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Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 4280 of 2007, Judgment Date: Nov 24, 2015

                                   REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.4280 OF 2007

M/S. SHREE BHAGWATI STEEL
ROLLING MILLS                                                       …APPELLANT

                             VERSUS

COMMISSIONER OF CENTRAL EXCISE
& ANR.                                                            …RESPONDENTS
    
                                    WITH

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                           J  U  D  G  M  E  N  T

R.F. Nariman, J.

1.    Leave granted.

2.    This batch of appeals raises questions  relating  to  the  demand  for
interest and penalty under Rules 96ZO, 96  ZP  and  96  ZQ  of  the  Central
Excise Rules, 1994, which were framed in order to effectuate the  provisions
contained in Section 3A of the  Central  Excise  Act,  1994.   Several  High
Courts have struck down the said Rules relating to penalty  as  being  ultra
vires the parent provision and violative of Articles 14 and 19(1)(g) of  the
Constitution.  Most of the appeals in this  batch  are,  therefore,  by  the
Union of India.  However, before  dealing  with  the  said  appeals,  it  is
necessary to first segregate Civil Appeal No.4280 of  2007  which  raises  a
slightly different question from the questions raised in the  other  appeals
and decide it first.

3.    The question which arises for decision  in  the  said  appeal  is  the
demand, by means of a letter dated 19.8.2005, for payment  of  interest  for
delayed payment of central excise duty  under  Section  3A  of  the  Central
Excise Act, 1944.

4.    The case of the appellant is that it took a rolling mill on lease  for
the period from 1997 to 2000 and  manufactured  rerolled  non-alloyed  steel
products. On 1.9.1997 the compounded levy scheme was introduced  by  way  of
insertion of Section 3A of the Central Excise Act.  The appellant opted  for
the aforesaid scheme under Rule 96ZP of the Central Excise Rules.  When  the
lease expired, the appellant surrendered  its  registration  certificate  on
1.6.2000.  As stated hereinabove,  on  19.8.2005  the  impugned  notice  was
issued to the appellant demanding interest for delayed payment of  duty  for
the period 1997 to 2000.

5.     The  High  Court  framed  two   questions   which   arose   for   its
consideration: (1) whether “omission” of the compounded levy scheme in  2001
wipes out the liability of the assessee for  the  period  during  which  the
scheme was in operation, and (2) whether the letter of  demand  of  interest
for delayed payment was liable to be set aside on the ground of delay.

6.    The High Court found, after distinguishing some of  the  judgments  of
this Court, and after relying upon Section 38A of the  Central  Excise  Act,
which was added vide Section 131 of the Finance Act, 2001, that on  omission
of Section 3A, the liability of the assessee was not wiped out.

7.    Shri Ajay Aggarwal, learned counsel who  appeared  on  behalf  of  the
appellant fairly submitted that a recent judgment delivered by  this  Bench,
namely, M/s Fibre Boards (P) Ltd., Bangalore v. Commissioner of Income  Tax,
Bangalore,  [2015] 376 ITR 596 (SC), would cover the matter before us  being
directly against the  appellant’s  case.  However,  he  submitted  that  for
various reasons this judgment requires a relook and ought to be referred  to
a larger Bench of three Judges. Shri Aggarwal argued the matter  with  great
ability and we listened to him with considerable interest.

8.    First, it may be stated that the judgment of this Court in  the  Fibre
Board’s case has taken the  view  that  an  “omission”  would  amount  to  a
“repeal”, after  referring  to  several  authorities  of  this  Court,  G.P.
Singh’s Principles of Statutory Interpretation, Section 6A  of  the  General
Clauses  Act,  1897,  and  a  passage  in  Halsbury’s   Laws   of   England.
Ultimately, this Court arrived at the conclusion that  an  “omission”  would
amount to a “repeal” for the purpose of Section 24 of  the  General  Clauses
Act.  Since the same expression, namely, “repeal” is used both in Section  6
and Section 24 of the General Clauses Act,  the  construction  of  the  said
expression in both sections would, therefore, include within it  “omissions”
made by the legislature.

