Custom, Excise & Service Tax Tribunal
India Steel Summit Private Limited vs Ce & Cgst Noida on 9 February, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.59841 of 2013
(Arising out of Order-in-Appeal No.106-CE/APPL/Noida/2013 dated
15/05/2013 passed by Commissioner (Appeals) Customs, Central Excise &
Service Tax, Noida)
M/s India Steel Summit Pvt. Ltd., .....Appellant
(2F-2G, Ecotech-III, Udyog Kendra, Noida-201307)
VERSUS
Commissioner of Central Excise, Noida ....Respondent
(C-56/42, Sector-62, Noida)
APPEARANCE:
Shri Atul Gupta, Advocate &
Shri Prakhar Shukla, Advocate for the Appellant
Shri Santosh Kumar, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70058/2024
DATE OF HEARING : 11 October, 2023
DATE OF PRONOUNCEMENT : 09 February, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.106-
CE/APPL/Noida/2013 dated 15/05/2013 passed by Commissioner
(Appeals) Customs, Central Excise & Service Tax, Noida. By the
impugned order Commissioner (Appeals) has upheld the Order-
in-Original No.32/Additional Commissioner/Noida/2012-13 dated
22.10.2012 by holding as follows:-
ORDER
1. I confirm the demand for recovery of the interest amounting to Rs 48,32,438/- (Forty Eight lacs Thirty Two Thousand Four Hundred and Thirty Eight) and Rs. 98,151/- (Ninety Eight Thousand One Hundred and Fifty One). Total Excise Appeal No.59841 of 2013 2 Rs.49,30,589/-( Forty Nine lacs Thirty Thousands Five Hundred and Eighty Nine) only on the wrongly availed credit, under Rule 14 of the Cenvat Credit Rules 2004 read with Section 11 AB of the Central Excise Act, 1944.
2. I impose a penalty of Rs.49,30,589/- (Forty Nine lacs Thirty Thousands Five Hundred and Eighty Nine) only upon them under Rule 15 of the Cenvat Credit Rules.2004. The dues so adjudged be paid forthwith.‖ 2.1 Appellant is registered with the Central Excise and engaged in the manufacture of Parts of Vehicles, Parts of Air Conditioners, etc. falling under Chapter Sub-hearingg No.8714990 & 8714900, 8415900, 85229000 of first schedule to Central Excise Tariff Act. 1985. They are also availing the benefit of Cenvat credit as provided in the law. During the course of scrutiny of the ER-1 returns anomalies in the closing and opening balance in the abstract of Cenvat Credit Account were noticed. On being asked appellant informed that-
(i) the difference of an amount of Rs.6,40,00,000/-
found in the opening balance of June, 2010 (Rs.3,91,64,719/-) and the closing balance of May, 2010 (Rs. 10,31 64,719/-), was caused due to clerical/typographical error in December 2009 return submitted in January, 2010. They have corrected the mistake in the month of June, 2010 and they shall be submitting Cenvat Account in support of their claim.
ii) the above said mistake occurred due to clerical / typographical error and therefore they are not liable to pay interest on such amount.
(iii) the amount of Rs.7.16 523.00 of Cenvat -input service was reversed due to management decision of capitalization of service fee paid to the contractor into land account, accordingly the said amount stand reversed without being utilized.‖ 2.2 Further, party vide letter dated 29.10.2010 submitted copy of RG-23 C Part-II for 2009-10 and Journal Vouchers for the credit of service tax which was subsequently reversed as the Excise Appeal No.59841 of 2013 3 same was steadily capitalized. Appellant submitted a computer generated copy of RG23 C Part-II for the period Dec 2009 to March 2010 to show that the credit was not taken. 2.3 The explanation given by the appellant was not acceptable and the data regarding amount of Cenvat credit in balance credit availed/taken during the month, utilized and the closing balance given in the ER-1 returns is always based on the factual data. If it was an error, as stated by the appellant the correction would have been made in the subsequent month but in the instant case appellant continued to retain the said inadmissible credit of Rs.6.40 crores during the period from December 2009 to June, 2010 as evident from the ER-1 returns filed for the relevant period. Show cause notice dated 19.09.2011 was issued to the appellant asking them to show cause as to why-
―1. The interest amounting to Rs.48,32,438/- (Forty Eight lac Thirty Two Thousand Four Hundred and Thirty Eight) and Rs.98,151/- (Ninety Eight Thousand One Hundred and Fifty One) on the wrongly availed credit of Rs.6,40,00,000/- and Rs.7,16,523/- respectively may not be demanded and recovered from them under Rule 14 of the Cenvat Credit Rules 2004 read with Section 11 AB of the Central Excise Act. 1944.
2. Penalty may not be imposed upon them under Rule 15 of the Cenvat Credit Rules.2004.‖ 2.4 This show cause notice was adjudicated as per the Order- in-Original referred in para-1 above and appeal filed by the appellant against the said order has been dismissed as per the impugned Order-in-Appeal referred in para-1 above. Aggrieved appellant have filed this appeal.
3.1 We have heard Shri Atul Gupta learned Counsel appearing for the appellant and Shri Santosh Kumar, learned Authorised Representative appearing for the revenue. 3.2 Arguing for the appellant learned Counsel submits that- Show cause notice was issued beyond the normal period of limitation without alleging any evasion of tax by Excise Appeal No.59841 of 2013 4 suppression of facts, fraud and in facts there cannot be any such factors exist.
Credit was never utilized and there was no case of demanding interest and imposition of penalties. Reliance is placed by the following rulings:-
o M/s Steria India Ltd. Vs Commissioner of Customs, Central Excise & Service Tax, Noida, 2018 (11) TMI 758-CESTAT-Allahabad.
o M/s Tirupati Structurals Ltd. Vs Commissioner of Central Excise & Service Tax, Ghaxiabad 2019 (2) TMI 940 - CESTAT-Allahabad.
Credit before the utilization is in the existent of government hence there is no revenue loss to the government. Accordingly, the demand for interest of such excess credit cannot be sustained.
Rule 14, which was interpreted by the Hon‟ble Supreme Court in the case of Union of India Vs Ind-Swift Laboratories Ltd. 2011 (265) ELT 3 (SC) amended vide Notification No.18/2012-CE(NT) dated 17.03.2012 by substitution of the words "taken or utilized wrongly" by the words "taken and utilized wrongly". Reliance is also placed by the decision of Hon‟ble Karnataka High Court in the case of Commissioner of Central Excise & Service Tax, Bangalore Vs Fosroc Chemicals (India) Pvt. Ltd. 2015 (318) ELT 240 (Kar.). Reliance is also placed on the decision of Hon‟ble Supreme Court in the case of Government of India Vs Indian Tobacco Association, 2005 (187) ELT 162 (SC), when and incentive scheme was introduced, as the amendment was brought to the said rule through substitution, thus the same would mean that the words "taken and utilized wrongly" were present in the Rule 14 since beginning and as the appellant has reversed the credit without utilizing the same, thus there was not occasion to issue the show cause notice to the appellant.
Appeal be allowed.
Excise Appeal No.59841 of 2013 5 3.3 Arguing for the revenue learned Authorised Representative reiterates the findings recorded in the impugned order.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 For holding against the appellant, Commissioner (Appeals) in the impugned following has been held:-
―6.4 Under the impugned order interest has been charged and demanded on the said wrongly taken credit under Rule 14 of the CENVAT Credit Rules, 2004. The said Rule 14 prevailing at the relevant time reads as under:
"Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded- Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or Sections 73 and 75 of the Finance Act shall apply mutatis mutandis for effecting such reconvenes."
