1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1976    OF 2011 [Arising out of SLP(c) No. 5169 of 2010]

lUnion of India & Ors.          …. Appellants

Versus

M/s.  Ind- Swift  

Laboratories Ltd. ...Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1.     Leave granted.

2 The present appeal is directed against the judgment and order dated

2 03.07.2009 in Civil Writ Petition No. 13860 of 2007 passed  

by  the  Punjab  &  Haryana  High  Court,  whereby  the  High  

Court  while  interfering  with  the  order  of  the  Settlement  

Commission regarding payment of interest on the CENVAT  

credit,  has  held  that  the  appellants  herein  have  wrongly  

claimed interest on the CENVAT credit, from the date when  

such credit  was wrongly  availed  instead  of  the  date  when  

such credit was actually utilized. The High Court has further  

held that the appellants are not entitled to claim interest on  

the  amount  of  Rs.  50  lacs  up  to  31.01.2007  as  the  said  

amount already stood deposited on 08.03.2006.

3 The respondent herein, viz., M/s. Ind-Swift Laboratories Ltd., is a  

manufacturer of bulk drugs, falling under Chapter 30 of the

3 First Schedule to the Central Excise Tariff  Act, 1985. The  

company  received  inputs  and  capital  goods  from  various  

manufacturers / dealers and availed CENVAT credit on the  

duty paid on such materials.  On the  basis  of  intelligence  

report,  the  factory premises of  the  respondent  as also its  

group  companies  at  different  places  were  searched  on  

08.03.2006. Searches were also conducted at the offices of  

large number of firms in Ghaziabad and Noida which had  

allegedly issued invoices without any accompanying goods to  

the respondent and its group companies. At the same time  

the residential premises of Mr. R.P. Jain and Mr. J.P. Singh,  

the Brokers, were also searched and particularly during the  

course of search of the residence of Mr. R.P. Jain  kachha  

ledgers / notebooks / files and cheques issued by the Swift

4 group to the parties from whom invoices without material  

were being received, were recovered. It also appears that the  

appellant conducted investigations which indicated that the  

respondent  had  taken  CENVAT  credit  on  fake  invoices.  

Consequently,  a show cause notice  dated 08.12.2006 was  

issued  to  the  respondent,  to  which  a  reply  was  also  

submitted by the respondent. The respondent company also  

filed  applications  for  settlement  of  the  proceedings  and  

consequently  the  entire  matter  was  placed  before  the  

Settlement Commission.

4 Before the Settlement Commission, it was an admitted position  

that  the  case  pertained  to  the  period  from  27.10.2001  to  

31.03.2006.  The  respondent  company  also  admitted  all  the  

allegations and duty liability as per the show cause notice dated

5 08.12.2006. The respondent also deposited the entire duty of Rs.  

5,71,47,148/-. Since conditions/parameters for the admission of  

a case prescribed under Section 32E(1) of the Central Excise Act,  

1944 [for short “the Act”]  were  fulfilled and complied with,  the  

application of the respondent for settlement was entertained and  

the same was proceeded with in terms of Section 32F(1) of the  

Act.  After  considering  the  records  and  hearing  the  parties  the  

Commission came to the findings that while the wrongful CENVAT  

credit was taken from the year 2001 to 31.03.2006, the payments  

refunds  have  been  made  on  22.02.2006  and  on  five  different  

dates  in  March,  2006  and  on  20.11.2006  and,  therefore,  the  

respondent  had  the  benefit  of  availing  the  large  amount  of  

CENVAT credit to which they were not entitled. Considering the  

said  fact,  the  Commission  felt  and  was  of  the  view  that  the

6 appropriate interest liability has to be borne by the respondent on  

such  wrongful  availment  of  CENVAT  credit.  Accordingly,  the  

applications of the respondent were settled under Section 32F(7)  

of the Act subject to the following terms and conditions: -

“(a) The amount of duty relating to wrongful availment  of  CENVAT credit is settled at Rs. 5,71,47,148/-. As  the  entire  amount  has  already  been  paid  by  the  applicant, no further duty remains payable. The Bench  directs  that  the  said  amount  of  deposit  by  the  

applicant shall be appropriated against the amount of   duty  settled  in  this  Order.  Besides  the  above,  the  inadmissible CENVAT  credit  of  Rs.  78,97,255/-,  as  mentioned in para 23(a)(ii) of the show cause notice is   disallowed.

(b)  Immunity  from  interest  in  excess  of  10%  simple  interest  per  annum  is  granted.  Accordingly,  the  applicant shall pay simple interest @ 10 % per annum  on  CENVAT  credit  wrongly  availed  (i.e.,  Rs.   5,71,47,148/-)  from  the  dates  the  duty  became  payable as per Section 11AB of the Act, till the dates  of  payment.  Revenue  is  directed  to  calculate  the

7 amount of interest as per this order and intimate the  same to the applicant within 15 days of the receipt of   this  order.  Thereafter,  the  applicant  shall  pay  the  amount of interest within 15 days of the receipt of the  said  intimation  and  report  compliance  both  to  the  Bench and to Revenue.”

2 5 The said order also specifically recorded that full immunity  

be granted to the respondent from penalty and prosecution.  

Subsequent to the passing of the said order, the respondent  

herein  filed  a  miscellaneous  application  seeking  for  

clarification  contending  inter  alia that  the  respondent  had  

deposited whole amount of duty during investigation without  

protest and that, following the final order, the Revenue has  

calculated  interest  liability  of  the  respondent  at  Rs.  

1,47,90,065/- and that the Revenue has calculated the said  

interest up to the date of the appropriation of the deposited

8 amount and not up to the date of payment.  It  was further  

contended that the interest has to be calculated from the date  

of  actual  utilization  and  not  from  the  date  of  availment.  

