M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER OF CENTRAL EXCISE, RAIPUR

A (2) The Assistant Collector of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-rule (1), determine the amount of duty due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined. B (3) For the purposes of this rule,— (i) ‘refund’ includes rebate referred to in Rules 12 and 12-A; (ii) ‘relevant date’ means,—

C (a) in the case of excisable goods on which duty of excise has not been levied or paid or on which duty has been short-levied or has not been paid in full, the date on which the duty was required to be paid under these rules; (b) in the case of excisable goods on which the value or the rate D of duty has been provisionally determined under these rules, the date on which the duty is adjusted after final determination of the value or the rate of duty, as the case may be; (c) in the case of excisable goods on which duty has been erroneously refunded, the date of such refund.”

38Copy pinpoint38. Thus, Rule 10 did provide for recovery of duties which were not levied or not paid or short levied or erroneously refunded. What is the position as far as the expression short paid to be found in Section 11A of the Act is concerned? Was there a counterpart in Rule 10? A perusal of Rule 10 would show that the expression ‘short paid’ as such was not used in Rule 10 as it is used in Section 11A. However, we notice that Rule 10 did contemplate recovery of duties which was assessed but have not been paid in full.

39Copy pinpoint39. Before we proceed to pronounce on the scope of the expression ‘short paid’ in Section 11A, we deem it appropriate also to refer to Rules 173-B and 173-C of the Central Excise Rules, 1944. The relevant provisions thereof read as follows: “173-B. Assessee to file list of goods for approval of the proper officer.—(1) Every assessee shall file with the proper officer for approval a list in such form as the Collector may direct, in quintuplicate, showing— H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 443 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

(a) the full description of — (i) all excisable goods produced or A manufactured by him, (ii) all other goods produced or manufactured by him and intended to be removed from his factory, and (iii) all the excisable goods already deposited or likely to be deposited from time to time without payment of duty in his warehouse; B (b) the Chapter, Heading No. and Sub-Heading No., if any, of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) under which each such goods fall; (c) the rate of duty leviable on each such goods; and (d) such other particulars as the Collector may direct. C

(2) The proper officer shall, after such inquiry as he deems fit, approve the list with such modifications as are considered necessary and return one copy of the approved list to the assessee who shall, unless otherwise directed by the proper officer, determine the duty payable on the goods intended to be removed in accordance with such list. (2-A) All clearances shall, subject to the provisions of Rule 173- CC, be made only after the approval of the list by the proper officer. If the proper officer is of the opinion that on account of any inquiry to be made in the matter or for any other reason to be recorded in writing, there is likely to be delay in according the approval, he shall, either on a written request made by the assessee or on his own accord, allow such assessee to avail himself of the procedure prescribed under Rule 9-B for provisional assessment of the goods. F (3) Where the assessee disputes the rate of duty approved by the proper officer in respect of any goods, he may, after giving an intimation to that effect to such officer, pay duty under protest at the rate approved by such officer. (4) If in the list approved by the proper officer under sub-rule (2), G any alteration becomes necessary because of— (a) the assessee commencing production, manufacture or warehousing of goods not mentioned in that list, or

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A (b) the assessee intending to remove from the factory any non- excisable goods not mentioned in that list, or (c) a change in the rate or rates of duty in respect of the goods mentioned in that list or, by reason of any amendment to the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), a B change in the Chapter, Heading No. and Sub-Heading No. the assessee shall likewise file a fresh list or an amendment of the list already filed for the approval of such officer in the same manner as is provided in sub-rule (1). (5) When the dispute about the rate of duty has been finalized or for any other reasons affecting rate or rates of duty, a modification of the rate or rates of duty is necessitated, the proper officer shall make such modification and inform the assessee accordingly. (6) The Collector may exempt by a general order any class of assessees, who manufacture wholly goods which, for the time being, are exempt from paying duty, from filing the list under sub- rule (1): Provided that as and when duty exemption is withdrawn or modified or no longer applicable, the assessee shall comply with the provisions of sub-rule (4) as if he had filed a list earlier and the list had been approved with ‘nil’ rate of duty. 173- E C. Assessee to file price list of goods assessable ad valorem.— (1) Every assessee who produces, manufactures or warehouses goods which are chargeable with duty at a rate dependent on the value of the goods, shall file with the proper officer a price list, in such form and in such manner and at such intervals as the Collector may require, showing the price of each of such goods and the trade discount, if any, allowed in respect thereof to the buyers along with such other particulars as the Central Board of Excise and Customs or the Collector may specify. (2) Prior approval by the proper officer of the price list filed by an assessee under sub-rule(1) shall be necessary only, where the assessee— (i) sells goods to or through a related person as defined in Section 4 of the Act; or (ii) uses such goods for manufacture or production of other goods in his factory; or H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 445 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

