Union Of India & Ors vs M/S Ind-Swift Laboratories Ltd

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1976 OF 2011

[Arising out of SLP(c) No. 5169 of 2010]

lUnion of India & Ors. .... Appellants

Versus

M/s. Ind-

Swift

Laboratories Ltd. ...Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

2 The present appeal is directed against the judgment and order dated

2

03.07.2009 in Civil Writ Petition No. 13860 of 2007 passed

by the Punjab & Haryana High Court, whereby the High

Court while interfering with the order of the Settlement

Commission regarding payment of interest on the CENVAT

credit, has held that the appellants herein have wrongly

claimed interest on the CENVAT credit, from the date when

such credit was wrongly availed instead of the date when

such credit was actually utilized. The High Court has further

held that the appellants are not entitled to claim interest on

the amount of Rs. 50 lacs up to 31.01.2007 as the said

amount already stood deposited on 08.03.2006.

3 The respondent herein, viz., M/s. Ind-Swift Laboratories Ltd., is a

manufacturer of bulk drugs, falling under Chapter 30 of the

3 First Schedule to the Central Excise Tariff Act, 1985. The

company received inputs and capital goods from various

manufacturers / dealers and availed CENVAT credit on the

duty paid on such materials. On the basis of intelligence

report, the factory premises of the respondent as also its

group companies at different places were searched on

08.03.2006. Searches were also conducted at the offices of

large number of firms in Ghaziabad and Noida which had

allegedly issued invoices without any accompanying goods to

the respondent and its group companies. At the same time

the residential premises of Mr. R.P. Jain and Mr. J.P. Singh,

the Brokers, were also searched and particularly during the

course of search of the residence of Mr. R.P. Jain kachha

ledgers / notebooks / files and cheques issued by the Swift

4

group to the parties from whom invoices without material

were being received, were recovered. It also appears that the

appellant conducted investigations which indicated that the

respondent had taken CENVAT credit on fake invoices.

Consequently, a show cause notice dated 08.12.2006 was

issued to the respondent, to which a reply was also

submitted by the respondent. The respondent company also

filed applications for settlement of the proceedings and

consequently the entire matter was placed before the

Settlement Commission.

4 Before the Settlement Commission, it was an admitted position

that the case pertained to the period from 27.10.2001 to

31.03.2006. The respondent company also admitted all the

allegations and duty liability as per the show cause notice dated

5

08.12.2006. The respondent also deposited the entire duty of Rs.

5,71,47,148/-. Since conditions/parameters for the admission of

a case prescribed under Section 32E(1) of the Central Excise Act,

1944 [for short "the Act"] were fulfilled and complied with, the

application of the respondent for settlement was entertained and

the same was proceeded with in terms of Section 32F(1) of the

Act. After considering the records and hearing the parties the

Commission came to the findings that while the wrongful CENVAT

credit was taken from the year 2001 to 31.03.2006, the payments

refunds have been made on 22.02.2006 and on five different

dates in March, 2006 and on 20.11.2006 and, therefore, the

respondent had the benefit of availing the large amount of

CENVAT credit to which they were not entitled. Considering the

said fact, the Commission felt and was of the view that the

6

appropriate interest liability has to be borne by the respondent on

such wrongful availment of CENVAT credit. Accordingly, the

applications of the respondent were settled under Section 32F(7)

of the Act subject to the following terms and conditions: -

"(a) The amount of duty relating to wrongful availment

of CENVAT credit is settled at Rs. 5,71,47,148/-. As

the entire amount has already been paid by the

applicant, no further duty remains payable. The Bench

directs that the said amount of deposit by the

applicant shall be appropriated against the amount of

duty settled in this Order. Besides the above, the

inadmissible CENVAT credit of Rs. 78,97,255/-, as

mentioned in para 23(a)(ii) of the show cause notice is

disallowed.

(b) Immunity from interest in excess of 10% simple

interest per annum is granted. Accordingly, the

applicant shall pay simple interest @ 10 % per annum

on CENVAT credit wrongly availed (i.e., Rs.

5,71,47,148/-) from the dates the duty became

payable as per Section 11AB of the Act, till the dates

of payment. Revenue is directed to calculate the

7

amount of interest as per this order and intimate the

same to the applicant within 15 days of the receipt of

this order. Thereafter, the applicant shall pay the

amount of interest within 15 days of the receipt of the

said intimation and report compliance both to the

Bench and to Revenue."

2 5 The said order also specifically recorded that full immunity

be granted to the respondent from penalty and prosecution.

Subsequent to the passing of the said order, the respondent

herein filed a miscellaneous application seeking for

clarification contending inter alia that the respondent had

deposited whole amount of duty during investigation without

protest and that, following the final order, the Revenue has

calculated interest liability of the respondent at Rs.