9.     Shri  Aggarwal,  however,  argued  that  there   is   a   fundamental
distinction between a “repeal” and an “omission” in that in the  case  of  a
“repeal” the statute is obliterated from the very beginning whereas  in  the
case of an “omission” what gets omitted is only from the date of  “omission”
and not before.  This being the case, it is clear that things  already  done
in the case of an “omission” would be saved. However, a “repeal”  without  a
savings clause like Section 6 of the General Clauses Act would not  so  save
things already done under the repealed  statute.   He  further  argued  that
Section 6A which was relied upon by the Bench in the Fibre Board’s case  did
not state that  an  “omission”  would  be  included  within  the  expression
“repeal”, but that if Section 6A were carefully read,  an  “omission”  would
only be included in an “amendment” which, under the Section, can be  by  way
of omission, insertion or substitution.   Therefore,  it  is  fallacious  to
state that Section 6A would lead to  the  conclusion  that  “omissions”  are
included in “repeals”.  He further argued that in any event, the true  ratio
decidendi of the Constitution Bench decision in Rayala Corporation (P)  Ltd.
& Ors. v. Director of Enforcement, New Delhi, 1969 (2) SCC 412, is  that  an
“omission” cannot amount to a “repeal” inasmuch as the  first  reason  given
for distinguishing the Madhya Pradesh High Court’s  judgment  in  that  case
was that Section 6 cannot apply  to  the  omission  of  a  rule  because  an
“omission” is not a “repeal”. He further argued that as the  Madhya  Pradesh
High Court’s decision was put forward by the  respondent  in  that  case  in
support of their argument, the Constitution Bench’s dealing  with  the  said
decision in order to overcome it would necessarily be  the  ratio  decidendi
of the said decision, and being a  Constitution  Bench  decision,  would  be
binding upon  this  Bench.   He  further  referred  to  Section  31  of  the
Prevention of Corruption Act, 1988, which, in his opinion,  makes  it  clear
that Parliament itself has understood that a repeal under Section 6  of  the
General Clauses Act would not apply to omissions.   He  has  further  argued
that it may be true that the expression “repeal” is normally  used  when  an
entire statute is done away with, as  opposed  to  an  “omission”  which  is
applied only when part of the statute is deleted, but said that this is  not
invariably the case, and referred to Section 1 of the  Indian  Contract  Act
in which enactments mentioned in the schedule  are  repealed  not  in  their
entirety but only to the extent provided and,  therefore,  argued  that  the
expression “repeals” will apply also to a part of an  enactment  as  opposed
to the enactment as a whole.

10.   Shri Radhakrishnan, learned senior counsel appearing on behalf of  the
revenue supported the judgment of this Court in the Fibre Board’s  case  and
said that recent judgments delivered which have clarified the law ought  not
to be disturbed in the larger public interest.

11.   Since Shri Aggarwal has made detailed submissions on why according  to
him the judgment in the Fibre Board’s case  is  not  correctly  decided,  we
propose to deal with each of those submissions in some detail.

12.   First and foremost, it is important to  refer  to  the  definition  of
“enactment” contained in Section 3(19) of  the  General  Clauses  Act.   The
said definition clause states that “enactment” shall mean the following:-

“enactment" shall include a Regulation  (as  hereinafter  defined)  and  any
Regulation of the Bengal, Madras or Bombay Code, and shall also include  any
provision contained in any Act or in any such Regulation as aforesaid.”



13.   From this it is clear that when Section 6 speaks of the repeal of  any
enactment, it refers not merely to the enactment as a whole but also to  any
provision contained in any Act.  Thus, it is clear  that  if  a  part  of  a
statute is deleted, Section 6  would  nonetheless  apply.  Secondly,  it  is
clear, as has been stated by referring to a passage in  Halsbury’s  Laws  of
England in the Fibre Board’s judgment, that  the  expression  “omission”  is
nothing but a particular form of words evincing an intention to abrogate  an
enactment or portion thereof. This  is  made  further  clear  by  the  Legal
Thesaurus  (Deluxe  Edition)  by  William  C  Burton,  1979  Edition.    The
expression “delete” is defined by the Thesaurus as follows:

 “Delete: - Blot out, cancel, censor, cross off, cross out,  cut,  cut  out,
dele, discard, do away with,  drop,  edit  out,  efface,  elide,  eliminate,
eradicate, erase, excise, expel, expunge, extirpate, get rid of, leave  out,
modify by excisions, obliterate, omit, remove, rub out,  rule  out,  scratch
out, strike off, take out, weed wipe out.”

Likewise the  expression  “omit”  is  also  defined  by  this  Thesaurus  as
follows:-

“Omit:- Abstain from inserting, bypass, cast  aside,  count  out,  cut  out,
delete, discard, dodge, drop exclude, exclude, fail to do, fail to  include,
fail to insert, fail to mention, leave out, leave undone, let go, let  pass,
let slip, miss, neglect, omittere, pass over, praetermittere, skip,  slight,
transire.”

