Pradeep Parikh, A.M. - (1.) THIS appeal by the assessee is directed against the order of the learned CIT, dt. 27th March, 1991, made under s. 263 of the IT Act, 1961 (the Act). The grounds raised, quite argumentative as they are, are seven in number, but the issue in question is only one - "Is the impugned order, which disallowed interest of Rs. 2,63,658 payable on excise refund, and which held the order of the learned Dy. CIT (Asst.) as erroneous in so far as it was prejudicial to the interest of the Revenue, bad in law ?"
(2.) Some relevant facts : The assessee-company, amongst other items, is also engaged in the manufacture of blended yarn. It had started manufacturing such yarn a few years prior to 1972. Till 1972, the assessee paid excise duty on the yarn manufactured by it under tariff item 18 and 18A of the First Schedule to the Central Excises and Salt Act, 1944 (the Excise Act). The Finance Act, 1972, introduced a new Tariff Item 18-E whereby for the first time, blended yarn was subjected to excise duty under the new Tariff Item w.e.f. from 16th March, 1972. After protracted litigation, the trial Court held that the levy of excise duty on blended yarn upto 15th March, 1972, was illegal, void and ultra vires. The Union of India appealed before the Gujarat High Court against the order of the trial Court and also filed an application to stay the operation of the said order. The High Court granted interim conditional stay which permitted the assessee to withdraw the decretal amount of excise duty paid prior to 16th March, 1972, on furnishing of bank guarantee. The assessee withdrew the decretal amount. On appeal, the High Court ruled that though the excise collected by the Revenue prior to 16th March, 1972, was illegal, the assessee did not suffer any injury and is not entitled to claim refund of excise duty. Consequently the Court, vide its order dt. 6th April, 1984, directed the assessee to refund the excise withdrawn with 12 per cent interest thereon. The High Court also rejected the prayer of the assessee for a certificate under Art. 133(1) of the Constitution to appeal to the Supreme Court. The Supreme Court, however, vide its order dt. 10th February, 1986, granted Special Leave to the assessee and stayed the recovery of the amount of excise duty already recovered by the assessee from the Central Government pursuant to the decree of the trial Court. But if it loses in the appeals, the Supreme Court said, it will have to refund that amount to the Central Government together with interest at the rate of 12 per cent per annum and that the bank guarantee already furnished for the full amount shall continue. It is this interest amounting to Rs. 2,63,658 which the High Court ordered the assessee to pay, was provided for in its accounts for the year ending on 30th June, 1985, and deduction thereof was claimed. The learned CIT, exercising his jurisdiction under s. 263 of the Act held that the impugned interest was a statutory liability and hence came within the purview of s. 43B of the Act which permits the deduction of such specified liabilities only on actual payment. For this proposition, the learned CIT drew strong support from the Heydon's case which laid down the mischief rule. He held the order of the learned Dy. CIT (Asst.) to be erroneous and prejudicial to the interests of the Revenue. He also enhanced the assessment to the extent of Rs. 2,63,658.
(3.) SHRI J. P. Shah, the learned counsel for the assessee, argued that the impugned liability was not a statutory liability because under no provision of the statute (the Excise Act in this case) the interest in question was levied. It was only by the order of the High Court that the liability was imposed which again, to repeat, was not under any of the provisions of the Excise Act. At this juncture a specific query was put to the learned counsel that if, for whatever reason, the liability is held to be a statutory liability, then would it attract the provisions of s. 43B. To this the learned counsel responded in a firm negative, amplifying further that s. 43B would be attracted only if the interest liability can be raised to the status of any tax, duty, cess or fee. He further contended that Heydon's case would apply only where interpretation is required and the rules of interpretation as laid out in the Heydon's case could be resorted to only when the language of the provisions was either not clear or was prone to more than one interpretation. The language of s. 43B is unambiguous and that by taking recourse to the Heydon's case, it cannot be stretched to mean something which is not intended at all by the legislature. It would also amount to assuming an authority to legislate which is not within the realm of either the executive or the judiciary. Thus, Mr. Shah strongly pleaded to quash the impugned order.;