Once the amended rules have come into force, they have to be given full effect and, therefore, for period from 1.4.2003, new rate of interest shall apply and not rate of interest which was prevalent when amount of duty was due - Otherwise, entire rule becomes infructuous/otiose: CESTAT
By TIOL News Service
MUMBAI, APR 04, 2014: THIS is a Revenue appeal.
The assessee defaulted in payment of excise duty amounting to Rs.2,26,240/- for the month of February, 2003 and Rs.1,81,656/- for the month of March, 2003.
The due dates for payment of duty were 15.3.2003 for February, 2003 and 15.4.2003 for the month of March, 2003. However, the payment of duty was made only on 2.9.2003; hence there was a delay of 169 days and 148 days respectively in payment of the duty for the months of February and March, 2003 respectively.
The rate of interest underwent change vide Central Excise (Second Amendment) Rules, 2003, which came into force from 1.4.2003 [Notification 12/2003-CE(NT) refers]. As per the amended rule, the rate of interest applicable was @2% per month or Rs.1,000/- per day whichever is higher for the period starting from the first day of the due date till the date of actual payment of the outstanding amount . The Rule also provided that the total amount of interest payable shall not exceed the amount of duty, which has not been paid by the due date.
The department issued notice to the appellant demanding interest as per the amended provisions for the period from 1.4.2003 onwards till 2.9.2003 , whereas the appellant contended that the rate of interest applicable would be those prevailing on the due date . The adjudicating authority confirmed the interest demand as per the amended provisions.
The Commissioner(A) set aside the order and held that the rate of interest applicable will be the one that was prevailing on the date when the duty was required to be paid.
As mentioned, Revenue is aggrieved and, therefore, has filed an appeal before the CESTAT.
It is submitted that when the rules were amended and new rates of interest were prescribed effective form 1.4.2003, it is the new interest rate that should apply on the outstanding amount of duty; otherwise the amendment made in the interest rate would be infructuous and otiose.
None appeared for the respondent assessee.
The Bench observed –
"5.1 The short question is what should be the rate of interest apply when the duty is outstanding. It is not in dispute that the interest rate was enhanced w.e.f. 1.4.2003 by amending sub-rule (3) of Rule 8 of the Central Excise Rules, 2002 and as per the amended provisions, the rate of interest applicable was 2% per month and Rs.1000/- per day, whichever is higher, subject to the cap of the amount of duty outstanding. Once the amended rules have come into force, they have to be given full effect and, therefore, for the period from 1.4.2003, the new rate of interest shall apply and not the rate of interest which was prevalent when the amount duty was due. Otherwise, the entire rule becomes infructuous/otiose. It is a settled position in law that the statute should not be interpreted so as to make the provisions infructuous or otiose.
6. In view of the above, the view taken by the lower appellate authority is clearly unsustainable in law. Accordingly, we set aside the impugned order and allow the appeal filed by the Revenue by holding that the interest leviable for the period from 1.4.2003 to 2.9.2003 would be at the rate prescribed in the amended provisions of sub-rule (3) of Rule 8 of the Central Excise Rules, 2002."
In passing : Incidentally, although the amendment was made in rule 8 on 01.03.2003 w.e.f 01.04.2003, the first illustration referred to default committed in respect of the goods cleared in the month of February and in respect of which duty was payable by the 5 th of March (this payment by the 5 th day of the following month itself was newly introduced w.e.f 01.04.2003). Be that as it may, take a look at the Illustration 1; the figure “A” has not been calculated and shown in the notification for reasons unknown –
Illustration 1- X, an assessee, fails to pay excise duty of Rs.31 lakhs payable on the goods cleared in February , by the 5 th of March . X pays the amount on 10th of March. The default has continued for 5 days. The interest payable by X is computed as follows:-
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2% of the amount of default for 5 days
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= 2% of Rs.31 lakhs x 5 / 31
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= Rs.
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- (A)
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Rs.1000 per day of default
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= 5 x Rs.1000
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= Rs.5000
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- (B)
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The interest payable is the higher of the amounts (A) and (B).
By the way, we did not have DDT those days!
(See 2014-TIOL-509-CESTAT-MUM)