(iii) clears such goods for free distribution; or A (iv) clears such goods in any other manner which does not involve sale to a non-related person; or (v) clears the goods of the same kind and quality from his factories located in the jurisdiction of different Collectors of Central Excise or Assistant Collectors of Central Excise; or B

(vi) submits a fresh price list or an amendment of the price list already filed with the proper officer and which has the effect of lowering the existing value of the goods. *** *** *** C (5) Subject to the provisions of Rule 173-CC, an assessee specified in sub-rule (2) shall not clear any goods from a factory, warehouse or other approved place of storage unless the price list has been approved by the proper officer. In case the proper officer is of the opinion that on account of any enquiry to be made in the matter D or for any other reasons to be recorded in writing, there is likely to be delay in according approval, he shall either on a written request made by the assessee or of his own accord allow such assessee to avail himself of the procedure prescribed under Rule 9-B for provisional assessment of the goods.” E

40Copy pinpoint40. We have already noticed that the new Central Excise Rules have come into force known as Central Excise Rules 2002. Under Rule 173-B of the erstwhile Rules, the method of assessment and payment of tax was essentially by the assessee filing a classification list under Rule 173-B which inter alia was to contain the rate of duty leviable. The Rule further contemplated approval of the said list with any modification as may be considered necessary. The clearance was, subject to the provision of Rule 173-CC, to be made only after the approval by the competent officer. Equally under rule 173(C), the assessee, the manufacturer or producer or one who warehoused goods chargeable with duty on the value of goods was to file a price list. Prior approval was necessary only in certain circumstances which included sale to or through related person as defined in Section 4 of the Act. Under Sub- rule 5 of Section 173-C again subject to the provisions of Rule 173CC, the assessee covered by Rule 173C(2) could not clear any goods from a factory, warehouse or other approved place of storage unless the price H

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A list was approved. Under the new dispensation namely, Excise Rule 2002, we have noticed that assessment was based on the value and the rate of tax as declared by the assessee.

41Copy pinpoint41. In the context of Rule 173B and 173C, questions have arisen before this Court as to the effect of notice issued under Rule 10 of the B Excise Rules, 1944 when the approved classification was sought to be reopened. The Assistant Collector sought to revise the net assessable value and recover the differential duty. A Bench of two learned Judges held in Rainbow Industries (P) Ltd. v. CCE (1994)6 SCC 563, that once the price list was approved and acted upon this reclassification would be effective from the date of issue of the show cause notice. A C Bench of three learned Judges in Balarpur Industries Ltd. v. Assistant Collector of Customs and Central Excise & Ors. (1995) Supplement 3 SCC 429, sought to confine the aforesaid judgment to the facts of the case. Finally, the matter was considered by a Constitution Bench in the case of Collector of Central Excise, Baroda v. Cotspun Ltd. reported in (1999) 7 SCC 633. This Court approved the view taken in Rainbow Industries (supra) and it disapproved of Balarpur Industries noticing that it did not advert to Rule 173-B. In the course of judgment, the Court inter alia held as follows: “12. Rule 173-B deals with classification lists. It entitles the proper officer of Excise to make such enquiry thereon as he deems fit and requires him to approve the list only thereafter, and that with such modifications as are considered necessary. The assessee must determine the excise duty that is payable by him on the goods he intends to remove in accordance with the approved classification list. Sub-rule (5) provides for modification of an approved classification list.