1,47,90,065/- and that the Revenue has calculated the said

interest up to the date of the appropriation of the deposited

8

amount and not up to the date of payment. It was further

contended that the interest has to be calculated from the date

of actual utilization and not from the date of availment.

Consequently, it was prayed in the said application that the

Settlement Commission may clarify the actual amount of

interest liability of the respondent and extend the period of

payment of interest in the interest of justice and equity.

3 6 The said application was taken up for consideration and

after hearing the parties the application was dismissed.

While rejecting the said application the Bench noted that the

final order sets out in very clear terms that the respondent

shall pay simple interest @ 10 per cent per annum on

CENVAT credit wrongfully availed from the date the duty

became payable as per Section 11AB of the Act, till the date

9

of payment and that the application is misconceived and that

no case of any clarification is made out because interest has

to be calculated till the date of the payment of the duty. It

was also held that the interest is also payable with reference

to the date of availment of CENVAT credit and not from the

date of utilization of a part of the balance of such credit. The

Commission held that such an issue was never raised before

the Settlement Commission at any earlier stage. The

Commission while rejecting the application held as follows: -

"The said show cause notice vide Para 23 thereof

proposes to demand the CENVAT credit availed

fraudulently by the applicant and not the amount of

CENVAT utilized by the applicant. As such, it naturally

follows that the interest is also payable with reference

to the date of availment of CENVAT credit and not

from the date of utilization of a part of balance of such

credit. In any case, this issue was not raised in the

10

application of settlement or at the time of settlement. In

a query from the Bench, Id. Advocate also not raising

this issue during settlement proceedings. As such, the

Bench finds no justification to go into the practice

adopted by the Revenue in this regard. In any case, it

is a new point that did not arise for decision in the

Final Order and on which the applicant is not seeking

a decision in the garb of seeking a clarification. The

Commission has already decided the issues which

were brought before it through the Settlement

Application. Section 32M of the Central Excise Act,

1944 bars the Commission from re-opening its final

order. Hence, the final order already passed in the

matter was conclusive as to the matters stated therein

and the same cannot be re-opened for the purpose of

deciding the said point raised subsequently."

2 7. The respondent, however, did not pay the entire amount

in terms of the liability fixed. Consequently, a letter was

issued on 16.08.2007 from the office of the appellant

directing the appellant to pay the balance amount in terms

of the order dated 19.01.2007.

11 3 8. The records disclose that immediately on receipt of the

aforesaid letter the respondent filed a Writ Petition in the

High Court of Punjab & Haryana which was registered as

Civil Writ Petition No. 13860 of 2007, praying for quashing

the order dated 31.05.2007 which was passed by the

Settlement Commission on the applications seeking

clarifications and the letter dated 16.08.2007 by which the

office of the appellant requested the respondent to deposit

the balance amount in terms of the order dated 19.01.2007.

4 9. The High Court issued notice and heard the parties on

the said Writ Petition. By its judgment and order dated

03.07.2009 the said Writ Petition was allowed by the High

Court holding that Rule 14 of the CENVAT Credit Rules,

2004 [for short "Credit Rules"] has to be read down to

12

mean that where CENVAT credit has been taken and/or

utilized wrongly, interest should be payable on the

CENVAT credit from the date the said credit had been

utilized wrongly and that interest cannot be claimed simply

for the reason that the CENVAT credit has been wrongly

taken, as such availment by itself does not create any

liability of payment of excise duty. The High Court further

held that on a conjoint reading of Section 11AB of the

Tariff Act and that of Rules 3 & 4 of the Credit Rules,

interest cannot be claimed from the date of wrong

availment of CENVAT credit and that the interest would be

payable from the date CENVAT credit was wrongfully

utilized.

5 10.Being aggrieved by the aforesaid judgment and order

13

passed by the High Court the present appeal was filed by

the appellant, which was entertained and notice was

issued to the respondent, on receipt of which, they have

entered appearance. Counsel appearing for the parties

were heard at length when the matter was listed for final

arguments. By the present judgment and order we now

proceed to dispose the said appeal by recording our

reasons.

6 11. The facts delineated hereinabove make it crystal

clear that the respondent accepted all the allegations

raised in the show cause notice and also the duty

liability under the said show cause notice dated

08.12.2006. They also deposited the entire duty of Rs.

5,71,47,148/- prior to the issuance of the show cause

14

notice and, therefore, they requested for settlement of

the proceedings in terms of Section 32E read with

Section 32F of the Act. The said settlement proceedings

were conducted in accordance with law and was

finalized by the order dated 19.01.2007 on the terms

and conditions which have already been extracted

hereinbefore.

7 12. A bare perusal of the said order would indicate that

the Settlement commission has imposed the liability of

payment of simple interest only @ 10 per cent per

annum on CENVAT credit wrongly availed, that is, Rs.

