the opinion that on account of
any inquiry to be made in the matter or for any other reason to be E
recorded in writing, there is likely to be delay in according the
approval, he shall, either on a written request made by the assessee
or on his own accord, allow such assessee to avail himself of the
procedure prescribed under Rule 9-B for provisional assessment
of the goods. F
(3) Where the assessee disputes the rate of duty approved by the
proper officer in respect of any goods, he may, after giving an
intimation to that effect to such officer, pay duty under protest at
the rate approved by such officer.
(4) If in the list approved by the proper officer under sub-rule (2), G
any alteration becomes necessary because of—
(a) the assessee commencing production, manufacture or
warehousing of goods not mentioned in that list, or
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444 SUPREME COURT REPORTS [2019] 7 S.C.R.
A (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
B 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
C 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
D being, are exempt from paying duty, from filing the list under sub-
rule (1): Provided that as and when duty exemption is withdrawn
or modified or no longer applicable, the assessee shall comply
with the provisions of sub-rule (4) as if he had filed a list earlier
and the list had been approved with ‘nil’ rate of duty. 173-
E C. Assessee to file price list of goods assessable ad valorem.—
(1) Every assessee who produces, manufactures or warehouses
goods which are chargeable with duty at a rate dependent on the
value of the goods, shall file with the proper officer a price list, in
such form and in such manner and at such intervals as the Collector
may require, showing the price of each of such goods and the
F trade discount, if any, allowed in respect thereof to the buyers
along with such other particulars as the Central Board of Excise
and Customs or the Collector may specify.
(2) Prior approval by the proper officer of the price list filed by an
assessee under sub-rule(1) shall be necessary only, where the
G assessee—
(i) sells goods to or through a related person as defined in Section
4 of the Act; or
(ii) uses such goods for manufacture or production of other goods
in his factory; or
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M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 445
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
(iii) clears such goods for free distribution; or A
(iv) clears such goods in any other manner which does not involve
sale to a non-related person; or
(v) clears the goods of the same kind and quality from his factories
located in the jurisdiction of different Collectors of Central Excise
or Assistant Collectors of Central Excise; or B
(vi) submits a fresh price list or an amendment of the price list
already filed with the proper officer and which has the effect of
lowering the existing value of the goods.
*** *** *** C
(5) Subject to the provisions of Rule 173-CC, an assessee specified
in sub-rule (2) shall not clear any goods from a factory, warehouse
or other approved place of storage unless the price list has been
approved by the proper officer. In case the proper officer is of
the opinion that on account of any enquiry to be made in the matter D
or for any other reasons to be recorded in writing, there is likely to
be delay in according approval, he shall either on a written request
made by the assessee or of his own accord allow such assessee
to avail himself of the procedure prescribed under Rule 9-B for
provisional assessment of the goods.”
E
40. We have 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 F
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
G
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
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446 SUPREME COURT REPORTS [2019] 7 S.C.R.
A list was approved. Under the new dispensation namely, Excise Rule
2002, we have noticed that assessment was based on the value and the
rate of tax as declared by the assessee.
41. In the context of Rule 173B and 173C, questions have arisen
before this Court as to the effect of notice issued under Rule 10 of the
B Excise Rules, 1944 when the approved classification was sought to be
reopened. The Assistant Collector sought to revise the net assessable
value and recover the differential duty. A Bench of two learned Judges
held in Rainbow Industries (P) Ltd. v. CCE (1994)6 SCC 563, that
once the price list was approved and acted upon this reclassification
would be effective from the date of issue of the show cause notice. A
C Bench of three learned Judges in Balarpur Industries Ltd. v. Assistant
Collector of Customs and Central Excise & Ors. (1995) Supplement
3 SCC 429, sought to confine the aforesaid judgment to the facts of the
case. Finally, the matter was considered by a Constitution Bench in the
case of Collector of Central Excise, Baroda v. Cotspun Ltd. reported
D in (1999) 7 SCC 633. This Court approved the view taken in Rainbow
Industries (supra) and it disapproved of Balarpur Industries noticing that
it did not advert to Rule 173-B. In the course of judgment, the Court
inter alia held as follows:
“12. Rule 173-B deals with classification lists. It entitles the proper
E officer of Excise to make such enquiry thereon as he deems fit
and requires him to approve the list only thereafter, and that with
such modifications as are considered necessary. The assessee
must determine the excise duty that is payable by him on the
goods he intends to remove in accordance with the approved
classification list. Sub-rule (5) provides for modification of an
F approved classification list.