6.5 A study of above Rule 14 divulges that the Rule clearly provides levy of interest on the credit taken or utilized wrongly. Therefore, interest under Rule 14 is liable to be paid on wrongly taken credit, irrespective of whether the same has been utilized or not. Hence, the appellants' contention, that they are not liable to pay interest since the wrongly taken credit was not utilized and the same was reversed without utilizing, is against the statutory provisions prevailing at the relevant time. I find that the Hon'ble Supreme Court's order in the case of Ind-Swift Labs. v. UOI 2011 (265) ELT. 3 (S.C.) decided the issue of recovery of interest, on credit taken or utilized wrongly, under Rule 14 of the CENVAT Credit Rules, 2004. The Apex Court has ruled that "if the aforesaid provision is read as a whole we find no reason to read the word "OR" in between the expressions taken or utilized wrongly or has been Excise Appeal No.59841 of 2013 6 erroneously refunded' as the word "AND" On the happening of any of the three circumstances such credit becomes recoverable along with interest." In view of above statutory provisions and rulings of the Apex Court in the case of Ind-Swift Lab. Vs. UOI the appellants are liable to pay interest in question under Rule 14, ibid. Thus, in view of above discussed legal position, I find merits in the findings of the adjudicating authority for demand of interest on the CENVAT credit taken or utilized wrongly and the same are upheld.
6.6 Regarding orders for recovery of interest on the credit of Service Tax of Rs.7,16,523/- the appellants contested that the amount of credit of Rs. 7,16,523/- pertains to CENVAT credit of service tax paid on the service of land development consulting services procured by them and these expenses were initially recorded in the expense account and the benefit of CENVAT credit was taken on the portion of service tax paid on these amounts, subsequently, there was a managerial decision to capitalize these expenses and consequently the appellants reversed the credit availed on the service tax portion of the expenses so incurred. The adjudicating authority ordered for recovery of interest by holding that the appellants had not submitted any such material evidence on record to show that when such decision was taken by them. In this context, I observe that the appellants have not submitted any such evidences at this stage. I, therefore, uphold the impugned order for recovery of interest on the said amount of credit of service tax taken wrongly and subsequently reversed.
6.7 The appellants contested that the demand for recovery of interest under the impugned order is time barred. It has been observed that the adjudicating authority has held that demand for recovery was issued under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11 AB of the Central Excise Act, 1944, and the provisions of Section 11 Excise Appeal No.59841 of 2013 7 AB as such do not prescribe any time limit for levy or recovery of applicable interest. That the issue has been considered and settled on many occasion by holding that intent of the legislature is very clear in not prescribing any time limit for recovery of interest under Section 11AB of the Central Excise Act 1944, and that when recovery of duty is not time-barred the recovery of applicable interest follows as the Section 11AB, ibid, not being subject to Section 11A(1) ibid. I observe that it is an undisputed fact that the appellants had reversed the credit on being found to be taken wrongly. The interest on wrongly taken credit is charged under Rule 14 read with Section 11AB prevailing during the relevant time. Section 11AB reads as under.
"SECTION [11AB. Interest on delayed payment of duty. -
(1) 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 duty as determined under sub-
section (2) or has paid duty under sub-section (28) of section 11A, shall in addition to the duty, be liable to pay interest at such rate not below ten per cent and not exceeding thirty-six per cent, per annum as is for the time being fixed by the Central Government, by the notification in the Official Gazette, from the first date of the month succeeding the month in which 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 (2B) of section 11A till the payment of such duty:"
6.8 On a careful study of the Section 11 AB it has been observed that the person who is liable to pay duty as determined under sub-section (2) or has paid duty under sub- section (2B) of section 11A, shall in addition to the duty, be liable to pay interest at such rate fixed by the Government by the notification. I, further, observe that the said Section does prescribe any time limit for demand of such interest in addition to the duty, and prescribes that such interest shall be paid. On a comparative study of Section 11A and 11AB it has been observed that Section 11A prescribe that, "a Central Excise Officer may within Excise Appeal No.59841 of 2013 8 one year from the relevant date, serve notice on the person chargeable duty which has not been levied or paid,"
whereas the Section 11AB prescribe that, "the person who is liable to pay duty as determined under sub-section (2) or has paid duty under sub-section (2B) of section 11A, shall in addition to the duty, be liable to pay interest." The Section 11A uses word "may" and prescribes time limit of one year or five year for demand of duty whereas Section 11AB uses word "shall be liable to pay interest and does not prescribe any time limit for demand and recovery of interest. Thus, legislature does not provide any time limit for recovery of interest under Section 11B, ibid. 6.9 The adjudicating authority in the support of his findings placed reliance upon the following:
(i) Prem Cables (P) Ltd Vs CCE, Jaipur-2012 (278) ELT 397 (Tri-Del);
(ii) SKH Auto Components Ltd Vs CCE, Delhi-IV-2011 (274) ELT 273(Tri-Del);
(iii) Abhinav Industries Vs CCE Jaipur-1-2011 (264) ELT538 (Tri-Del),
(iv) CCE Ghaziabad Vs KL Concast (P) Ltd- 2007 (209) ELT425 (Tri-Del) (V) CCE & C Aurangabad v. Padamshri Www Patit-S S.K. Ltd. 2007 (215) ELT 23 (Bom) 6.9.1 I find that in the case of Prem Cables (P) Ltd Vs CCE, Jaipur- 2012 (278) ELT 397 the Principal Bench of CESTAT, New Delhi held that "Section 11AB of Central Excise Act, 1944 takes care of interest realization in circumstances of non-payment or short levy While prescribing recovery of interest limitation not prescribed by legislature - When levy not time-barred interest follows - Section 11AB ibid not being subject to Section 11A(1) ibid, plea of levy being time barred inconceivable Once duty paid on supplementary invoices, assessee legally bound to pay interest being automatic consequence Once no ambiguity in levy of duty u/s 11A, no scope to argue interest not payable on plea of limitation, while levy not disputed but Excise Appeal No.59841 of 2013 9 paid - Point of limitation never pure question of law but a mixed question of law."
6.9.2 In the case of SKH Auto Components Ltd Vs CCE, Delhi-IV-2011 (274) ELT 273(Tn-Del) the Principal Bench of CESTAT, New Delhi held that "Time and again it has been held by the Apex Court and High Courts that in the absence of any limitation being prescribed under the statute, it is not for the Courts or the Tribunal to invent a limitation for such action. Prescribing period of limitation is essentially a legislative function and. therefore, it cannot be encroached upon by the judicial authorities".
"Considering the facts as above and law laid down by the Apex Court, the action having been taken within a period of five years for recovery, it cannot be said that the action is even beyond the reasonable period for enforcing the recovery of interest" (Para- 14).
6.9.3 In the case of Abhinav Industries vs. CCE Jaipur-1- 2011(264) ELT 538 (Tri- Del)the Principal Bench of CESTAT, New Delhi held that, "On the other hand, I find that the interest liability arises in terms of provisions of Section 11AB. The said section is to the effect that 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) of Section 11A, shall in addition to the duty, being liable to pay interest at such rate............ till the date of payment of such duty. A reading of the above provision makes it clear that there is no time limit fixed by the legislation for payment of interest in respect of the duty confirmed against the assessee. In fact, the Hon'ble Bombay High Court in the case of CCE, Aurangabad v. Padmashri V.V. Patil S.S.K. Ltd. reported in 2007 (215) E.L.T. 23 (Bom.) has held that even if no notice is issued, interest is liable to be paid for the delayed payment of duty. Use of words 'shall' and 'be liable' appearing in the relevant section indicate absence of option and chargeable Excise Appeal No.59841 of 2013 10 of interest in all cases of non-payment or short payment."
(Para-6).
"It is well settled that interest being appending to the principal amount and when the principal amount is to be paid by the assessee to the exchequer, as confirmed in terms of Section 11A, interest liability would arise automatically. In the absence of any provision, laying down any time limit for raising of interest demand and in the light of the Bombay High Court judgment liability of interest ast is to be paid automatically without any notice and as such, the question of limitation does not arise"
(Para-7).