13. Rule 10 is a provision for recovery of duties that have not been levied or paid in full or part. So far as is relevant for our purposes, it provides that where any duty has been short-levied, the Excise Officer may, within six months from the relevant date, serve notice on the assessee requiring him to show cause why he should not pay the amount that had been short-levied. Rule 10 does not deal with classification lists or relate to the reopening of approved classification lists. That is exclusively provided for by Rule 173-B. H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 447 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

14. The levy of excise duty on the basis of an approved A classification list is the correct levy, at least until such time as to the correctness of the approval is questioned by the issuance to the assessee of a show-cause notice. It is only when the correctness of the approval is challenged that an approved classification list ceases to be such. B

15. The levy of excise duty on the basis of an approved classification list is not a short levy. Differential duty cannot be recovered on the ground that it is a short levy. Rule 10 has then no application.” (Emphasis supplied) C

42Copy pinpoint42. A Bench of two learned Judges in the case of M/s. Eastland Combines, Coimbatore v. Collector of Central Excise, Coimbatore reported in AIR 2003 SC 843 after noticing the judgment in Ballarpur Industries, Rainbow and also noticing the change brought about by the Finance Act 10 of 2000 in Section 11A, proceeded to take the view that in view of the amendment, the basis for arriving at the conclusion that Rule 10 does not deal with classification list or relate to the reopening of classification list is altered and the conditions on which Cotspun (supra) judgment was rendered in (1999)7 SCC 633 was fundamentally altered. The view taken in M/s. Eastland Combines, Coimbatore (supra) came to be doubted by another Bench of two Judges. Consequently, again it was referred to a Bench of three learned Judges and the reference came to be answered in the decision reported in ITW Signod India Limited vs. Collector of Central Excise reported in (2004) 3 SCC 48. Thereunder, the Court, after referring to the 1994 Rules, Section 11A which was introduced in the Act, the amendment which was brought about by Section 97 of the Finance Act, 2000, found that Section 11A, as amended by the Finance Act, 2000 brought about a completely different situation in the course of the judgment of the Court held inter alia as under: “55. Section 11-A deals with a case when inter alia excise duty has been levied or has been short-levied or short-paid. The word “such” occurring after the words “whether or not” refers to non- levy, non-payment, short-levy or short payment or erroneous refund. It is, therefore, not correct to contend that the word “such” indicates only such short-levy which has been held to be non- H

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57. The procedure laid down under Rule 173-B of the Rules has specifically been included in the Act. Furthermore, by reason of the amended Act a provision has been made for reopening the approved classification lists. It is a procedural provision, in terms whereof statutory authorities are required to determine as to whether the earlier classification was correctly done or not. The said authority upon giving an opportunity of hearing to the parties may come to the conclusion that decision on the approval granted need not be reopened and even if the same is reopened, the reasons therefor are to be stated. As the provision of Section 11-A is a recovery provision as regards non-levy or non-paid or short-levy or short-paid or erroneously refunded duties by reason of the said amendment, Parliament had merely provided that an approval on the basis of a classification list inter alia in case of a short-levy can be recovered if a finding is arrived at that the goods had undergone a short-levy. For the aforementioned purpose, Section 110 of the Finance Act, validating actions taken under Section 11- A can be taken into consideration whereby and whereunder a F legal fiction is created.” (Emphasis supplied)

43Copy pinpoint43. Section 11A, thus, was held to be a recovery provision as regards non-levy, non-paid, short-levy, short-paid or erroneously refunded duty. Levy of excise duty under Rule 10 of the Excise Rules, 1944 on the basis of approved classification list or price list was found to be correct levy. It did not give rise to short-levy. Undoubtedly, the amended provisions of Section 11A empowered recovery of duty even in a case where the classification list has been approved earlier and it would operate from the date of removal and not from the date on which show cause was issued.

