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S.C. Dharmadhikari, J—By this petition under Article 226 of the Constitution of India, the petitioner - M/s. Swan Mills Limited is challenging a communication/letter dated 18th October, 2006 (Annexure A to the writ petition) and a direction therein to pay interest as per applicable rate from the relevant date under section 11AA of the Central Excise Act, 1944, after 26th August, 1995, upto the date of actual payment of Government dues (duty and penalty), namely, upto 7th October, 2004. This interest amount works out in terms of the calculation by the Central Excise authorities at Rs. 1,69,55,030/-.
This case has a chequered history. The petitioners were, at the relevant time, carrying on business as a composite textile mill, engaged, inter alia, in the manufacture of cotton yarn, man-made yarn, cotton fabrics and man-made fabrics as well as processing the same. The respondents to this writ petition had imposed, levied and assessed excise duty and additional duty under the erstwhile Central Excise Tariff Item Nos. 19(1) and 22(1) and additional duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 on cotton fabrics and man-made fabrics processed and manufactured by the petitioners in their processing house. The petitioners filed a Miscellaneous Petition before this Court being Misc. Petition No. 1604 of 1979 on 24th July, 1979, challenging the validity and legality of the above imposition and levy. This writ petition was admitted by this Court and an interim order was passed by which the Revenue/Central Excise Department was restrained from recovering the above duties from the petitioners on the condition that the petitioners furnish bank guarantees to the satisfaction of the Prothonotary & Senior Master of this Court. It is the case of the petitioners that pursuant to this order dated 26th July, 1979, copy of which is at Annexure B, they furnished the bank guarantees to the satisfaction of the Prothonotary & Senior Master of this Court.
Eventually this writ petition was dismissed by this Court on 17th November, 1983 along with several other petitions involving identical challenge. Against the order and judgment dated 17th November, 1983, the Special Leave Petition was filed in the Hon''ble Supreme Court of India. The petitioners applied for stay of recovery of the above duties and by an order dated 9th December, 1983, in Special Misc. Petition No. 36924 of 1983 in Special Appeal No. 10794 (NT) of 1983, the Hon''ble Supreme Court passed an interim order. The interim order contained a direction to the petitioners to deposit 50% of the disputed amount in cash, in instalments and furnish bank guarantees for the 50% balance sum which was to be kept alive from time to time. The petitioners do not dispute that by judgment and order dated 4th November, 1988, the Special Appeal in the Hon''ble Supreme Court together with a group of matters came to be disposed of. The petitioners'' challenge to the legality and validity of the above duties failed. The Union of India and the authorities exercising powers under the respective statutes were held entitled to recover the amount by way of arrears of excise duty. They were given liberty to enforce the bank guarantees with a view to recover these arrears.
Thereafter, two writ petitions were filed in this Court being Writ Petition No. 236 of 1989 and Writ Petition No. 202 of 1989 praying for a restraint order against the department of Central Excise from recovering the excise duty if demanded. The interim orders were refused. The petitioners filed appeals before the Division Bench of this Court aggrieved by such refusals being Appeal No. 507 of 1989 in Writ Petition No. 236 of 1989 and Appeal Nos. 227 of 1989 and 285 of 2989 in Writ Petition No. 202 of 1989. This Court while dismissing the appeals by two orders dated 27th April, 1989, directed the Prothonotary & Senior Master to take steps to encash the bank guarantees within two weeks from the date of the order and pay the amount to the Union of India. The petitioners filed three Special Leave Petitions against this Division Bench order but all the SLPs being SLP No. 7136 of 1989, 7013 and 7014 of 1989 were dismissed by the Hon''ble Supreme Court on 16th May, 1989.
In response to an application made to the Prothonotary & Senior Master by the respondents, he addressed a letter to the Bank of India and Bank of Baroda who had furnished the bank guarantees. By the letters dated 24th July, 1992 and 25th July, 1992, the Bank of India and Bank of Baroda respectively informed the Prothonotary & Senior Master of this Court that they are unable to pay any sums under these bank guarantees because they had expired. Once again another letter was addressed on 10th June, 1992 by the Prothonotary & Senior Master of this Court. Thereafter, the second respondent - the present petitioner moved a Contempt Notice of Motion No. 432 of 1994 in Misc. Petition No. 1604 of 1979 alleging contempt of this Court''s order and undertaking. This Notice of Motion was dismissed by this Court on 2nd September, 1994. Thereafter, the respondent No. 3 to this writ petition directed the petitioners to pay the dues of Rs. 96,20,511/-. The petitioners requested the third respondent to return them the original bank guarantees to enable them to encash and pay off the dues as the said bank guarantees were not only in the safe custody of the Prothonotary & Senior Master of this Court, but the Prothonotary & Senior Master was directed to encash the bank guarantees in terms of the Division Bench order of this Court. Since the compliance was not made with this direction, the third respondent passed an order attaching the immovable properties of the petitioner. The order in that behalf is dated 13th October, 1999 (Annexure J). In response to this detention order, the petitioners approached the Addl. Commissioner of Central Excise (Task Force) to vacate this detention order subject to the petitioners paying duty amount in the above sum. By the letter dated 6th October, 2004, the petitioner referred to the discussions and informed that they have decided to deposit the amount. The petitioners deposited the amount of duty as agreed which was equal to the bank guarantees. The details of the payment are set out in paragraph 22 at pages 9 and 10 of the writ petition. Thereafter, the attachment/detention of the immovable properties was vacated.