13. Rule 10 is a provision for recovery of duties that have not
been levied or paid in full or part. So far as is relevant for our
purposes, it provides that where any duty has been short-levied,
the Excise Officer may, within six months from the relevant date,
G serve notice on the assessee requiring him to show cause why he
should not pay the amount that had been short-levied. Rule 10
does not deal with classification lists or relate to the reopening of
approved classification lists. That is exclusively provided for by
Rule 173-B.
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M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 447
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
14. The levy of excise duty on the basis of an approved A
classification list is the correct levy, at least 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.
B
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) C
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 D
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, Coimbatore (supra) came
to be doubted by another Bench of two Judges. Consequently, again it E
was referred to a Bench of three learned Judges and the reference
came to be answered in the decision reported in ITW Signod India
Limited vs. Collector of Central Excise reported in (2004) 3 SCC 48.
Thereunder, the Court, after referring to the 1994 Rules, Section 11A
which was introduced in the Act, the amendment which was brought F
about by Section 97 of the Finance Act, 2000, found that Section 11A, as
amended by the Finance Act, 2000 brought about a completely different
situation in the course of the judgment of the Court held inter alia as
under:
“55. Section 11-A deals with a case when inter alia excise duty G
has been levied or has been short-levied or short-paid. The word
“such” occurring after the words “whether or not” refers to non-
levy, non-payment, short-levy or short payment or erroneous
refund. It is, therefore, not correct to contend that the word “such”
indicates only such short-levy which has been held to be non-
H
448 SUPREME COURT REPORTS [2019] 7 S.C.R.
A existent in Cotspun [(1999) 7 SCC 633] having regard to Rule
173-B. Such short-levy or non-levy may be on the basis of any
approval, acceptance or assessment relating to the rate of duty
on or valuation of excisable goods. Thus, any approval made in
terms of Rule 10 (sic 173-B), in the event, any mistake therein is
detected, would also come within the purview of the expression
B
“such short-levy or short payment”. Such notice is to be served
on the person chargeable with the duty which inter alia has been
short-levied or short-paid.”
57. The procedure laid down under Rule 173-B of the Rules has
specifically been included in the Act. Furthermore, by reason of
C the amended Act a provision has been made for reopening the
approved classification lists. It is a procedural provision, in terms
whereof statutory authorities are required to determine as to
whether the earlier classification was correctly done or not. The
said authority upon giving an opportunity of hearing to the parties
D may come to the conclusion that decision on the approval granted
need not be reopened and even if the same is reopened, the reasons
therefor are to be stated. As the provision of Section 11-A is a
recovery provision as regards non-levy or non-paid or short-levy
or short-paid or erroneously refunded duties by reason of the said
amendment, Parliament had merely provided that an approval on
E 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
F 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
G 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
H was issued.
