UNION OF INDIA Vs M/S IND-SWIFT LABORATORIES LTD.
Bench: MUKUNDAKAM SHARMA,ANIL R. DAVE, , ,
Case number: C.A. No.-001976-001976 / 2011
Diary number: 36414 / 2009
Advocates: B. KRISHNA PRASAD Vs
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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.