M/S
GTC Industries Limited Vs. Union of India
& Ors [1998] INSC 146 (4 March 1998)
Sujata
V. Manohar, D.P. Wadhwa Mrs. Sujata V. Manohar, J.
ACT:
HEAD NOTE:
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 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 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 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 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.
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