And the expression “repeal” is defined as follows:-

“Repeal:- Abolish, abrogare, abrogate, annul,  avoid,  cancel,  countermand,
declare null and void, delete,  eliminate,  formally  withdraw,  invalidate,
make void,  negate,  nullify,  obliterate,  officially  withdraw,  override,
overrule, quash,  recall,  render  invalid,  rescind,  rescindere,  retract,
reverse, revoke, set aside, vacate, void, withdraw.”



14.   On a conjoint reading of the three expressions “delete”,  “omit”,  and
“repeal”,  it  becomes   clear   that   “delete”   and   “omit”   are   used
interchangeably, so that when the expression “repeal” refers to “delete”  it
would necessarily take within its ken an omission as well.  This  being  the
case, we do not find any substance in the argument that a  “repeal”  amounts
to an obliteration from the very beginning, whereas an  “omission”  is  only
in futuro. If the expression “delete” would amount to a “repeal”, which  the
appellant’s counsel does not deny, it is clear that a  conjoint  reading  of
Halsbury’s Laws of England and the Legal Thesaurus  cited  hereinabove  both
lead to the same result, namely that an “omission”  being  tantamount  to  a
“deletion” is a form of repeal.

15.   Learned counsel’s second argument that Section 6A when  it  speaks  of
an “omission” only speaks of an “amendment” which omits and, therefore  does
not refer to a repeal is equally fallacious. In Bhagat Ram Sharma  v.  Union
of India, 1988  Supp  SCC  30,  this  Court  held  that  there  is  no  real
distinction between a repeal and an amendment and that  “amendment”   is  in
fact a wider term which includes deletion of  a  provision  in  an  existing
statute.  In the said judgment, this Court held:-

“17. It is a matter of legislative practice to  provide  while  enacting  an
amending law, that  an  existing  provision  shall  be  deleted  and  a  new
provision substituted. Such  deletion  has  the  effect  of  repeal  of  the
existing provision. Such a law may also provide for the  introduction  of  a
new provision.  There  is  no  real  distinction  between  'repeal'  and  an
'amendment'. In Sutherland's Statutory Construction, 3rd Edn., Vol. 1 at  p.
477, the learned author makes the following statement of law:

The distinction between repeal and amendment as these terms are used by  the
Courts is arbitrary. Naturally the use of these terms by the Court is  based
largely on how the Legislature have developed and  applied  these  terms  in
labelling their enactments. When a section is being added to  an  Act  or  a
provision added to a section, the Legislatures commonly entitled the Act  as
an  amendment....  When  a  provision  is  withdrawn  from  a  section,  the
Legislatures call the Act an amendment  particularly  when  a  provision  is
added to replace the one withdrawn. However, when an entire Act  or  section
is abrogated and no new section is added to replace it,  Legislatures  label
the  Act  accomplishing  this  result  a  repeal.  Thus  as  used   by   the
Legislatures, amendment and repeal may differ in kind - addition as  opposed
to withdrawal or only in degree -abrogation of part of a section as  opposed
to abrogation of a whole section or Act; or more commonly, in both kind  and
degree - addition of a provision to a section to replace a  provision  being
abrogated as opposed by abrogation of  a  whole  section  of  an  Act.  This
arbitrary distinction has  been  followed  by  the  Courts,  and  they  have
developed separate rules  of  construction  for  each.  However,  they  have
recognised that frequently an Act purporting to  be  an  amendment  has  the
same qualitative effect  as  a  repeal  -  the  abrogation  of  an  existing
statutory provision -and have therefore applied the  term  "implied  repeal'
and the rules of construction applicable to repeals to such amendments.

18. Amendment is in fact,  a  wider  term  and  it  includes  abrogation  or
deletion of a provision in an existing  statute.  If  the  amendment  of  an
existing law is small, the Act professes to amend; if it  is  extensive,  it
repeals a law and re-enacts it. An  amendment  of  substantive  law  is  not
retrospective unless  expressly  laid  down  or  by  necessary'  implication
inferred.” (at para 17 & 18)



16.   It is clear, therefore, that when this Court referred  to  Section  6A
in Fibre Board’s case and held that Section 6A shows that a  repeal  can  be
by way of an  express  omission,  obviously  what  was  meant  was  that  an
amendment which repealed a provision could  do  so  by  way  of  an  express
omission.  This being the case, it is clear  that  Section  6A  undisputedly
leads to the conclusion that a repeal would include a repeal by  way  of  an
express omission.

