Important Point
Though Appellant is liable to pay interest on delayed payment of duty on the entire amount of Rs. 6,20,28,059.98p. but he should pay it from 1.10.1991 and not from 1.12.1982 looking to the intervening changes in the law as a result of the insertion of Section 11B in Central Excise and Salt Act, 1944 by Customs Law (Amendment) Act, 1991.

Headnote:Central Excise and Salt Act, 1944-Section 11AA (inserted by Finance Act, 1995) and Section 11B (introduced by Customs Law Amendment Act, 1991)-Recovery of interest on delayed payment of duty-Previously no specific provision - Amount involved Rs. 6,20,28,059 - Payment due on 1.10.1991 (after amendment made in 1991) but paid on 1.5.97-High Court directed to pay interest @12% from 1.11.1982 -Whether be modified? (Yes).
       Held : In the context of the amendment made in the Central Excises and Salt Act of 1944, by virtue of the introduction of Section 11B, the order for the return of Rs. 6,20,28,059.98 cannot be questioned, although we should not be taken to have made any pronouncement on the question of applicability of Section 11B to the appellant’s claims in the present case. The applicability of Section 11-B to the appellant’s claim is the subject matter of the pending departmental appeal and will be decided in accordance with law and in the light of the decision of this Court in the case of Mafatlal Industries Ltd. v. Union of India, 1997 (89) ELT 247 (SC). (Para 13)
       Prior to the insertion of Section 11AA there was no specific provision in the Central Excises and Salt Act, 1944 under which the department could recover interest on delayed payment of duty. But this Court had, in suitable cases, directed payment of interest. (Para 16)
       Held finally : In the present case, the appellant’s submission that he should not be asked to pay interest on the entire amount of Rs. 6,20,28,059.98 has not impressed us, looking to the intervening changes in the law as a result of the insertion of Section 11B and the decision of this Court in the case of Mafatlal Industries Ltd. v. Union of India (supra) and the facts and circumstances of the case. The order directing the appellant to pay interest, however, is modified as follows in the facts and circumstances of the present case set out above. We, therefore, direct the appellant to pay interest at the rate of 12% per annum on the said amount of Rs. 6,20,28,059.98 from 1.10.1991 to 1.5.1997, the latter date being the date when the entire principal amount was recovered by the respondents. (Para 18)
       The appeal is, therefore, dismissed with the above modification in the High Court’s order. (Para 19)

Judgment

Mrs. Sujata V. Manohar, J.-Leave granted.

2. This appeal is against the judgment and order dated 14th of October, 1996 of the High Court at Bombay in Civil Writ Petition No. 1938 of 1982.

3. The appellant is a manufacturer of Cigarettes. Cigarettes so manufactured are liable to excise duty. It is the case of the appellant that till August 1972 he filed his price list on the basis of the price at which his goods were sold by the sole distributor to wholesellers, the appellant being under an erroneous impression that this was the price to be considered for the value of the goods for the purposes of excise duty. In August 1972, the appellant claimed that he discovered his mistake in not filing a price list on the basis of the price charged by the appellant to his sole distributor. Thereupon the appellant filed fresh price list from 1st of September, 1972 declaring the value of its products as the price at which the product was sold by the appellant to the distributors. This price list was approved.

4. In September 1973, the appellant filed a price list in which he sought reduction of post-manufacturing expenses from the value of his product. This request was rejected by the Assistant Collector of Central Excise. However, the Central Government ultimately granted a refund in respect of such post-manufacturing expenses but limited the period of refund to the period from 28.9.1971 to 31.8.1972. Thus, in respect of the change in assessing the value of the goods on the basis of the price which the appellant had charged to his distributors, as also in respect of the deduction of post-manufacturing expenses from such value, the appellant was granted relief for the said period.

5. On 11th of August, 1975 the appellant filed Writ Petition No. 907 of 1975 before the Bombay High Court claiming a refund of excise duty for the period 1.3.1965 to 31.8.1972 on the basis that excise duty should have been levied on the basis of the value of their goods determined (1) on the basis of the price at which the appellant sold his product to his distributors and (2) the value of the product so determined should be reduced by the amount of post-manufacturing expenses. In the writ petition the appellant excluded the period 28.9.1971 to 31.8.1972 for which the appellant had already received a favourable order from the Central Government. A learned Single of the High Court (Madon, J. as he then was), by his order dated 23.11.1981 allowed the writ petition. He directed the respondents i.e. the excise department to ascertain the amount due to the petitioners by way of refund under both these heads, by May 10, 1982 and make payment to the petitioners within a period of three months or August 10, 1982 whichever was earlier. The respondents preferred an appeal-being Appeal No. 382 of 1982 before the Division Bench of the High Court which was dismissed by the Division Bench by its order dated 27.8.1982.

6. Pursuant to the directions given by the High Court in its order of 23.11.1981 the Assistant Commissioner passed two orders in July 1982 calculating the amount of refund due and payable to the appellant. As per his first order which calculated the refund for the said period (1.3.1965 to 27.9.1981 excluding the period for which refund had already been received) in respect of the value of the goods being determined on the basis of the price charged by the appellant to his distributors, instead of the price charged by the distributors to the wholesalers, the refund calculated was Rs. 1,72,76,320.14. In the second order, which calculated refund on the basis of the reduction in the value of the goods by post-manufacturing expenses, the Assistant Collector calculated refund for the said period at Rs. 4,47,51,719.14. Under the second order, he calculated post-manufacturing expenses under three heads-(1) interest and bank charges relating to post-manufacturing expenses, (2) advertisement and publicity expenses, and (3) selling, distribution and marketing expense

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1998 Supreme(SC) 315

Cases Referred (4)