JULY 18, 2016

By G Jayaprakash, Advocate

THOSE who eat ‘RICE' were surprised when the Finance Minister hailing from Tamil Nadu informed his colleague, Civil Supplies Minister hailing from Kerala that ‘RICE' is not an agricultural produce and hence the exemptions available to agriculture produce in Service Tax is not applicable to RICE. The timely intervention of the Hon'ble Chief Minister of Tamil Nadu Smt. J.Jayalalithaa, resolved the issue by writing to the then Prime Minister and forcing CBE&C (TRU) to issue an exemption Notification.[Please see DDT 2293 & 2296] This issue is reflected when I read the news [DDT 2880] of a recent meeting of the Regional Advisory Committee of the Cochin Central Excise Zone, where in aquery was raised:

"Notification 13/2016 dated 1.03.2016 supersedes Notification 12/2014 which prescribed different rates of interest from 18% - 30 % from 1.10.2014. The Notification prescribes two different rates of 24% and 15% as the case may be. But the supersession is subject to the condition "except as respects things done or omitted to be done before such supersession" .

Please clarify whether the above expression would cover:

1. Show Cause Notice issued but not adjudicated.

2. Show Cause adjudicated but pending filing of appeal

3. Investigation started/Audit completed but no show cause issued.

In case no Departmental Investigation/Enquiry/Audit initiated whether the assessee can adopt 15% interest for the past period also.

On this query, the Commissioner Trivandrum explained to the members that the phrase "Except as respects things done or omitted to be done before such supersession" suggests that there is an existing order and this order is superseded or replaced by new order to such an extent that where the replacing or new order is silent, the prevalent rules and process are to be followed.

It was clarified that in all the situation/cases mentioned in the query, the interest rate applicable would be the rates notified as per the Notifications which were in force during the respective periods. The new Interest rate as specified in NotfnNo.13/2016 takes effect only with effect from the date the Finance Bill, 2016 receives the assent of the President of India and the changes has only prospective effect."

The phrase under reference was referred to answers.com and the answer is:

"Let us break the statement in small parts. Logical conclusion would be as under:1. An existing order is there2. This existing order is superseded be as under:

1. An existing order is there2. This existing order is superseded replacing or new order is silent, the prevalent rules and process are to be followed. i.e. what the phrase "Except as respects things done or omitted to be done before such supersession" suggests. Hope you will agree."

Doesn't the nation need a better answer on this query from the authorities by analysing the wordings of Section 75 of the Finance Act, 1994 than what answers.com informs while interpreting a Notification?

Interest rate under Section 75 of the Finance Act, 1994 - Notification No. 12/2014-S.T. superseded

In exercise of the powers conferred by section 75 of the Finance Act, 1994 (32 of 1994) and in supersession of the notification No. 12/2014-Service Tax, dated the 11th July, 2014, published in the Gazette of India, Extraordinary, vide number G.S.R. 482(E), dated the 11th July, 2014, except as respects things done or omitted to be done before such supersession, the Central Government hereby, for delayed payment of any amount as service tax in the situation mentioned in column (2) of the Table below, fixes the rate of simple interest per annum mentioned in the corresponding entry in the column (3) of the said Table :-

2. This notification shall come into force on the day the Finance Bill, 2016 receives the assent of the President.

[Notification No. 13/2016-S.T., dated 1-3-2016]

This Notification is issued as per Section 75 of the Act and it is a settled issue that the Notification cannot go beyond the scope of the Section empowering to issue a Notification. The section clearly states the applicable rate of interest for delayed payment is as is for the time being fixed by the Central Government , by Notification in the official Gazette. The phrase “for the time being" is judicially interpreted to that of time indefinite, and refers to indefinite state of facts which will arise in future and which may vary from time to time.

The incorporation of the term "except as respects things done or omitted to be done before such supersession" appears to be an unintentional insertion due to cut and paste everyone adopts for ease of doing business. When rate of interest is re-fixed either by superseding or amending the existing rate, the rate applicable will be the rate prevalent at the time of payment.

This statement is supported by Circular No. 15/2009-Cus, dated 12-5-2009 on Levy of Interest under Section 47(2) of the Customs Act, 1962 for delayed payment of duty in respect of clearance of goods from a bonded warehouse

"(1) .......

(2) Where the importer fails to pay the import duty under sub-section (1) within five days excluding holidays from the date on which the bill of entry is returned to him for payment of duty, he shall 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 notification in the Official Gazette, on such duty till the date of payment of the said duty".

A harmonious reading of the above provisions indicates that

3. the provisions of Section 47(1) are applicable to the goods entered for home consumption by filing a bill of entry accordingly, and the interest liability for delayed payment of duty after the return of Bill of Entry is attracted on import duty as assessed under Section 47(1) on such goods.

Further, what is the consequence of a continuing offence will equally be applicable for a continuing omission. A beneficial rate of interest prevalent on date of payment is the rateapplicable for payment of interest as per Section 75 of the Act. The applicable rate of interest for delayed payment of Service Tax from 14.5.2016 is 15%. So an assessee, as per law, need to pay interest only @15% if the same is paid on or after 14.5.2016 and not as explained in the RAC.

Hope a messiah will intervene and save the nation as in the case of “RICE"to avoid unnecessary litigation.