Consequently, it was prayed in the said application that the  

Settlement  Commission  may  clarify  the  actual  amount  of  

interest liability of the respondent and extend the period of  

payment of interest in the interest of justice and equity.  

3 6 The said application was taken up for consideration and  

after  hearing  the  parties  the  application  was  dismissed.  

While rejecting the said application the Bench noted that the  

final order sets out in very clear terms that the respondent  

shall  pay  simple  interest  @  10  per  cent  per  annum  on  

CENVAT credit  wrongfully  availed  from the  date  the  duty  

became payable as per Section 11AB of the Act, till the date

9 of payment and that the application is misconceived and that  

no case of any clarification is made out because interest has  

to be calculated till the date of the payment of the duty. It  

was also held that the interest is also payable with reference  

to the date of availment of CENVAT credit and not from the  

date of utilization of a part of the balance of such credit. The  

Commission held that such an issue was never raised before  

the  Settlement  Commission  at  any  earlier  stage.  The  

Commission while rejecting the application held as follows: -

“The  said show cause  notice  vide  Para 23  thereof  proposes  to  demand  the  CENVAT  credit  availed  fraudulently by the applicant and not the amount of   CENVAT utilized by the applicant. As such, it naturally  follows that the interest is also payable with reference  to the date of  availment of  CENVAT credit and not  from the date of utilization of a part of balance of such  credit. In any case, this issue was not raised in the

10 application of settlement or at the time of settlement. In  a query from the Bench, Id. Advocate also not raising  this issue during settlement proceedings. As such, the  Bench  finds  no  justification  to  go  into  the  practice   adopted by the Revenue in this regard. In any case, it   is a new point that did not arise for  decision in the  Final Order and on which the applicant is not seeking  a decision in the garb of  seeking a clarification. The  Commission has  already  decided  the  issues  which  were  brought  before  it  through  the  Settlement  Application.  Section 32M of  the  Central Excise  Act,  1944 bars the Commission from re-opening its  final  order.  Hence,  the final  order  already passed in the  

matter was conclusive as to the matters stated therein  and the same cannot be re-opened for the purpose of   deciding the said point raised subsequently.”

2 7. The respondent, however, did not pay the entire amount  

in  terms  of  the  liability  fixed.  Consequently,  a  letter  was  

issued  on  16.08.2007  from  the  office  of  the  appellant  

directing the appellant to pay the balance amount in terms  

of the order dated 19.01.2007.

11 3 8. The records disclose that immediately on receipt of the  

aforesaid letter  the respondent filed a Writ Petition in the  

High Court of Punjab & Haryana which was registered as  

Civil Writ Petition No. 13860 of 2007, praying for quashing  

the  order  dated  31.05.2007  which  was  passed  by  the  

Settlement  Commission  on  the  applications  seeking  

clarifications and the letter dated 16.08.2007 by which the  

office of the appellant requested the respondent to deposit  

the balance amount in terms of the order dated 19.01.2007.  

4 9. The High Court issued notice and heard the parties on  

the  said Writ  Petition.  By its  judgment  and order  dated  

03.07.2009 the said Writ Petition was allowed by the High  

Court holding that Rule 14 of the CENVAT Credit Rules,  

2004 [for  short  “Credit  Rules”]  has  to  be  read  down to

12 mean that where  CENVAT credit has been taken and/or  

utilized  wrongly,  interest  should  be  payable  on  the  

CENVAT credit  from the  date  the  said  credit  had  been  

utilized wrongly and that interest cannot be claimed simply  

for the reason that the CENVAT credit has been wrongly  

taken,  as  such  availment  by  itself  does  not  create  any  

liability of payment of excise duty. The High Court further  

held  that  on a  conjoint  reading  of  Section  11AB of  the  

Tariff  Act  and that  of  Rules  3 & 4 of  the  Credit  Rules,  

interest  cannot  be  claimed  from  the  date  of  wrong  

availment of CENVAT credit and that the interest would be  

payable  from  the  date  CENVAT  credit  was  wrongfully  

utilized.  

5 10.Being aggrieved by the aforesaid judgment and order

13 passed by the High Court the present appeal was filed by  

the  appellant,  which  was  entertained  and  notice  was  

issued to the respondent, on receipt of which, they have  

entered  appearance.  Counsel  appearing  for  the  parties  

were heard at length when the matter was listed for final  

arguments.  By the  present  judgment  and order  we  now  

proceed  to  dispose  the  said  appeal  by  recording  our  

reasons.

6 11.  The  facts  delineated  hereinabove  make  it  crystal  

clear that the respondent accepted all  the allegations  

raised  in  the  show  cause  notice  and  also  the  duty  

liability  under  the  said  show  cause  notice  dated  

08.12.2006. They also deposited the entire duty of Rs.  

5,71,47,148/- prior to the issuance of the show cause

14 notice and, therefore, they requested for settlement of  

the  proceedings  in  terms  of  Section  32E  read  with  

Section 32F of the Act. The said settlement proceedings  

were  conducted  in  accordance  with  law  and  was  

finalized by the order dated 19.01.2007 on the terms  

and  conditions  which  have  already  been  extracted  

hereinbefore.  

7 12. A bare perusal of the said order would indicate that  

the Settlement commission has imposed the liability of  

payment  of  simple  interest  only  @  10  per  cent  per  

annum on CENVAT credit wrongly availed, that is, Rs.  

5,71,47,148/- from the date the duty became payable.  