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 449
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
44. In the case of N.B. Sanjana, Assistant Collector of Central A
Excise, Bombay & Ors. v. The Elphinstone Spinning and
Weaving Mills Co. Ltd.; 1978 E.L.T. (J 399), the contention of
the assessee was that neither Rule 9 nor Rule 10A (1944 Rules)
gave power to the Revenue to raise the demand notice involved
in the said case. The demand had to be made if at all under Rule
B
10 and the demand having been made long after three months,
contrary to what was prescribed in the said Rule, the notices were
illegal and void. The court inter alia held as follows:- “14. We are
not inclined to accept the contention of Dr. Syed Mohammad that
the expression ‘levy’ in Rule 10 means actual collection of some
amount. The charging provision Section 3(i) specifically says C
“There shall be levied and collected in such a manner as may “be
prescribed the duty of excise. It is to be noted that Sub-section (i)
uses both the expressions “levied and collected” and that clearly
shows that the expression “levy” has not been used, in the Act or
the Rules as meaning actual collection. Dr. Syed Mohammad is,
D
no doubt, well founded in his contention that if the appellants have
power to issue notice either under Rule 10A or Rule 9(2), the fact
that the notice refers specifically to a particular rule, which may
not be applicable, will not make the notice invalid on that ground
as has been held by this Court in J.K. Steel Ltd. v. Union of India
(1969) 2 SCR 418 = (AIR 1970 SC 1173). E
“If the exercise of a power can be traced to a legitimate source,
the fact that the same was purported to have been exercised
under a different power does not vitiate the exercise of the power
in question. This is a well settled proposition of law. In this
connection reference may usefully be made to the decisions of F
this Court in B. Balakotaiah v. The Union of India: [1958]SCR
1052 = (AIR 1958 SC 232); and Afzal Ullah v. State of U.P.
[1964]4SCR 991 = (AIR 1964 SC 264).
The Court further proceeded to held as follows:-
“18. This now takes us to the question of proper interpretation to G
be placed on the expression “short-levied” and “paid” in Rule 10.
Does the expression “short-levied” mean that some amount should
have been levied as duty as contended by Dr. Syed Mohammad
or will that expression cover even cases where the assessment is
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450 SUPREME COURT REPORTS [2019] 7 S.C.R.
A of ‘nil duty’, as contended by Mr. Daphtary. What is the meaning
of the word “paid” in Rule 10 ? It is contended on behalf of the
appellants that it means “actually paid”, 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
B
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
C 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
D
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 the issue
of a written demand. The Act and the Rules provide in great
E detail the stage at which and the time when the excise duty is to
be paid by a party. If the literal construction that the amount should
have been actually paid is accepted, then in case like the present
one on hand, when no duty has been levied, the Department will
not be able to take any action under Rule 10. Rule 10-A cannot
apply when a short-levy is made through error or misconstruction
F
on the part of an officer, as such a case is specifically provided by
Rule 10. therefore, in our opinion, the proper interpretation to be
placed on the expression “paid” is “ought to have been paid”.
Such an interpretation has been placed on the expression “paid”
occurring in certain other enactments as in Gursahai Saigal v.
G Commissioner of Income-tax, Punjab [1963] 3 SCR 893 = (AIR
1963 SC 1062), and in Allen v. Thorn Electrical Industries Ltd.
(1968) 1 QB 487. In (1963) 3 SCR 893 = (AIR 1963 SC 1062, the
question arose as follows: In certain assessment proceedings under
the Indian Income-tax Act, 1922, an assessee was charged with
interest Under Sub-section (8) of Section 18A of that Act Under
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M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 451
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
that Sub-section interest calculated in the manner laid down in A
Sub-section (6) of Section 18A was to be added to the tax
assessed. Sub-section 3 of Section 18A dealt with cases of a
person who has not been assessed before and he was required to
make his own estimate of the tax payable by him and pay
accordingly. Sub-section (3) of Section 18A was applicable to the
B
assessee in that case. However, he neither submitted any estimate
nor did he pay any advance tax. Under Sub-section (6) of
Section 18A it was provided:
“Where in any year an assessee has paid tax Under Sub-
section(2) or Sub-section (3) on the basis of his own estimate,
and the tax so paid is less than eighty percent of the tax C
determined on the basis of regular assessment simple interest
at the rate of six per cent per annum from the 1st day of
January in the financial year in which the tax was paid up to
the date of the said regular assessment shall be payable by the
assessee upon the amount by which the tax so paid falls short D
of the said eighty percent.”
