Full Judgment Text
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PETITIONER:
M/S GTC INDUSTRIES LIMITED
Vs.
RESPONDENT:
UNION OF INDIA & ORS
DATE OF JUDGMENT: 04/03/1998
BENCH:
SUJATA V. MANOHAR, D.P. WADHWA
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
Mrs. Sujata V. Manohar, J.
Leave granted.
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.
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
product as the price at which the product was sold by the
appellant to the distributors. The price list was approved.
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.
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
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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), b y 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.
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 expenses. He held that post-
manufacturing expenses under all these three heads were
deductible from the assessable value for the purposes of
excise, and thus calculated the above refund.
Under the said order of the High Court dated 23rd of
November, 1981, the amounts so calculated by the Assistant
Commissioner were to be paid on or before 10th of August,
1982. Since the amounts were not paid, the appellant filed
Writ Petition No. 1938 on 17th of September, 1982 in the
High Court for payment of Rs. 6,20,28,059.98 (there is a
small discrepancy in the adding up of the said two amounts)
together with interest.
On 21st of September ,, 1982 the High Court admitted
the Writ Petition No. 1938 of 1982 and directed interim
refund of the said amount against bank guarantees to be
furnished by the appellant. The High Court did not pass any
interim order in respect of the appellant’s claim for
interest but kept the question open at the stage of final
disposal. Pursuant to the interim order of 21st of
September, 1982 the said amount of Rs. 6,20,28,059.98 was
withdrawn by the appellant against bank guarantees which
were furnished on 1.11.1982. Clearly the above order was
passed in view of the order of the High Court dated
23.11.1981 in Writ Petition No.907 of 1975, which was upheld
by the Division Bench.
From the order of the Division Bench dismissing the
appeal No. 398 of 1982 in Writ Petition No. 907 of 1975, the
respondents had preferred a Special Leave Petition to this
Court which was admitted. But no interim stay had been
granted.
When the appeal from the Division Bench’s judgment and
order came up for hearing before this Court on 19.7.1995,
this Court passed an order therein in the light of a
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decision of this Court in Government of India vs.
M.R.F.Limited (1995 (77) ELT page 433). This Court said that
deduction in respect of freight and bank charges on
discounting of bills will have to be considered in the light
of the decision in the case of Government of India vs.
M.R.F. Limited (Supra). It, therefore, remanded the matter
to the Assistant Collector of Central Excise for the purpose
of finalisation of the appellant’s claim under the said
head, namely, freight and bank charges. The appeal was
accordingly disposed of. This order has been subsequently
clarified on 28.2.1997 as not denying to the appellant,
claims which had already been allowed earlier, since these
were not the subject matter of this Court’s order.
Therefore, this court should not be taken to have rejected
those claims. As a result of this order, the order dated
23.11.1981 in Writ Petition No.907 of 1975 was now replaced
by the order of remand of this court dated 19.7.1995,
confined to examination of the claim for deduction regarding
freight and bank charges on bill discounting.
On 24.1.1996, in the light of the remand order of this
Court, in original Writ Petition No. 907 of 1975, the High
Court, by an interim order in Writ Petition No. 1938 of 1982
(which was for recovery of the amounts due under the order
dated 23.11.1981 of the High Court), directed the appellant
to return the amount of Rs, 6,20,28,059.98 earlier withdrawn
by it. This order, however, was set aside by this Court on
16.8.1996. Thereupon, in September, 1996, the respondents
took out a regular notice of motion before the High Court in
Writ Petition No. 1938 of 1982 for the purpose of obtaining
an interim order for the return of the said amount of Rs.
6,20,28,059.98. The motion was heard along with the main
Writ Petition 1938 of 1982. The High Court by its order
dated 14th of October, 1996 dismissed the Writ Petition No.
1938 of 1982, vacated the interim order passed on 21.9.1982
and directed the appellant to deposit the sum of Rs.