6.10 Therefore, in view of above legal provisions and various judicial pronouncements, find no force in the appellants' plea of time barred on the grounds of limitation of time. The findings under the impugned order on the issue of limitation are upheld.‖ 4.3 We find that the issue involved in the present case is squarely covered by the decision of Hon‟ble Supreme Court in the case of M/s Ind-Swift Laboratories Ltd. [2011-TIOL-21-SC- CX] following has been held:-
―10 In order to appreciate the findings recorded by the High Court by way of reading down the provision of Rule 14, we deem it appropriate to extract the said Rule at this stage which is as follows:
"Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded: - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of Sections 11A and 11AB of the Excise Act or Sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries."
Excise Appeal No.59841 of 2013 11
11. A bare reading of the said Rule would indicate that the manufacturer or the provider of the output service becomes liable to pay interest along with the duty where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded and that in the case of the aforesaid nature the provision of Section 11AB would apply for effecting such recovery.
12. We have very carefully read the impugned judgment and order of the High Court. The High Court proceeded by reading it down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Therefore, High Court on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is wrongly utilized. In our considered opinion, the High Court misread and misinterpreted the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR" appearing in Rule 14, twice, could be read as "AND" by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole we find no reason to Excise Appeal No.59841 of 2013 12 read the word "OR" in between the expressions `taken' or `utilized wrongly' or `has been erroneously refunded' as the word "AND". On the happening of any of the three aforesaid circumstances such credit becomes recoverable along with interest.
13. We do not feel that any other harmonious construction is required to be given to the aforesaid expression/provision which is clear and unambiguous as it exists all by itself. So far as Section 11AB is concerned, the same becomes relevant and applicable for the purpose of making recovery of the amount due and payable. Therefore, the High Court erroneously held that interest cannot be claimed from the date of wrong availment of CENVAT credit and that it should only be payable from the date when CENVAT credit is wrongly utilized. Besides, the rule of reading down is in itself a rule of harmonious construction in a different name. It is generally utilized to straighten the crudities or ironing out the creases to make a statute workable. This Court has repeatedly laid down that in the garb of reading down a provision it is not open to read words and expressions not found in the provision/statute and thus venture into a kind of judicial legislation. It is also held by this Court that the Rule of reading down is to be used for the limited purpose of making a particular provision workable and to bring it in harmony with other provisions of the statute. In this connection we may appropriately refer to the decision of this Court in Calcutta Gujarati Education Society and Another v. Calcutta Municipal Corporation and Others reported in (2003) 10 SCC 533 in which reference was made at Para 35 to the following observations of this Court in the case of B.R. Enterprises v. State of U.P. and Others reported in (1999) 9 SCC 700: -
"81. .............. It is also well settled that first attempt should be made by the courts to uphold the charged provision and not to invalidate it merely because one of Excise Appeal No.59841 of 2013 13 the possible interpretations leads to such a result, howsoever attractive it may be. Thus, where there are two possible interpretations, one invalidating the law and the other upholding, the latter should be adopted. For this, the courts have been endeavouring, sometimes to give restrictive or expansive meaning keeping in view the nature of legislation, maybe beneficial, penal or fiscal etc. Cumulatively it is to subserve the object of the legislation. Old golden rule is of respecting the wisdom of legislature that they are aware of the law and would never have intended for an invalid legislation. This also keeps courts within their track and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not static but dynamic.
This infuses fertility in the field of interpretation. This equally helps to save an Act but also the cause of attack on the Act. Here the courts have to play a cautious role of weeding out the wild from the crop, of course, without infringing the Constitution. For doing this, the courts have taken help from the preamble, Objects, the scheme of the Act, its historical background, the purpose for enacting such a provision, the mischief, if any which existed, which is sought to be eliminated ... ...
This principle of reading down, however, will not be available where the plain and literal meaning from a bare reading of any impugned provisions clearly shows Excise Appeal No.59841 of 2013 14 that it confers arbitrary, uncanalised or unbridled power." (emphasis supplied)"
14. A taxing statute must be interpreted in the light of what is clearly expressed. It is not permissible to import provisions in a taxing statute so as to supply any assumed deficiency. In support of the same we may refer to the decision of this Court in Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd. reported in (1961) 2 SCR 189 wherein this Court at Para 10 has observed as follows: -
"10......... In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed: it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency."
15. Therefore, the attempt of the High Court to read down the provision by way of substituting the word "OR" by an "AND" so as to give relief to the assessee is found to be erroneous. In that regard the submission of the counsel for the appellant is well- founded that once the said credit is taken the beneficiary is at liberty to utilize the same, immediately thereafter, subject to the Credit rules.‖ We are concerned with the period prior to 2011 when the provisions of Rule 14 existed and have been interpreted by the Hon‟ble Supreme Court in the above stated case. The said decision of Hon‟ble Supreme Court is squarely applicable in the facts and circumstances of this case.
4.4 Appellant argued against the said decision by referring to the amendment specifically by substituting the word "or" in Rule 14 by "and". They argued that amendment was brought to the said rule through substitution of the words „taken and utilized wrongly‟, the rule was amended with retrospective effect, we do Excise Appeal No.59841 of 2013 15 not find any merits in the said submissions. Appellant has relied upon the decision in case of Fosroc Chemicals (India) Pvt Ltd [2015 (318) ELT 240 (Kar)], holding as follows to argue that the effect of "substitution" done in Rule 14 by the Notification No had the impact to amend the provisions said rule retrospectively.
7. The contention of the revenue is, that the statutory provision of the notification referred to supra became effective from 31.12.2008 as per para 1(2) of the notification issued by the Government of India and therefore, the finding of the Tribunal that the notification is effective retrospectively from 10.9.2004 is beyond the scope of statutory provision and therefore, the impugned order is liable to be set-aside.
8. Per contra, the learned counsel appearing for the assessee supported the impugned order.
9. What is the effect of "substitution" of a provision in the place of an existing one is no more res-integra. The Constitution Bench of the Hon'ble Apex Court in the case of SHAMARAO V. PARULEKAR vs. THE DISTRICT MAGISTRATE, THANA, BOMBAY & Others reported in AIR 1952 SC page 324, dealing with the scope of substitution of a provision by way of amendment held as under:-
"When a subsequent Act amends an earlier one in such a way as to incorporate itself or a part of itself into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that there is no need to refer to the amending Act at all."
10. Yet another Constitution Bench of the Hon'ble Supreme Court in the case of SHYAM SUNDER & Others vs. RAM KUMAR & Another reported in AIR 2001 SC page 2472, while dealing with the question whether a substituted Excise Appeal No.59841 of 2013 16 provision necessarily means the amended provision is retrospective in nature has held as under:
"A substituted section in an Act is the product of an amending Act and all the effects and consequences that follow in the case of an amending Act the same would also follow in the case of a substituted section in an Act."
11. In fact, the Division Bench of this Court in the case of SHA CHUNNILAL SOHANRAJ VS. T. GURUSHANTAPPA reported in 1972(1) MYS.L.J. PAGE 327 DB has held as under:
"When an amending Act has stated that the old sub- section has been substituted by the new sub-section the inference is that the Legislature intended that the substituted provision should be deemed to have been part of the Act from the very inception."
12. Recently, the Hon'ble Apex Court in the case of GOVERNMENT OF INDIA VS. INDIAN TOBACCO ASSOCIATION reported in 2005(187) ELT PAGE 162 (SC) = 2005-TIOL-109-SC-CUS, while dealing with the exemption notification which was issued by way of substitution, held as under:-
"15. The word ‗substitute' ordinarily would mean ‗to put (one) in place of another', or ‗to replace'. In Black's Law Dictionary, Fifth Edition, at page 1281, the word ‗substitute' has been defined to mean ‗To put in the place of another person or thing', or ‗to exchange'. In Collins English Dictionary, the word ‗substitute' has been defined to mean ‗to serve or cause to serve in place of another person or thing'; ‗to replace (an atom or group in a molecule) with (another atom or group)"; or ‗a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague'.