5,71,47,148/- from the date the duty became payable.

Incidentally, imposition of such simple interest at 10

per cent per annum was the minimum, whereas levy of

15

interest at 36 per cent per annum was the highest in

terms of the Section11 AB of the Act. Besides, the

allegations made in the show cause notice were

admitted by the respondent which, therefore,

establishes that the respondent had taken wrongful

CENVAT credit from the year 2001 to 31.03.2006 and

the payment has been made only on 22.02.2006 and

on five different dates in March, 2006 and on

20.11.2006, which indicates that the respondent had

the benefit of availing the large amount of CENVAT

credit to which they were otherwise not entitled to.

8 13.The order of the Settlement Commission also

indicates that full immunities were granted to the

respondent from penalty and prosecution. The

16

aforesaid order was not challenged by the respondent

in any forum and, therefore, it became final and

conclusive in terms of Section 32M of the Act, which

states that every order of settlement passed under sub-

Section 7 of Section 32F would be conclusive as to the

matters stated therein subject to the condition that

when a settlement order is obtained by fraud or

misrepresentation of fact, such an order would be void.

According to the said provisions, no matter covered by

such order could be reopened in any proceeding under

the Central Excise Act or under any other law for the

time being in force.

9 14.Although, subsequently, an application by way of

clarification was filed by the respondent, the said

17

application was, however, not entertained. It was held

that the said application is misconceived, particularly,

in view of the fact that no such issue was raised before

the Commission. Since, however, a Writ Petition was

filed by the respondent challenging only the second

order of the Settlement Commission and the

subsequent letter issued from the office of the

appellant, on the basis of which, High Court even

proceeded to interfere with the first order passed by the

Settlement Commission, we heard the counsel

appearing for the parties on the issue decided by the

High Court also.

10 15. In order to appreciate the findings recorded by the

High Court by way of reading down the provision of Rule

18

14, we deem it appropriate to extract the said Rule at this

stage which is as follows:

"Rule 14. Recovery of CENVAT credit wrongly taken or

erroneously refunded: - Where the CENVAT credit has

been taken or utilized wrongly or has been erroneously

refunded, the same along with interest shall be recovered

from the manufacturer or the provider of the output

service and the provisions of Sections 11A and 11AB of

the Excise Act or Sections 73 and 75 of the Finance Act,

shall apply mutatis mutandis for effecting such

recoveries."

2 16. A bare reading of the said Rule would indicate that

the manufacturer or the provider of the output service

becomes liable to pay interest along with the duty

where CENVAT credit has been taken or utilized

wrongly or has been erroneously refunded and that in

the case of the aforesaid nature the provision of Section

19

11AB would apply for effecting such recovery.

3 17. We have very carefully read the impugned judgment

and order of the High Court. The High Court proceeded

by reading it down to mean that where CENVAT credit

has been taken and utilized wrongly, interest should be

payable from the date the CENVAT credit has been

utilized wrongly for according to the High Court interest

cannot be claimed simply for the reason that the

CENVAT credit has been wrongly taken as such

availment by itself does not create any liability of

payment of excise duty. Therefore, High Court on a

conjoint reading of Section 11AB of the Act and Rules 3

& 4 of the Credit Rules proceeded to hold that interest

cannot be claimed from the date of wrong availment of

20

CENVAT credit and that the interest would be payable

from the date CENVAT credit is wrongly utilized. In our

considered opinion, the High Court misread and

misinterpreted the aforesaid Rule 14 and wrongly read it

down without properly appreciating the scope and

limitation thereof. A statutory provision is generally read

down in order to save the said provision from being

declared unconstitutional or illegal. Rule 14 specifically

provides that where CENVAT credit has been taken or

utilized wrongly or has been erroneously refunded, the

same along with interest would be recovered from the

manufacturer or the provider of the output service. The

issue is as to whether the aforesaid word "OR" appearing

in Rule 14, twice, could be read as "AND" by way of

21

reading it down as has been done by the High Court. If

the aforesaid provision is read as a whole we find no

reason to read the word "OR" in between the expressions

`taken' or `utilized wrongly' or `has been erroneously

refunded' as the word "AND". On the happening of any

of the three aforesaid circumstances such credit

becomes recoverable along with interest.

4 18. We do not feel that any other harmonious construction

is required to be given to the aforesaid

expression/provision which is clear and unambiguous as it

exists all by itself. So far as Section 11AB is concerned, the

same becomes relevant and applicable for the purpose of

making recovery of the amount due and payable.

