Bombay High Court
Indo Swiss Embroidery Industries ... vs Commissioner Of Central Excise, ... on 17 July, 2017
Bench: Anoop V. Mohta
dgm 1 os-judgment-cexa-111-15.sxw
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO. 111 OF 2015
Indo Swiss Embroidery Industries Limited,
a company registered under the
Companies Act, 1956, having factory at
Plot No. 2134/4, Near Dadra Check Post,
Dadra, (UT of D & NH) ..Appellant
Versus
Commissioner of Central Excise, Vapi,
4th floor, Adarsh Dham building,
Opposite Town Police Station,
Vapi 396 191. ..Respondent
Mr. Bharat Raichandani i/by Mr. Gaurav Agrawal for the Appellant
Mr. Pradeep S. Jetly for the Respondent.
CORAM: ANOOP V. MOHTA AND
SMT.ANUJA PRABHUDESSAI, JJ.
CLOSED FOR JUDGMENT : July 10, 2017
PRONOUNCED ON : July 17, 2017
JUDGMENT (Per Anoop V. Mohta, J.):
1 This is an Appeal under Section 35-G of the Central Excise
Act, 1944 (for short, "Excise Act"). The Appellant has preferred this
Appeal against final order dated 27.09.2013 passed by the Customs,
dgm 2 os-judgment-cexa-111-15.sxw
Excise & Service Tax Appellate Tribunal, Ahmedabad (The Appellate
Tribunal) and prayed to quash and set aside the order on the
following questions of law:
(1) Whether, in the facts and circumstances of the
present case, the Appellate Tribunal was correct in
holding that the appellant is liable to pay interest when
there is no provision in law for charging interest?
(2) Whether, in the facts and circumstances of the
present case, the Appellate Tribunal was correct in
holding that the appellant has not agitated this issue
and hence, the same cannot be gone into?
2 Heard finally by consent of the parties, therefore, this final
judgment.
3 The relevant facts are as under:
The Appellant is inter alia, engaged in the manufacture of
Embroidered Grey Fabrics falling under Chapter Sub Heading No.
5804.11 of the Central Excise Tariff Act, 1985 (Excise Tariff Act). The
Central Excise Officers, Daman, summoned the appellant for
dgm 3 os-judgment-cexa-111-15.sxw
production of records. On scrutiny of the records, the central excise
department alleged that the appellant had incorrectly classified the
product under chapter heading No. 5804.11 as "Lace/Motif of Cotton"
instead of chapter heading No. 5804.19 as "Embroidery". The
department was of the view that the appellant is liable to pay AED
(TTA) @ 15% instead of 8% w.e.f. 20/08/1998 onwards.
4 The provision of law which is applicable is: Sub-section (3)
of Section 3 of the Additional Duties of Excise (Textile & Textile
Articles) Act, 1978 (ADE (T&TA) Act) and the same reads as under:
"Section 3 : Levy and Collection of additional
duties :-
(1) .....
(2) .....
(3) The provisions of the Central Excise act, 1944
and the rules made thereunder, including those
relating to refunds and exemptions from duties, shall,
so far as may be, apply in relation to the levy and
collection of the duties of excise leviable under this
section in respect of any goods as they apply in relation
to the levy and collection of the duties of excise on
such goods under the Act or other rules."
It is clear that Section 3(3) of the Excise Act adopts the provision of
Central Excise and Salt Act relating to levy and collection including of
refund and exemption from duty. There is no provision in this ADE
dgm 4 os-judgment-cexa-111-15.sxw
(T&TA) Act for imposing of penalty so contemplated under Section
11AC of Excise Act and the charge of interest provided under Section
11AB of Excise Act. The above provision, therefore, we have to keep
in mind while deciding the issues so raised in the present Appeal.
5 On 02.05.2003, the appellant replied to the show cause
notice and denied the allegations. On 31.03.2004, the Joint
Commissioner, Central Excise, Vapi vide its order confirmed the entire
demand of ADE (T&TA) of Rs.6,23,478/- along with interest under
Section 11AB and imposed equal penalty amounting to Rs.6,23,478/-
under Section 11AC of the Central Excise Act, apart from penalty of
Rs.1,00,000/- under erstwhile Rule 173-Q of Central Excise Rules,
1994 (The Rules).