16. By reason of the aforementioned amendment no substantive right has been taken away nor any penal Excise Appeal No.59841 of 2013 17 consequence has been imposed. Only an obvious mistake was sought to be removed thereby.
17. There cannot furthermore be any doubt whatsoever that when a person is held to be eligible to obtain the benefits of an exemption notification, the same should be liberally construed."
13. The Parliament has enacted the Special Economic Zones Act 2005 (The SEZ Act for short) to provide for the establishment, development and management of the Special Economic Zones for the promotion of exports and for matters connected therewith or incidental thereto. Section 53 of the Act declares that a special economic zone shall, on and from the appointed day, be deemed to be a territory outside the customs territory of India for the purposes of undertaking the authorized operations. The word "export" has been defined under Act at section 2(m). According to the definition of the word export, vide Section 2(m) (ii) "export" means supplying goods or providing services, from the Domestic Tariff Area to a Unit or Developer. Such exports were exempted from duty of Central Excise under Section 26 of the SEZ Act, 2005 and consequently application of Cenvat Credit Rules. Section 151 of the Special Economic Zones Act 2005, overrides the provision of all other laws for the time being in force, notwithstanding anything inconsistent therein with the provision of the Special Economic Zones Act, 2005. This section therefore overreaches and eclipses the provisions of any other law containing provisions contrary to the SEZ Act, 2005. Though the definition of the word "export" in the SEZ Act, in Sec.2(m) included supply of goods to a "Unit" or "Developer", in clause (i) of sub-rule (6) of Rule 6 of the Cenvat Credit Rules, 2004 the word "Developer" was conspicuously missing and only "unit" was included before the 2008 amendment. It is in that context the aforesaid amendment by Notification No.50/2008 CE (N.T) dated Excise Appeal No.59841 of 2013 18 31.12.2008 was brought in, to clarify the doubt. As the said amendment is clarificatory in nature, that is the reason why it was brought by way of "substitution". The effect of the said "substitution" is that the Cenvat Rules 2004 are to be read and construed as if the altered words had been written into the Rules of 2004 with pen and ink and the words "to a developer of the SEZ for their authorized operation" was there from the inception. This is the understanding of the Government as is also clear from the circular issued by the CBEC bearing No.29/2006-Cus., dated 27.12.2006 wherein clause 4 reads as under:-
"4. In the light of the aforesaid provisions, with effect from 14.3.2006, Chapter XA of the Customs Act, 1962, the SEZ Rules, 2003, the SEZ (Customs Procedure) Regulations, 2003, and the exemption Notification No.58/2003-C.E., dated 22.7.2003 regarding the supply of goods to SEZ units & SEZ developers have become redundant. Consequently the supplies from DTA to a SEZ unit, or to SEZ developers for their authorized operations inside a SEZ notified under sub-section (1) of Section 4 of the Act, may be treated as in the nature of exports."
Therefore, it is clear, the said amendment has to be construed as retrospective in nature and the benefit of Rule 6(6)(1) as amended in 2008 has to be extended to the goods cleared to a "developer" of a Special Economic Zone for their authorized operations. Therefore, we do no see any merit in these appeals.
made to cease to exist and, next, the new rule is brought into existence in its place.‖ 4.5 Notification No 18/2012-CE (NT) reads as follows:
G.S.R. (E).-In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules Excise Appeal No.59841 of 2013 19 further to amend the CENVAT Credit Rules, 2004, namely :
-
1. (1) These rules may be called the CENVAT Credit (Third Amendment) Rules, 2012.
(2) Save as otherwise provided in these rules, they shall come into force on the 1st day of April, 2012.
11. In rule 14 of the said rules, with effect from the 17th day of March, 2012,-
(a) for the words ―taken or utilised wrongly‖, the words ―taken and utilised wrongly‖ shall be substituted;
(b) for the word, figures and letters ―and 11AB‖, the word, figures and letters ―and 11AA‖ shall be substituted‖ From the perusal of the above notification it is quite evident that the Notification clearly provides the date from which the word "or" has been substituted in Rule 14 of The CENVAT Credit Rules, 2004. It is unambiguously provided that the substitution is being made from 17th March 2012, and no retrospective effect has been given to the said amendment/ substitution.
4.6 Section 38 A of the Central Excise Act, 1944 provides as follows:
"Section 38A. Effect of amendments, etc., of rules, notifications or orders. -
Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not -
(a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or
(b) affect the previous operation of any rule, notification or order so amended, repealed, Excise Appeal No.59841 of 2013 20 superseded or rescinded or anything duly done or suffered there under; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, notification or order so amended, repealed, superseded or rescinded; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded.
In terms of sub-clause (b) and (c) it is evident that the effect of any amendments made in any rules, notifications or order, will not affect the operation of the earlier rule as it existed prior to amendment. Section 38 A is pari-materia with Section 6 of the General Clause Act, 1897. Section 6 and 6A of the General Clause Act, 1897 is reproduced below which is reproduced below:
―6. Effect of repeal.--Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not--
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered there under;
or Excise Appeal No.59841 of 2013 21
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.
6A. Repeal of Act making textual amendment in Act or Regulation.--Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.
4.7 The Supreme Court in Bhagat Ram Sharma v. Union of India [1988 Supp SCC 30] held:
―17. It is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. There is no real distinction between ‗repeal' and an ‗amendment'.‖ 4.8 In the case of Ramkanali Colliery of BCCL v. Workmen by Secy., Rashtriya Colliery Mazdoor Sangh[(2001) 4 SCC 236,] explaining the impact of „substitution‟ Hon‟ble Apex Court held:
Excise Appeal No.59841 of 2013 22 ―If there is both repeal and introduction of another provision in place thereof by a single exercise, the expression ―substituted‖ is used. Such deletion has the effect of the repeal of the existing provision and also provides for introduction of a new provision. In our view there is thus no real distinction between repeal and amendment or substitution in such cases.‖ 4.9 Hon‟ble Delhi High Court has in the case of Madhu Koda v.
State[2020 SCC OnLine Del 599], held as follows:
45. The provisions of Section 13 of the PC Act were substituted by virtue of the PC (Amendment) Act, 2018. It is well settled that the effect of substitution of a statutory provision by another is that the earlier provision is repealed and is replaced by the provisions so enacted. The provisions existing prior to the substitution cease to exist and the provisions enacted in substitution of the earlier provisions replace the earlier ones. Subject to any savings provision, the effect would be to write down the substituted provision in the Act as originally enacted. In Zile Singh v. State of Haryana & Ors.: (2004) 8 SCC 1, the Supreme Court had explained the effect of substitution of a statutory provision in the following words:
―24. The substitution of one text for the other preexisting text is one of the known and well-recognised practices employed in legislative drafting. ―Substitution‖ has to be distinguished from ―supersession‖ or a mere repeal of an existing provision.