22 Therefore, the High Court erroneously held that interest

cannot be claimed from the date of wrong availment of

CENVAT credit and that it should only be payable from the

date when CENVAT credit is wrongly utilized. Besides, the

rule of reading down is in itself a rule of harmonious

construction in a different name. It is generally utilized to

straighten the crudities or ironing out the creases to make

a statute workable. This Court has repeatedly laid down

that in the garb of reading down a provision it is not open

to read words and expressions not found in the

provision/statute and thus venture into a kind of judicial

legislation. It is also held by this Court that the Rule of

reading down is to be used for the limited purpose of

making a particular provision workable and to bring it in

23

harmony with other provisions of the statute. In this

connection we may appropriately refer to the decision of

this Court in Calcutta Gujarati Education Society and

Another v. Calcutta Municipal Corporation and Others

reported in (2003) 10 SCC 533 in which reference was

made at Para 35 to the following observations of this Court

in the case of B.R. Enterprises v. State of U.P. and

Others reported in (1999) 9 SCC 700: -

"81. .............. It is also well settled that first attempt

should be made by the courts to uphold the charged

provision and not to invalidate it merely because one of

the possible interpretations leads to such a result,

howsoever attractive it may be. Thus, where there are

two possible interpretations, one invalidating the law

and the other upholding, the latter should be adopted.

For this, the courts have been endeavouring,

sometimes to give restrictive or expansive meaning

keeping in view the nature of legislation, maybe

beneficial, penal or fiscal etc. Cumulatively it is to

subserve the object of the legislation. Old golden rule is

of respecting the wisdom of legislature that they are

24

aware of the law and would never have intended for

an invalid legislation. This also keeps courts within

their track and checks individual zeal of going

wayward. Yet in spite of this, if the impugned

legislation cannot be saved the courts shall not

hesitate to strike it down. Similarly, for upholding any

provision, if it could be saved by reading it down, it

should be done, unless plain words are so clear to be

in defiance of the Constitution. These interpretations

spring out because of concern of the courts to salvage

a legislation to achieve its objective and not to let it fall

merely because of a possible ingenious interpretation.

The words are not static but dynamic. This infuses

fertility in the field of interpretation. This equally helps

to save an Act but also the cause of attack on the Act.

Here the courts have to play a cautious role of weeding

out the wild from the crop, of course, without infringing

the Constitution. For doing this, the courts have taken

help from the preamble, Objects, the scheme of the Act,

its historical background, the purpose for enacting

such a provision, the mischief, if any which existed,

which is sought to be eliminated.................................

......... .....................................................................

....................................................... This principle of

reading down, however, will not be available where

the plain and literal meaning from a bare reading of

any impugned provisions clearly shows that it confers

arbitrary, uncanalised or unbridled power."

(emphasis supplied)"

25 2 19. A taxing statute must be interpreted in the light of what

is clearly expressed. It is not permissible to import

provisions in a taxing statute so as to supply any assumed

deficiency. In support of the same we may refer to the

decision of this Court in Commissioner of Sales Tax, U.P.

v. Modi Sugar Mills Ltd. reported in (1961) 2 SCR 189

wherein this Court at Para 10 has observed as follows: -

"10......... In interpreting a taxing statute, equitable

considerations are entirely out of place. Nor can taxing

statutes be interpreted on any presumptions or

assumptions. The court must look squarely at the words

of the statute and interpret them. It must interpret a

taxing statute in the light of what is clearly expressed: it

cannot imply anything which is not expressed; it cannot

import provisions in the statutes so as to supply any

assumed deficiency."

2 20. Therefore, the attempt of the High Court to read

down the provision by way of substituting the word "OR"

26 by an "AND" so as to give relief to the assessee is found

to be erroneous. In that regard the submission of the

counsel for the appellant is well-founded that once the

said credit is taken the beneficiary is at liberty to utilize

the same, immediately thereafter, subject to the Credit

rules.

3 21. An order passed by the Settlement Commission could

be interfered with only if the said order is found to be

contrary to any provisions of the Act. So far findings of

the fact recorded by Commission or question of facts are

concerned, the same is not open for examination either

by the High Court or by the Supreme Court. In the

present case the order of the Settlement Commission

clearly indicates that the said order, particularly, with

27

regard to the imposition of simple interest @ 10 per cent

per annum was passed in accordance with the provisions

of Rule 14 but the High Court wrongly interpreted the

said Rule and thereby arrived at an erroneous finding.

4 22. So far as the second issue with respect to interest on

Rs. 50 lacs is concerned, the same being a factual issue

should not have been gone into by the High Court

exercising the writ jurisdiction and the High Court

should not have substituted its own opinion against the

opinion of the Settlement Commission when the same

was not challenged on merits.

5 23. In that view of the matter, we set aside the order

passed by the Punjab & Haryana High Court by the

impugned judgment and order and restore the order of the

28

Settlement Commission leaving the parties to bear their

own costs.

.................................................J

[D r. Mukundakam Sharma]

.............................................J

[ Anil R. Dave ]

New Delhi,

February

21, 2011.

