Relevant Date for Payment of Interest – Rule inconsistent with Act!
SECTION 11AB of the Central Excise Act, 1944 provides for payment of interest on delayed payment of duty. As per Section 11AB, 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 as notified by the Central Government.
This provision further stipulates that this interest is payable 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.
For e.g. if a manufacturer does not pay the duty for the month of February, 2010 by the 5 th of March, 2010 (or 6 th if being paid electronically), then as per the above provision, the interest will have to be computed and paid from April 1, 2010.
But Rule 8(3) of Central Excise Rules, 2002 reads as follows:
“ If the assessee fails to pay the amount of duty by due date, he shall be liable to pay the outstanding amount along with interest at the rate specified by the Central Government vide notification under section 11AB of the Act on the outstanding amount, for the period starting with the first day after due date till the date of actual payment of the outstanding amount” (emphasis supplied)
This sub-rule refers to the phrase ‘due date' and the interest is payable starting with the first day after ‘due date'. As per Rule 8(1), the ‘due date' for payment of duty is 5 th of the following month (or 6 th in case of electronic payment).
So, if we apply the provisions of Rule 8(3) to the above example, the relevant date for payment of interest would be 6 th March, 2010.
Fortunately or unfortunately, the field formations are following the provisions of this sub-rule and collecting a higher amount of interest. While a majority of the assessees are paying up higher amounts of interest blissfully unaware of the provisions of the Act, some are disputing the same citing the inconsistency in the provisions of the said sub-rule with that of the Act.
Let us hope that the Board brings in a suitable amendment to Rule 8(3) of CER retrospectively by way of amendments to Finance Bill, 2010 before it is enacted into law and generously allow retrospective refund of higher amounts of interest illegally collected from gullible assessees.