The petitioners complain that though the original bank guarantees were not returned to them but the duty amount was paid as above, they relied upon the oral assurance of the then Commissioner of Central Excise of not levying any interest on payment of the duty amount. It is in these circumstances they allege that the impugned letter directing payment of interest quantified at the above sum is illegal. It is contrary to the principles of natural justice as well.
Mr. Patil, the learned counsel appearing on behalf of the petitioners submits that the impugned letter contains a direction to pay interest. This is not a simplicitor communication, but containing a direction and of binding nature. There was no show cause notice, leave alone any prior opportunity of being heard before such a direction has been issued. The direction does not follow any demand or adjudication. The sum has been quantified unilaterally and equally the direction has been issued in total disregard to the principles of natural justice. Hence, on this ground alone the writ petition deserves to succeed.
Mr. Patil alternatively submits that the direction to pay interest in this case cannot be said to be automatic or following alleged non payment of the sum due within a stipulated time. Even the interest as demanded is in pursuance of a statutory power. The provision conferring power of this nature came on the statute book later on. In such circumstances and for lack of power as well, this communication deserves to be quashed and set aside.
It is further alternatively submitted that the bank guarantees were not encashed in time by the Registry of this Court. No fault can be found with the petitioner in that regard. Now, and belatedly for no fault of the petitioner, interest is claimed from it. Even the period for which interest is claimed is lost sight of. If the relevant period was 1979 to 1984, but the litigation was pending in the Hon''ble Supreme Court of India, then also the petitioner cannot be faulted or held responsible. After the proceedings concluded and the demand was raised, the money was paid on 7th October, 2004. There is no justification for demanding interest and by a communication issued on 18th October, 2006. That is also claiming interest for a past period. The demand is thus time barred. In these circumstances, the petitioner be granted the reliefs as prayed in terms of the prayer clauses. Mr. Patil has handed over a compilation containing copies of Rule 10, 10A of the Central Excise Rules, 1944 and Section 11A, 11AA and 11AB of the Central Excise Act, 1944. He has also relied upon the following judgments of the Hon''ble Supreme Court, other High Court and this Court in support of his contention.
(1) Commissioner of Trade Tax, Lucknow Vs. Kanhai Ram Thekedar, AIR 2005 SC 3033 : (2005) 185 ELT 3 : (2005) 5 JT 13 : (2005) 4 SCC 472 : (2005) 3 SCR 984 : (2005) 141 STC 1 .
(2) Collector of Customs vs. T.V.S. Whirlpool Ltd.1996 (66) ECR 345 .
(3) Government of India Vs. Citedal Fine Pharmaceuticals, Madras and Others, AIR 1989 SC 1771 : (1989) 24 ECR 440 : (1989) 42 ELT 515 : (1990) 184 ITR 467 : (1989) 3 JT 118 : (1989) 2 SCALE 44 : (1989) 3 SCC 483 : (1989) 3 SCR 465 : (1989) 2 UJ 368 .
(4) Jai Bharat Maruti Ltd. Vs. Commissioner of Central Excise, (2014) 307 ELT 282 : (2014) 26 GSTR 141 .
On the other hand, Mr. Rao appearing on behalf of the respondents invited our attention to the affidavit-in-reply and submits that this is a fit case where the direction to pay interest should be sustained. He submits that the writ petitioner before this Court filed two writ petitions. The first writ petition is to question the legality and validity of the duties. In that the Department or Revenue was involved in litigation right upto the Hon''ble Supreme Court. Having succeeded therein the fruits of the order passed in that behalf could not be obtained as the petitioner commenced a second round with a view to obstruct and delay the recovery. The second attempt was obviously lacking in bona fides. The writ petitions could never have succeeded and were filed by abusing the process of this Court. Such a litigant does not deserve any discretionary and equitable relief. The act of delaying the recovery is willful and deliberate. The dilatory tactics have been adopted to deprive the State of its legitimate dues.
Mr. Rao submits that there is absolutely no substance in the writ petition. Firstly, the liability to pay interest is part and parcel of the obligation and duty to pay the tax. The tax is held to be legal and valid. Implicit and inherent in the recovery of taxes by a legitimate mode is a direction to pay interest and for the deliberate and intentional act and dilatory tactics. There is no question of any legal provision and applying to such a case. The present matter is such a case.