“25. We may point out that if the contention of Dr. Syed
Mohammad that in order to constitute short-levy, some amount
should have been assessed as payable by way of duty so as to
make Rule 10 applicable, is accented the result will be rather E
anomalous. For instance if due to collusion (which means collusion
between a party and an officer of the Department) a sum of Rs.
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 F
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 G
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
H
452 SUPREME COURT REPORTS [2019] 7 S.C.R.
A by us. By the interpretation placed by us on Rule 10, the position
will be that an assessee who has been assessed to a smaller
amount as well as an assessee who has been assessed to nil duty
will all be put on a par and that is what is intended by Rule 10.”
(Emphasis supplied)
B 45. In fact, it is to be noticed, that Section 11A which was inserted
by Act 26 of 1978 is substantially the reproduction of Rule 10 of 1944
Rules. We notice, in fact, the following answers given by Shri Satish
Aggarwal, the Minister of State in the Ministry of Finance, as regards,
the reasons for Act 26 of 1978 by which Section 11A was inserted:-
C “Shri Amrit Nahata made a frontal attack on clause 24 and asked,
why are you going to increase the limit with regard to short levy
from six months to five years? Previously, there was no limit. It
was only in August 1977 that the rules were amended and provision
made in the rules to fix a time limit in the case of fraud. Earlier, a
D case could be reopened even after 20 years in the case of fraud.
In 1977 the rules prescribed a time limit of five years in the case
of fraud. Otherwise, the period was unlimited. When we limited
the period to five years, the Committee on Subordinate Legislation
recommended that instead of incorporating such an important
provision in the rules it should find a place in the Act itself. That is
E why we have brought in this amendment to the Act. Otherwise,
since those rules were laid on the Table of the House by implication
they were approved by the House without any amendment. So,
that is more or less the law now. We are only incorporating it in
the Act, as recommended by the Committee on Subordinate
F Legislation.”
46. It is apparently thus that Section 11A came to be inserted.
47. Coming to Section 11AB, it came to be inserted by Act 33 of
1996. Thereafter, it was amended by Act 10 of 2000, Act 14 of 2001,
Act 20 of 2002 and Act 49 of 2005. We have already extracted the
G relevant provisions of the said section. Section 11A must necessarily be
read with Section 11AB. This is for the reason that interest under Section
11AB is premised upon the duty of excise not being levied or paid or
short levied, short paid or erroneously refunded. Such duty is either
determined under sub-Section(2) of Section 11A or without such
determination it being paid under Section 2B of Section 11A. In any of
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 453
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
the circumstances, namely, non-levy, non-payment, short-levy and short- A
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 B
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. C
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 D
goods takes place. Undoubtedly, if the removal takes place in March,
the payment is to be made by 31st of March.
50. We have also noticed what happens if there is provisional
assessment. In the case of provisional assessment, the assessee
entertains a doubt regarding the actual value or the rate of duty. He E
applies and he is permitted under the order to remove goods on a
provisional assessment. The assessment is thereafter finalized. When
the provisional assessment is finalized, the assessee becomes liable
however to pay interest from the first date of the month succeeding the
month for which the amount is determined. We have no doubt in our F
mind that under Rule 7(4), the expression “succeeding the month for
which such amount” is determined refer to the month of removal of the
goods. When the provisional assessment has such consequences, it
would occasion an invidious discrimination to place an interpretation on
Section 11AB by which those assesses who go in for provisional
assessment under Rule 7 are called upon to pay interest upon finalization G
of the assessment with reference to the date of removal in a case where
the value is fully determined as a result of escalation clause being worked
resulting in an upward revision of prices and under Section 11AB
payability arises with reference to the date of decision to grant escalation.