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 449 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

44Copy pinpoint44. In the case of N.B. Sanjana, Assistant Collector of Central A Excise, Bombay & Ors. v. The Elphinstone Spinning and Weaving Mills Co. Ltd.; 1978 E.L.T. (J 399), the contention of the assessee was that neither Rule 9 nor Rule 10A (1944 Rules) gave power to the Revenue to raise the demand notice involved in the said case. The demand had to be made if at all under Rule B 10 and the demand having been made long after three months, contrary to what was prescribed in the said Rule, the notices were illegal and void. The court inter alia held as follows:- “14. We are not inclined to accept the contention of Dr. Syed Mohammad that the expression ‘levy’ in Rule 10 means actual collection of some amount. The charging provision Section 3(i) specifically says C “There shall be levied and collected in such a manner as may “be prescribed the duty of excise. It is to be noted that Sub-section (i) uses both the expressions “levied and collected” and that clearly shows that the expression “levy” has not been used, in the Act or the Rules as meaning actual collection. Dr. Syed Mohammad is, D no doubt, well founded in his contention that if the appellants have power to issue notice either under Rule 10A or Rule 9(2), the fact that the notice refers specifically to a particular rule, which may not be applicable, will not make the notice invalid on that ground as has been held by this Court in J.K. Steel Ltd. v. Union of India (1969) 2 SCR 418 = (AIR 1970 SC 1173). E “If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in B. Balakotaiah v. The Union of India: [1958]SCR 1052 = (AIR 1958 SC 232); and Afzal Ullah v. State of U.P. [1964]4SCR 991 = (AIR 1964 SC 264). The Court further proceeded to held as follows:- “18. This now takes us to the question of proper interpretation to be placed on the expression “short-levied” and “paid” in Rule 10. Does the expression “short-levied” mean that some amount should have been levied as duty as contended by Dr. Syed Mohammad or will that expression cover even cases where the assessment is H

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A of ‘nil duty’, as contended by Mr. Daphtary. What is the meaning of the word “paid” in Rule 10 ? It is contended on behalf of the appellants that it means “actually paid”, whereas, according to the respondents, it means “ought to have been paid”. Taken literally, the word “paid” does mean actually paid in cash. That means that a party or an assessee must have paid some amount of duty whatever may be the quantum. If this literal interpretation is placed on the expression “paid” in rule it is needless to state that it will support in a large measure the contention of Dr. Syed Mohammad that Rule 10 contemplates a short-levy in the sense that the amount which falls short of the correct amount has been assessed and actually paid. In our opinion, the expression “paid” should not be read in a vacuum and it will not be right to construe the said word literally, which means actually paid. That word will have to be understood and Interpreted in the context in which it appears in order to discover its appropriate meaning. If this is appreciated and the context is considered it is apparent that there is an ambiguity in the meaning of the word “paid”. It must be remembered that Rule 10 deals with recovery of duties or charges short levied or erroneously refunded. The expression “paid” has been used to denote the starting point of limitation of three months for the issue of a written demand. The Act and the Rules provide in great detail the stage at which and the time when the excise duty is to be paid by a party. If the literal construction that the amount should have been actually paid is accepted, then in case like the present one on hand, when no duty has been levied, the Department will not be able to take any action under Rule 10. Rule 10-A cannot apply when a short-levy is made through error or misconstruction on the part of an officer, as such a case is specifically provided by Rule 10. therefore, in our opinion, the proper interpretation to be placed on the expression “paid” is “ought to have been paid”. Such an interpretation has been placed on the expression “paid” occurring in certain other enactments as in Gursahai Saigal v. G Commissioner of Income-tax, Punjab [1963] 3 SCR 893 = (AIR 1963 SC 1062), and in Allen v. Thorn Electrical Industries Ltd. (1968) 1 QB 487. In (1963) 3 SCR 893 = (AIR 1963 SC 1062, the question arose as follows: In certain assessment proceedings under the Indian Income-tax Act, 1922, an assessee was charged with interest Under Sub-section (8) of Section 18A of that Act Under H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 451 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