Incidentally, imposition of such simple  interest  at 10  

per cent per annum was the minimum, whereas levy of

15 interest at 36 per cent per annum was the highest in  

terms  of  the  Section11  AB  of  the  Act.  Besides,  the  

allegations  made  in  the  show  cause  notice  were  

admitted  by  the  respondent  which,  therefore,  

establishes  that  the  respondent  had  taken  wrongful  

CENVAT credit from the year 2001 to 31.03.2006 and  

the payment has been made only on 22.02.2006 and  

on  five  different  dates  in  March,  2006  and  on  

20.11.2006, which indicates that the respondent had  

the  benefit  of  availing  the  large  amount  of  CENVAT  

credit to which they were otherwise not entitled to.  

8 13.The  order  of  the  Settlement  Commission  also  

indicates  that  full  immunities  were  granted  to  the  

respondent  from  penalty  and  prosecution.  The

16 aforesaid order was not challenged by the respondent  

in  any  forum  and,  therefore,  it  became  final  and  

conclusive in terms of Section 32M of the Act, which  

states that every order of settlement passed under sub-

Section 7 of Section 32F would be conclusive as to the  

matters  stated  therein  subject  to  the  condition  that  

when  a  settlement  order  is  obtained  by  fraud  or  

misrepresentation of fact, such an order would be void.  

According to the said provisions, no matter covered by  

such order could be reopened in any proceeding under  

the Central Excise Act or under any other law for the  

time being in force.  

9 14.Although,  subsequently,  an  application  by  way  of  

clarification  was  filed  by  the  respondent,  the  said

17 application was, however, not entertained.  It was held  

that the said application is misconceived, particularly,  

in view of the fact that no such issue was raised before  

the Commission.  Since, however, a Writ Petition was  

filed  by  the  respondent  challenging  only  the  second  

order  of  the  Settlement  Commission  and  the  

subsequent  letter  issued  from  the  office  of  the  

appellant,  on  the  basis  of  which,  High  Court  even  

proceeded to interfere with the first order passed by the  

Settlement  Commission,  we  heard  the  counsel  

appearing for the parties on the issue decided by the  

High Court also.  

10 15.  In order  to  appreciate  the  findings recorded  by the  

High Court by way of reading down the provision of Rule

18 14, we deem it appropriate to extract the said Rule at this  

stage which is as follows:  

“Rule 14. Recovery of CENVAT credit wrongly taken or   erroneously refunded:  -  Where the CENVAT credit has  been taken or utilized wrongly or has been erroneously  refunded, the same along with interest shall be recovered  from  the  manufacturer  or  the  provider  of  the  output  service and the provisions of Sections 11A and 11AB of   the Excise Act or Sections 73 and 75 of the Finance Act,  shall  apply  mutatis  mutandis  for  effecting  such  

recoveries.”

2 16. A bare reading of the said Rule would indicate that  

the manufacturer or the provider of the output service  

becomes  liable  to  pay  interest  along  with  the  duty  

where  CENVAT  credit  has  been  taken  or  utilized  

wrongly or has been erroneously refunded and that in  

the case of the aforesaid nature the provision of Section

19 11AB would apply for effecting such recovery.  

3 17. We have very carefully read the impugned judgment  

and order of the High Court. The High Court proceeded  

by reading it down to mean that where CENVAT credit  

has been taken and utilized wrongly, interest should be  

payable  from  the  date  the  CENVAT  credit  has  been  

utilized wrongly for according to the High Court interest  

cannot  be  claimed  simply  for  the  reason  that  the  

CENVAT  credit  has  been  wrongly  taken  as  such  

availment  by  itself  does  not  create  any  liability  of  

payment  of  excise  duty.  Therefore,  High  Court  on  a  

conjoint reading of Section 11AB of the Act and Rules 3  

& 4 of the Credit Rules proceeded to hold that interest  

cannot be claimed from the date of wrong availment of

20 CENVAT credit and that the interest would be payable  

from the date CENVAT credit is wrongly utilized. In our  

considered  opinion,  the  High  Court  misread  and  

misinterpreted the aforesaid Rule 14 and wrongly read it  

down  without  properly  appreciating  the  scope  and  

limitation thereof. A statutory provision is generally read  

down in  order  to  save  the  said  provision  from  being  

declared unconstitutional or illegal. Rule 14 specifically  

provides that where CENVAT credit has been taken or  

utilized wrongly or has been erroneously refunded, the  

same along with interest  would be recovered from the  

manufacturer or the provider of the output service. The  

issue is as to whether the aforesaid word “OR” appearing  

in Rule  14,  twice,  could be  read as “AND” by way of

21 reading it down as has been done by the High Court. If  

the  aforesaid provision is read as a whole we find no  

reason to read the word “OR” in between the expressions  

‘taken’  or  ‘utilized  wrongly’  or  ‘has  been  erroneously  

refunded’ as the word “AND”. On the happening of any  

of  the  three  aforesaid  circumstances  such  credit  

becomes recoverable along with interest.

4 18. We do not feel that any other harmonious construction  

is  required  to  be  given  to  the  aforesaid  

expression/provision which is clear and unambiguous as it  

exists all by itself. So far as Section 11AB is concerned, the  

same becomes relevant and applicable for the purpose of  

making  recovery  of  the  amount  due  and  payable.