17.   Learned counsel then  argued  that  while  distinguishing  the  Madhya
Pradesh High Court’s judgment in Rayala Corporation,  a  Constitution  Bench
of this Court expressly held as the first  reason  that  Section  6  applies
only to repeals and not  to  omissions.   The  Fibre  Board’s  judgment  has
clearly held as follows:

“First and foremost, it will be noticed  that  two  reasons  were  given  in
Rayala Corporation (P) Ltd.  for  distinguishing  the  Madhya  Pradesh  High
Court judgment.  Ordinarily, both reasons would  form  the  ratio  decidendi
for the said decision and both reasons would be  binding  upon  us.  But  we
find that once it is held that Section 6 of the General  Clauses  Act  would
itself not apply to a rule which is subordinate legislation  as  it  applies
only to a Central Act or Regulation,  it  would  be  wholly  unnecessary  to
state that on a construction of the  word  “repeal”  in  Section  6  of  the
General Clauses Act, “omissions”  made  by  the  legislature  would  not  be
included.  Assume, on the other hand, that the Constitution Bench had  given
two reasons for the non-applicability of Section 6 of  the  General  Clauses
Act. In such a situation, obviously both reasons would  be  ratio  decidendi
and would be binding upon a subsequent bench.  However,  once  it  is  found
that Section 6 itself would not apply, it would  be  wholly  superfluous  to
further state that on an interpretation of the word “repeal”, an  “omission”
would not be included.  We are, therefore, of the view that the  second  so-
called ratio of the  Constitution  Bench  in  Rayala  Corporation  (P)  Ltd.
cannot be said to be a ratio decidendi at all and is really  in  the  nature
of obiter dicta.” (at para 27)



18.   Merely because  the  Constitution  Bench  referred  to  a  repeal  not
amounting to an omission as the first reason given  for  distinguishing  the
Madhya Pradesh High Court’s judgment would not undo the effect of  paragraph
27 of Fibre Board’s case which, as has already been  stated,  clearly  makes
the distinction between Section 6 not applying at all and  Section  6  being
construed in a particular manner.  Obviously, if the  Section  were  not  to
apply at all, any construction of the Section would necessarily  be  in  the
nature of obiter dicta.

19.   We also find that Section 6 could not possibly apply to the  facts  in
Rayala Corporation’s case for yet another reason. Clause 2 of the  amendment
rules which was referred to in  paragraph  14  of  the  judgment  in  Rayala
Corporation reads as follows:-

“In the Defence of India Rules, 1962, rule 132A (relating to prohibition  of
dealings in foreign exchange) shall be omitted  except  as  respects  things
done or omitted to be done under that rule.”



20.   A cursory reading of clause 2 shows that after omitting Rule  132A  of
the Defence of India Rules, 1962, the  provision  contains  its  own  saving
clause.  This being the case, Section 6 can in any case have no  application
as Section 6  only  applies  to  a  Central  Act  or  regulation  “unless  a
different intention appears”.  A different intention clearly  appears  on  a
reading of clause 2 as only a very limited savings  clause  is  incorporated
therein.  In fact, this aspect is  noticed  by  the  Constitution  Bench  in
paragraph 18 of its judgment, in which the Constitution Bench states:-

“As we have indicated earlier, the notification  of  the  Ministry  of  Home
Affairs omitting Rule 132-A of the D.I.Rs. did not make any  such  provision
similar to that contained in Section 6 of the General Clauses Act.”



21.   It was then urged before us that  Section  31  of  the  Prevention  of
Corruption Act, 1988 would also  lead  to  the  conclusion  that  Parliament
itself is cognizant of the fact that an omission cannot amount to a  repeal.
Section 31 of the Prevention of Corruption Act, 1988, states as follows:-

“Section 31 - Omission of certain sections of Act 45 of 1860

Sections 161 to 165A (both inclusive) of the Indian Penal Code, 1860 (45  of
1860) shall be omitted, and section 6 of the General Clauses Act,  1897  (10
of 1897), shall apply to such omission as if  the  said  sections  had  been
repealed by a Central Act.”