29 30 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. O F 2011

[Arising out of SLP(c) No. 5169 of 2010]

lUnion of India & Ors. .... Appellants

Versus

M/s. Ind-

Swift

Laboratories Ltd. ...Respondent

JUDGMENT

Dr. MUKUNDAKAM SHARMA, J.

1. Leave granted.

31

2 The present appeal is directed against the

judgment and order dated 03.07.2009 in

Civil Writ Petition No. 13860 of 2007

passed by the Punjab & Haryana High

Court, whereby the High Court while

interfering with the order of the

Settlement Commission regarding

payment of interest on the CENVAT credit,

has held that the appellants herein have

wrongly claimed interest on the CENVAT

credit, from the date when such credit was

wrongly availed instead of the date when

such credit was actually utilized. The High

Court has further held that the appellants

32

are not entitled to claim interest on the

amount of Rs. 50 lacs up to 31.01.2007 as

the said amount already stood deposited

on 08.03.2006.

3 The respondent herein, viz., M/s. Ind-Swift

Laboratories Ltd., is a manufacturer of

bulk drugs, falling under Chapter 30 of

the First Schedule to the Central Excise

Tariff Act, 1985. The company received

inputs and capital goods from various

manufacturers / dealers and availed

CENVAT credit on the duty paid on such

materials. On the basis of intelligence

33

report, the factory premises of the

respondent as also its group companies at

different places were searched on

08.03.2006. Searches were also conducted

at the offices of large number of firms in

Ghaziabad and Noida which had allegedly

issued invoices without any accompanying

goods to the respondent and its group

companies. At the same time the

residential premises of Mr. R.P. Jain and

Mr. J.P. Singh, the Brokers, were also

searched and particularly during the

course of search of the residence of Mr.

R.P. Jain kachha ledgers / notebooks /

34

files and cheques issued by the Swift

group to the parties from whom invoices

without material were being received, were

recovered. It also appears that the

appellant conducted investigations which

indicated that the respondent had taken

CENVAT credit on fake invoices.

Consequently, a show cause notice dated

08.12.2006 was issued to the respondent,

to which a reply was also submitted by the

respondent. The respondent company also

filed applications for settlement of the

proceedings and consequently the entire

matter was placed before the Settlement

35

Commission.

4 Before the Settlement Commission, it was an admitted position

that the case pertained to the period from 27.10.2001 to

31.03.2006. The respondent company also admitted all the

allegations and duty liability as per the show cause notice dated

08.12.2006. The respondent also deposited the entire duty of

Rs. 5,71,47,148/-. Since conditions/parameters for the

admission of a case prescribed under Section 32E(1) of the

Central Excise Act, 1944 [for short "the Act"] were fulfilled and

complied with, the application of the respondent for settlement

was entertained and the same was proceeded with in terms of

Section 32F(1) of the Act. After considering the records and

hearing the parties the Commission came to the findings that

while the wrongful CENVAT credit was taken from the year

36

2001 to 31.03.2006, the payments refunds have been made on

22.02.2006 and on five different dates in March, 2006 and on

20.11.2006 and, therefore, the respondent had the benefit of

availing the large amount of CENVAT credit to which they were

not entitled. Considering the said fact, the Commission felt and

was of the view that the appropriate interest liability has to be

borne by the respondent on such wrongful availment of

CENVAT credit. Accordingly, the applications of the respondent

were settled under Section 32F(7) of the Act subject to the

following terms and conditions: -

"(a) The amount of duty relating to wrongful availment of CENVAT credit is

settled at Rs. 5,71,47,148/-. As the entire amount has already been paid by

the applicant, no further duty remains payable. The Bench directs that the

said amount of deposit by the applicant shall be appropriated against the

amount of duty settled in this Order. Besides the above, the inadmissible

CENVAT credit of Rs. 78,97,255/-, as mentioned in para 23(a)(ii) of the

show cause notice is disallowed.

37

(b) Immunity from interest in excess of 10% simple interest per annum is

granted. Accordingly, the applicant shall pay simple interest @ 10 % per

annum on CENVAT credit wrongly availed (i.e., Rs. 5,71,47,148/-) from the

dates the duty became payable as per Section 11AB of the Act, till the dates

of payment. Revenue is directed to calculate the amount of interest as per

this order and intimate the same to the applicant within 15 days of the

receipt of this order. Thereafter, the applicant shall pay the amount of

interest within 15 days of the receipt of the said intimation and report

compliance both to the Bench and to Revenue."