that Sub-section interest calculated in the manner laid down in A Sub-section (6) of Section 18A was to be added to the tax assessed. Sub-section 3 of Section 18A dealt with cases of a person who has not been assessed before and he was required to make his own estimate of the tax payable by him and pay accordingly. Sub-section (3) of Section 18A was applicable to the assessee in that case. However, he neither submitted any estimate nor did he pay any advance tax. Under Sub-section (6) of Section 18A it was provided: “Where in any year an assessee has paid tax Under Sub- section(2) or Sub-section (3) on the basis of his own estimate, and the tax so paid is less than eighty percent of the tax determined on the basis of regular assessment simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in which the tax was paid up to the date of the said regular assessment shall be payable by the assessee upon the amount by which the tax so paid falls short of the said eighty percent.” “25. We may point out that if the contention of Dr. Syed Mohammad that in order to constitute short-levy, some amount should have been assessed as payable by way of duty so as to make Rule 10 applicable, is accented the result will be rather anomalous. For instance if due to collusion (which means collusion between a party and an officer of the Department) a sum of Rs. 2/-is managed to be assessed by way of duty when really more than thousand times that amount is payable and if the smaller amount of duty so assessed has been paid, the Department will have to take action within three months for payment of the proper amount of duty. On the other hand, if due to collusion again an order of nil assessment is passed, in which case no duty would have been paid, according to the appellants Rule 10A will apply. We do not see any reason to distinguish the above two cases one from the other. Both are cases of collusion and if an assessee in collusion manages to have a petty amount of duty assessed and paid he can effectively plead limitation of three months under Rule 10. Whereas in the same case of collusion where no duty has been levied there will be no period of limitation. In our opinion, that will not be a proper interpretation to be placed on Rule 10A H

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A by us. By the interpretation placed by us on Rule 10, the position will be that an assessee who has been assessed to a smaller amount as well as an assessee who has been assessed to nil duty will all be put on a par and that is what is intended by Rule 10.” (Emphasis supplied)

45Copy pinpoint45. In fact, it is to be noticed, that Section 11A which was inserted by Act 26 of 1978 is substantially the reproduction of Rule 10 of 1944 Rules. We notice, in fact, the following answers given by Shri Satish Aggarwal, the Minister of State in the Ministry of Finance, as regards, the reasons for Act 26 of 1978 by which Section 11A was inserted:- C “Shri Amrit Nahata made a frontal attack on clause 24 and asked, why are you going to increase the limit with regard to short levy from six months to five years? Previously, there was no limit. It was only in August 1977 that the rules were amended and provision made in the rules to fix a time limit in the case of fraud. Earlier, a D case could be reopened even after 20 years in the case of fraud. In 1977 the rules prescribed a time limit of five years in the case of fraud. Otherwise, the period was unlimited. When we limited the period to five years, the Committee on Subordinate Legislation recommended that instead of incorporating such an important provision in the rules it should find a place in the Act itself. That is E why we have brought in this amendment to the Act. Otherwise, since those rules were laid on the Table of the House by implication they were approved by the House without any amendment. So, that is more or less the law now. We are only incorporating it in the Act, as recommended by the Committee on Subordinate F Legislation.”

46Copy pinpoint46. It is apparently thus that Section 11A came to be inserted.

47Copy pinpoint47. Coming to Section 11AB, it came to be inserted by Act 33 of

1996. Thereafter, it was amended by Act 10 of 2000, Act 14 of 2001, Act 20 of 2002 and Act 49 of 2005. We have already extracted the G relevant provisions of the said section. Section 11A must necessarily be read with Section 11AB. This is for the reason that interest under Section 11AB is premised upon the duty of excise not being levied or paid or short levied, short paid or erroneously refunded. Such duty is either determined under sub-Section(2) of Section 11A or without such determination it being paid under Section 2B of Section 11A. In any of H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 453 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

the circumstances, namely, non-levy, non-payment, short-levy and short- A paid, any duty has been determined or paid as has been provided under Section 11A, necessarily the assessee becomes liable to pay interest from the first date of the month succeeding the month in which duty ought to have been paid.

48Copy pinpoint48. The question which we are necessarily called upon to decide B is when price is revised upward with retrospective effect and the excise duty on the same is paid immediately on a future date whether interest is payable under Section 11AB from the first day of the month succeeding the month in which the duty ought to have been paid under the Act. To keep the matter in focus, the exact question is which is the month in which the duty ought to have been paid. C

49Copy pinpoint49. Under the Rules, goods become exigible to duty on removal. Assessment is to be done by assessee itself by way of self-assessment. In a case where duty is payable on the basis of the value, the assessee is to apply the rate of duty to the value and pay the duty on or before the sixth day of the month succeeding the month in which removal of the D goods takes place. Undoubtedly, if the removal takes place in March, the payment is to be made by 31st of March.

