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2025 Supreme(Online)(Mad) 79719
IN THE HIGH COURT OF JUDICATURE AT MADRAS
N. Anand Venkatesh, J
M/s.The Dharmapuri District Co-operative Spinning Mills Ltd. – Appellant
Versus
The Commissioner Of Central Excise – Respondent
WP No. 7640 of 2006 | WMP.No.8405 of 2006
For the Appellants/Petitioners: Mr.S.Rajesh
For the Respondents: Mr.Meganathan Standing Counsel
The court confirmed that mandatory interest on delayed excise duty payments does not constitute a penalty if the non-payment is not intentional.
Headnote:This judgment concerns a writ petition challenging the proceedings of the 2nd respondent under Article 226 of the Constitution of India regarding the penalty for delayed excise duty payments. The Court examined Rule 8(3) of Central Excise Rules, 2002, and established that the authority had no discretion in imposing interest on delayed payments. The main issues were whether the imposition of interest constituted a penalty and whether the limitation period under Section 11(A) of the Central Excise Act applied. The Court found no errors in the 2nd respondent's proceedings and dismissed the petition.
| Table of Content |
|---|
| 1. the petitioner challenges the penalty for delayed excise payments. (Para 1 , 2 , 3 , 4) |
| 2. respondents argue interest is mandatory under existing rules. (Para 5 , 7 , 8 , 9) |
| 3. court examines nature of the imposed interest. (Para 10 , 11 , 12) |
| 4. authority lacked discretion in interest imposition. (Para 13 , 14) |
| 5. the writ petition is dismissed with no finding of error. (Para 18) |
ORDER
This writ petition has been filed challenging the proceedings of the 2nd respondent dated 24.02.2006 and for a consequential direction to the respondents not to levy and collect penal interest for the delay in payment of excise duty for the month of June 2004.
2.The case of the petitioner is that they are running the Mill and for the duty liability for the month of June 2004, the petitioner filed the returns on 07.07.2004 by admitting the liability of excise duty at Rs.10,32,506/-. The petitioner did not pay the liability for the month of June 2004 along with the returns that were filed in June 2004.
3.Out of the total liability, the petitioner was able to pay around Rs.6,00,000/- with three months delay and the balance in nine monthly installments. The delay in payment of duty was due to the fact that the petitioner merely had accumulated losses and they were also not able to pay the wages on time.
4.The petitioner is aggrieved by the impugned proceedings of the 2nd respondent dated 24.2.2006, wherein the request made by the petitioner seeking for reduction of the rate of interest for the delayed payment of duty was came to be rejected.
5.The 2nd respondent has filed a counter affidavit and has taken a stand that the interest has been levied in line with the mandate prescribed under Rule 8(3) of Central Excise Rules 2002 and no discretion is available for the respondents to waive the interest prescribed under the Rule. It is further stated that the petitioner cannot question the demand of interest since it neither suffers from lack of jurisdiction nor it does suffers from perversity. In view of the same, the respondents have justified the rejection of the claim made by the petitioner seeking for reduction in the rate of interest.
6.This Court has carefully considered the submissions made on either side and the materials available on record.
7.The learned counsel for the petitioner mainly raised two grounds while assailing the proceedings of the 2nd respondent. The first ground is that if in case there is any duty not paid and recovery is initiated, Section 11 (A) of the Central Excise Act, 1944 has prescribed one year period as the limitation for the recovery of the duty not paid. In the case in hand, the duty was payable for the month of June 2004 and the due date fell on 05.7.2004. However, the notice has been served only on 06.7.2004 and the same is beyond the period of limitation.
8.The other ground that was raised by the learned counsel for the petitioner is that penalty can be imposed against the petitioner only if the petitioner had intentionally failed to pay the duty and whereas in the case in hand, the petitioner had volunteered to pay the simple interest and the duty was due only for one month and there were reasonable grounds for the petitioner for not being able to pay the duty on time. Therefore, it was contended that the 2nd respondent ought to have considered this issue and received the simple interest as was offered by the petitioner.
9.Per contra, the learned Standing Counsel for the respondents submitted that there is no discretion available to the 2nd respondent in this case since sub rule (3) of rule 8 of Central Excise Rules, 2002 makes it mandatory to demand interest at the rate of 2% p.m., or Rs.1,000/- per day, whichever is higher, for the period starting from the first day after due date, till the date of actual payment of the outstanding amount. The learned Standing Counsel further submitted that the notice under Section 11 of the Central Excise Act, 1944 was already served on the petitioner as early as on 0