Section 11AA was brought on the statute book on 26th May, 1995. Prior to this provision, recovery of interest and payment was governed by Notifications. In the circumstances, there is no substance in this writ petition. Merely because some legal provision is mentioned and that provision was not in force at the relevant time does not mean interest cannot be claimed or the recovery is invalid and illegal. Similarly, the liability to pay being admitted, the delay being admitted, it is not open to the petitioner to urge that there is any violation of the principles of natural justice. There was no lis pending between the parties. The sum demanded as duty was already crystallised. That was not paid, but the Revenue was forced to resort to coercive measures for recovery thereof is admitted. The list of dates and events would itself disclose as to how having lost the litigation right upto the Hon''ble Supreme Court the bank guarantees could not be encashed for they were not kept alive. Similarly, the Revenue was forced to move a Motion in contempt. Thereafter from 1997, there was detailed correspondence. The sum due towards taxes was demanded but in response to each of these letters, neither the payment was forthcoming nor the petitioner came forward to discharge the liability. The petitioner bought time and it was only after the detention order was issued that a good five years from the issuance of the said order dated 13th October, 1999, payment was made on 7th October, 2004. Thus, the Revenue could have earned the moneys in 1989 itself. That was not possible because of the writ petitions being filed in this Court by the petitioner. The petitioner was fully aware of the outcome of the litigation as it lost the battle in the Hon''ble Supreme Court in the first round on legality and validity of the levy. Yet it commenced the second round and with an intention to delay the recovery. That was visible and apparent. Thereafter the Prothonotary & Senior Master of this Court could not encash the bank guarantees and time was lost because of another deliberate act of the petitioner from 1992 till 2004. In the circumstances, a very reasonable demand has been raised and which is of payment of interest from the date on which section 11AA came into force upto 7th October, 2004. That is not time barred because of the events which have been admitted by the petitioner. Thus, from 1995 till 2004, there were several steps taken and culminating in issuance of a detention order dated 13th October, 1999. Thereafter, the petitioner came forward to pay the sum but after nearly five years. Hence it is not open to the petitioner to raise any technical pleas. Each one of them is, therefore, frivolous. The writ petition deserves to be dismissed.
Mr. Rao relies upon the following two decisions one of which is of this Court:
(1) Calcutta Jute Manufacturing Co. and another Vs. Commercial Tax Officer and others, AIR 1997 SC 2920 : (1997) 93 ELT 657 : (1997) 5 JT 690 : (1997) 4 SCALE 411 : (1997) 6 SCC 262 : (1997) 1 SCR 474 Supp : (1997) 106 STC 433 : (1997) AIRSCW 2933 : (1997) 6 Supreme 256 .
(2) Premier Ltd. Vs. Union of India, (2014) 309 ELT 3
Before we proceed further, we would like to observe that there is no dispute on facts. A perusal of the writ petition and the events disclosed therein together with the dates on which they took place discloses that there was nothing which was required to be adjudicated or decided. The petitioner engaged the Revenue in prolonged legal battle. Even after losing the battle in the Hon''ble the Supreme Court of India on legality and validity of the levy, the petitioner pursued its case. It filed two more writ petitions in this Court and in which as well, interim orders were sought. The interim orders were not to the satisfaction of the petitioner and, therefore, matters were taken to the Division Bench. The Division Bench found that there is no merit in the writ petition. The demand towards duty liability is already crystallized and determined. There is no substance in the contention of the petitioner that procedure under section 11A of the Central Excise Act is required to be followed. The learned single Judge''s order to that effect was challenged by the petitioner before the Division Bench. The Revenue was aggrieved by the direction of the learned Judge not to encash the bank guarantees which were otherwise encashable after the petitioner suffered a loss in the Hon''ble Supreme Court of India. It is in these circumstances that the rival contentions were noted and considered by the Division Bench and it found that none of the grounds raised in the petition by the petitioner herein in the second round deserves acceptance. The Division Bench, therefore, rightly held that the bank guarantees ought to be encashed and with expedition. That order of the Division Bench dated 27th April, 1989, was also challenged in the Hon''ble Supreme Court of India but the petitioner failed. Thus, legal proceedings and which were utterly frivolous and vexatious were pursued with vigor and impunity thereby depriving the Revenue of its legitimate dues. Eventually, in matters of payment of taxes, interest of public is at stake. The public interest immensely suffers when recovery of Revenue is blocked and by assesses who admit their liability otherwise. Prolonged legal proceedings frustrate and defeat recovery and are intended in such cases to achieve that object and purpose. Therefore, when the bank guarantees were not kept alive as is clear from the communication of Bank of Baroda dated 24th July, 1992 pages 48 to 50 and pages 51 to 52, then, we do not think that the petitioner can insist on compliance with any legal requirement much less of issuance of a show cause notice, personal hearing and a reasoned order thereafter demanding interest. There being no dispute on facts, there being no lis that we are of the view that the first contention of Mr. Patil must fail.
Equally untenable is his second contention that recovery of interest in this case is not automatic. In that regard, Mr. Rao''s contentions deserves acceptance.