50Copy pinpoint50. We have also noticed what happens if there is provisional assessment. In the case of provisional assessment, the assessee entertains a doubt regarding the actual value or the rate of duty. He E applies and he is permitted under the order to remove goods on a provisional assessment. The assessment is thereafter finalized. When the provisional assessment is finalized, the assessee becomes liable however to pay interest from the first date of the month succeeding the month for which the amount is determined. We have no doubt in our mind that under Rule 7(4), the expression “succeeding the month for which such amount” is determined refer to the month of removal of the goods. When the provisional assessment has such consequences, it would occasion an invidious discrimination to place an interpretation on Section 11AB by which those assesses who go in for provisional assessment under Rule 7 are called upon to pay interest upon finalization of the assessment with reference to the date of removal in a case where the value is fully determined as a result of escalation clause being worked resulting in an upward revision of prices and under Section 11AB payability arises with reference to the date of decision to grant escalation. In other words, the law will have to be interpreted in a manner that it is H

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A fair and equal to similarly situated group of assessees. Legislative intention, in this regard, also cannot be otherwise. Legislature has clearly in Section 11AB spelt out the time with reference to the Act and the Rules. Under Section 11AB in the case of short levy or short payment inter alia, the expression “month in which the duty has become payable” under the Act and the rules must be understood as the month in which the duty is payable under the Rules made under the Act. Thus, if goods are removed in the month of January ordinarily payment must be made by the 6th of February. If the duty is not paid by the 6th of February, Section 11AB must be understood as mulcting the assessee with liability to pay interest from the first day of March in the example we have given. If the assessee went in for provisional assessment under rule 7, it becomes liable from the 1st day of the month following the month for which the amount is determined.

51Copy pinpoint51. The expression “the month in which the duty ought to have been paid” under this Act, when it is read alongwith Rule 8, which declares that the duty on the goods removed from the factory or warehouse during a month is to be paid on the 6th day of the following month would mean that the Legislature has understood the expression “the month in which the duty ought to have been paid” under the Act in the same sense as it is declared in Rule 8.

52Copy pinpoint52. In this regard it is also pertinent to notice the finding in the order of the original authority that perusal of the Circular dated 01/07/ 2004 makes it unambiguously clear that the price was understood as provisional price. This belies quite clearly the case of the appellant that the price was final. Could the assessee in the light of the Circular even for a moment in the same breath contend that the assessee was F unhesitatingly ready and able to determine the price and hence the value. We would think that it certainly presented a situation where the assessee should have resorted to Rule 7.

53Copy pinpoint53. As we have already noted, SAIL has paid the differential duty of Rs.142.78 crores even without waiting for any notice under Section G 11A(1). The assessee volunteered and made payment in October 2006. We find merit in the finding by the authority that this is a case where therefore the payment made by the assessee is to be treated as one falling under Section 11A(2)b). This meant also that there was no need for determination of the duty within the meaning of Section 11A(2)(a) or issuance of notice under Section 11A.

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 455 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

54Copy pinpoint54. It is important to notice that when we contrast Section 11A as it was introduced with effect from 15.11.1980 with Section 11A after amendment by Section 97 of the Finance Act, 2000, we find that in the later avtar of Section 11A, the following words have been inserted: - “Whether or not such non-levy or non-payment, short-levy or short-payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or the rules made thereunder.” No doubt, it had the effect of taking away the basis for the decision in the case of Collector of Central Excise, Baroda v. Cotspun Ltd. C reported in (1999) 7 SCC 633, which took the view that a levy based on the approved classification list, is not short-levy. But its impact goes beyond the same. Power under Section 11A to recover the duty which has not been levied or not been paid or short-levied or short-paid will be available inter alia irrespective of, whether the aforesaid contingency was or was not the result of any approval, acceptance or assessment D either relating to the rate of duty or the valuation under the Act and the Rules. Thus, even when there has been an assessment or acceptance in relation to the rate of duty or valuation, it does not stand in the way of invoking power under Section 11A.