2 The said order also specifically recorded that full

immunity be granted to the respondent

from penalty and prosecution. Subsequent

to the passing of the said order, the

respondent herein filed a miscellaneous

application seeking for clarification

contending inter alia that the respondent

had deposited whole amount of duty

38

during investigation without protest and

that, following the final order, the Revenue

has calculated interest liability of the

respondent at Rs. 1,47,90,065/- and that

the Revenue has calculated the said

interest up to the date of the appropriation

of the deposited amount and not up to the

date of payment. It was further contended

that the interest has to be calculated from

the date of actual utilization and not from

the date of availment. Consequently, it

was prayed in the said application that the

Settlement Commission may clarify the

actual amount of interest liability of the

39

respondent and extend the period of

payment of interest in the interest of

justice and equity.

3 The said application was taken up for consideration and after

hearing the parties the application was dismissed. While

rejecting the said application the Bench noted that the final

order sets out in very clear terms that the respondent shall pay

simple interest @ 10 per cent per annum on CENVAT credit

wrongfully availed from the date the duty became payable as

per Section 11AB of the Act, till the date of payment and that

the application is misconceived and that no case of any

clarification is made out because interest has to be calculated

till the date of the payment of the duty. It was also held that the

interest is also payable with reference to the date of availment

40

of CENVAT credit and not from the date of utilization of a part

of the balance of such credit. The Commission held that such

an issue was never raised before the Settlement Commission at

any earlier stage. The Commission while rejecting the

application held as follows: -

"The said show cause notice vide Para 23 thereof proposes to demand the

CENVAT credit availed fraudulently by the applicant and not the amount of

CENVAT utilized by the applicant. As such, it naturally follows that the

interest is

also

payable

with

reference

to the date

of

availment

of CENVAT

credit and

not from

the date of

utilization

of a part of

balance of

such

credit. In

any case,

this issue was not raised in the application of settlement or at the time of

settlement. In a query from the Bench, Id. Advocate also not raising this

issue during settlement proceedings. As such, the Bench finds no

justification to go into the practice adopted by the Revenue in this regard. In

any case, it is a new point that did not arise for decision in the Final Order

and on which the applicant is not seeking a decision in the garb of seeking a

clarification. The Commission has already decided the issues which were

brought before it through the Settlement Application. Section 32M of the

Central Excise Act, 1944 bars the Commission from re-opening its final

order. Hence, the final order already passed in the matter was conclusive

as to the matters stated therein and the same cannot be re-opened for the

purpose of deciding the said point raised subsequently."

41

2 The respondent, however, did not pay the entire

amount in terms of the liability fixed.

Consequently, a letter was issued on

16.08.2007 from the office of the appellant

directing the appellant to pay the balance

amount in terms of the order dated

19.01.2007.

3 The records disclose that immediately on receipt

of the aforesaid letter the respondent filed

a Writ Petition in the High Court of Punjab

& Haryana which was registered as Civil

Writ Petition No. 13860 of 2007, praying

for quashing the order dated 31.05.2007

which was passed by the Settlement

42

Commission on the applications seeking

clarifications and the letter dated

16.08.2007 by which the office of the

appellant requested the respondent to

deposit the balance amount in terms of

the order dated 19.01.2007.

4 The High Court issued notice and heard the

parties on the said Writ Petition. By its

judgment and order dated 03.07.2009 the

said Writ Petition was allowed by the High

Court holding that Rule 14 of the CENVAT

Credit Rules, 2004 [for short "Credit

Rules"] has to be read down to mean that

where CENVAT credit has been taken

43

and/or utilized wrongly, interest should be

payable on the CENVAT credit from the

date the said credit had been utilized

wrongly and that interest cannot be

claimed simply for the reason that the

CENVAT credit has been wrongly taken, as

such availment by itself does not create

any liability of payment of excise duty. The

High Court further held that on a conjoint

reading of Section 11AB of the Tariff Act

and that of Rules 3 & 4 of the Credit

Rules, interest cannot be claimed from the

date of wrong availment of CENVAT credit

and that the interest would be payable

44

from the date CENVAT credit was

wrongfully utilized.

5 Being aggrieved by the aforesaid judgment and

order passed by the High Court the

present appeal was filed by the appellant,

which was entertained and notice was

issued to the respondent, on receipt of

which, they have entered appearance.

Counsel appearing for the parties were

heard at length when the matter was

listed for final arguments. By the present

judgment and order we now proceed to

dispose the said appeal by recording our

reasons.

45 6 The facts delineated hereinabove make it crystal

clear that the respondent accepted all the

allegations raised in the show cause notice

and also the duty liability under the said

show cause notice dated 08.12.2006. They

also deposited the entire duty of Rs.

5,71,47,148/- prior to the issuance of the

show cause notice and, therefore, they

requested for settlement of the

proceedings in terms of Section 32E read

with Section 32F of the Act. The said

settlement proceedings were conducted in

accordance with law and was finalized by

the order dated 19.01.2007 on the terms

46

and conditions which have already been

extracted hereinbefore.

