1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION jmi WRIT PETITION NO. 419 OF 2008. Apar Industries Limited. ..Petitioners. v/s. Mr. B.S. Ganu & Ors. ..Respondents. .... Mr. Shiraz Rustomjee, with Ms. P.C. Bachani & Ms. R.R. Paradkar, i/b. I.R. Joshi & Co., for Petitioners. Mr. P.S. Jetly, for Respondents. .... CORAM : V.C. DAGA & S.J. KATHAWALLA, JJ. DATE : 16TH JUNE, 2010. P.C. By this writ petition, the petitioners Apar Industries Limited (assessee) have impugned the order passed by the Settlement Commission dated 28th September, 2007 in so far as it relates to the direction to the petitioners to pay interest on the amount of excise duty at 13% p.a. 2. Facts :- The petitioners are engaged in the manufacture of aluminium conductors covered under Chapter 76 of the First 2 Schedule of the Central Excise Tariff Act, 1985. Under notification no.108/95-CE, dated 28th August, 1995, the goods supplied inter-alia to projects financed by the United Nations or an international organization approved by the Government of India, were exempted. One of the conditions of the notification was the issuance of a certificate by the Project Implementing Authority, counter-signed by the Principal Secretary or the Secretary, Finance of the concerned State Government or the Union Territory. 3. Some time in March, 2000, Transmission Corporation of Andhra Pradesh (APTRANSCO) placed an order with the petitioners for supply of conductors for an electrification programme financed by the Japan Bank of International Corporation (JBIL). On 20th July, 2000, as per the requirement of the notification, a certificate was issued by APTRANSCO countersigned by the Secretary to Government of Andhra Pradesh. Between the period of 31st August, 2000 to 7th January 2002, on production of the certificate, the petitioners availed of exemption under the notification for the conductors manufactured for APTRANSCO, thereby not paying a duty of Rs.7,62,93,908/- 3 4. On 11th January 2002, the petitioners received a letter from APTRANSCO cancelling the certificate on the ground that the JBIL was not notified as an international organization. On 28th March 2002, a show cause notice was issued to the petitioners calling for the recovery of duty of Rs.7,62,93,908/- alongwith interest and penalty. Between 1st February, 2002 and 22nd February 2002, the petitioners paid Rs.50 lacs. to the Excise Department. 5. On 26th February 2002, the petitioners filed a writ petition no.3808 of 2002 in the Andhra Pradesh High Court, challenging the cancellation of the certificate. On 28th February 2002 and 15th March 2002, interim orders restraining the department from taking coercive steps pursuant to the cancellation of the certificate, were passed by the Andhra Pradesh High Court. On 3rd August 2006, the Andhra Pradesh High Court dismissed the petitioners’ writ petition. 6. On 7th October 2006, the petitioners filed a settlement application before the Settlement Commission. On 20th June 2007, the petitioners paid Rs.6,31,15,178/- to the department. The total by the petitioners by 20th June 2007 towards duty, therefore aggregated 4 to Rs.6,81,15,178/-. On 24th July 2007, the Settlement Commission admitted the petitioners’ application. 7. On 17th September 2007, the petitioners paid Rs. 81,78,730/- to the department thereby making a total payment of Rs. 7,62,93,908/-, i.e. the full duty demanded in the show cause notice. 8. On 28th September 2007, a final order was passed by the Settlement Commission, inter-alia directing the petitioners to pay interest on the admitted duty amount @ 13% for the period between the date of receipt of intimation from M/s. APTRANSCO about cancellation of their certificates and the date of making the final payment. 9. On 12th November 2007, the present petition was filed by the petitioners. 10. Submissions :- It is submitted on behalf of the petitioners that - (i) the clearances effected by the petitioners to APTRANSCO are treated as deemed exports and consequently, they are entitled for deemed exports benefits; 5 (ii) there was a bonafide belief entertained by the petitioners, APTRANSCO and the Excise Department that JBIL was notified as an international organization. The clearances were effected after intimation to the department; (iii) the bonafide belief was entertained by the entire Trade and Industry; (iv) there was no suppression of facts with an intention to evade payment of duty; (v) Section 11A cannot be invoked in the present case as the demand arises not on account of non-levy or short levy but due to the non-fulfillment of condition of Notification no.108/95-CE and consequently interest under section 11AB cannot be levied. (vi) there is no provision to demand interest in terms of notification no.108/95-CE, (vii) interest under section 11AA is also not leviable as there is no determination of the duty in terms of section 11A(2). (viii) The Settlement Commission has accepted that there is considerable weight in the argument of the petitioners and that in view of the benefit available to them under the deemed 6 export provision, the gain or loss to the exchequer of the Government and consequential so-called financial accommodation becomes more ‘notional’ than ‘real’ in its character. It is submitted that in view thereof, there would be no revenue implication. The petitioners in support of this contention have relied on the decision of the Hon’ble Supreme Court in the case of the Commissioner of C. Ex., Pune vs. Coca-Cola India Pvt. Ltd., reported in 2007 (213) ELT 490 (SC) and the decision in the case of the Commissioner of Cus. & C. Ex. vs. Textile Corporation Marathwada Ltd., reported in 2008(231)ELT 195(SC). 