55Copy pinpoint55. Rule 12 declares that every assessee is to file monthly returns. E There is no provision in the rule which contemplates an assessment as such based on the return by the authorities. Assessment is self-assessment by the assessee under Rule (6). No doubt, in the case covered by Rule 7 there is a provisional assessment followed by a final assessment. The main ingredients for self-assessment would appear to be (1) the rate of F duty (2) valuation (3) quantity of removal.

56Copy pinpoint56. Are cases of non-levy, non-payment, short-levy and short- payment mutually exclusive?. In other words, can it be said that in a case of non-payment, it would not be a case of non-levy? Do they overlap? If there is non-levy, will there by short levy at the same time. G Finally, in a case of short levy, can there also be short payment?

57Copy pinpoint57. What is levy? We have already noticed that in the decision of this Court in N.B. Sanjana (supra), this Court rejected the argument of the Revenue that levy in Rule 10 means collection of some amount. The H

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A Court went on to hold that levy has not been used in the Act or the rules as meaning actual collection.

58Copy pinpoint58. In a case where goods are removed clandestinely, there would be no levy. Equally, there will be non-payment. Thus, a case of non- levy can overlap with non-payment. No doubt, there can be cases where B despite full levy there can be no payment, may be by mistake or otherwise. Equally thus, if there is no non-levy, there can be partial payment. That would make it a case of short payment as the payment does not match the amount of duty levied as per the self-assessment carried out by the assessee. A short levy ordinarily would be a case where out of the ingredients of assessment, namely, (1) rate of duty, (2) C valuation and (3) quantity removed, the components all or any are incorrectly applied. As an instance if the full rate of duty applicable is not applied though the valuation and the quantity is correctly arrived at, it may fall under short-levy. In one sense it could be said that there is short-payment also, as if payment could be understood as the amount which ought to have been paid but it has not been paid, it may be a case of short payment. But it may be more appropriate to put it under short levy where the deficit in payment is essentially in terms of a short-levy.

59Copy pinpoint59. 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 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- F 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 G 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 1944 Rules which we have adverted to., the expression “short- payment” is not used. Instead the words duty has not been paid in full, has 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 H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 457 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

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. 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 11A read with Section 11AB applying. C

60Copy pinpoint60. It is true that the statutory authority has found it to be a case of short payment. In the notice issued claiming interest it is stated there is short levy (see page 89 Vol.II SLP paper book). Proceeding on the basis that it is a case of short levy, Section 11A read with Section 11AB is attracted and the interest clock ticks from the date as we have found namely as provided in Rule 8 read with Section 11AB. If the concept of short payment is stretched to include all amounts which ought to have been paid, it may also be treated as a case of short payment though juridically it may be true that it may strictly fall under short levy.

61Copy pinpoint61. 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 11AB, 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 11AB 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.

62Copy pinpoint62. As far as the scope of the second explanation of Section 11A(2)(b) is concerned, it contemplates payment voluntarily by the assessee. It is without any notice being issued under Section 11A. There is also reference to liability on the part of the assessee to pay interest H

p. 458 Copy page pinpoint

A under Section 11A(2)(b), not only on the amount which is paid within the meaning of Section 11A(2)(b) but on any short payment as may be determined by the excise officer. This only means that payment can by an assessee of any of the four amounts with which we are more concerned namely, non-levy, non-payment, short-levy or short-payment. Since there is no notice under Section 11A and non-determination of the amount as such pursuant to which the amount is paid it may happen that there may be shortfall in the amount which is paid by the assessee in comparison to what the assessee is legally required to pay. The short payment which is therefore referred to in the second Explanation to Section 11A(2)(B) can only be the aforesaid short payment and it is not referring to the short payment of duty which was originally occasioned and which is the subject matter of Section 11A(2)(b) and Section 11AB.

63Copy pinpoint63. 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 11AB, 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 11AB 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. 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 crystalised only after the escalation is finalized 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 H

M/S STEEL AUTHORITY OF INDIA LTD. v. COMMISSIONER 459 OF CENTRAL EXCISE, RAIPUR [K. M. JOSEPH, J.]

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 11A and section 11AB 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(supra) and International Auto (supra). We find no merit in the appeals. The appeals will stand dismissed.

C Devika Gujral Appeals dismissed.