- (1.) TWO principal prayers have been made in the writ petition relating to challenge the vires of Rule 8(3) of the Central Excise Rules, 2002 as under: (i) The impugned provision and particularly phrase 'Rs. 1000/ - per day or whichever is higher of Rule 8(3) of Central Excise Rules, 2002 may be declared ultra vires Section 11AB of the Central Excise Act, 1944? (ii) The offending phrase 'Rs. 1,000/ - per day or whichever is higher may be declared arbitrary, confiscatory and violative of Articles 19(1)(g) and 265 of the Constitution of India. Consequential relief is for setting aside the demand founded on the aforesaid rule to the extent it levied interest @ Rs. 1,000/ - per day.
(2.) THE provision in the parent Act which authorises charge of interest on delayed payment of duty reads as under: Section 11AB Interest on delayed payment of duty : Where any duty of excise has not been levied or paid or has been short levied or short -paid or erroneously refunded, the person who is liable to pay the duty as determined under Sub -section (2), or has paid the duty under Sub -section (2B) of Section 11A, shall, in addition to the duty, be liable to pay interest at such rate not below ten per cent and not exceeding thirty -six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, from the first date of the month succeeding the month in which the duty ought to have been paid under this Act, or from the date of such erroneous refund, as the case may be, but for the provisions contained in Sub -section (2), or Sub -section (2B), of Section 11A till, the date of payment of such duty.... For giving effect to this provision, the Rule which has been framed by the Central Government is as under: Rule 8(3) If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with an interest at the rate of two per cent, per month or rupees one thousand per day, whichever is higher, for the period starting with the first day after due date till the date of actual payment of the outstanding amount: Provided that the total amount of interest payable in terms of this sub -rule shall not exceed the amount of duty which has not been paid by date date:Provided further that till such time the amount of duty outstanding and the interest payable thereon are not paid, it shall be deemed that the goods in question in respect of which the duty and interest are outstanding, have been cleared without payment of duty and the consequences and the penalties as provided in these rules shall follow.
(3.) THE contention of the learned Counsel for the petitioner is that the parent Act does not authorize the Central Government to lay the procedure and method for levy of quantification of interest but merely authorises to notify the rate of interest per annum which is to be levied on delayed payment of Duty, or wrongful receipt of refund as the case may be, and therefore, to the extent it provides levy of collecting interest chargeable on delayed payment of duty by fixing Rs. 1,000/ - per day to the minimum penalty if it does not exceed the amount chargeable as interest at the rate of 2% per month cannot be sustained. The rule in effect amounts to providing rate of interest chargeable on delayed payment of duty at 2% subject to minimum interest @ Rs. 1,000/ - per day.;