Customs, Excise and Gold Tribunal - Bangalore
Goldstone Teleservices Limited vs The Commissioner Of Customs And Central ... on 18 October, 2006
Equivalent citations: 2007(116)ECC147, 2007ECR147(TRI.-BANGALORE), 2007(209)ELT23(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIA No. 49/2005 (H-III)CE dated 28.02.2005 passed by the Commissioner of Customs & Central Excise (Appeals-III), Hyderabad.
2. There was some dispute on the excitability of Cable Jointing Kits supplied by the appellant to the Department of Telecommunications. Due to Revenue's compulsion, duty was paid under protest. However, the Hon'ble Andhra Pradesh High Court ruled that no duty is payable on Cable Jointing Kits, as putting up various items as a Kit does not amount to manufacture. Refund of duty was ordered vide Writ Petition No. 5048/1998 dated 27.02.1998. The Assistant Commissioner, Hyderabad, in his order dated 6.5.1998, rejected the refund claim on grounds of unjust enrichment. The appellants approached the Commissioner (Appeals). The Commissioner (Appeals), in his order dated 20.07.1998 held that the appellant was entitled for the amount of refund only and not for the interest. Pursuant to the above order of the Commissioner (Appeals). The Assistant Commissioner, in his OIO dated 6.8.1998, sanctioned a refund of Rs. 2,35,36,913/-. A cheque dated 6.8.1998 was issued. As interest was not paid, the appellants approached the Hon'ble High Court of Andhra Pradesh. The High Court ruled that the appellant is entitled for interest on the amount of Rs. 2,35,36,936/- from the date of payment made to the respondent under protest. Consequent to the decision of the High Court, the Assistant Commissioner, Hyderabad-I Division passed the OIO dated 29.07.2004. As per the order of the Adjudicating Authority, the rate of interest was at 24%. This is not in dispute. Regarding the date till which interest was to be paid, he held that the entire amount of Rs. 2,35,36,913/- was refunded by way of cheque dated 6.8.1998 on the same day. It was held that the date of handing over the cheque is the date of payment. Hence, interest was required to be paid only upto 6.8.1998 and not upto 11.08.1998 as claimed by the appellants. Interest at 24% was calculated on the duty paid in an entire month. But, an amount of Rs. 96,79,716/-claimed as interest on interest was rejected by the Adjudicating Authority on the grounds that the appellants are not eligible for the same in terms of the High Court order. Aggrieved over the order dated 29.07.2004, the appellants approached the Commissioner (Appeals). The prayer of the appellants before the Commissioner (Appeals) is that they are entitled for interest upto 11.08.1998 as the cheque was realized only on that date and, therefore, the date of payment of the duty is 11.08.1998. This amount comes to Rs. 70,47,025/-. Further, the appellant took the stand that when refund made is part principal and part interest, and when the principal amount is payable with interest, interest portion should be recovered first and the remaining amount adjusted towards principal. This stand was not accented by the Commissioner (Appeals). Therefore, the Commissioner (Appeals), in the impugned order dated 28.2.2005, has rejected the appellant's appeal. According to the Commissioner (Appeals), the case-laws quoted by the appellants are not relevant. The appellants strongly challenge the impugned OIA.
3. S/Shri M. Chandrasekharan, the learned Senior Advocate and V.J. Sankaram, the learned Advocate, appeared for the appellants and Shri Anil Kumar, the learned JDR, for the Revenue.
4. The learned Advocates, after narrating the circumstances leading to the grant of refund, urged the point that where a debt carries interest, payments are appropriated in the first place towards the interest. The following case-laws were relied on:
(i) AIR 2002 Madras 254 R. Lingaraj, Petitioner v. Dr. Arumugha Pandian, Respondent When in the execution proceeding, the decree holder had received the total amount of costs and interest due to him on the day of payment and also received a portion of the principal amount on the same day by cheque issued by the judgment debtor, the decree holder would be permitted to calculate the interest only to the extent of the unpaid principal amount and not on the whole principal amount because as per law interest would cease to the extent of the amount paid towards the principal.
(ii) : . Industrial Credit and Development Syndicate now called ICDS, Ltd. Appellant v. Smt Smithaben H. Patel and Ors., Respondent.
No direction given by trial court regarding mode for payment. There is no agreement between parties specifying such mode. If debtor while making payment indicates manner in which appropriation is to be made, Creditor is not bound to accept such mode and should follow general rule of adjustment firstly towards interests and costs and then to principal amount.
(iii) 1996 (1) ALD 561. Andhra Pradesh: Sukhdev Pershad v. B. Kishanlal and Ors.
All amounts paid by the judgment debtor towards decree amount should first be appropriated towards interest and excess if any towards the principal amount.
(iv) 1998 (68) STC 177. State of Andhra Pradesh v. Commercial Tax Officer, Kurnool and Anr.