25. Substitution of a provision results in repeal of the earlier provision and its replacement by the new provision (See Principles of Statutory Interpretation, ibid, p.565). If any authority is needed in support of the proposition, it is to be found in West U.P. Sugar Mills Assn. and Ors. Vs. State of U.P. and Ors.: (2002) 2 SCC 645, State of Rajasthan Vs. Mangilal Pindwal: (1996) 5 SCC 60, Koteswar Vittal Kamath Vs. K. Rangappa Baliga and Co.:
Excise Appeal No.59841 of 2013 23 (1969) 1 SCC 255 and A.L.V.R.S.T. Veerappa Chettiar Vs. S. Michael & Ors.: AIR 1963 SC 933. In West U.P. Sugar Mills Association and Ors.'s case (supra) a three-Judges Bench of this Court held that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the circumstances centering around the issue the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. In Mangilal Pindwal's case (supra) this Court upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that the substitution would have the effect of amending the operation of law during the period in which it was in force. In Koteswar's case (supra) a three-
Judges Bench of this Court emphasized the distinction between ―supersession‖ of a rule and ―substitution‖ of a rule and held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place.‖
53. However, this Court is unable to accept that the PC (Amendment) Act, 2018 seeks to repeal the provisions of Section 13(1)(d) of the Act, as it existed prior to 26.07.2018 ab initio. Mens rea is an integral part of the offence under Sub-clause (ii) of Section 13(1)(d) of the PC Act. The use of the word ‗abuse' in the said Subclause indicates so. Thus, there is no reason to assume that the legislative intent of repealing Section 13 of the PC Act was to exclude the said offence from the scope of PC Act with retrospective effect.‖
54. In view of the above, Section 6(d) of the General Clauses Act is applicable and persons convicted of committing the offence of criminal misconduct under Section 13(1)(d) of the PC Act would not be absolved of their offences or the liability incurred prior to the PC Act Excise Appeal No.59841 of 2013 24 coming into force. It is also relevant to note that the offence of criminal misconduct as falling under the provisions of Section 13(1)(d) of the PC Act prior to its amendment, is not the same offence as is now covered under the amended provision.‖ 4.10 It is settled position in law that physical statute need to be interpreted in a literal sense on the basis of what have been stated in the law or statute. There is no room for indictment or according to any beneficial construction to the appellant/assessee. Hon‟ble Supreme Court in the case M/s Dilip Kumar & Co. 2019 (361) ELT 577 (SC) has held as follows:-
18. It is well accepted that a statute must be construed according to the intention of the Legislature and the Courts should act upon the true intention of the legislation while applying law and while interpreting law. If a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents the intention of the Legislature. In this connection, the following observations made by this Court in District Mining Officer v. Tata Iron and Steel Co., (2001) 7 SCC 358, may be noticed :
―... A statute is an edict of the Legislature and in construing a statute, it is necessary, to seek the intention of its maker. A statute has to be construed according to the intent of them that make it and the duty of the Court is to act upon the true intention of the Legislature. If a statutory provision is open to more than one interpretation the Court has to choose that interpretation which represents the true intention of the Legislature. This task very often raises the difficulties because of various reasons, inasmuch as the words used may not be scientific symbols having any precise or definite meaning and Excise Appeal No.59841 of 2013 25 the language may be an imperfect medium to convey one's thought or that the assembly of Legislatures consisting of persons of various shades of opinion purport to convey a meaning which may be obscure. It is impossible even for the most imaginative Legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. Nonetheless, the function of the Courts is only to expound and not to legislate. Legislation in a modern State is actuated with some policy to curb some public evil or to effectuate some public benefit. The legislation is primarily directed to the problems before the Legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines both literal and purposive approaches. In other words the legislative intention, i.e., the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed...‖
19. The well-settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the Excise Appeal No.59841 of 2013 26 statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanai Lal Sur v.
Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words used are capable of one construction only then it would not be open to the Courts to adopt any other hypothetical construction on the ground that such construction is more consistent with the alleged object and policy of the Act.
20. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose [Assistant Commissioner, Gadag Sub- Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC 355]. Not only that, if the plain construction leads to anomaly and absurdity, the Court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation.
21. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right to life and liberty has to be given strict interpretation or else many innocent might become victims of discretionary decision-
Excise Appeal No.59841 of 2013 27 making. Insofar as taxation statutes are concerned, Article 265 of the Constitution [265. Taxes not to be imposed save by authority of law - No tax shall be levied or collected except by authority of law.] prohibits the State from extracting tax from the citizens without authority of law. It is axiomatic that taxation statute has to be interpreted strictly because State cannot at their whims and fancies burden the citizens without authority of law. In other words, when competent Legislature mandates taxing certain persons/certain objects in certain circumstances, it cannot be expanded/interpreted to include those, which were not intended by the Legislature.
22. At the outset, we must clarify the position of ‗plain meaning rule or clear and unambiguous rule' with respect of tax law. ‗The plain meaning rule' suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase ―cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio‖. Following such maxim, the Courts sometimes have made strict interpretation subordinate to the plain meaning rule [Mangalore Chemicals case (Infra para 37).], though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is self- contradictory.
23. Next, we may consider the meaning and scope of ‗strict interpretation', as evolved in Indian law and how the higher Courts have made a distinction while interpreting a taxation statute on one hand and tax Excise Appeal No.59841 of 2013 28 exemption notification on the other. In Black's Law Dictionary (10th Edn.) ‗strict interpretation' is described as under :
Strict interpretation. (16c) 1. An interpretation according to the narrowest, most literal meaning of the words without regard for context and other permissible meanings. 2. An interpretation according to what the interpreter narrowly believes to have been the specific intentions or understandings of the text's authors or ratifiers, and no more. - Also termed (in senses 1 & 2) strict construction, literal interpretation; literal construction; restricted interpretation; interpretatio stricta; interpretatio restricta; interpretatio verbalis. 3. The philosophy underlying strict interpretation of statutes. - Also termed as close interpretation; interpretatio restrictive.
See strict constructionism under constructionism. Cf. large interpretation; liberal interpretation (2).
―Strict construction of a statute is that which refuses to expand the law by implications or equitable considerations, but confines its operation to cases which are clearly within the letter of the statute, as well as within its spirit or reason, not so as to defeat the manifest purpose of the legislature, but so as to resolve all reasonable doubts against the applicability of the statute to the particular case.' Wiliam M. Lile et al., Brief Making and the use of Law Books 343 (Roger W. Cooley & Charles Lesly Ames eds., 3d ed. 1914).
―Strict interpretation is an equivocal expression, for it means either literal or narrow. When a provision is ambiguous, one of its meaning may be wider than the other, and the strict (i.e., narrow) sense is not necessarily the strict (i.e., literal) sense.‖ John Excise Appeal No.59841 of 2013 29 Salmond, Jurisprudence 171 n. (t) (Glanville L. Williams ed., 10th ed. 1947).
24. As contended by Ms. Pinky Anand, Learned Additional Solicitor General, the principle of literal interpretation and the principle of strict interpretation are sometimes used interchangeably. This principle, however, may not be sustainable in all contexts and situations. There is certainly scope to sustain an argument that all cases of literal interpretation would involve strict rule of interpretation, but strict rule may not necessarily involve the former, especially in the area of taxation.
The decision of this Court in Punjab Land
Development and Reclamation Corporation Ltd.,
Chandigarh v. Presiding Officer, Labour Court
Chandigarh and Ors., (1990) 3 SCC 682, made the said distinction, and explained the literal rule-
―The literal rules of construction require the wording of the Act to be construed according to its literal and grammatical meaning whatever the result may be. Unless otherwise provided, the same word must normally be construed throughout the Act in the same sense, and in the case of old statutes regard must be had to its contemporary meaning if there has been no change with the passage of time.‖ That strict interpretation does not encompass strict - literalism into its fold. It may be relevant to note that simply juxtaposing ‗strict interpretation' with literal rule' would result in ignoring an important aspect that is ‗apparent legislative intent'. We are alive to the fact that there may be overlapping in some cases between the aforesaid two rules. With certainty, we can observe that, ‗strict interpretation' does not encompass such literalism, which lead to absurdity and go against the legislative intent. As Excise Appeal No.59841 of 2013 30 noted above, if literalism is at the far end of the spectrum, wherein it accepts no implications or inferences, then ‗strict interpretation' can be implied to accept some form of essential inferences which literal rule may not accept.