22.   It is settled law that Parliament is presumed to know the law when  it
enacts a particular piece of legislation. The  Prevention of Corruption  Act
was passed in the year 1988, that is long after 1969 when  the  Constitution
Bench decision in Rayala Corporation had been delivered. It  is,  therefore,
presumed that Parliament enacted Section 31 knowing  that  the  decision  in
Rayala Corporation had stated that an omission would not amount to a  repeal
and it is for this reason that Section 31 was enacted.  This again does  not
take us further as this statement of the law in  Rayala  Corporation  is  no
longer the law declared by the Supreme  Court  after  the  decision  in  the
Fibre  Board’s  case.   This  reason  therefore  again  cannot  avail    the
appellant.

23.   The reference to the savings provision in  Section  1  of  the  Indian
Contract Act again does not take us very  much  further  as  the  expression
“repeal” as has been pointed out above can be of part of an enactment  also.
This being the case, when the legislature uses the word  “omit”  it  usually
does so when it  wishes  to  delete  a  particular  section  as  opposed  to
deleting an entire Act. As has been noticed both in Fibre Board’s  case  and
hereinabove, these are all expressions which only go  to  form  and  not  to
substance. Even assuming for the sake of argument that we were  inclined  to
agree with Shri Aggarwal, given the force  of  his  inexorable  logic,  this
Court has laid down the parameters of when it would be expedient to  have  a
relook at a particular decision in the case of  Keshav  Mills  Co.  Ltd.  v.
CIT, Bombay North, 1965 (2) SCR 908, as follows.-

“In dealing with the question as to whether the earlier  decisions  of  this
Court in the New Jehangir Mills  [1959]37ITR11(SC) case and the  Petlad  Co.
Ltd.  [1963] S.C.R. 871 case should be reconsidered and revised  by  us,  we
ought to be clear as to the approach which should be adopted in such  cases.
Mr. Palkhivala has not disputed the fact that, in proper  case,  this  Court
has inherent jurisdiction to reconsider and revise  its  earlier  decisions,
and so, the abstract question as to whether  such  a  power  vests  in  this
Court or not  need  not  detain  us.  In  exercising  this  inherent  power,
however, this would naturally like to impose certain reasonable  limitations
and would be reluctant  to  entertain  pleas  for  the  reconsideration  and
revision of its earlier decisions, unless it is  satisfied  that  there  are
compelling and substantial reasons to do so. It general judicial  experience
that in matters of law  involving  question  of  constructing  statutory  or
constitutional provisions, two views are often reasonably possible and  when
judicial approach has to make a choice between the two  reasonably  possible
views, the process of decision-making is often very difficult and  delicate.
When this Court hears appeals against decisions of the High  Courts  and  is
required to consider the propriety or correctness of the view taken  by  the
High Courts on any point of law, it would be open  to  this  Court  to  hold
that though the view taken by the High Court  is  reasonably  possible,  the
alternative view which is also reasonably possible is better and  should  be
preferred. In such a case, the choice is between the view taken by the  High
Court whose judgment  is  under  appeal,  and  the  alternative  view  which
appears to this Court to be more reasonable; and in accepting  it  own  view
in preference to that of the High Court, this  Court  would  be  discharging
its duty as Court of Appeal. But different  considerations  must  inevitably
arise where a previous decision of this Court has taken  a  particular  view
as  to  the  construction  of  a  statutory  provision  as,  for   instance,
section 66(4) of the Act. When it is urged that the view  already  taken  by
this Court should be reviewed and revised, it  may  not  necessarily  be  an
adequate reason for such  review  and  revision  to  hold  that  though  the
earlier view is a reasonably possible view, the alternative  view  which  is
pressed on the subsequent occasion is  more  reasonable.  In  reviewing  and
revising its earlier decision, this  Court  should  ask  itself  whether  in
interests of the public good or for any other valid and compulsive  reasons,
it is necessary that the earlier  decision  should  be  revised.  When  this
Court decides questions  of  law,  its  decisions  are,  under  Article 141,
binding on all courts within the territory of India, and so, it must be  the
constant endeavour and concern of this Court to introduce  and  maintain  an
element of certainty and continuity in the  interpretation  of  law  in  the
country. Frequent exercise by this Court of its power to review its  earlier
decisions on the ground that the view pressed before  it  later  appears  to
the Court  to  be  more  reasonable,  may  incidentally  tend  to  make  law
uncertain and introduce confusion which must be consistently  avoided.  That
is not to say that if on a subsequent occasion, the Court is satisfied  that
its earlier decision was clearly erroneous, it should  hesitate  to  correct
the error; but before a  previous  decision  is  pronounced  to  be  plainly
erroneous, the Court must satisfied with a fair amount of unanimity  amongst
its members that a revision of the said view is fully justified. It  is  not
possible or desirable, and in any case it would be inexpedient to  lay  down
any principles which should govern the approach  of  the  Court  in  dealing
with the question of reviewing and revising its earlier decisions. It  would
always depend upon several relevant considerations:- What is the  nature  of
the infirmity or error on which a  plea  for  review  and  revision  of  the
earlier view is based? On the earlier occasion, did some patent  aspects  of
the question remain unnoticed, or was the attention of the Court  not  drawn
to any relevant and  material  statutory  provision,  or  was  any  previous
decision of this Court bearing on  the  point  not  noticed?  Is  the  Court
hearing such plea fairly unanimous that  there  is  such  an  error  in  the
earlier view? What  would  be  the  impact  of  the  error  on  the  general
administration of law or on public good ?  Has  the  earlier  decision  been
followed on subsequent occasions either by this Court or by the High  Courts
?  And,  would  the  reversal  of  the  earlier  decision  lead  to   public
inconvenience,  hardship  or   mischief   ?   These   and   other   relevant
considerations must be carefully  borne  in  mind  whenever  this  Court  is
called upon to exercise its jurisdiction to review  and  review  and  revise
its earlier decisions.” (at page 921-922)