22 Therefore,  the  High Court  erroneously held  that interest  

cannot  be  claimed  from the  date  of  wrong  availment  of  

CENVAT credit and that it should only be payable from the  

date when CENVAT credit is wrongly utilized. Besides, the  

rule  of  reading  down  is  in  itself  a  rule  of  harmonious  

construction in a different name. It is generally utilized to  

straighten the crudities or ironing out the creases to make  

a statute workable.  This Court has repeatedly laid down  

that in the garb of reading down a provision it is not open  

to  read  words  and  expressions  not  found  in  the  

provision/statute and thus venture into a kind of judicial  

legislation. It is also held by this Court that the Rule of  

reading  down  is  to  be  used  for  the  limited  purpose  of  

making a particular provision workable and to bring it in

23 harmony  with  other  provisions  of  the  statute.  In  this  

connection we may appropriately refer  to the decision of  

this Court in  Calcutta Gujarati  Education Society and  

Another  v. Calcutta Municipal Corporation and Others  

reported  in  (2003) 10 SCC 533 in which reference  was  

made at Para 35 to the following observations of this Court  

in  the  case  of  B.R.  Enterprises v.  State  of  U.P.  and  

Others reported in (1999) 9 SCC 700: -

“81.  ………….. It is also well settled that first attempt  should be made by the courts to uphold the charged  provision and not to invalidate it merely because one of   the  possible  interpretations  leads  to  such  a  result,  howsoever attractive it may be. Thus, where there are  two possible interpretations, one invalidating the law  and the other upholding, the latter should be adopted.  For  this,  the  courts  have  been  endeavouring,   sometimes  to  give  restrictive  or  expansive  meaning  keeping  in  view  the  nature  of  legislation,  maybe  beneficial,  penal  or  fiscal  etc.  Cumulatively  it  is  to   subserve the object of the legislation. Old golden rule is  of  respecting the wisdom of  legislature that they are

24 aware of the law and would never have intended for   an invalid legislation. This  also  keeps  courts  within  their  track  and  checks  individual  zeal  of  going  wayward.  Yet  in  spite  of  this,  if  the  impugned  legislation  cannot  be  saved  the  courts  shall  not  hesitate to strike it down. Similarly, for upholding any  provision, if  it could be saved by reading it down, it  should be done, unless plain words are so clear to be  in defiance of  the Constitution.  These interpretations  spring out because of concern of the courts to salvage  a legislation to achieve its objective and not to let it fall   merely because of a possible ingenious interpretation.   The  words  are  not  static  but  dynamic. This  infuses  fertility in the field of interpretation. This equally helps  to save an Act but also the cause of attack on the Act.   

Here the courts have to play a cautious role of weeding  out the wild from the crop, of course, without infringing  the Constitution. For doing this, the courts have taken  help from the preamble, Objects, the scheme of the Act,  its  historical  background,  the  purpose  for  enacting  such a provision, the mischief,  if  any which existed,  which is sought to be eliminated…………………………… ……...  …………………………………………………………… …………………………………………….... This principle of   reading down,  however,  will not  be  available where  the plain and literal meaning from a bare reading of   any impugned provisions clearly shows that it confers   arbitrary,  uncanalised  or  unbridled  power.”

(emphasis supplied)”

25 2 19. A taxing statute must be interpreted in the light of what  

is  clearly  expressed.  It  is  not  permissible  to  import  

provisions in a taxing statute so as to supply any assumed  

deficiency.  In  support  of  the  same  we  may  refer  to  the  

decision of this Court in Commissioner of Sales Tax, U.P.  

v.  Modi Sugar Mills Ltd. reported in  (1961) 2 SCR 189  

wherein this Court at Para 10 has observed as follows: -

“10………  In  interpreting  a  taxing  statute,  equitable  considerations are entirely out of  place. Nor can taxing  statutes  be  interpreted  on  any  presumptions  or  assumptions. The court must look squarely at the words  of  the  statute  and  interpret  them.  It  must  interpret a  taxing statute in the light of what is clearly expressed: it  cannot imply anything which is not expressed; it cannot  import  provisions in  the statutes  so  as to supply  any  assumed deficiency.”

2 20.  Therefore,  the  attempt  of  the  High  Court  to  read  

down the provision by way of substituting the word “OR”

26 by an “AND” so as to give relief to the assessee is found  

to be  erroneous.  In that regard the  submission of  the  

counsel for the appellant is well-founded that once the  

said credit is taken the beneficiary is at liberty to utilize  

the same, immediately thereafter,  subject to the Credit  

rules.

3 21. An order passed by the Settlement Commission could  

be interfered with only if the said order is found to be  

contrary to any provisions of the Act. So far findings of  

the fact recorded by Commission or question of facts are  

concerned, the same is not open for examination either  

by  the  High  Court  or  by  the  Supreme  Court.  In  the  

present  case  the  order  of  the  Settlement  Commission  

clearly  indicates  that  the  said  order,  particularly,  with

27 regard to the imposition of simple interest @ 10 per cent  

per annum was passed in accordance with the provisions  

of Rule 14 but the High Court wrongly interpreted the  

said Rule and thereby arrived at an erroneous finding.

4 22. So far as the second issue with respect to interest on  

Rs. 50 lacs is concerned, the same being a factual issue  

should  not  have  been  gone  into  by  the  High  Court  

exercising  the  writ  jurisdiction  and  the  High  Court  

should not have substituted its own opinion against the  

opinion of  the  Settlement  Commission when the  same  

was not challenged on merits.

5 23.  In  that  view  of  the  matter,  we  set  aside  the  order  

passed  by  the  Punjab  &  Haryana  High  Court  by  the  

impugned judgment and order and restore the order of the

28 Settlement  Commission leaving  the  parties  to  bear  their  

own costs.  

…..............................................J                   [Dr. Mukundakam Sharma]

.............................................J                            [ Anil R. Dave ]

New Delhi, February  21, 2011.

