In Indo Swiss Embroidery Industries Limited v. CCE, Vapi, a division bench of the Bombay High Court held that penalty and interest under sections 11AB and 11AC of the Central Excise Act cannot be levied alongwith Additional Excise Duty (ADE) when there is no provisions under the Additional Duties of Excise (T & TA) Act empowering the department to levy interest and penalty.
A bench comprising of Justices Anoop V Mohta and Anuja Prabhudessai was hearing an appeal filed by the assessee company.
The department levied Additional Excise Duty on the appellant-assessee on ground of misclassification of goods under the Additional Duties of Excise (Textile & Textile Articles) Act, 1978 (AED (T & TA)). While doing so, the officer also imposed interest and penalty under sections 11AB and 11AC of the Central Excise Act.
On appeal, the assessee challenged the levy of penalty and interest.
The bench pointed out that there is no provision empowering the department to levy penalty and interest under the ADE (T&TA) Act and in the absence of any statutory provisions, it is settled that any demand of penalty (11AC) and/or interest (11AB) would be without jurisdiction and authority of law. “It is settled that a clear statutory mandate requires for authority to collect and/or raise demand of any tax and penalty and/or interest. In the absence of such provision, any demand in the present case, of penalty/interest is unauthorised, impermissible and unsustainable,” it said.
In view of a catena of decisions by the Apex Court, the bench held that the authority has to be specific and explicit and expressly provided in view of law and Article 265 of the Constitution of India and the present case falls within the ambit of protection so provided for such law.
“The taxing provisions must be cleared and so also the charging Section and the mechanism to collect it. It needs to be construed strictly.”
While concluding, it further nullified the action of the department appropriating the said amount towards other refund. It said that “if interest is not payable for want of specific authority and provision, there is no question of appropriation of any amount towards any other refund. The order of recovery of interest at appropriate rate for delayed payment by invoking the provision of Section 11AB of Excise Act, therefore, is unjust, unclaimable as it is illegal.”
Read the full text of the Judgment below.