The authorities and the Tribunals functioning within the jurisdiction of the High Court, and in respect of whom the High Court has the power of superintendence under Article 227 of the Constitution are bound to follow the decisions of the High Court, unless on appeal the operation of the judgment has been suspended. It is not possible for the authorities and the Tribunals to ignore or refuse to follow the decisions of this Court on the pretext that an appeal has been filed in the Supreme Court and is pending, or that steps are being taken to file an appeal. If any authority or Tribunal refuses to follow any decisions of the High Court on the above grounds, it would clearly be guilty of committing contempt of court and would be liable to be proceeded against.
(v) . Meghraj and Ors., Appellants v. Mst. Bayabai and Ors., Respondents The normal rule in the case of a debt due with interest is that any payment made by the debtor is in the first instance to be applied towards satisfaction of interest and thereafter to the principal.
(vi) AIR (37) 1950 Federal Court 38 from : AIR (33) 1946 Mad.47 Shanmugam Pillai and Ors., Appellants v. Annalakshmi Ammal and Ors., Respondents Appropriation of debt, endorsement of payment not stating whether it is towards principal or interest. Payment must first be appropriated towards interest and balance to principal.
(vii) The Madras Law Journal Reports (Vol. XL-part XVIII) 549. Privy Council Meka Venkatadri Appa Row and Ors., appellants v. Parthsarathi Appa Row, Respondents The rule is that where a debt carries interest, payments are appropriated in the first place towards the interest.
4.1 It was further urged that as per the High Court's order, the date on which the cheque was first given, the principal amount together with interest should have been discharged. Since that was not done, the amount which was paid on that date contains only interest accrued upto that date and also part of the principal amount. From that date onwards, the principal amount remaining to be paid after the issue of cheque, would amount to Rs. 69,69,250/-. If this amount is discharged together with interest, the total amount still outstanding from the department would be Rs. 99,40,978/-. The Assistant Commissioner limited the interest to the date of payment of cheque which is not correct and proper. He refunded an amount of Rs. 69,72,293/-. Therefore, an amount of Rs. 99,40,978/- is payable by the Department towards full discharge of the amounts collected and the interest accrued due to such wrongful collection.
4.2. The observation of the Commissioner (Appeals) that there are no provisions to support the claim of the appellants under Central Excise law is not correct. The High Court has extensively discussed the applicability of the Central Excise law and was pleased to award the interest on considerations outside the purview of the Central Excise Act.
4.3 The Commissioner (Appeals) failed to notice that since the levy itself is unconstitutional and illegal, interest is payable from the date of collection. The non-application or non-availability of provision in Central Excise law can be no excuse, since this case of violation of Article 265 of the Constitution of India where amounts were collected as duties of excise when there was hardly an iota of authority for doing so, the law laid down by Courts shall have precedence. The following case-laws were relied on:
(i) CCE (Appeals), Mangalore v. Siddharth Industries 2003 (157) ELT 622(Commr. Appl.)
(ii) Hindustan Motors Ltd. v. CCE, Calcutta-IV
(iii) Chimanlal S. Patel v. CIT 1994 (21) ITR 419;
(iv) D.J. Works v. CIT .
5. The learned JDR urged that "The decision cited by the appellant M/s. Gold Stone Teleservices Ltd., is pertaining to grant of refund and interest under Income Tax Act which cannot ipso facto be applied to refund under Central Excise Act. Normally in case of recovery of arrears of Central Excise duties wherever arrears is paid by the noticee in instalments, amount paid adjusted towards principal first and remaining towards interest payable thereon as a matter of practice since no specific procedure has been prescribed in the Central Excise Act/Rules to calculate the liability of interest. As such in case of refund too, same procedure should be applicable as a principle of equity."
6. We have gone through the records of the case carefully. When the refund along with interest was to be paid as per the Hon'ble High Court's order dated 27.2.1998, the lower authority issued a cheque for an amount of Rs. 2,35,36,913/- on 06.08.1998. As the levy and collection on a non-excisable commodity is illegal, the duty collected is without any authority of law. In terms of the High Court's order, Revenue should have discharged their liability towards the principal amount along with interest on 6.8.1998. They had not done that. When the refund amount is Rs. 2,35,36,913/-, only that amount was paid on 6.8.1998. Since there is an interest liability, as per the decided case-laws which were cited by the learned Advocates, that amount should be first adjusted towards the interest liability. In that view of the matter, on 6.8.1998, the entire refund amount had not been paid, as first the interest liability has to be adjusted. In fact, the appellants have stated that the principal amount which remained to be paid after the issue of the cheque amounts to Rs. 69,69,250/-. This amount had not been paid till the order dated 29.07.2004 of the Assistant Commissioner. Therefore, on this amount, interest is payable from 6.8.1998 to 30.04.2004 as claimed by the appellant. This amount comes to Rs. 99,40,978/-. The appellants are entitled for this amount in terms of the Hon'ble Andhra Pradesh High Court's order and also the decided case laws which hold that when a debt carries interest, payments are appropriated in the first place, towards the interest. The law laid down by the Supreme Court cannot be ignored saying that there is no provision for such an adjustment in the Central Excise laws. In fine, we allow the appeal with consequential relief, if any.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)