29

30 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.                 OF 2011 [Arising out of SLP(c) No. 5169 of 2010]

lUnion of India & Ors.          …. Appellants

Versus

M/s.  Ind- Swift  

Laboratories Ltd. ...Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

31 2 The  present  appeal  is  directed  against  the  

judgment and order dated 03.07.2009 in  

Civil  Writ  Petition  No.  13860  of  2007  

passed  by  the  Punjab  &  Haryana  High  

Court,  whereby  the  High  Court  while  

interfering  with  the  order  of  the  

Settlement  Commission  regarding  

payment of interest on the CENVAT credit,  

has held that the appellants herein have  

wrongly claimed interest  on the  CENVAT  

credit, from the date when such credit was  

wrongly availed instead of the date when  

such credit was actually utilized. The High  

Court has further held that the appellants

32 are  not entitled  to  claim interest  on the  

amount of Rs. 50 lacs up to 31.01.2007 as  

the said amount already stood deposited  

on 08.03.2006.

3 The  respondent  herein,  viz.,  M/s.  Ind-Swift  

Laboratories  Ltd.,  is  a  manufacturer  of  

bulk  drugs,  falling  under  Chapter  30  of  

the  First  Schedule  to the  Central  Excise  

Tariff  Act,  1985.  The  company  received  

inputs  and  capital  goods  from  various  

manufacturers  /  dealers  and  availed  

CENVAT credit on the duty paid on such  

materials.  On  the  basis  of  intelligence

33 report,  the  factory  premises  of  the  

respondent as also its group companies at  

different  places  were  searched  on  

08.03.2006. Searches were also conducted  

at the offices of large number of firms in  

Ghaziabad and Noida which had allegedly  

issued invoices without any accompanying  

goods  to  the  respondent  and  its  group  

companies.  At  the  same  time  the  

residential premises of Mr. R.P. Jain and  

Mr.  J.P.  Singh,  the  Brokers,  were  also  

searched  and  particularly  during  the  

course  of  search of  the  residence  of  Mr.  

R.P.  Jain  kachha ledgers  /  notebooks  /

34 files  and  cheques  issued  by  the  Swift  

group to the parties from whom invoices  

without material were being received, were  

recovered.  It  also  appears  that  the  

appellant  conducted  investigations which  

indicated that the  respondent  had taken  

CENVAT  credit  on  fake  invoices.  

Consequently, a show cause notice dated  

08.12.2006 was issued to the respondent,  

to which a reply was also submitted by the  

respondent. The respondent company also  

filed  applications  for  settlement  of  the  

proceedings  and  consequently  the  entire  

matter  was placed  before  the  Settlement

35 Commission.

4 Before the Settlement Commission, it was an admitted position  

that  the  case  pertained  to  the  period  from  27.10.2001  to  

31.03.2006.  The  respondent  company  also  admitted  all  the  

allegations and duty liability as per the show cause notice dated  

08.12.2006. The respondent also deposited the entire duty of  

Rs.  5,71,47,148/-.  Since  conditions/parameters  for  the  

admission  of  a  case  prescribed  under  Section  32E(1)  of  the  

Central Excise Act, 1944 [for short “the Act”] were fulfilled and  

complied with, the application of the respondent for settlement  

was entertained and the same was proceeded with in terms of  

Section  32F(1)  of  the  Act.  After  considering  the  records  and  

hearing the parties the Commission came to the findings that  

while  the  wrongful  CENVAT credit  was  taken  from the  year

36 2001 to 31.03.2006, the payments refunds have been made on  

22.02.2006 and on five different dates in March, 2006 and on  

20.11.2006 and, therefore,  the respondent had the benefit  of  

availing the large amount of CENVAT credit to which they were  

not entitled. Considering the said fact, the Commission felt and  

was of the view that the appropriate interest liability has to be  

borne  by  the  respondent  on  such  wrongful  availment  of  

CENVAT credit. Accordingly, the applications of the respondent  

were  settled  under  Section  32F(7)  of  the  Act  subject  to  the  

following terms and conditions: -

“(a) The amount of duty relating to wrongful availment of CENVAT credit is   settled at Rs. 5,71,47,148/-. As the entire amount has already been paid by  the applicant, no further duty remains payable. The Bench directs that the  said amount of deposit by the applicant shall be appropriated against the  amount of duty settled in this Order. Besides the above, the inadmissible  CENVAT credit of  Rs.  78,97,255/-,  as mentioned in para 23(a)(ii) of  the  show cause notice is disallowed.

37 (b) Immunity from interest in excess of 10% simple interest per annum is   granted. Accordingly, the applicant shall pay simple interest @ 10 % per  annum on CENVAT credit wrongly availed (i.e., Rs. 5,71,47,148/-) from the  dates the duty became payable as per Section 11AB of the Act, till the dates  of payment. Revenue is directed to calculate the amount of interest as per  this order and intimate the same to the applicant within 15 days of  the  receipt  of  this order.  Thereafter,  the  applicant  shall  pay the  amount  of   interest within  15  days of  the receipt of  the said intimation  and  report   compliance both to the Bench and to Revenue.”

2 The said order also specifically recorded that full  

immunity  be  granted  to  the  respondent  

from penalty and prosecution. Subsequent  

to  the  passing  of  the  said  order,  the  

respondent  herein  filed  a  miscellaneous  

application  seeking  for  clarification  

contending  inter alia that the respondent  

had  deposited  whole  amount  of  duty

38 during  investigation  without  protest  and  

that, following the final order, the Revenue  

has  calculated  interest  liability  of  the  

respondent at Rs. 1,47,90,065/- and that  

the  Revenue  has  calculated  the  said  

interest up to the date of the appropriation  

of the deposited amount and not up to the  

date of payment. It was further contended  

that the interest has to be calculated from  

the date of actual utilization and not from  

the  date  of  availment.  Consequently,  it  

was prayed in the said application that the  

Settlement  Commission  may  clarify  the  

actual  amount  of  interest  liability  of  the

39 respondent  and  extend  the  period  of  

payment  of  interest  in  the  interest  of  

justice and equity.  