In other words, the law will have to be interpreted in a manner that it is H
454 SUPREME COURT REPORTS [2019] 7 S.C.R.
A fair and equal to similarly situated group of assessees. Legislative
intention, in this regard, also cannot be otherwise. Legislature has clearly
in Section 11AB spelt out the time with reference to the Act and the
Rules. Under Section 11AB in the case of short levy or short payment
inter alia, the expression “month in which the duty has become payable”
under the Act and the rules must be understood as the month in which
B
the duty is payable under the Rules made under the Act. Thus, if goods
are removed in the month of January ordinarily payment must be made
by the 6th of February. If the duty is not paid by the 6th of February,
Section 11AB must be understood as mulcting the assessee with liability
to pay interest from the first day of March in the example we have
C given. If the assessee went in for provisional assessment under rule 7,
it becomes liable from the 1st day of the month following the month for
which the amount is determined.
51. The expression “the month in which the duty ought to have
been paid” under this Act, when it is read alongwith Rule 8, which
D 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.
E 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
F 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 Rs.142.78 crores even without waiting for any notice under Section
G 11A(1). The assessee volunteered and made payment in October 2006.
We find merit in the finding by the authority that this is a case where
therefore the payment made by the assessee is to be treated as one
falling under Section 11A(2)b). This meant also that there was no need
for determination of the duty within the meaning of Section 11A(2)(a) or
H issuance of notice under Section 11A.
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 455
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
54. It is important to notice that when we contrast Section 11A as A
it was introduced with effect from 15.11.1980 with Section 11A after
amendment by Section 97 of the Finance Act, 2000, we find that in the
later avtar of Section 11A, the following words have been inserted: -
“Whether or not such non-levy or non-payment, short-levy or
short-payment or erroneous refund, as the case may be, was on B
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.”
No doubt, it had the effect of taking away the basis for the decision
in the case of Collector of Central Excise, Baroda v. Cotspun Ltd. C
reported in (1999) 7 SCC 633, which took the view that a levy based on
the approved classification list, is not short-levy. But its impact goes
beyond the same. Power under Section 11A to recover the duty which
has not been levied or not been paid or short-levied or short-paid will be
available inter alia irrespective of, whether the aforesaid contingency
was or was not the result of any approval, acceptance or assessment D
either relating to the rate of duty or the valuation under the Act and the
Rules. Thus, even when there has been an assessment or acceptance in
relation to the rate of duty or valuation, it does not stand in the way of
invoking power under Section 11A.
55. Rule 12 declares that every assessee is to file monthly returns. E
There is no provision in the rule which contemplates an assessment as
such based on the return by the authorities. Assessment is self-assessment
by the assessee under Rule (6). No doubt, in the case covered by Rule
7 there is a provisional assessment followed by a final assessment. The
main ingredients for self-assessment would appear to be (1) the rate of F
duty (2) valuation (3) quantity of removal.
56. Are cases of non-levy, non-payment, short-levy and short-
payment mutually exclusive?. In other words, can it be said that in a
case of 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. G
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
H
456 SUPREME COURT REPORTS [2019] 7 S.C.R.
A 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
B 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)
C valuation and (3) quantity removed, the components all or any are
incorrectly applied. As an instance if the full rate of duty applicable is
not applied though the valuation and the quantity is correctly arrived at,
it may fall under short-levy. In one sense it could be said that there is
short-payment also, as if payment could be understood as the amount
D which ought to have been paid but it has not been paid, it may be a case
of short payment. But it may be more appropriate to put it under short
levy where the deficit in payment is essentially in terms of a short-levy.