In the case of Aditya Mass Communications (P) Ltd. Vs. A.P.S.R.T.C., AIR 2003 SC 3411 : (2004) 1 BC 197 : (2003) 2 JT 363 Supp : (2004) 136 PLR 461 : (2003) 8 SCALE 37 : (2003) 11 SCC 17 : (2003) AIRSCW 4845 : (2003) 7 Supreme 59 , the Hon''ble Supreme Court held as under:
"8. The facts narrated hereinabove clearly shows the respondent has retained the money belonging to the appellant without authority of law and has driven the appellant to series of litigations, therefore, this fact itself should have been sufficient to refuse the request of the respondent made before the High Court for reduction of rate of interest. The quantum of interest a Court may allow in a given case is governed by the facts of the case and not by any precedent law unless of course, limited by a statute. If a Court comes to the conclusion on a given set of facts, a party has been wrongly denied the use of its own money, it is the duty of the Court to see that the said party is appropriately compensated. In the instant case, we are of the opinion that the respondent has deprived the appellant of its rightful use of the money. Therefore, the interest awarded by the trial Court to say the least was most reasonable. We also notice that the High Court has not given any reason except referring to the judgments of this Court in the case of Sovintorg (India) Ltd. Vs. State Bank of India, New Delhi, AIR 1999 SC 2963 : (2000) 99 CompCas 126 : (1999) 6 JT 10 : (1999) 123 PLR 490 : (1999) 4 SCALE 659 : (1999) 6 SCC 406 : (1999) 1 SCR 337 Supp : (1999) 2 UJ 1524 : (1999) AIRSCW 2878 : (1999) 7 Supreme 181 and Ghaziabad Development Authority Vs. Union of India and Another, AIR 2000 SC 2003 : (2000) 3 CTC 546 : (2000) 7 JT 256 : (2000) 5 SCALE 59 : (2000) 6 SCC 113 : (2000) 1 SCR 447 Supp : (2000) AIRSCW 1861 : (2000) 4 Supreme 373 . As stated above, the facts of this case do not justify the application of the principle, laid down by this Court in those judgments."
Further, the Hon''ble Supreme Court refers to its prior decision in the case of Sovintorg (India) Ltd. Vs. State Bank of India, New Delhi, AIR 1999 SC 2963 : (2000) 99 CompCas 126 : (1999) 6 JT 10 : (1999) 123 PLR 490 : (1999) 4 SCALE 659 : (1999) 6 SCC 406 : (1999) 1 SCR 337 Supp : (1999) 2 UJ 1524 : (1999) AIRSCW 2878 : (1999) 7 Supreme 181 wherein the Supreme Court has laid down this principle and which is salutary in nature. The Court of law must possess a power to compensate those who have been deprived of money legitimately due and payable to them. In that case and other cases following the same, the Supreme Court found that absence of a legal provision will not affect the demand for interest and rather it must be read as a power implicit and inherent in the power to render justice. In Sovintorg (supra), the Hon''ble Supreme Court held as under:
"... ... ... ... There was no contract between the parties regarding payment of interest on delayed deposit or on account of delay on the part of the opposite party to render the services. Interest cannot be claimed under Section 34 of the Civil Procedure Code as its provisions have not been specifically made applicable to the proceedings under the Act. We, however, find that the general provision of the Section 34 being based upon justice, equity and good conscious (conscience) would authorise the Redressal Forums and Commissions to also grant interest appropriately under the circumstance of each case. Interest may also be awarded in lieu of compensation or damages in appropriate cases. The interest can also be awarded on equitable grounds as was held by this Court in Satinder Singh and Others Vs. Amrao Singh and Others, AIR 1961 SC 908 : (1961) 3 SCR 676 . Referring to the province of the Interest Act of 1839, in relation to the compulsory acquisition of land where no specific provision is made for grant for awarding the interest, the Court held at p. 917 of AIR):
"In this connection we may incidentally refer to Interest Act, 1839 (XXXII of 1839). Section 2 of this Act confers power on the Court to allow interest in cases specified therein, but the proviso to the said section makes it clear that interest shall be payable in all cases in which it is now payable by law. In other words, the operative provisions of S. 1 of the said Act do not mean that where interest was otherwise payable by law Court''s power to award such interest is taken away. The power to award such interest on equitable grounds or under any other provisions of the law is expressly saved by the proviso to S. 1 . This question was considered by the Privy Council in Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji, (1938) 65 Ind App 66: (AIR 1939 PC 67) . Referring to the proviso to S. 1 of the Act the Privy Council observed "this proviso applies to cases in which the Court of equity exercises its jurisdiction to allow interest." We have already seen that the right to receive interest in lieu of possession of immovable property taken away either by private treaty or by compulsory acquisition is generally regarded by judicial decisions as an equitable right; and so, the proviso to S. 1 of the Interest Act saves the said right. We must accordingly hold that the High Court was in error in rejecting the claimants case for the payment of interest on compensation amount, and so we direct that the said amount should carry interest at 4% per annum from the date when respondent 2 took possession of the claimant''s lands to the date on which it deposited or paid the amount of compensation to them."
