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2005 Supreme(Raj) 1783
High Court Of Rajasthan
Judgename : R.S. Chauhan
Lucid Colloids Ltd. - Appellant
Versus
Union of India - Respondent
D.B Civil Writ No. 1192 of 2005
Decided On : 08/03/2005
Mr. Dinesh Mehta, for the Petitioner.
Mr. Vinit Kumar Mathur, for the Respondents.
The central legal point established in the judgment is that the provision in Rule 8(3) providing an alternative mode to provide a higher ceiling limit for interest chargeable on delayed payment is in violation of Section 11-AB of the Central Excise Act, 1944.
Headnote:
Rule 8(3) - Challenge to vires of Rule 8(3) of the Central Excise Rules, 2002 - Section 11-AB of the Central Excise Act, 1944 - Summary of Acts and Sections: Section 11-AB of the Central Excise Act, 1944; Rule 8(3) of the Central Excise Rules, 2002 - The court discussed the validity of Rule 8(3) in relation to Section 11-AB, highlighting the limits of interest chargeable on delayed payments and the discretion of the Central Government to fix the rate of interest per annum. The court found that the provision in Rule 8(3) providing an alternative mode to provide a higher ceiling limit for interest chargeable on delayed payment is in violation of Section 11-AB and cannot be sustained.
Fact of the Case:
The writ petition challenged the vires of Rule 8(3) of the Central Excise Rules, 2002 in relation to Section 11-AB of the Central Excise Act, 1944. The petitioner sought to declare the provision ultra vires and arbitrary, confiscatory, and violative of constitutional articles. Consequential relief was sought for setting aside the demand founded on the rule to the extent it levied interest at a specific rate.
Finding of the Court:
The court found that Rule 8(3) to the extent it provides an alternative mode to provide a higher ceiling limit for interest chargeable on delayed payment is in violation of Section 11-AB and cannot be sustained. Consequently, the demand notices were quashed and interest on delayed payment had to be recomputed only to the extent it is referred to the rate of interest @ 2% per month or 24% per annum under Rule 8(3).
Issues: The issues revolved around the validity of Rule 8(3) in relation to Section 11-AB, the authority of the Central Government to fix the rate of interest per annum, and the compliance of the rule with the provisions of the parent Act.
Ratio Decidendi: The court held that the provision in Rule 8(3) providing an alternative mode to provide a higher ceiling limit for interest chargeable on delayed payment is in violation of Section 11-AB and cannot be sustained. It also found that the rule altered the nature of interest from compensatory to penalty, contrary to the enabling power conferred on the Rule Making Authority under Section 11-AB of the Act.
Final Decision: The writ petition was allowed, and the part of Rule 8(3) which includes the expression 'at the rate of two per cent, per month or rupees one thousand per day, whichever is higher' was held to be invalid. Consequently, the demand notices were quashed, and interest on delayed payment had to be recomputed only to the extent it is referred to the rate of interest @ 2% per month or 24% per annum under Rule 8(3).
.1. Two principal prayers have been made in the writ petition relating to challenge the vires of Rule 8(3) of the Central Excise Rules, 2002 as under:-
.(i) The impugned provision and particularly phrase Rs. 1,000/-per day or whichever is higher of Rule 8(3) of Central Excise Rules, 2002 may be declared ultra vires Section 11-AB of the Central Excise Act, 1944?
.(ii) The offending phrase “Rs. 1,000/-per day or whichever is higher may be declared arbitrary, confiscatory and violative of Articles 19(1)(g) and 265 of the Constitution of India.
2. Consequential relief is for setting aside the demand founded on the aforesaid rule to the extent it levied interest @ Rs. 1, 0000/-per day.
3. The provision in the parent Act which authorises charge of interest on delayed payment of duty
reads as under:-Section 11-AB Interest on delayed payment of duty:-Where any duty of excise has not been levied or paid or has been short levied or short-paid or erroneously refunded, the person who is liable to pay the duty as determined under Sub-section (2), or has paid the duty under Sub-section (2-B) of Section 11-A, shall, in addition to the duty, be liable to pay interest at such rate not below ten percent and not exceeding thirty-six percent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in Sub-section (2), or Sub-section (2-B), of Section 11-A till the date of payment of such duty..... For giving effect to this provision, the rule which has been framed by the Central Government is as under:-Rule 8(3) If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount alongwith an interest at the rate of two percent, 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: 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 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 that the goods in question in respect of which the duty and interest are outstanding, have been cleared without payment of duty and the consequences and the penalties as provided in these rules shall follow.
4. The contention of the learned Counsel for the petitioner is that the parent Act does not authorise the Central Government to lay the procedure and method for levy of quantification of interest but merely authorises to notify the rate of interest per annum which is to be levied on delayed payment of duty or wrongful receipt of refund as the case may be, and, therefore, to the extent it provides levy of collecting interest chargeable on delayed payment of duty by fixing Rs. 1,000/-per day to the minimum penalty if it does not exceed the amount chargeable as interest at the rate of 2% per month cannot be sustained. The rule in effect amounts to providing rate of interest chargeable on delayed payment of duty at 2% subject to minimum interest @ Rs. 1,000/-per day.
5. The learned Counsel for the revenue says that the levy of interest on delayed payment of duty has been in accordance with Rule 8(3), and, therefore, has validly been charged. However, in term nothing has been submitted how the provisions made in the Rule 8(3) to the extent it provides basis of charge interest is within the province of the parent Act.
6. A perusal of Section 11-AB clearly indicates that while delayed payment of duty or erroneous receipt of refund has been made subject to payment of interest from the first date of month succeeding the month in which the duty ought to have been pa