25. We are not suggesting that literal rule de hors the strict interpretation nor one should ignore to ascertain the interplay between ‗strict interpretation' and ‗literal interpretation'. We may reiterate at the cost of repetition that strict interpretation of a statute certainly involves literal or plain meaning test. The other tools of interpretation, namely contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well-settled that in a taxation statute, there is no room for any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute.
26. Justice G.P. Singh, in his treatise ‗Principles of Statutory Interpretation' (14th ed. 2016 p.-879) after referring to Re, Micklethwait, (1885) 11 Ex 452; Partington v. A.G., (1869) LR 4 HL 100; Rajasthan Rajya Sahakari Spinning & Ginning Mills Federation Ltd. v. Deputy CIT, Jaipur, (2014) 11 SCC 672, State Bank of Travancore v. Commissioner of Income Tax, (1986) 2 SCC 11 and Cape Brandy Excise Appeal No.59841 of 2013 31 Syndicate v. IRC, (1921) 1 KB 64, summed up the law in the following manner -
―A taxing statute is to be strictly construed. The well- established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY AND LORD SIMONDS, means : ‗The subject is not to be taxed without clear words for that purpose : and also that every Act of Parliament must be read according to the natural construction of its words. In a classic passage LORD CAIRNS stated the principle thus : ―If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute. VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words : ―In a taxing Act one has to look merely at what is clearly said. This is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.‖ It was further observed :
―In all tax matters one has to interpret the taxation statute strictly. Simply because one class of legal entities is given a benefit which is specifically stated in the Act, does not mean that the benefit can be Excise Appeal No.59841 of 2013 32 extended to legal entities not referred to in the Act as there is no equity in matters of taxation....‖ Yet again, it was observed :
―It may thus be taken as a maxim of tax law, which although not to be overstressed ought not to be forgotten that, ―the subject is not to be taxed unless the words of the taxing statute unambiguously impose the tax on him‖, [Russel v. Scott, (1948) 2 All ER 1]. The proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible [Ormond Investment Co. v. Betts, (1928) AC 143]. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity [Mapp v. Oram, (1969) 3 All ER 215]. It has also been said that if taxing provision is ―so wanting in clarity that no meaning is reasonably clear, the Courts will be unable to regard it as of any effect [IRC v. Ross and Coutler, (1948) 1 All ER 616].‖ Further elaborating on this aspect, the Learned author stated as follows :
―Therefore, if the words used are ambiguous and reasonable open to two interpretations benefit of interpretation is given to the subject [Express Mill v. Municipal Committee, Wardha, AIR 1958 SC 341]. If the Legislature fails to express itself clearly and the taxpayer escapes by not being brought within the letter of the law, no question of unjustness as such arises [CIT v. Jalgaon Electric Supply Co., AIR 1960 SC 1182]. But equitable considerations are not Excise Appeal No.59841 of 2013 33 relevant in construing a taxing statute, [CIT, W.B. v. Central India Industries, AIR 1972 SC 397], and similarly logic or reason cannot be of much avail in interpreting a taxing statute [Azam Jha v. Expenditure Tax Officer, Hyderabad, AIR 1972 SC 2319]. It is well-settled that in the field of taxation, hardship or equity has no role to play in determining eligibility to tax and it is for the Legislature to determine the same [Kapil Mohan v. Commr. of Income Tax, Delhi, AIR 1999 SC 573]. Similarly, hardship or equity is not relevant in interpreting provisions imposing stamp duty, which is a tax, and the Court should not concern itself with the intention of the Legislature when the language expressing such intention is plain and unambiguous [State of Madhya Pradesh v. Rakesh Kohli & Anr., (2012) 6 SCC 312]. But just as reliance upon equity does not avail an assesse, so it does not avail the Revenue.‖ The passages extracted above, were quoted with approval by this Court in at least two decisions being Commissioner of Income Tax v. Kasturi Sons Ltd., (1999) 3 SCC 346 and State of West Bengal v.
Kesoram Industries Limited, (2004) 10 SCC 201 [hereinafter referred as ‗Kesoram Industries case' for brevity]. In the later decision, a Bench of seven- Judges, after citing the above passage from Justice G.P. Singh's treatise, summed up the following principles applicable to the interpretation of a taxing statute :
―(i) In interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed : it cannot imply anything which is not expressed : it cannot import provisions in the statute so as to supply any Excise Appeal No.59841 of 2013 34 deficiency : (ii) Before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section; and (iii) If the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject and there is nothing unjust in a taxpayer escaping if the letter of the law fails to catch him on account of Legislature's failure to express itself clearly‖.
4.11 In the case of Shri Vile Parle Kelvani Mandal & Ors [Order dated January 07, 2022. in Civil Appeal No 7319 Of 2021] Hon‟ble Supreme Court analyzing the earlier decisions on the issue has observed as follows:
―9. While answering the aforesaid question/issue, law on how to interpret and/or consider the statutory provisions in the taxing statute and the exemption notifications is required to be analysed first.
9.1 In the case of Dilip Kumar & Company (supra), five-
judge bench of this Court has held that in every taxing statute -- the charging, the computation and exemption provisions at the threshold stage should be interpreted strictly. In case of ambiguity in case of charging provision, the benefit necessarily must go into favour of the subject/assessee. This means that the subject of tax, the person liable to pay tax and the rate at which the tax is to be levied have to be interpreted and construed strictly. If there is any ambiguity in any of these three components, no tax can be levied till the ambiguity or defect was removed by the legislature [See pages 53 to 55 in Dilip Kumar & Company]. However, in case of exemption notification or clause, same is to be allowed based wholly by the language of the notification, and exemption cannot be gathered by necessary implication, or on a construction different from the words used by reference to the object and purpose of granting exemption [See Hansraj Gordhandas Vs. H.H. Dave, Assistant Collector of Central Excise Appeal No.59841 of 2013 35 Excise Customs, Surat & Ors., AIR 1970 SC 755]. Further it's for the assessee to show by construction of the exemption clause/notification that it comes within the purview of exemption. The assessee/citizen cannot rely on ambiguity or doubt to claim benefit of exemption. The rationale is not to widen the ambit at the stage of applicability. However, once the hurdle is crossed, the notification is constructed liberally [See Collector of Central Excise, Bombay-I & Anr. vs. Parle Exports (P) Ltd., (1989) 1 SCC 345 and Union of India & Ors. vs. Wood Papers Ltd. & Anr., (1998) 4 SCC 256]. Thus, distinction can be made between the substantive requirements that require strict compliance - non-compliance of which would render the assessee ineligible to claim exemption, and the procedural or compliance provision which can be interpreted liberally [See paragraphs 64 to 65 in Dilip Kumar & Company]. 9.2 Essar Steel India Ltd. & Anr. was a case relating to grant of exemption under Section 3(2)(vii)(a) from payment of electricity duty under the 1958 Act. The court relied on several decisions on interpretation of notification in nature of exemption, to hold that the statutory conditions for grant of exemption can neither be tinkered with nor diluted. The exemption notification must be interpreted by their own wordings, and where the wordings of notification with regard the construction is clear, it has to be given effect to. If on the wordings of the notification benefit is not available, then the court would not grant benefit by stretching the words of the notification or by adding words to the notification. To interpret the exemption notification one should go by the clear, unambiguous wordings thereof. These principles were applied in Essar Steel India Ltd. & Anr. to deny benefit of Section 3(2)(vii)(a) of the 1958 Act, as the condition of generating energy jointly with another undertaking was not fulfilled.