11. Per Contra :- Mr. Jetly, Learned Counsel appearing for the respondents submitted that it is true that the petitioners initially failed to pay the duty on the basis of the erroneous impression that the JBIL was notified as an international organization. However, the question of the erroneous impression continuing does not arise, once APTRANSCO on 11th January, 2002 cancelled the certificate issued by it on 20th July, 2000 under notification no.108/95-CE. It is also submitted that after the said cancellation, the petitioners ought to 7 have immediately paid the duty. Instead the petitioners paid only an amount of Rs.50 lacs. to the Excise Department towards duty, between the period of 1st February, 2002 and 22nd February, 2002 and paid an additional amount of Rs.6,31,15,178/- on 20th June, 2007 and further amount of Rs.81,78,730/- on 17th September, 2007. In the meantime, the petitioners chose to file a writ petition No.3808 of 2002 before the Andhra Pradesh High Court, challenging the cancellation of the certificate. The same was dismissed by an order dated 3rd August, 2006. It is submitted by Mr. Jetly that interim orders dated 28th February, 2002 and 15th March, 2002 were passed by the Andhra Pradesh High Court restraining the department from taking coercive steps pertaining to the cancellation of the certificate. Accordingly, it will not entitle the petitioners to any waiver of interest during that period in view of the dismissal of the writ petition on 3rd August 2006. 12. Mr. Jetly has contended that even though the petitioners were entitled to immediate refund of duty so deposited on the grounds of deemed export benefits, the revenue would have atleast earned an interest on the duty so deposited until receipt of an 8 application seeking refund was received from the petitioners and payment of the said refund was made. Mr. Jetly has, therefore, submitted that the decisions of the Hon’ble Supreme Court relied upon by the petitioners are of no assistance to them. 13. Conclusion :- The relevant portion of the order passed by the Settlement Commission dated 28th September, 2007 is reproduced as under :- 8. “We have gone through the records of the case and the submissions made by the applicant & the Revenue. We note that the applicant has made full and true disclosure of its duty liability and has co-operated in the proceedings before the Bench. The Bench also find much force in the submission, made on behalf of the applicant that rather than any motive of evading the duty, the default was attributable to their erroneous belief that they were indeed entitled to the exemption in question. Similarly, we also see considerable weight in their argument that in view of the benefit available to them under the deemed export provision, the gain or loss to the exchequer of the government and consequential so called financial accommodation become more ‘notional’ than ‘real’ in their character. However, the delay covered in making payment of duty even after the certificates were cancelled by M/s. APTRANSCO is quite indefensible. Accordingly, the Bench lays down the following terms and conditions under Section 32F(7) of the Act for settlement of this case :- 9 Central Excise Duty : The amount of Central Excise duty is settled at Rs.7,62,93,908/-. This amount stands paid. Interest : The applicant is directed to pay the interest on the admitted amount of duty at rate of 13% for the period between the date of receipt of intimation from M/s.APTRANSCO about cancellation of their certificates and the date of making the final payment. Penalty : Considering the totality of facts and circumstances and the conduct of the applicant during the proceedings before us, the Commission consider this to be a fit case for granting full immunity from penalty and grants the same to the applicant and the co- applicant. Prosecution : We also grant immunity to the applicant and the co-applicants from prosecution under the Central Excise Act, 1944 and the Rules as applicable.” 14. The above order makes it clear that the Settlement Commission have appreciated the fact that the petitioners have not intentionally evaded the payment of duty and that the default on their part can be attributable to their erroneous belief that they were actually entitled to the exemption in question. Even according to Mr. Jetly, the Learned Counsel appearing for the respondents, the 10 petitioners were entitled to immediate refund of duty deposited by them on the ground of deemed export benefits. 15. We have also noted the finding of the Settlement Commission that in view of the benefit available to the petitioners under the deemed export provision, there is no gain or loss to the exchequer of the government and hence the so called financial accommodation becomes ‘notional’ than ‘real’ in its character. In view thereof, the submission of Mr. Jetly that the respondents could have earned some interest from the date of deposit of the duty amount by the petitioners and their application seeking refund cannot be accepted. Since the duty paid by the petitioners and the credit availed by the petitioners were identical, as held by the Hon’ble Apex Court in the above decisions cited on behalf of the petitioners, in the instant case too the consequences of payment of duty after availing credit was revenue neutral. The Tribunal after holding that in view of the benefit available to the petitioners under the deemed export provision, there is no gain or loss to the exchequer of the Government and hence, the so-called financial accommodation becomes ‘notional’ than ‘real’ in its character ought 11 not to have directed the petitioners to pay interest on the duty amount paid, on the ground of delay. The order of the Settlement Commission directing the petitioners to pay interest on duty is, therefore, erroneous and perverse and deserves to be set aside. 16. In the result, the order of the Settlement Commission dated 28th September 2007 in so far as it relates to the direction to the petitioners to pay interest on the amount of excise duty at 13% p.a., is quashed and set aside. Rule is made absolute in terms of this order with no order as to costs. [ S.J. KATHAWALLA, J. ] [V.C. DAGA, J.]