6.20.28,059.98 together with interest at the rate of 12% per
annum from 1.11.1982. The present appeal has been filed from
the above order of the High Court. Pursuant to interim
orders passed in this Special Leave Petition, the
respondents have encashed bank guarantees given by appellant
for Rs. 6,20,28,059.98 on 5.5.1997. The appellant has not so
far deposited the interest amount as ordered by the High
Court.
Since Writ Petition No. 1938 of 1982 was for the
purpose of recovery of amounts granted to the appellant in
Writ Petition No.907 of 1975, the fate of that writ petition
determined the outcome of Writ Petition No. 1938 of 1982. By
the order of remand of this Court dated 19.7.1995 the entire
claim of the appellant for refund has not been remanded for
reconsideration. The remand is for considering only two
claims, namely, for freight and bank charges on bill
discounting in the light of the judgment of this Court which
came to be delivered only in May 1995 in the case of
Government of India vs. M.R.F. Limited (Supra). However, on
11.7.1996 the Assistant Commissioner, examining the claims
on remand, rejected all claims of the appellant for refund
on the ground of the addition of Section 11B (1) and 11B (2)
in the Central Excises and Salt Act of 1944 by an amendment
in 1991. An appeal from this order of the Assistant
Commissioner is pending.
In the context of the amendment made in the Central
Excise 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
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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. vs. Union of India (1997
(89) E.L.T. page 247 [S.C.]).
The appellant has, however, objected to the order
directing it to pay interest on this amount at the rate of
12% per annum form 1.11.1982. On this date the appellant
contends that it was entitled, prima facie, to the amount,
as Section 11B had not been introduced in the Central
Excises and Salt Act of 1944. The section came to be
introduced by an amendment made in 1991 by the Central
Excises and Customs Law (Amendment) Act, 1991, which came
into force on 19.9.1991.
On merit a part of the claim of the appellant for
refund under the head of post-manufacturing expenses became
untenable in some aspects on account of a judgment delivered
by this Court in May, 1995 in the case of Government of
India vs. M.R.F. Limited (Supra). It was in the light of
the above judgment that this Court in the writ petition
claiming refund, directed a remand by its order of 19th of
July, 1995.
Section 11AA of the Central Excise and Salt Act, 1944
was added on 26th of May, 1995 by the Finance Act, 1995.
This section provides, inter alia, for interest on delayed
payment of duty. Where a person chargeable with duty
determined under sub-section (2) of Section 11A fails to pay
such duty within three months from the date of such
determination, he shall pay, in addition to the duty,
interest at such rate not below 10% and not exceeding 30%
per annum as is for the time being fixed by the board on
such duty from the date immediately after the expiry of the
said period of three months till the date of payment of such
duty. 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. Two such decision have been
brought to our notice. In the case of Kashyap Zip Ind vs.
Union of India & Ors. (1993 Supp. (3) SCC 493), the recovery
of disputed duty had been stayed by an interim order of the
High Court in the writ petition. While dismissing the writ
petition and revoking the Stay order, the High Court
directed the appellant to pay interest at 17.5% per annum
from the date of the order of Stay till recovery. This Court
reduced the rate of interest to 12% per annum and on the
facts and circumstances directed that this amount should be
recovered from 1st of January, 1985 till payment, this being
the year in which the matter was finally decided by this
Court as a result of which the writ petition came to be
dismissed by the High Court.
In the case of Star Paper Mills Ltd. vs. Union of India
(1996 (83) E.L.T. page 18 [S.C.]), dealing with the payment
of interest on demand which had been stayed, the High Court
had ordered payment of compound interest at 17.5% from the
date of the Stay order dated 22.5.1981. This Court reduced
the rate of interest to 12% per annum simple interest and
ordered its payment only from 1.1.1984.
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
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Mafatlal Industries Ltd. vs. 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 of 1.5.1997, the latter date being
the date when the entire principal amount was recovered by
the respondents.
The appeal is, therefore, dismissed with the above
modification in the High Court’s order.