6 Being aggrieved, the appellant filed appeal before the
Appellate Tribunal. The Appellate Tribunal vide Order dated
21.09.2005 held that the appellant is liable to pay the demand.
However, the Appellate Tribunal remanded the matter back to the
original authority to re-determine the penalty to be imposed under
Section 11AC in light of the decision of the Apex Court in the case of
dgm 5 os-judgment-cexa-111-15.sxw
State of Madhya Pradesh vs. M/s. BHEL,1. On 20.10.2006, however,
vide its order, the Joint Commissioner of Central Excise, Vapi imposed
same penalty on the appellant under Section 11AC of the Excise Act
and the Rules.
7 Being aggrieved, the appellant herein filed appeal before
the Commissioner of Central Excise (Appeals), Vapi. The
Commissioner of Central Excise (Appeals) vide stay order dated
15.10.2007 directed the appellant to pre-deposit Rs.4,00,000/- as a
condition to hear the appeal. The appellant filed an application for
modification of stay order. The Commissioner of Central Excise
(Appeals) rejected the appeal for non-compliance vide order dated
23.06.2008. On 07.11.2008, on appeal by the appellant, the
Appellate Tribunal vide order directed the appellant to deposit 50% of
the penalty amount i.e. Rs.3,12,000/- and remanded the case back to
the Commissioner (Appeals) to decide the issue on merits.
8 On 27.02.2009, the Commissioner of Central Excise
(Appeals) vide its order upheld the entire penalty again. On
1 1998 (99) ELT 33 (SC)
dgm 6 os-judgment-cexa-111-15.sxw
22.07.2009, on further appeal, the Appellate Tribunal, once again,
vide its order remanded the matter back to the adjudicating authority
to follow the directions contained in the earlier order passed by the
Appellate Tribunal.
9 In the year 2010, 2011 and 2012, the adjudicating
authority dropped the penalty under Section 11AC ibid vide order
dated 29.03.2010 on the ground that there was no provision for
confiscation or imposition of penalty under Section 11AC ibid for
failure to pay AED (T & TA) which was levied under the provisions of
the ADE (T&TA) Act. Consequently, the appellant filed an application
seeking refund of pre-deposit of Rs. 3,12,000/- made in compliance of
order dated 07.11.2008 passed by the Appellate Tribunal.
10 On 26.12.2012, however, its order the adjudicating
authority sanctioned the refund of Rs.3,12,000/- but appropriated the
same against interest amounting to Rs.8,45,446/- alleged to be
payable by the appellant on AED (T & TA) of Rs.6,23,478/-.
11 Being aggrieved, the appellant filed appeal before
dgm 7 os-judgment-cexa-111-15.sxw
Commissioner of Central Excise (Appeals), Vapi, on the ground that
in absence of statutory provision, no interest can be demanded from
the appellant. However, vide order dated 11.04.2013, the
Commissioner of Central Excise (Appeals) rejected the appeal filed by
the appellant.
12 In 2013, being aggrieved, the appellant filed an appeal
before the Appellate Tribunal. However, the Appellate Tribunal by
impugned order (Exhibit "A") rejected the appeal on the ground that
the appellant had not challenged order dated 21.09.2005, and hence,
the same has become final. The appellant therefore cannot agitate the
issue of interest. Hence, this Appeal.
13 Admittedly, Sections 11AC and 11AB of Excise Act have
not been incorporated in the ADE (T&TA) Act. The counsel appearing
for the Department/Respondent though endeavoured unable to
pinpoint the incorporation of these Sections. In absence of any
statutory provisions, it is settled that any demand of penalty (11AC)
and/or interest (11AB) would be without jurisdiction and authority of
law. It is settled that a clear statutory mandate requires for authority
dgm 8 os-judgment-cexa-111-15.sxw
to collect and/or raise demand of any tax and penalty and/or interest.
In the absence of such provision, any demand in the present case, of
penalty/interest is unauthorised, impermissible and unsustainable.