7 A bare perusal of the said order would indicate

that the Settlement commission has

imposed the liability of payment of simple

interest only @ 10 per cent per annum on

CENVAT credit wrongly availed, that is,

Rs. 5,71,47,148/- from the date the duty

became payable. Incidentally, imposition

of such simple interest at 10 per cent per

annum was the minimum, whereas levy of

interest at 36 per cent per annum was the

highest in terms of the Section11 AB of

the Act. Besides, the allegations made in

47

the show cause notice were admitted by

the respondent which, therefore,

establishes that the respondent had taken

wrongful CENVAT credit from the year

2001 to 31.03.2006 and the payment has

been made only on 22.02.2006 and on five

different dates in March, 2006 and on

20.11.2006, which indicates that the

respondent had the benefit of availing the

large amount of CENVAT credit to which

they were otherwise not entitled to.

8 The order of the Settlement Commission also

indicates that full immunities were

granted to the respondent from penalty

48

and prosecution. The aforesaid order was

not challenged by the respondent in any

forum and, therefore, it became final and

conclusive in terms of Section 32M of the

Act, which states that every order of

settlement passed under sub-Section 7 of

Section 32F would be conclusive as to the

matters stated therein subject to the

condition that when a settlement order is

obtained by fraud or misrepresentation of

fact, such an order would be void.

According to the said provisions, no

matter covered by such order could be

reopened in any proceeding under the

49 Central Excise Act or under any other law

for the time being in force.

9 Although, subsequently, an application by way of

clarification was filed by the respondent,

the said application was, however, not

entertained. It was held that the said

application is misconceived, particularly,

in view of the fact that no such issue was

raised before the Commission. Since,

however, a Writ Petition was filed by the

respondent challenging only the second

order of the Settlement Commission and

the subsequent letter issued from the

office of the appellant, on the basis of

50

which, High Court even proceeded to

interfere with the first order passed by the

Settlement Commission, we heard the

counsel appearing for the parties on the

issue decided by the High Court also.

10 In order to appreciate the findings recorded by the High Court

by way of reading down the provision of Rule 14, we deem it

appropriate to extract the said Rule at this stage which is as

follows:

"Rule 14. Recovery of CENVAT credit wrongly taken or erroneously

refunded: - Where the CENVAT credit has been taken or utilized wrongly or

has been erroneously refunded, the same along with interest shall be

recovered from the manufacturer or the provider of the output service and

the provisions of Sections 11A and 11AB of the Excise Act or Sections 73

and 75 of the Finance Act, shall apply mutatis mutandis for effecting such

recoveries."

51

2 A bare reading of the said Rule would indicate

that the manufacturer or the provider of

the output service becomes liable to pay

interest along with the duty where

CENVAT credit has been taken or utilized

wrongly or has been erroneously refunded

and that in the case of the aforesaid

nature the provision of Section 11AB

would apply for effecting such recovery.

3 We have very carefully read the impugned

judgment and order of the High Court. The

High Court proceeded by reading it down

to mean that where CENVAT credit has

been taken and utilized wrongly, interest

52

should be payable from the date the

CENVAT credit has been utilized wrongly

for according to the High Court interest

cannot be claimed simply for the reason

that the CENVAT credit has been wrongly

taken as such availment by itself does not

create any liability of payment of excise

duty. Therefore, High Court on a conjoint

reading of Section 11AB of the Act and

Rules 3 & 4 of the Credit Rules proceeded

to hold that interest cannot be claimed

from the date of wrong availment of

CENVAT credit and that the interest would

be payable from the date CENVAT credit is

53

wrongly utilized. In our considered

opinion, the High Court misread and

misinterpreted the aforesaid Rule 14 and

wrongly read it down without properly

appreciating the scope and limitation

thereof. A statutory provision is generally

read down in order to save the said

provision from being declared

unconstitutional or illegal. Rule 14

specifically provides that where CENVAT

credit has been taken or utilized wrongly

or has been erroneously refunded, the

same along with interest would be

recovered from the manufacturer or the

54

provider of the output service. The issue is

as to whether the aforesaid word "OR"

appearing in Rule 14, twice, could be read

as "AND" by way of reading it down as has

been done by the High Court. If the

aforesaid provision is read as a whole we

find no reason to read the word "OR" in

between the expressions `taken' or `utilized

wrongly' or `has been erroneously

refunded' as the word "AND". On the

happening of any of the three aforesaid

circumstances such credit becomes

recoverable along with interest.

