Important pointWhere money of a person in a matter of tax cannot be said to have been retained/withheld unjustifiably, interest which could be granted on grounds of equity, cannot be granted in such a case.

Headnote:Central Excise and Salt Act—Notification No. 145 of 1974 granting certain rebates on sugar—Respondent made a claim for Rs. 27,84,474/- by calculating “Excess on excess” Production—Assistant Collector granted rebate only on excess of average production and allowed rebate for Rs. 12,76,621/- —Tribunal in appeal held that rebate was to be granted on excess of excess production and allowed appeal of the respondent and granted the consequential reliefs i.e. respondents held entitled to credit for Rs. 15,07,791/- — Respondents were given credit in the said amount—Claim for interest on the amount—Assistant Commissioner rejected the claim—Collector (Appeals) dismissed the appeal—Tribunal also rejected further appeal—High Court in writ jurisdiction held respondents entitled to interest at the rate of 10 per cent on the amount—State Appeal—Whether respondents can be considered entitled to interest on the amount?—No—Tribunal while considering rebate claim had denied interest—It was not a case where question whether respondents were entitled to credit on the amount was free from doubt and thus it was not a case where money had been withheld unjustifiably—Impugned judgment could not be sustained.
       Held : In this case, in our view, there are two reasons why interest could not have been granted. The Respondents have very fairly handed over to the Court the Appeal filed by them before the Tax Tribunal and the Order dated 28th January 1992. In the Appeal filed by them, the Respondents had prayed for interest at the rate of 18% per annum with effect from 8th January 1976 till payment. As already noted above, the Tribunal upheld the contention of the Respondents that they were entitled to credit, but the Tribunal did not grant interest. Having already made a prayer and the same not having been granted, it was not open to the Respondents to again make a claim for interest. (Para 7)
       The second ground on which the Respondents are not entitled to interest is that this is not a case where the question, whether they were entitled to the credit of Rs. 15,07,791/-, was free from doubt. This was a question which was bona fide agitated. It is only in 1992 that this question was settled by the Tax Tribunal. This therefore is not a case where the money had been withheld unjustifiably. Thus even presuming, in law interest can be granted on grounds of equity this is not a case where such principles could be applied. If that be so, then in the absence of any provision in the contract or any statutory provision, interest could not have been awarded. (Para 9)

Judgment

S.N. Variava, J.—This Appeal is against the Judgment of the Allahabad High Court dated 16th January 1998.

2. Briefly stated the facts are as follows.

On 12th October 1974, the Central Government issued Notification No. 145 of 1974 granting certain rebates on sugar. On 1st August 1975, the Respondents submitted a claim for Rs. 27,84,474/-. The Respondents claimed this amount as a rebate by calculating excess on excess production for the period 1st December 1974 to 30th September 1975. The Assistant Collector was of the view that the rebate could only be claimed on excess of average production. Therefore, by an Order dated 8th January 1976, he allowed a rebate of only Rs. 12,76,621/-.

3. The Respondents filed a Writ Petition No. 762 of 1981 before the Allahabad High Court claiming credit for the balance amount of Rs. 15,07,791/-. By an Order dated 7th December 1981, the Respondents were directed to exhaust the remedy of Appeal as provided under the statute. The Respondents then filed an Appeal, which was dismissed on 8th January 1976 by the Collector (Appeals). The Respondents filed a further Appeal to the Tribunal. The Tribunal by its Order dated 28th January 1992 held that the rebate was to be granted on excess of excess production. Thus, the Appeal of the Respondents was allowed with consequential reliefs, i.e., that they were to receive a credit in the sum of Rs. 15,07,791/- in their PLA Account. Pursuant to the Order of the Tribunal, the Respondents were given credit in the above mentioned sum.

4. On 1st May 1993, the Respondents filed an application before the Assistant Commissioner claiming interest on the sum of Rs. 15,07,791/- at 18% from 8th January 1976 to 28th January 1992. They made this claim on the ground that they were entitled to compensation for the amount not having been paid to them earlier. This application was rejected by the Assistant Collector on 21st December 1993. The Collector (Appeals) dismissed the Appeal of the Respondents by an Order dated 1st August 1994. The Respondents filed a further Appeal to the Tribunal, which was also rejected on 3rd May 1997. The Respondents then filed a Writ Petition in the Allahabad High Court which has been allowed by the impugned Judgment. It has been held that the Respondents are entitled to interest at the rate of 10%.

5. This matter, like so many others on our Board for the last few months, indicates the negligent and callous manner, in which the Revenue is dealing with litigation. In matter after matter, we have found that relevant documents have not been filed with the paper books. Even at the time of hearing neither the Advocate-on-Record nor arguing Counsel have the relevant documents with them. In most cases it is the other side which supplies the relevant documents. On being queried by Court, Counsel frankly states that no officer is coming forward to give any instructions or supply any documents. Even with the stakes being so high there is apparent callousness and negligence on the part of the Revenue authorities. It is hoped that this sorry state of affairs will get remedied and proper instructions given and documents supplied to the Advocates-on-Record and the arguing counsel.

6. In this matter, the question before the Court is whether the Respondents were entitled to interest on the amount of Rs. 15,07,791/-. Both parties have argued at great length and cited a number of authorities as to when interest can or cannot be granted. In our view, for the purposes of this case, it is not necessary to go into the larger question whether or not interest can be granted for delayed payments.

7. In this case, in our view, there are two reasons why interest could not have been granted. The Respondents have very fairly handed over to the Court the Appeal filed by them before the Tax Tribunal and the Order dated 28th January 1992. In the Appeal filed by them, the Respondents had prayed for interest at the rate of 18% per annum with effect from 8th January 1976 till p

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