3 The said application was taken up for consideration and after  

hearing  the  parties  the  application  was  dismissed.  While  

rejecting  the  said application the  Bench noted that  the  final  

order sets out in very clear terms that the respondent shall pay  

simple  interest  @ 10 per  cent per  annum on CENVAT credit  

wrongfully availed from the date the duty became payable as  

per Section 11AB of the Act, till the date of payment and that  

the  application  is  misconceived  and  that  no  case  of  any  

clarification is made out because interest has to be calculated  

till the date of the payment of the duty. It was also held that the  

interest is also payable with reference to the date of availment

40 of CENVAT credit and not from the date of utilization of a part  

of the balance of such credit. The Commission held that such  

an issue was never raised before the Settlement Commission at  

any  earlier  stage.  The  Commission  while  rejecting  the  

application held as follows: -

“The said show cause notice vide Para 23 thereof proposes to demand the  CENVAT credit availed fraudulently by the applicant and not the amount of   CENVAT utilized by the applicant. As such,  it  naturally follows that the  interest  is  also  payable  with  reference  to the date  of   availment  of CENVAT  credit  and  not  from  the date of   utilization  of a part of   balance  of   such  credit.  In  any  case,  this issue was not raised in the application of settlement or at the time of   settlement.  In a query from the Bench, Id. Advocate also not raising this  issue  during  settlement  proceedings.  As  such,  the  Bench  finds  no  justification to go into the practice adopted by the Revenue in this regard. In  any case, it is a new point that did not arise for decision in the Final Order  and on which the applicant is not seeking a decision in the garb of seeking a  clarification. The Commission has already decided the issues which were  brought before  it  through the Settlement Application.  Section 32M of  the  Central Excise Act,  1944 bars  the Commission from re-opening its  final  order. Hence, the final order already passed in the matter was conclusive  as to the matters stated therein and the same cannot be re-opened for the  purpose of deciding the said point raised subsequently.”

41 2 The respondent, however, did not pay the entire  

amount  in  terms  of  the  liability  fixed.  

Consequently,  a  letter  was  issued  on  

16.08.2007 from the office of the appellant  

directing the appellant to pay the balance  

amount  in  terms  of  the  order  dated  

19.01.2007.  

3 The records disclose that immediately on receipt  

of the aforesaid letter the respondent filed  

a Writ Petition in the High Court of Punjab  

& Haryana which was registered as Civil  

Writ Petition No. 13860 of 2007, praying  

for quashing the order dated 31.05.2007  

which  was  passed  by  the  Settlement

42 Commission  on  the  applications  seeking  

clarifications  and  the  letter  dated  

16.08.2007  by  which  the  office  of  the  

appellant  requested  the  respondent  to  

deposit  the  balance  amount  in  terms  of  

the order dated 19.01.2007.  

4 The  High  Court  issued  notice  and  heard  the  

parties  on  the  said  Writ  Petition.  By  its  

judgment and order dated 03.07.2009 the  

said Writ Petition was allowed by the High  

Court holding that Rule 14 of the CENVAT  

Credit  Rules,  2004  [for  short  “Credit  

Rules”] has to be read down to mean that  

where  CENVAT  credit  has  been  taken

43 and/or utilized wrongly, interest should be  

payable  on  the  CENVAT credit  from the  

date  the  said  credit  had  been  utilized  

wrongly  and  that  interest  cannot  be  

claimed  simply  for  the  reason  that  the  

CENVAT credit has been wrongly taken, as  

such availment  by itself  does  not  create  

any liability of payment of excise duty. The  

High Court further held that on a conjoint  

reading of Section 11AB of the Tariff Act  

and  that  of  Rules  3  &  4  of  the  Credit  

Rules, interest cannot be claimed from the  

date of wrong availment of CENVAT credit  

and  that  the  interest  would  be  payable

44 from  the  date  CENVAT  credit  was  

wrongfully utilized.  

5 Being aggrieved  by the  aforesaid  judgment  and  

order  passed  by  the  High  Court  the  

present appeal was filed by the appellant,  

which  was  entertained  and  notice  was  

issued  to  the  respondent,  on  receipt  of  

which,  they  have  entered  appearance.  

Counsel  appearing  for  the  parties  were  

heard  at  length  when  the  matter  was  

listed for final arguments. By the present  

judgment  and  order  we  now  proceed  to  

dispose the said appeal by recording our  

reasons.

45 6 The facts delineated hereinabove make it crystal  

clear that the respondent accepted all the  

allegations raised in the show cause notice  

and also the duty liability under the said  

show cause notice dated 08.12.2006. They  

also  deposited  the  entire  duty  of  Rs.  

5,71,47,148/- prior to the issuance of the  

show  cause  notice  and,  therefore,  they  

requested  for  settlement  of  the  

proceedings in terms of Section 32E read  

with  Section  32F  of  the  Act.  The  said  

settlement proceedings were conducted in  

accordance with law and was finalized by  

the order dated 19.01.2007 on the terms

46 and conditions which have  already  been  

extracted hereinbefore.  

