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2020 DIGILAW 1005 (JHR)

Bharat Coking Coal Limited v. State of Jharkhand

2020-10-14

ANUBHA RAWAT CHOUDHARY, APARESH KUMAR SINGH

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JUDGMENT : Through Video Conferencing Heard learned counsel for the petitioner Mr. Indrajit Sinha; learned counsel Mr. Ratnesh Kumar for the Central Excise and Service Tax Department and Mr. Ankur Sinha, A.C. to G.A. V for the State. 2. Petitioner approached this Court for quashing of the notice dated 6/8.10.2016 issued under Section 87 of the Finance Act by the Assistant Commissioner of Central Excise and Service Tax Division no.2, Bokaro whereby and where under it was directed to comply with the provisions of Section 87 of the Finance Act, failing which it was to be treated as defaulter and face legal consequences and recovery. Petitioner also prayed for quashing of notice dated 10.08.2016 issued under Section 87 of the Finance Act, 1994, where again he was asked to take steps in terms thereof, otherwise it would be declared defaulter and face all legal consequences. 3. The basic challenge is to the direction to deposit the arrears of interest on the enhanced rate of washed coking coal dispatched to the Steel Authority of India Limited (SAIL) in terms of long terms agreement between the SAIL and this petitioner Bharat Coking Coal Limited (BCCL) for the period from April 2011 to March, 2012, which according to them, has been raised with retrospective effect. As per the Memorandum of Understanding (MOU) executed on 24.02.2011, petitioner Company was required to supply washed coking coal for the year 2011-12 to 2015-16. According to the petitioner, the MOU for the year 2010-11 was deemed to have commenced w.e.f. 01.04.2010 irrespective of the date on which it was signed and that the annual MOU for supply of washed coking coal for the long terms agreement were to be signed every year in line with the terms agreed therein. Petitioner started supplying washed coking coal to the SAIL as per the schedule. Central Excise tax was levied on coal for the first time w.e.f. March, 2011. As per the petitioner, since the MOU for the financial year 2011-12 was not finalized till the beginning of the financial year 2011-12, billing of washed coking coal was done @ Rs.7500/- per ton i.e. as per available rate for the financial year 2010-2011. Central Excise tax was levied on coal for the first time w.e.f. March, 2011. As per the petitioner, since the MOU for the financial year 2011-12 was not finalized till the beginning of the financial year 2011-12, billing of washed coking coal was done @ Rs.7500/- per ton i.e. as per available rate for the financial year 2010-2011. The rate for the financial year 2011-12 got finalized at much later date when it was increased to Rs.10,303/- per ton for the period April 2011 to June 2011 ; Rs.9678/- per ton for the period from July, 2011 to September 2011 and Rs.8,273/- per ton for the period from October, 2011 to December, 2011 with retrospective effect. In this regard the Deputy Commissioner (Audit), Central Excise ( Headquarters), Ranchi raised an objection vide its report dated 26.07.2012 for short payment of service tax under Works Contract ( Reserve Charge Mechanism) during the period July 2012 to March 2013. On such objection, BCCL deposited an amount of Rs.10,03,913/- and Rs.1,41,974/- towards service tax in August, 2013 and March, 2013. Notice under Section 87 of the Finance Act, 1994 was issued on 10.08.2016 wherein petitioner was directed to take steps otherwise he would be declared defaulter and face consequences. The Superintendent of Central Excise, Range No. 5, Division no.2, Bokaro had also issued a letter dated 09.05.2016 for payment of interest. It was followed up by letter dated 25.07.2016 stipulating that failure to deposit the amount would invite legal consequences. Petitioner informed the department that all initiatives would be taken for payment of interest after due approval of the competent authority. Another notice dated 6/8.10.2016 was issued under Section 87 of the Act of 1994 asking the petitioner to deposit the arrears of interest amount, failing which, it was to be treated as defaulter and face all legal consequences. 4. These notices are under challenge by the petitioner on the ground they are wholly illegal, arbitrary and without jurisdiction. Petitioner has been asked to deposit the arrears of interest on the enhanced rate of washed coking coal dispatched to the SAIL in terms of the long term agreement for the period from April 2011 to March 2012 with retrospective effect. Petitioner contended that no notice of demand for payment of duty was raised earlier without which notice of payment of interest over late payment of duty was without jurisdiction. Petitioner contended that no notice of demand for payment of duty was raised earlier without which notice of payment of interest over late payment of duty was without jurisdiction. Petitioner has relied upon a decision of the Hon’ble Supreme Court in the case of SAIL Vs. CCE reported in 2015 (326) ELT 450 (SC) on the point, which has been referred to the larger Bench. 5. Learned counsel for the respondent Central Excise and Service Tax Department had filed counter affidavit earlier on 30.10.2018 and contested the plea raised by the petitioner. Respondent took a plea that payment of the differential duty and / or the unpaid service tax (after being detected by the Revenue-Audit) is an admission under law by the assesse and consequentially the liability to pay interest becomes incumbent upon the assesse within the meaning of sub-clause (1) to Section 11 AA of the Central Excise Act, 1944; incorporated by the Finance Act, 2011 w.e.f. 08.04.2011 by merging Sections 11 AA and 11 AB providing for interest from the date on which duty becomes due till the date of payment. This is the sheet anchor of the reply of respondent Central Exercise and Service Tax Department. 6. Learned counsel for the respondent Mr. Ratnesh Kumar has placed on record the decision rendered by the larger Bench of the Apex Court in the case of Steel Authority of India Limited Vs. Commissioner of Central Excise, Raipur reported in 2019 (6) SCC 693 . He submits that by virtue of this judgment the issue now stands settled that the assesse is liable to pay interest upon the differential duty and / or the unpaid service tax detected by the Revenue. Para 67, 69 and 71 of the report in particular have been relied upon. 7. Learned counsel for the petitioner is not in a position to dispute the legal position settled by the Hon’ble Supreme Court in the case of Steel Authority of India Limited Vs. Commissioner of Central Excise, Raipur as per the larger Bench decision reported in 2019(6) SCC 693 . 