14 The learned counsel appearing for the Respondent
submitted that the adjudicating authorities have, at every stage,
confirmed the demand including of penalties and recovery of interest
and, therefore, the issues have attained finality; the Appellant ought
to have, at the relevant time, filed an Application for rectification of
mistake; the same was not done and, therefore, such concurrent
findings so given by the authorities need not be disturbed and/or
interfered with in the present Appeal. We are not inclined to accept
these contentions, even the reasoning given by the learned authorities
while confirming the said demand of interest specifically in view of
above provision of law and fact. There is no provision to collect such
taxes and specifically when there is nothing pointed out nor any
reason given by the authorities, how they have charged this interest
referring to Section 11AB of the Act. If there is no provision and
authority to raise such demand, the rectification application filed or
not, in no way confirm the power to collect tax or penalty and/or
dgm 9 os-judgment-cexa-111-15.sxw
interest without the provisions of law and authority. There is no
estoppal against the law. Such demand itself, as recorded, as we have
noted after going through the reasons given by the authorities, was
not based upon any facts and/or finding so recorded on the interest or
penalty. The Supreme Court in many cases, specifically in Collector of
C. Ex., Ahmedabad v. Orient Fabrics Pvt. Ltd.2 expressly concluded
that in the absence of any specific provision for any penalty and/or
confiscation proceeding any imposition of this nature is unwarranted
and without authority of law. It is reiterated that the authority has to
be specific and explicit and expressly provided in view of law and
Article 265 of the Constitution of India. The present case falls within
the ambit of protection so provided for such law.
15 Additional factor in the present case is that all the
authorities have confirmed the finding so arrived at about the interest,
but without giving any reason to charge such penalty and/or interest
referring to Sections 11AC and 11AB of Excise Act. Mere confirmation
of such demand of penalty and/or interest by the authority, in the
absence of provisions of law, as it goes to the root of the matter for
2 2003 (158) E.L.T. 545 (S.C.)
dgm 10 os-judgment-cexa-111-15.sxw
want of law and authority, is unsustainable and is required to be
interfered with. The taxing provisions must be cleared and so also the
charging Section and the mechanism to collect it. It needs to be
construed strictly. [Commissioner of Income Tax (Central)-I, New Delhi
Vs. Vatika Township Private Limited3 (5 Judges Bench).]
16 We have noted that the Appellate Tribunal while passing
the order though dealt with Section 11AC of Excise Act, referring to
Supreme Court judgment in State of M. P. vs. BHEL (supra), set aside
the demand of penalty by allowing the Appeal of the Appellant.
17 The Department itself, therefore, accepted the position of
law and even set aside such imposition under Section 11AC by
Additional Commissioner by order dated 29.03.2010. In view of
above, the order passed by the Assistant Commissioner dated
26.12.2012 whereby order to refund the amount in view of above, but
directed to appropriate the interest to be paid by the assessee
(Appellant) under Section 11 of the Excise Act, is unsustainable.
This is again contrary to the provisions of law. If interest is not
payable for want of specific authority and provision, there is no
question of appropriation of any amount towards any other refund.
The order of recovery of interest at appropriate rate for delayed
payment by invoking the provision of Section 11AB of Excise Act,
3 (2015) 1 SCC 1
dgm 11 os-judgment-cexa-111-15.sxw
therefore, is unjust, unclaimable as it is illegal. In view of above
reasons, the confirmation of the same by the impugned order dated
27.09.2013 is also unsustainable and is required to be set aside. The
Appeal is required to be allowed.
18 Therefore, the following order :
ORDER
(i) Both the questions are answered in the Negative.
(ii) Appeal is allowed in terms of prayer (b) which
reads thus:
(b) that this Hon'ble Court be pleased to
quash and set aside the Final Order No.
A/11253/WZB/AHD/2013 dated 27.09.2013
passed by the Appellate Tribunal in Appeal
No.E/11591/2013 (Exhibit A).
(iii) No costs.
(ANUJA PRABHUDESSAI,J.) (ANOOP V. MOHTA, J.)