To the same effect is the judgment in Laxmichand Vs. Indore Improvement Trust, Indore and Another, AIR 1975 SC 1303 : (1975) 1 SCC 565 : (1975) 3 SCR 686 : (1975) 7 UJ 235 . The State Commission as well as the National Commission were, therefore, justified in awarding the interest to the appellant but in the circumstances of the case we feel that grant of interest at the rate of 12% was inadequate as admittedly the appellant was deprived of the user of a sum of Rs. One lakh for over a period of seven years. ... ... ..."
In regard to the Court''s duty, the following judgment of the Hon''ble Supreme Court in South Eastern Coalfields Ltd. Vs. State of M.P. and Others, AIR 2003 SC 4482 : (2003) 2 JT 443 Supp : (2003) 8 SCALE 600 : (2003) 8 SCC 648 : (2003) 4 SCR 651 Supp : (2003) AIRSCW 5258 : (2003) 7 Supreme 539 contains pertinent observations. The same have far reaching consequences in law. We are bound by the following observations:
"19. Interest is also payable in equity in certain circumstances. The rule in equity is that interest is payable even in the absence of any agreement or custom to that effect though subject, of course, to a contrary agreement (see Chitty on Contracts, Addition 1999, Vol. II, Part 38-248, at page 712). Interest in equity has been held to be payable on a market rate even though the deed contains no mention of interest. Applicability of the rule to award interest in equity is attracted on the existence of a state of circumstances being established which justify the exercise of such equitable jurisdiction and such circumstances can be many.
We may refer to the decision of this Court in Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa, Vs. N.C. Budharaj (Dead) by Lrs. etc. etc., AIR 2001 SC 626 : (2001) 91 CLT 754 : (2001) 1 JT 486 : (2001) 1 SCALE 109 : (1999) 9 SCC 514 : (2001) 1 SCR 264 , wherein the controversy relating to the power of an arbitrator (under the Arbitration Act, 1940) to award interest of pre-reference period has been settled at rest by the Constitution Bench. The majority speaking through Doraiswamy Raju, J. has opined that the basic proposition of law that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation by whatever name it may be called, viz., interest compensation or damages and this proposition is unmistakable and valid; the efficacy and binding nature of such law cannot be either diminished or whittled down. It was held that in the absence of anything in the arbitration agreement, excluding the jurisdiction of the arbitrator to award interest on the amount due under the contract and in the absence of any other prohibition, the arbitrator can award interest.
... ... ...
... ... Unless otherwise ordered by the Court, the successful party at the end would be justified with all expediency in demanding compensation and being placed in the same situation in which it would have been if the interim order would not have been passed against it. The successful party can demand (a) the delivery of benefit earned by the opposite party under the interim order of the Court, or (b) to make restitution for what it has lost; and it is the duty of the court to do so unless it feels that in the facts and on the circumstances of the case, the restitution would far from meeting the ends of justice, would rather defeat the same. ... ... ...
That no one shall suffer by an act of the Court is not a rule confined to an erroneous act of the court; the act of the court embraces within its sweep all such acts as to which the court may from an opinion in any legal proceedings that the Court would not have so acted had it been correctly apprised of the facts and the law. The factor attracting applicability of restitution is not the act of the Court being wrongful or a mistake or error committed by the court; the test is whether on account of an act of the party persuading the Court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage which it would not have otherwise earned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the Court and the act of such party. The quantum of restitution, depending on the facts and circumstances of a given case, may take into consideration not only what the party excluded would have made but also what the party under obligation has or might reasonable have made. There is nothing wrong in the parties demanding being placed in the same position in which they would have been had the Court not intervened by its interim order when at the end of the proceedings the Court pronounces its judicial verdict which does not match with and countenance its own interim verdict. Whenever called upon to adjudicate, the Court would act in conjunction with what is the real and substantial justice. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be resorted to or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. ... ... ..."
Recently in the case of M/s. Raymond Limited vs. Union of India and Ors. Central Excise Appeal Nos. 101 to 104 of 2014, decided on 5th March, 2015, we applied this very principle to uphold the demand of interest.
We are of the view that these principles squarely apply to the present facts and circumstances. The Revenue was engaged in prolonged litigation and had to move a Notice of Motion in contempt and thereafter as well the amounts were not paid. Then, notices were issued for encashment of bank guarantees and which are to be found from page 67 onwards. Despite such notices, the petitioner did not come forward to clear the dues. Thereafter, Detention Memo was issued detaining the immovable properties. That also did not have any effect and impact till 2004. On 6th October, 2004, the petitioner came forward and offered to pay the duty amount. After that amount was paid, the detention was raised.