Excise Appeal No.59841 of 2013 36 9.3 In case of Star Industries, it was held that the eligibility criteria laid down for exemption notification is required to be construed strictly, and once it is found that applicant satisfies the same, the exemption notification should be construed liberally. Reference was made to the decision Novopan India Ltd. vs. CCE and Customs, 1994 Supp (3) SCC 606 and the Constitution Bench decision in Hansraj Gordhandas vs. H.H. Dave, Assistant Collector of Central Excise Customs, Surat & Ors. (supra), which decisions have been noted and elucidated by this Court in Dilip Kumar & Company. Therefore, in the context of exemption notification there is no new room for intendment. Regard must be to the clear meaning of the words. Claim to exemption is governed wholly by the language of the notification, which means by plain terms of the exemption clause. An assessee cannot claim benefit of exemption, on the principle that in case of ambiguity a taxing statue must be construed in his favour, for an exception or exemption provision must be construed strictly.
9.4 In the case of Giridhar G. Yadalam (supra), it is observed and held that in taxing statute, it is the plain language of the provision that has to be preferred where language is plain and is capable of one definite meaning. It is further observed that the strict interpretation to the exemption provision is to be accorded. It is observed that the purposive interpretation can be given only when there is some ambiguity in the language of the statutory provision or it leads to absurd results. In paragraph 16, it is observed and held as under:-
―16. We have already pointed out that on the plain language of the provision in question, the benefit of the said clause would be applicable only in respect of the building ―which has been constructed‖. The expression ―has been constructed‖ obviously cannot include within its sweep a building which is not fully constructed or in the Excise Appeal No.59841 of 2013 37 process of construction. The opening words of clause (ii) also become important in this behalf, where it is stated that ―the land occupied by any building‖. The land cannot be treated to be occupied by a building where it is still under construction. If the contention of Mr Jain is accepted, an assessee would become entitled to the benefit of the said clause, at that very moment, the commencement of construction even with construction the moment one brick is laid. It would be too far-fetched, in such a situation, to say that the land stands occupied by a building that has been constructed thereon. Even Mr Jain was candid in accepting that when the construction of building is still going on and is not completed, literally speaking, it cannot be said that the building ―has been constructed‖. It is for this reason that he wanted us to give the benefit of this provision even in such cases by reading the expression to mean the same as ―is being constructed‖. His submission was that the moment construction starts the urban land is put to ―productive use‖ and that entitles the land from exemption of wealth tax. This argument of giving so-called purposive interpretation has to be rejected for more than one reasons. These are:
(i) In taxing statute, it is the plain language of the provision that has to be preferred where language is plain and is capable of one definite meaning.
(ii) Strict interpretation to the exemption provision is to be accorded, which is the case at hand.
(iii) The purposive interpretation can be given only when there is some ambiguity in the language of the statutory provision or it leads to absurd results. We do not find it to be so in the present case.‖ 9.5 In the case of Godrej & Boyce Mfg. Co. Ltd. (supra), it is observed and held by this Court that where the words of the statute are clear and unambiguous, recourse cannot be had to principles of interpretation other than the literal view. It is Excise Appeal No.59841 of 2013 38 further observed that it is the bounden duty and obligation of the court to interpret the statute as it is. It is further observed that it is contrary to all rules of construction to read words into a statute which the legislature in its wisdom has deliberately not incorporated.‖ 4.12 In view of the categorical decision of Hon‟ble Supreme Court, we do not find any merits in the submissions made by the appellant relying on the decision of the Hon‟ble Karnataka High Court. In case of Sundaram Fasteners [2014-TIOL-201-HC-MAD-
CX] Hon‟ble Madras High Court has held as follows:
―9. The learned counsel appearing for the assessee sought to distinguish the decision of the Hon'ble Supreme Court in the case of IND-SWIFT LABORATORIES LTD . by stating that, that was a case where the CENVAT credit was taken and utilized and not a case where CENVAT credit has been reversed as that of the case of the assessee herein. It is his further submission that reversal of credit would amount to "no credit" being taken. In this regard, reliance has been placed on the decision of Allahabad High Court in the case of Hello Minerals Water (P) Ltd., vs. Union of India reported in 2004 (174) ELT 422 (All.) = (2004-TIOL-57- HC-ALL-CX) , the decision of the Karnataka High Court in the case of Commissioner of C.Ex . & S.T., LTU. Bangalore vs. Bill Forge Pvt. Ltd reported in 2012 (279) ELT 209 ( Kar .) = 2011-TIOL-799-HC-KAR-CX and the decision of the Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. vs. Collector of C.Excise , Nagpur reported in 1996 (81) ELT 3 (SC) =(2002-TIOL-41-SC-CX).
10. We do not agree with the submissions made by the learned counsel for the assessee, as the decisions rendered in the aforesaid cases by the Allahabad High Court as well as the Karnataka High Court as well as the Hon'ble Supreme Court, arose out of a case where the assessee claimed benefit of an exemption notification. The question which fell for consideration in those cases is as to whether reversal of credit after the removal of the final Excise Appeal No.59841 of 2013 39 product would entitle the assessee therein to the benefits of exemption notification, which states that the reversal of the credit should be done before the removal of the products. In such circumstances, the Courts considered the issue and said that for the purpose of extending the benefits of exemption notification, the time of reversal was not the material and reversal of the credit would amount to "no credit" being taken. In these decisions, Rule 14 or Section 11AB was not the subject matter for consideration. Therefore, these decisions relied upon by the learned counsel for the assessee are clearly distinguishable by facts, while read in the context of the facts and relevant notification which are applicable to the facts of the case.
11. The one and only decision which concerns about Rule 14 is the decision reported in 2011 (265) ELT 3 (SC) (2011-TIOL-21-SC-CX)., where the Hon'ble Supreme Court in paragraph No.17 has clearly pointed out that on the happening of any of the three situations viz., credit taking credit, utilizing it wrongly or erroneously refunding the credit, becomes recoverable along with interest. In paragraph Nos.16 and 17 of the said Judgment, the Hon'ble Apex Court has observed as follows:-
"16.A bare reading of the said Rule would indicate that the manufacturer or the provider of the output service becomes liable to pay interest along with the duty where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded and that in the case of the aforesaid nature of provision of Section 11AB would apply for effecting such recovery.
17. We have very carefully read the impugned order and order of the High Court. The High Court proceeded by reading it down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has Excise Appeal No.59841 of 2013 40 been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Therefore, High Court on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that the interest would be payable from the date CENVAT credit is wrongly utilized. In our considered opinion, the High Court misread and misinterpreted the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically provides that where CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest would be recovered from the manufacturer or the provider of the output service. The issue is as to whether the aforesaid word "OR"
appearing in Rule 14, twice, could be read as "AND" by way of reading it down as has been done by the High Court. If the aforesaid provision is read as a whole, we find no reason to read the word "OR" in between the expressions 'taken' or 'utilized wrongly' or 'has been erroneously refunded' as the word "AND". On the happening of any of the three circumstances such credit becomes recoverable along with interest".
12. In the light of the above findings of the Hon'ble Apex Court, particularly with regard to Rule 14 of the Act, we do not find any justifiable ground to accept the plea of the assessee based on the decisions relied on by the assessee reported in 1996 (81) ELT 3 (SC) = (2002-TIOL-41-SC-CX) , 2004 (174) ELT 422 (All.) = (2004-TIOL-57-HC-ALL-CX) , and 2012 (279) ELT 209 ( Kar .) = 2011-TIOL-799-HC- KAR-CX.
13. The learned counsel for the assessee submitted his notes on the contention that interest being compensatory and that question of payment of interest would arise only where the principal is due. To that contention, by placing Excise Appeal No.59841 of 2013 41 reliance on the decision reported in 1996 (88) ELT 12 (SC) = (2002-TIOL-273-SC-CUS) ( Prathiba Processors vs. Union of India as well as the decision reported in 2007 (215) ELT 3 = 2007-TIOL-141-SC-CX (CCE v s. Bombay Dyeing) , the learned counsel for the assessee contended that, when credit has been reversed before utilization, the same did not amount to taking credit.