55 4 We do not feel that any other harmonious construction is

required to be given to the aforesaid expression/provision

which is clear and unambiguous as it exists all by itself. So far

as Section 11AB is concerned, the same becomes relevant and

applicable for the purpose of making recovery of the amount

due and payable. Therefore, the High Court erroneously held

that interest cannot be claimed from the date of wrong

availment of CENVAT credit and that it should only be payable

from the date when CENVAT credit is wrongly utilized. Besides,

the rule of reading down is in itself a rule of harmonious

construction in a different name. It is generally utilized to

straighten the crudities or ironing out the creases to make a

statute workable. This Court has repeatedly laid down that in

the garb of reading down a provision it is not open to read

56

words and expressions not found in the provision/statute and

thus venture into a kind of judicial legislation. It is also held by

this Court that the Rule of reading down is to be used for the

limited purpose of making a particular provision workable and

to bring it in harmony with other provisions of the statute. In

this connection we may appropriately refer to the decision of

this Court in Calcutta Gujarati Education Society and

Another v. Calcutta Municipal Corporation and Others

reported in (2003) 10 SCC 533 in which reference was made at

Para 35 to the following observations of this Court in the case of

B.R. Enterprises v. State of U.P. and Others reported in

(1999) 9 SCC 700: -

"81. .............. It is also well settled that first attempt

should be made by the courts to uphold the charged

provision and not to invalidate it merely because one

of the possible interpretations leads to such a result,

57

howsoever attractive it may be. Thus, where there

are two possible interpretations, one invalidating the

law and the other upholding, the latter should be

adopted. For this, the courts have been

endeavouring, sometimes to give restrictive or

expansive meaning keeping in view the nature of

legislation, maybe beneficial, penal or fiscal etc.

Cumulatively it is to subserve the object of the

legislation. Old golden rule is of respecting the

wisdom of legislature that they are aware of the law

and would never have intended for an invalid

legislation. This also keeps courts within their track

and checks individual zeal of going wayward. Yet in

spite of this, if the impugned legislation cannot be

saved the courts shall not hesitate to strike it down.

Similarly, for upholding any provision, if it could be

saved by reading it down, it should be done, unless

plain words are so clear to be in defiance of the

Constitution. These interpretations spring out

because of concern of the courts to salvage a

legislation to achieve its objective and not to let it fall

merely because of a possible ingenious

interpretation. The words are not static but dynamic.

This infuses fertility in the field of interpretation. This

equally helps to save an Act but also the cause of

attack on the Act. Here the courts have to play a

cautious role of weeding out the wild from the crop,

of course, without infringing the Constitution. For

doing this, the courts have taken help from the

preamble, Objects, the scheme of the Act, its

58

historical background, the purpose for enacting such

a provision, the mischief, if any which existed, which

is sought to be eliminated....................................

...... .....................................................................

....................................................... This principle

of reading down, however, will not be available

where the plain and literal meaning from a bare

reading of any impugned provisions clearly shows

that it confers arbitrary, uncanalised or unbridled

power." (emphasis supplied)"

2 A taxing statute must be interpreted in the light of what is

clearly expressed. It is not permissible to import provisions in a

taxing statute so as to supply any assumed deficiency. In

support of the same we may refer to the decision of this Court

in Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd.

reported in (1961) 2 SCR 189 wherein this Court at Para 10

has observed as follows: -

59 "10......... In interpreting a taxing statute, equitable

considerations are entirely out of place. Nor can taxing

statutes be interpreted on any presumptions or assumptions.

The court must look squarely at the words of the statute and

interpret them. It must interpret a taxing statute in the light of

what is clearly expressed: it cannot imply anything which is

not expressed; it cannot import provisions in the statutes so

as to supply any assumed deficiency."

2 Therefore, the attempt of the High Court to read

down the provision by way of substituting

the word "OR" by an "AND" so as to give

relief to the assessee is found to be

erroneous. In that regard the submission

of the counsel for the appellant is well-

founded that once the said credit is taken

the beneficiary is at liberty to utilize the

same, immediately thereafter, subject to

60

the Credit rules.

3 An order passed by the Settlement Commission

could be interfered with only if the said

order is found to be contrary to any

provisions of the Act. So far findings of the

fact recorded by Commission or question

of facts are concerned, the same is not

open for examination either by the High

Court or by the Supreme Court. In the

present case the order of the Settlement

Commission clearly indicates that the said

order, particularly, with regard to the

imposition of simple interest @ 10 per cent

per annum was passed in accordance with

61

the provisions of Rule 14 but the High

Court wrongly interpreted the said Rule

and thereby arrived at an erroneous

finding.

4 So far as the second issue with respect to interest

on Rs. 50 lacs is concerned, the same

being a factual issue should not have been

gone into by the High Court exercising the

writ jurisdiction and the High Court

should not have substituted its own

opinion against the opinion of the

Settlement Commission when the same

was not challenged on merits.

5 In that view of the matter, we set aside the order passed by the

62

Punjab & Haryana High Court by the impugned judgment and

order and restore the order of the Settlement Commission

leaving the parties to bear their own costs.

.................................................J

[Dr. Mukundakam Sharma]

.

........

................

................

....J

[ Anil

R. Dave ]

New Delhi,

February

21, 2011.