We do not see how in such circumstances can the demand for interest be termed as belated. In all fairness to Mr. Patil he has placed on record the communications prior to the impugned one. In those communications, the petitioner was called upon by the Superintendent of Central Excise to pay interest. That was demanded from 4th February 1989 upto the date of payment, namely, 7th October, 2004. The petitioner disputed that by addressing a communication. We have on record a communication from the respondent dated 8th June, 2006, demanding interest as above. Prior thereto, on 7th October, 2004, there is a communication from the petitioner and which records payment of the duty amount. However, the petitioner continued to raise a dispute and addressed a letter dated 27th June, 2006. It denied the liability to pay any interest. It relied upon some oral understanding with the Department and an assurance from one of the Commissioners, orally given, that interest will not be charged if payment of the duty amount is made as demanded by the Revenue. Thus, this was not a bona fide stand at all. It is in these circumstances that we do not accept the contentions of Mr. Patil based on section 11AA of the Central Excise Act, 1944 and Rules 10 and 10A of the Central Excise Rules, 1944. He has handed over the extract of these Rules. He has emphasised that section 11A was inserted with effect from 17th November, 1986 by section 21 of the Customs, Central Excise and Salt and Central Boards of Revenue (Amendment) Act, 1978. He submits that by the later amendment there are various changes that have been brought about in section 11A and our attention has been invited to each of them. Further, our attention is invited to insertion of section 11AA. The argument is that in the absence of any provision of this nature at the relevant time the demand for interest is untenable. We are unable to accept these contentions because interest is not demanded strictly in terms of the legal provisions though the letter of the respondents and impugned in the writ petition may be making such a reference. In the circumstances, we are unable to uphold his arguments that absent a provision like section 11AA at the relevant time, interest cannot be demanded. The impugned letter reads as under:
"OFFICE OF THE SUPDT. OF C. EX. RANGE 05, CHEMBUR - II DIVISION, 110, GANGES INK BLDG., LAL BAHADUR SHASTRI MARG, VIKHROLI (WEST), MUMBAI - 400 083
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F. No. C. EX/R 05/Ch-II/Swan/2005/363 Vikhroli, the 18th October, 2006.
MOST URGENT
To, The Director, M/s. Swan Mills Ltd., Free Press House, 2nd Floor, 215, Nariman Point, Mumbai 400 021
Sir,
Sub: Interest on duty of Rs. 96,20,511/- paid reg.
Kindly refer this office letter dated 8.6.2006 and your reply dated 27.06.2006 on subject matter.
In this connection, it is to inform you that the views expressed in your above referred letter dated 27.6.2006 are not acceptable to the Department. Hence, you are once again directed to pay the interest amount a per applicable rate, from the relevant date under of Section 11AA of CEA, 1944 after enactment of Section 11AA i.e. from 26.8.1995, upto the date of actual payment of Government dues (duty and penalty) by you i.e. upto 07.10.2004. The interest amount works out to be Rs. 1,69,55,030/- (Rupees One crore Sixty Nine lakhs Fifty Five thousand Thirty only), calculated as under:-
Date of enactment of Section 11AA: - 26.-5.1995
Relevant date for calculating interest under Section 11AA:-26.08.1995
Date of payment : - 07.10.2004 Amount of Duty paid:-Rs. 98,20,511/-
You are requested to pay the interest within 25 days of receipt of this letter and intimate the details of payment to this office immediately, failing which necessary action will be initiated against you as per the provisions of Central Excise Act, 1944 and Rules made thereunder.
Yours faithfully (M.O. Varghese) Superintendent of Central Excise Range-05, Chembur - I Division
Copy to:- Assistant Commissioner of Central Excise, Chembur-II Division."
Thus, interest is demanded as per the applicable rate from the date Section 11AA came into force, namely, from 26th August, 1995, to 7th October, 2004. Beyond that, we do not read anything in this letter. That there is a power to demand interest is not denied. However, it is urged that the said power could not have been exercised in the absence of any provision in the relevant and applicable law. That the Notifications referred above were in the field is not disputed and the demand is in terms of the same is also clear.
In all the decisions that Mr. Patil brings to our notice, the issue was of claim of interest and either in terms of the allegations in the show cause notice or absent a show cause notice. Such is not the case before us. Therefore, the decisions cited are distinguishable on facts. Mr. Patil relying upon the position in law, particularly regarding insertion of provisions enabling recovery of interest on delayed payment of duty submitted that unless there is any such provision, the interest is not leviable. He has also relied upon judgments where recovery of interest without a notice to show cause was held to be unsustainable.