7 A bare perusal of the said order would indicate  

that  the  Settlement  commission  has  

imposed the liability of payment of simple  

interest only @ 10 per cent per annum on  

CENVAT  credit  wrongly  availed,  that  is,  

Rs. 5,71,47,148/- from the date the duty  

became  payable.  Incidentally,  imposition  

of such simple interest at 10 per cent per  

annum was the minimum, whereas levy of  

interest at 36 per cent per annum was the  

highest  in  terms of  the  Section11 AB of  

the Act. Besides,  the allegations made in

47 the  show cause  notice  were  admitted  by  

the  respondent  which,  therefore,  

establishes that the respondent had taken  

wrongful  CENVAT  credit  from  the  year  

2001 to 31.03.2006 and the payment has  

been made only on 22.02.2006 and on five  

different  dates  in  March,  2006  and  on  

20.11.2006,  which  indicates  that  the  

respondent had the benefit of availing the  

large amount of CENVAT credit to which  

they were otherwise not entitled to.  

8 The  order  of  the  Settlement  Commission  also  

indicates  that  full  immunities  were  

granted  to  the  respondent  from  penalty

48 and prosecution. The aforesaid order was  

not challenged by the respondent in any  

forum and, therefore, it became final and  

conclusive in terms of Section 32M of the  

Act,  which  states  that  every  order  of  

settlement passed under sub-Section 7 of  

Section 32F would be conclusive as to the  

matters  stated  therein  subject  to  the  

condition that when a settlement order is  

obtained by fraud or misrepresentation of  

fact,  such  an  order  would  be  void.  

According  to  the  said  provisions,  no  

matter  covered  by  such  order  could  be  

reopened  in  any  proceeding  under  the

49 Central Excise Act or under any other law  

for the time being in force.  

9 Although, subsequently, an application by way of  

clarification was filed by the  respondent,  

the  said  application  was,  however,  not  

entertained.   It  was  held  that  the  said  

application  is  misconceived,  particularly,  

in view of the fact that no such issue was  

raised  before  the  Commission.   Since,  

however,  a Writ Petition was filed by the  

respondent  challenging  only  the  second  

order  of  the  Settlement  Commission and  

the  subsequent  letter  issued  from  the  

office  of  the  appellant,  on  the  basis  of

50 which,  High  Court  even  proceeded  to  

interfere with the first order passed by the  

Settlement  Commission,  we  heard  the  

counsel  appearing for  the  parties  on the  

issue decided by the High Court also.  

10 In order to appreciate the findings recorded by the High Court  

by way of reading down the provision of Rule 14, we deem it  

appropriate to extract the said Rule at this stage which is as  

follows:  

“Rule  14.  Recovery  of  CENVAT  credit  wrongly  taken  or  erroneously   refunded: - Where the CENVAT credit has been taken or utilized wrongly or  has  been  erroneously  refunded,  the  same along  with  interest  shall  be  recovered from the manufacturer or the provider of the output service and  the provisions of Sections 11A and 11AB of the Excise Act or Sections 73  and 75 of the Finance Act, shall apply mutatis mutandis for effecting such  recoveries.”

51 2 A bare  reading of  the  said Rule  would indicate  

that the manufacturer or the provider of  

the  output service  becomes liable  to pay  

interest  along  with  the  duty  where  

CENVAT credit has been taken or utilized  

wrongly or has been erroneously refunded  

and  that  in  the  case  of  the  aforesaid  

nature  the  provision  of  Section  11AB  

would apply for effecting such recovery.  

3 We  have  very  carefully  read  the  impugned  

judgment and order of the High Court. The  

High Court proceeded by reading it down  

to  mean  that  where  CENVAT credit  has  

been taken and utilized wrongly, interest

52 should  be  payable  from  the  date  the  

CENVAT credit has been utilized wrongly  

for  according  to  the  High Court  interest  

cannot be  claimed simply for  the  reason  

that the CENVAT credit has been wrongly  

taken as such availment by itself does not  

create  any  liability  of  payment  of  excise  

duty. Therefore, High Court on a conjoint  

reading  of  Section  11AB of  the  Act  and  

Rules 3 & 4 of the Credit Rules proceeded  

to  hold  that  interest  cannot  be  claimed  

from  the  date  of  wrong  availment  of  

CENVAT credit and that the interest would  

be payable from the date CENVAT credit is

53 wrongly  utilized.  In  our  considered  

opinion,  the  High  Court  misread  and  

misinterpreted the aforesaid Rule 14 and  

wrongly  read  it  down  without  properly  

appreciating  the  scope  and  limitation  

thereof.  A statutory provision is generally  

read  down  in  order  to  save  the  said  

provision  from  being  declared  

unconstitutional  or  illegal.  Rule  14  

specifically  provides  that  where  CENVAT  

credit has been taken or utilized wrongly  

or  has  been  erroneously  refunded,  the  

same  along  with  interest  would  be  

recovered  from  the  manufacturer  or  the

54 provider of the output service. The issue is  

as  to  whether  the  aforesaid  word  “OR”  

appearing in Rule 14, twice, could be read  

as “AND” by way of reading it down as has  

been  done  by  the  High  Court.  If  the  

aforesaid provision is read as a whole we  

find no reason to read the word “OR” in  

between the expressions ‘taken’ or ‘utilized  

wrongly’  or  ‘has  been  erroneously  

refunded’  as  the  word  “AND”.  On  the  

happening  of  any  of  the  three  aforesaid  

circumstances  such  credit  becomes  

recoverable along with interest.