59. We are here concerned in these cases with one of the
ingredients of assessment, namely, valuation. There is no dispute
E regarding the quantity removed. There is no issue relating to rate of
duty. The dispute is relating to the correct value. To appreciate it better,
let us take an example of an assessee who deliberately undervalues the
goods which he removed. This results in assessee arriving at an amount
which would not be the correct amount. He pays this incorrectly assessed
amount. Would it be a case of short levy or short payment? If short-
F levy is to be understood as confined to cases where the assessment is
not the full assessment, taking into account the parameters involved
correctly, namely, rate of duty, valuation and quantity it could be classified
as a case of short levy as one of the components of proper assessment
namely, valuation has been incorrectly arrived at. The payment in such
G a case is made in terms of the incorrectly assessed figure. The payment
matches the assessment. In fact, it is worthwhile to recall that under
Rule 10 of 1944 Rules which we have adverted to., the expression “short-
payment” is not used. Instead the words duty has not been paid in full,
has been used. No doubt, in a case where in law though the amount
which is paid is in harmony with the amount which is assessed, it is not
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 457
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
the amount which ought to have been paid by the assessee. The absence A
of full payment of duty or short payment has indeed also in one sense
taken place. In a case where there is an escalation clause goods are
cleared on a provisional price. Consequently, the value is provisional.
There is a subsequent escalation with retrospective effect. It will affect
the valuation which was employed in the self-assessment by the assessee
B
which would necessarily be provisional. Enhancement of the value will
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. C
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 D
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 E
of damages or compensation and it is also further true that unless there
is a substantive provision providing for payment of interest in a fiscal
statute, interest cannot be demanded, we would think in the context of
the Act and the Rules in question, under Section 11AB, particularly, when
there is no dispute relating to liability to pay the differential duty and we
notice that absence of dispute is a fair acknowledgement of the fact that F
the facts of the present cases are unlike the situation in MRF decision
where the price was fixed at the time of removal, interest is payable as
provided in Section 11AB and from the point of time indicated therein.
But in these cases, the price was variable under the escalation clause
which was very much within the knowledge of the assessee and the G
demand for interest is sustainable.
62. As far as the scope of the second explanation of Section
11A(2)(b) is concerned, it contemplates payment voluntarily by the
assessee. It is without any notice being issued under Section 11A. There
is also reference to liability on the part of the assessee to pay interest H
458 SUPREME COURT REPORTS [2019] 7 S.C.R.
A under Section 11A(2)(b), not only on the amount which is paid within
the meaning of Section 11A(2)(b) but on any short payment as may be
determined by the excise officer. This only means that payment can by
an assessee of any of the four amounts with which we are more
concerned namely, non-levy, non-payment, short-levy or short-payment.
Since there is no notice under Section 11A and non-determination of the
B
amount as such pursuant to which the amount is paid it may happen that
there may be shortfall in the amount which is paid by the assessee in
comparison to what the assessee is legally required to pay. The short
payment which is therefore referred to in the second Explanation to
Section 11A(2)(B) can only be the aforesaid short payment and it is not
C referring to the short payment of duty which was originally occasioned
and which is the subject matter of Section 11A(2)(b) and Section 11AB.
63. We are of the view that the reasoning of this Court in the
order referring the cases to us (to this Bench) that for the purpose of
Section 11AB, the expression “ought to have been paid” would mean
D the time when the price was agreed upon by the seller and the buyer
does not square with our understanding of the clear words used in Section
11AB and as the rules proclaim otherwise and it provides for the duty to
be paid for every removal of 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
E 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
F 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
G 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 that differential duty is paid. We would think that while the
principle that the value of the goods at the time of removal is to reign
H
M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 459
OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]
supreme, in a case where the price is provisional and subject to variation A
and when it is varied retrospectively it will be the price even at the time
of removal. The fact that it is known, later cannot detract from the fact,
that the later discovered price would not be value at the time of removal.
Most significantly, section 11A and section 11AB as it stood at the relevant
time did not provide read with the rules any other point of time when the
B
amount of duty could be said to be payable and so equally the interest.
We would concur with the views expressed in SKF case(supra) and
International Auto (supra). We find no merit in the appeals. The
appeals will stand dismissed.
C
Devika Gujral Appeals dismissed.
D
E
F
G
H
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