However, the reliance placed by Mr. Patil on these judgments is entirely misplaced. In the first decision of the Hon''ble Supreme Court in the case of Metal Forgings and Another Vs. Union of India (UOI) and Others, AIR 2003 SC 291 : (2002) 84 ECC 705 : (2002) 146 ELT 241 : (2002) 9 JT 582 : (2003) 2 SCC 36 , the facts were that the manufacturers viz. appellants before the Supreme Court were assessable to central excise duty under certain tariff items. On the introduction of Tariff Head 68 in the First Schedule to the Central Excise & Salt Act, 1944 with effect from 1st March, 1985. A question arose whether the product manufactured by the appellant by forging became liable for further duty under Tariff Item 68 in the First Schedule because after this process the appellant was said to have subjected this product to certain other processes like polishing and trimming to make the product suitable for its ultimate use. This gave rise to a dispute between the assessee and the Revenue and which had an equally chequered history. The Tribunal considered the two questions, one on the point of limitation and the other was pertaining to classification under Tariff Item 68. When the matter was carried to the Supreme Court what was argued was that the demand could not have been within limitation as no show cause notice as required in law was ever issued and in absence of which there could not be at all any demand raised under section 11A of the Act. The Hon''ble Supreme Court, while dealing with these two questions and as summarised in paragraph 8 held that the admitted factual position was that no show cause notice raising the demand was issued as required in law. It is on this footing and by turning down the contention that when there were several letters and orders, issuance of a demand notice in a specified manner is not required in law that the Hon''ble Supreme Court made the observations in paragraph 17 of this judgment which are heavily relied upon by Shri Patil before us. We are of the view that this judgment has no bearing on the controversy before us. There the demand of duty was made without a show cause notice and particularly after insertion of Tariff Item 68 in the Tariff Schedule. That led to the Hon''ble Supreme Court holding in favour of the assessee.
In the second judgment in the case of Collector of Central Excise, Patna and Others Vs. I.T.C. Limited and Another, (1994) 71 ELT 324 : (1998) 4 JT 452 : (1995) 2 SCC 38 the order-in-original came to be passed and duty liability was determined. The Assessing Authority served additional demand and additional excise duty but this was done without giving an opportunity to the assessee - ITC Limited to meet the grounds upon which duty was enhanced or revised. That is how a writ petition was filed questioning the enhanced demand. That was allowed by the High Court and particularly the direction that before enhancing the duty payable by the assessee, the Assessing Authority shall give a notice calling upon it to show cause why it should not be made liable for paying the same. That order was challenged in the Supreme Court and that is how the observations in paragraphs 2 and 4 have been made. They must be, therefore, seen in the peculiar facts and not by ignoring the same. In both these decisions, the interest as demanded in the present case was never an issue. Similarly, in the case of Union of India (UOI) and Others Vs. Madhumilan Syntex Pvt. Ltd. and Another, AIR 1988 SC 1236 : (1988) 17 ECC 39 : (1988) 35 ELT 349 : (1988) 2 JT 255 : (1988) 1 SCALE 979 : (1988) 3 SCC 348 : (1988) 3 SCR 838 : (1988) 2 UJ 130 a show cause notice was issued and raising the demand on ground of short-levy or non-levy of excise duty. Therefore, the observations and which are to be found in paragraphs 4 and 6 have been made. We must at once note that duty demand is a matter which has been dealt with in these decisions. The demand to be confirmed and granted must precede a show cause notice being issued, an opportunity to the assessee to meet and reply the same and thereafter an order following the same. More so, when the extended period is sought to be invoked. Such is not the case before us.
In the case of a Division Bench judgment of this Court in the case of Nirlon Ltd. Vs. Union of India (UOI), (2007) 209 ELT 12 the petitioner-company was paying excise duty while clearing the goods from time to time. However, there were few defaults in payment of such duty. The petitioner was required to make good these defaults by paying interest that too at the rate of 24% under Rule 173-G(1)(d). The petitioner paid the same. Thereafter, there was communication from the Deputy Commissioner, Central Excise that the petitioner will be disallowed to pay central excise duty on fortnightly basis as it was doing earlier and that it will have to pay the duty for each consignment by debiting the current account or by cenvat for a period of two months from the date of communication of that order. The petitioner preferred to follow the cenvat method from 16th November, 2000, onwards. Thereafter, a Corrigendum was issued making it clear that the petitioner will have to make payment by debiting to the credit account only. That is how thereafter the petitioners made payment from the personal ledger account. That continued and much later a notice was issued to the petitioner calling upon it to pay interest to the tune of Rs. 31,98,398/- for having resorted to cenvat during the period 16th November, 2000 to 20th December, 2000 and terming that as incorrect. That demand having been raised and repeatedly after which a detention memo followed that the petitioner approached this Court in writ jurisdiction. It is in these circumstances that this Court was of the view that principles of natural justice require issuance of a show cause-cum-demand notice and particularly on the claim of interest. The claim ought to be adjudicated and such communications were held to be untenable in law. We are not in any manner doubting this proposition but its application must depend on facts and circumstances in each case. The claim for interest could arise in various situations. The demand may also arise if the admitted and adjudicated sum is not remitted and paid within the time stipulated by law or within a reasonable period. The party being deprived of its legitimate dues and without any cause can seek to compensate itself by raising a demand for interest and which demand could be based on the undisputed facts. Then there is nothing required to be adjudicated or decided. We do not see any case of this nature being decided in these decisions. Therefore, they have no application.