14. We reject the arguments of the assessee. In the said decisions, it has been no doubt held that interest is compensatory and the question arises only where principal is due. If one gets into the background of the scheme of Modvat Credit, his contention that the assessee has not taken credit, does not merit consideration, particularly so, in the background of Rule 14. As it stands today, one has to go only by the provisions contained in Rule 14 and nothing beyond.
15. Further, the decision rendered in Bombay Dyeing case reported in 2007 (215) E.L.T. 3 (SC) = 2007-TIOL-141- SC-CX is also distinguishable one, considering again the issue raised therein with reference to notification No.14/2002-C.E., granting exemption, a situation similar to the cases in Hello Minerals as well as Chandrapur Magnet.
16. The learned counsel has also placed reliance on the decision reported in 226 ITR 625 (SC) (CIT vs. Poddar Cement (P) Ltd.) = (2002-TIOL-445-SC-IT) to contend that when there are two possible interpretations of a particular section, the interpretation which is favourable to the assessee should be preferred. The said contention has no relevance at all to the issue score for the simple reason that the provision of Rule 14 read with Section 11 AB is clear and does not leave to any ambiguity in its understanding, more so, in the context of the decision of the Hon'ble Supreme Court reported in Ind -Swift Industries , we reject this contention too. Consequently, we hold that in the context of the decision in Ind -Swift Excise Appeal No.59841 of 2013 42 Industries , irrespective of the utilization of the credit and going by the provisions as it stood during the relevant time, we accept the plea of the revenue that interest on the wrong credit is called for, as per Rule 14 read with Section 11AB and the circumstances on the aspect of leviable interest, we set aside the order of the Tribunal and allow the appeal.‖ 4.13 In the case of Padmashri V.V. Patil SSK Ltd. 2007 (215) ELT 23 (Bom.) Hon‟ble Bombay High Court has held as follows:-
10. So far as interest Under Section 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations between 10% to 36% is as determined by the Central Government by notification in the official gazette from time to time. There would be discretion, if at all the same is incorporated in such notification in the gazette by which rates of interest chargeable Under Section 11AB are declared.
The second aspect would be whether there is any discretion not to charge the interest Under Section 11AB at all and we are afraid, language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied / short paid / non levied / unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. This is evident from the opening part of Sub-section (1) of Section 11, which runs thus:
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 duty as determined under Sub-section (2) or has paid the duty Excise Appeal No.59841 of 2013 43 under Sub-section (2B) of Section 11A, shall in addition to the duty be liable to pay interest at such rate....
The terminal part in the quotation above, which is couched with the words "shall" and "be liable" clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the Page 1612 pockets of the Central Government much earlier. Upon reading Section 11AB togetherwith Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional.‖ 4.14 It is also settled law that interest is a statutory/ contractual liability for the wrongly taken credit or is equivalent to the time value of the money/credit. It is an absolute liability as has been held by the courts in the various decisions for the same no person could claim the benefit and claim that interest as provided by the statute could not have been recovered as has been held the same is barred by limitation. It was for the appellant to have paid the interest along with the reversal of the excess credit taken. It is also observed that during the period of dispute section 11A did not provided, for recovery of interest and hence was not applicable. The recovery of interest was made in terms of Section 11AB/ 11AA which did not provided for any limitation.
4.15 In case of Abhinav Industries [2010-TIOL-1843-CESTAT-
DEL] Delhi bench observed as follows:
―5. Examining the above plea independently, I find that the limitation provisions are contained in Section 11A of the Central Excise Act, 1944. On going through the same, I find that they are related to recovery of duty not levied or not paid or short levied or short paid or erroneously refunded. There is not even a whisper of the word interest' in the said section so as to indicate that the Excise Appeal No.59841 of 2013 44 limitation, as contained in the said section, applies to interest.
6. On the other hand, I find that the interest liability arises in terms of provisions of Section 11AB. The said section is to the effect that 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) of Section 11A, shall in addition to the duty, being liable to pay interest at such rate.................... till the date of payment of such duty. A reading of the above provision makes it clear that there is no time limit fixed by the legislation for payment of interest in respect of the duty confirmed against the assessee. In fact, the Hon'ble Bombay High Court in the case of CCE, Aurangabad v. Padmashri V.V. Patil S.S.K. Ltd. reported in 2007 (215) ELT 23 (Bom.) = (2007-TIOL-
419-HC-MUM-CX) has held that even if no notice is issued, interest is liable to be paid for the delayed payment of duty. Use of words shall' and be liable' appearing in the relevant section indicate absence of option and chargeable of interest in all cases of nonpayment or short payment.‖
7. It is well settled that interest being appending to the principal amount and when the principal amount is to be paid by the assessee to the exchequer, as confirmed in terms of Section 11A, interest liability would arise automatically. In the absence of any provision, laying down any time limit for raising of interest demand and in the light of the Bombay High Court judgment liability of interest is to be paid automatically without any notice and as such, the question of limitation does not arise.‖ 4.16 In the case of SKH Auto Components Ltd. [2011 (274) ELT 273 (T-Del)], Delhi Bench has held as follows:
―12. As far as the decision of the Tribunal in T.V.S. Whirlpool case is concerned, the Tribunal was not dealing with the issue as to whether law of limitation will apply to the recovery of interest as such. The issue was whether Excise Appeal No.59841 of 2013 45 the interest was not paid in terms of Section 47 read with Section 61(3) of the Customs Act and in that context it was observed that "The position being similar we hold that the same logic will apply in respect of the recovery to be made under the Customs Act where no period of limitation has been prescribed". The said observation was made having noted that under Section 28 of the Customs Act, period of limitation prescribed for recovery of duty is six months or five years and also the period for claim of refund was six months. In that context, it was observed that where no period of limitation is specifically prescribed for any specific action under the Act, the recovery should satisfy the principle of such general provision of recovery of the duty. The Apex Court dismissed the challenge by observing that as already stated above that it is only reasonable that the period of limitation that applies to a claim for the principal amount should also apply to the claim for interest thereon. Undoubtedly, the Apex Court has recorded the general principle of law in that regard while dismissing the appeal. It is pertinent to note that neither before the Tribunal nor before the Apex Court there was issue as to whether at all any limitation period applies to such claim or not. The decision of T.V.S. Whirlpool cannot support the contention in respect of period of limitation, that necessarily the limitation prescribed under Section 11A would apply. That is not the decision on the subject matter in controversy.
13. Time and again it has been held by the Apex Court and High Courts that in the absence of any limitation being prescribed under the statute, it is not for the Courts or the Tribunal to invent a limitation for such action. Prescribing period of limitation is essentially a legislative function and, therefore, it cannot be encroached upon by the judicial authorities.
14. Considering the facts as above and law laid down by the Apex Court, the action having been taken within a Excise Appeal No.59841 of 2013 46 period of five years for recovery, it cannot be said that the action is even beyond the reasonable period for enforcing the recovery of interest.‖ 4.17 As we have upheld the demand made within the period of five years for recovery, we do not find any merits in the submissions made for not imposition of the penalties imposed under Rule 15, in view of the decision of the Hon‟ble Apex Court in the case of Rajasthan Spinning and Weaving Mills Ltd [2009 (238) ELT 3 (SC)].
4.18 Appellant has relied upon certain other decisions of the tribunal which we have not considered as we have based our order on the decisions of Hon‟ble Supreme Court and Hon‟ble High Court. In view of the discussions as above, we do not find any merits in the appeal filed by the appellant. 5.1 Appeal is dismissed.
(Pronounced in open court on-09 February, 2024) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Akp