8. Having regard to the aforesaid facts and circumstances and the legal issues relating to interest over differential duty or unpaid service tax in terms of Section 11AA of the Act of 1944 having been settled, the challenge to the impugned notices has to fail. The opinion of the Apex Court as contained in para no. 8. Having regard to the aforesaid facts and circumstances and the legal issues relating to interest over differential duty or unpaid service tax in terms of Section 11AA of the Act of 1944 having been settled, the challenge to the impugned notices has to fail. The opinion of the Apex Court as contained in para no. 67, 69 and 71 are quoted herein below for better appreciation in the factual canvass of the present case: 67. We are here concerned in these cases with one of the ingredients of assessment, namely, valuation. There is no dispute regarding the quantity removed. There is no issue relating to rate of duty. The dispute is relating to the correct value. To appreciate it better, let us take an example of an assessee who deliberately undervalues the goods which he removed. This results in the assessee arriving at an amount which would not be the correct amount. He pays this incorrectly assessed amount. Would it be a case of short-levy or short-payment? If short-levy is to be understood as confined to cases where the assessment is not the full assessment, taking into account the parameters involved correctly, namely, rate of duty, valuation and quantity it could be classified as a case of short-levy as one of the components of proper assessment, namely, valuation has been incorrectly arrived at. The payment in such a case is made in terms of the incorrectly assessed figure. The payment matches the assessment. In fact, it is worthwhile to recall that under Rule 10 of the 1944 Rules which we have adverted to, the expression “short-payment” is not used. Instead, the words “duty has not been paid in full”, have been used. No doubt, in a case where in law though the amount which is paid is in harmony with the amount which is assessed, it is not the amount which ought to have been paid by the assessee. The absence of full payment of duty or short-payment has indeed also in one sense taken place. In a case where there is an escalation clause goods are cleared on a provisional price. Consequently, the value is provisional. There is a subsequent escalation with retrospective effect. It will affect the valuation which was employed in the self-assessment by the assessee which would necessarily be provisional. In a case where there is an escalation clause goods are cleared on a provisional price. Consequently, the value is provisional. There is a subsequent escalation with retrospective effect. It will affect the valuation which was employed in the self-assessment by the assessee which would necessarily be provisional. Enhancement of the value will date back to the dates of removal in view of the retrospective operation. Admittedly the liability for payment of differential duty has arisen. Upon the true value, in a case of retrospective escalation of price though later agreed being received and consequential differential duty being admittedly payable, it would result in Section 11-A read with Section 11-AB applying. 69. While it may be true that interest cannot be demanded by way of damages or compensation and it is also further true that unless there is a substantive provision providing for payment of interest in a fiscal statute, interest cannot be demanded, we would think in the context of the Act and the Rules in question, under Section 11-AB, particularly, when there is no dispute relating to liability to pay the differential duty and we notice that absence of dispute is a fair acknowledgement of the fact that the facts of the present cases are unlike the situation in MRF decision where the price was fixed at the time of removal, interest is payable as provided in Section 11-AB and from the point of time indicated therein. But in these cases, the price was variable under the escalation clause which was very much within the knowledge of the assessee and the demand for interest is sustainable. 71. We are of the view that the reasoning of this Court in the order referring the cases to us (to this Bench) that for the purpose of Section 11-AB, the expression “ought to have been paid” would mean the time when the price was agreed upon by the seller and the buyer does not square with our understanding of the clear words used in Section 11-AB and as the Rules proclaim otherwise and it provides for the duty to be paid for every removal of goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which referred the matter would result in doing violence to the provisions of the Act and the Rules which we have interpreted. Interpreting the words in the manner contemplated by the Bench which referred the matter would result in doing violence to the provisions of the Act and the Rules which we have interpreted. We have already noted that when an assessee in similar circumstances resorts to provisional assessment upon a final determination of the value consequently, the duty and interest dates back to the month “for which” the duty is determined. Duty and interest is not paid with reference to the month in which final assessment is made. In fact, any other interpretation placed on Rule 8 would not only be opposed to the plain meaning of the words used but also defeat the clear object underlining the provisions. It may be true that the differential duty becomes crystallised only after the escalation is finalised under the escalation clause but it is not a case where escalation is to have only prospective operation. It is to have retrospective operation admittedly. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly that differential duty is paid. We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal. Most significantly, Section 11-A and Section 11-AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. We would concur with the views expressed in SKF case and International Auto. We find no merit in the appeals. The appeals will stand dismissed.” 9. In view of the foresaid legal position, there is no merit in the writ petition. It is accordingly dismissed.