55 4 We  do  not  feel  that  any  other  harmonious  construction  is  

required  to  be  given  to  the  aforesaid  expression/provision  

which is clear and unambiguous as it exists all by itself. So far  

as Section 11AB is concerned, the same becomes relevant and  

applicable  for the purpose of making recovery of the amount  

due and payable.  Therefore,  the High Court erroneously held  

that  interest  cannot  be  claimed  from  the  date  of  wrong  

availment of CENVAT credit and that it should only be payable  

from the date when CENVAT credit is wrongly utilized. Besides,  

the  rule  of  reading  down  is  in  itself  a  rule  of  harmonious  

construction  in  a  different  name.  It  is  generally  utilized  to  

straighten the crudities or ironing out the creases to make a  

statute workable. This Court has repeatedly laid down that in  

the  garb of  reading down a provision it  is  not open to  read

56 words and expressions not found in the provision/statute and  

thus venture into a kind of judicial legislation. It is also held by  

this Court that the Rule of reading down is to be used for the  

limited purpose of making a particular provision workable and  

to bring it in harmony with other provisions of the statute. In  

this connection we may appropriately refer  to the decision of  

this  Court  in  Calcutta  Gujarati  Education  Society  and  

Another  v. Calcutta  Municipal  Corporation  and  Others  

reported in (2003) 10 SCC 533 in which reference was made at  

Para 35 to the following observations of this Court in the case of  

B.R.  Enterprises v.  State  of  U.P.  and  Others reported  in  

(1999) 9 SCC 700: -

“81.  ………….. It is also well settled that first attempt  should be made by the courts to uphold the charged  provision and not to invalidate it merely because one  of the possible interpretations leads to such a result,  

57 howsoever  attractive  it  may be.  Thus,  where  there  are two possible interpretations, one invalidating the  law and  the  other upholding,  the  latter  should  be  adopted.  For  this,  the  courts  have  been  endeavouring,  sometimes  to  give  restrictive  or   expansive  meaning  keeping  in  view the  nature of   legislation,  maybe  beneficial,  penal  or  fiscal  etc.   Cumulatively  it  is  to  subserve  the  object  of  the  legislation.  Old  golden  rule  is  of  respecting  the  wisdom of legislature that they are aware of the law  and  would  never  have  intended  for  an  invalid  legislation. This also keeps courts within their track  and checks individual zeal of going wayward. Yet in  spite  of  this, if  the impugned legislation cannot be  saved the courts shall not hesitate to strike it down.   

Similarly, for upholding any provision, if it could be  saved by reading it down, it should be done, unless  plain words  are  so  clear  to  be  in  defiance  of  the  Constitution.  These  interpretations  spring  out  because  of  concern  of  the  courts  to  salvage  a  legislation to achieve its objective and not to let it fall   merely  because  of  a  possible  ingenious  interpretation. The words are not static but dynamic.   This infuses fertility in the field of interpretation. This  equally helps to save an Act but also the cause of   attack  on the Act.  Here  the courts have  to  play a  cautious role of weeding out the wild from the crop,   of  course,  without  infringing  the  Constitution.  For  doing  this,  the  courts  have  taken  help  from  the  preamble,  Objects,  the  scheme  of  the  Act,  its  

58 historical background, the purpose for enacting such  a provision, the mischief, if any which existed, which  is  sought  to  be  eliminated……………………………… …...  …………………………………………………………… ……………………………………………....  This  principle  of  reading  down,  however,  will  not  be  available  where  the  plain  and  literal  meaning  from  a  bare  reading of  any impugned provisions clearly  shows  that  it  confers  arbitrary, uncanalised or  unbridled  power.” (emphasis supplied)”

2 A taxing statute  must  be  interpreted  in the  light  of  what is  

clearly expressed. It is not permissible to import provisions in a  

taxing  statute  so  as  to  supply  any  assumed  deficiency.  In  

support of the same we may refer to the decision of this Court  

in Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd.  

reported in  (1961) 2 SCR 189 wherein this Court at Para 10  

has observed as follows: -

59 “10………  In  interpreting  a  taxing  statute,  equitable  considerations  are  entirely  out  of  place.  Nor  can  taxing  statutes be interpreted on any presumptions or assumptions.  The court must look squarely at the words of the statute and  interpret them. It must interpret a taxing statute in the light of   what is clearly expressed: it cannot imply anything which is  not expressed; it cannot import provisions in the statutes so  as to supply any assumed deficiency.”

2 Therefore, the attempt of the High Court to read  

down the provision by way of substituting  

the word “OR” by an “AND” so as to give  

relief  to  the  assessee  is  found  to  be  

erroneous. In that regard the submission  

of  the  counsel  for  the  appellant  is  well-

founded that once the said credit is taken  

the beneficiary is at liberty to utilize  the  

same,  immediately  thereafter,  subject  to

60 the Credit rules.

3 An order passed by the Settlement Commission  

could be  interfered  with  only if  the  said  

order  is  found  to  be  contrary  to  any  

provisions of the Act. So far findings of the  

fact recorded by Commission or question  

of  facts  are  concerned,  the  same  is  not  

open for  examination either  by the  High  

Court  or  by  the  Supreme  Court.  In  the  

present case the  order of  the Settlement  

Commission clearly indicates that the said  

order,  particularly,  with  regard  to  the  

imposition of simple interest @ 10 per cent  

per annum was passed in accordance with

61 the  provisions  of  Rule  14  but  the  High  

Court  wrongly  interpreted  the  said  Rule  

and  thereby  arrived  at  an  erroneous  

finding.

4 So far as the second issue with respect to interest  

on  Rs.  50  lacs  is  concerned,  the  same  

being a factual issue should not have been  

gone into by the High Court exercising the  

writ  jurisdiction  and  the  High  Court  

should  not  have  substituted  its  own  

opinion  against  the  opinion  of  the  

Settlement  Commission  when  the  same  

was not challenged on merits.

5 In that view of the matter, we set aside the order passed by the

62 Punjab & Haryana High Court by the impugned judgment and  

order  and  restore  the  order  of  the  Settlement  Commission  

leaving the parties to bear their own costs.  

…..............................................J            [Dr. Mukundakam Sharma]

. ........

................

................ ....J [ Anil  

R. Dave ]

New Delhi, February  21, 2011.