We have already held as to how the demand for interest in this case cannot be termed as time-barred. We have referred to the correspondence in that regard extensively. In the circumstances, the decisions and particularly of the Hon''ble Supreme Court in the case of Commissioner of Trade Tax, Lucknow Vs. Kanhai Ram Thekedar, AIR 2005 SC 3033 : (2005) 185 ELT 3 : (2005) 5 JT 13 : (2005) 4 SCC 472 : (2005) 3 SCR 984 : (2005) 141 STC 1 can have no application. The Hon''ble Supreme Court has held that demand for interest must be made within a reasonable period. What could be said to be a reasonable period must depend upon facts and circumstances of each case. We do not find that in this case the demand was hopelessly time-barred or said to be unreasonable. Yet again, we find that the decision of the High Court was reversed by the Supreme Court also on the ground that no notice was served. Thus there was no demand for interest in the assessment order and that was raised after nearly four years. Therefore, the principle of reasonable time or period was invoked and applied. The same is the position with regard to the demand of interest in the case of Collector of Customs vs. T.V.S. Whirlpool Ltd.1996 (66) ECR 345 . Thus, these are all orders and judgments based on the settled principle that a demand for interest should be made within a reasonable period, if at all it is not made during assessment or as part thereof or is not contained in the order of assessment or adjudication. Thus, the ground of delay and laches has been allowed to be invoked and upheld based on these observations of the Hon''ble Supreme Court and which are also forming part of the judgment in the case of Government of India Vs. Citedal Fine Pharmaceuticals, Madras and Others, AIR 1989 SC 1771 : (1989) 24 ECR 440 : (1989) 42 ELT 515 : (1990) 184 ITR 467 : (1989) 3 JT 118 : (1989) 2 SCALE 44 : (1989) 3 SCC 483 : (1989) 3 SCR 465 : (1989) 2 UJ 368 . In paragraph 6 it has been held by the Hon''ble Supreme Court that no hard and fast rule can be laid down as to when a demand for interest can be said to be made within reasonable period. The application of this principle will apply on facts of each case. Hence all these decisions are clearly distinguishable.
We do not find that any of the above decisions, therefore, can be of assistance. Same is the position with regard to the judgment of a Division Bench of this Court in Blue Star Limited and Mr. K.P.T. Kutty of Mumbai, Indian Inhabitant, Blue Star Limited Vs. Union of India (UOI), Assistant Commissioner of Central Excise, Wagle II Divn. and Commissioner of Central Excise, (2010) 250 ELT 179 . There the original order demanding duty was set aside. The facts are noted in paragraphs 4 to 8 of the order passed by the Division Bench. The Division Bench relied upon the earlier decisions including of the Hon''ble Supreme Court on the explanation to section 11AA of the Central Excise Act, 1944. The issue was whether interest is payable in terms of section 11AA. Such is not the issue before us. There is no demand of any increased sum nor is there a revised demand and depending upon which the interest is claimed. Hence this decision is also of no assistance.
Mr. Rao appearing on behalf of the Revenue relied on the judgment of the Supreme Court in Calcutta Jute Manufacturing Co. and another Vs. Commercial Tax Officer and others, AIR 1997 SC 2920 : (1997) 93 ELT 657 : (1997) 5 JT 690 : (1997) 4 SCALE 411 : (1997) 6 SCC 262 : (1997) 1 SCR 474 Supp : (1997) 106 STC 433 : (1997) AIRSCW 2933 : (1997) 6 Supreme 256 .
We are of the view that the reliance on this judgment is apposite and correct. It is that very principle and which has been set out in paragraph 16 of this judgment which we have applied. Once an advantage of an interim order has been taken and the Revenue is deprived of the amount of tax, then, the recovery of public dues is deferred and delayed. The advantage cannot continue after such interim orders are vacated or set aside. Thereafter, if the amounts are not paid on demand or if demanded but paid belatedly, the interest can be recovered and it is the duty of the Court to ensure that one deprived of legitimate and legal dues particularly public money is compensated. It is this principle which we have applied.
We would rest our conclusion on the basis of the principles which we have culled out from the Supreme Court decisions referred to herein above. We, therefore, conclude that if the interest is in any event demanded upon insertion of section 11AA in the statute book, then, all the more the above contentions cannot be accepted.
Therefore, we feel that the demand was justified in this case and deserves to be upheld. We clarify that our view must be seen in the light of the admitted and undisputed facts noted above and of the present case. The applicability of the principles laid down in the Supreme Court decisions must be seen in the facts and circumstances of each case. No general rule can be laid down. Our conclusion does not mean that in each and every case of such nature no prior opportunity should be given or the demand can be made and anytime for any period, prior and subsequent. Ultimately, equitable principles should be applied if the facts and circumstances demand and not otherwise.
As a result of the above discussion, the writ petition fails. Rule is discharged. There will be no order as to costs.