24.   Fibre Board’s case is a recent judgment which, as has  correctly  been
argued by Shri Radhakrishnan,  learned  senior  counsel  on  behalf  of  the
revenue, clarifies the law in holding that an omission  would  amount  to  a
repeal. The converse view of the law has led to an omitted  provision  being
treated as if it never existed, as Section 6  of  the  General  Clauses  Act
would not then apply to allow the previous operation of  the  provision   so
omitted or anything duly done  or  suffered  thereunder.  Nor  may  a  legal
proceeding in respect of any right or liability be instituted, continued  or
enforced in respect of rights and liabilities  acquired  or  incurred  under
the enactment so omitted. In the vast majority of cases,  this  would  cause
great public mischief, and the decision of Fibre Board’s case  is  therefore
clearly delivered by this Court for the public  good,  being,  at  the  very
least a reasonably possible view.  Also, no aspect of the question  at  hand
has remained unnoticed.  For this reason also  we  decline  to  accept  Shri
Aggarwal’s persuasive plea to  reconsider  the  judgment  in  Fibre  Board’s
case.   This being the case, it is clear  that  on  point  one  the  present
appeal would have to be dismissed as being concluded by the decision in  the
Fibre Board’s case.

25.   Even on the point of limitation, we find that the High  Court  noticed
that the assessee undertook to pay the amount with interest upto  31.3.2003,
on which date a last part payment was made. As the demand was raised by  the
Department on 19.8.2005 i.e. within a period of three years from  31.3.2003,
it is clear that the said recovery notice  would  not  be  beyond  the  time
limit.

26.   However, Shri Aggarwal has also argued that in this appeal as well  as
in Civil Appeal No.4281 and 4282 of 2007, the Rule providing for payment  of
interest would itself be ultra vires inasmuch as Section 3A of the Act  does
not itself provide for the payment of interest. He argued that  despite  the
fact that this point was not raised before any of the authorities  below  he
ought to be allowed to raise it for the first time in this  Court  not  only
as it is a pure question of law but also because,  according  to  him,  this
Court has held that rules which are ultra vires ought to be ignored  by  the
courts even if there is no substantive challenge to them.

27.    Shri  Radhakrishnan,  learned  senior  advocate  appearing  for   the
revenue, strongly contradicts this position and has vehemently  argued  that
since this issue was never raised before the authorities below,  this  Court
should not allow the appellant to  raise  it  at  this  belated  stage.   He
further submitted that in any  case  it  would  not  be  necessary  for  the
statute to provide for interest and  it  is  good  enough  that  subordinate
legislation in the nature of a rule could do so.  Inasmuch  as  these  cases
relate to interest and penalty leviable  under  certain  provisions  of  the
Central Excise Rules, it may be necessary to set out  the  said  provisions.
They read as follows:

 “RULE 96ZO. Procedure to be followed by  the  manufacturer  of  ingots  and
billets.

 (3)……..

Provided also that where a manufacturer  fails  to  pay  the  whole  of  the
amount payable for any month by the 15th day or the last day of such  month,
as the case may be, he shall be liable to,-

Pay the outstanding amount of duty along with interest thereon at  the  rate
of eighteen per cent. per annum, calculated for the  period  from  the  16th
day of such month or the 1st day of next month, as the  case  may  be,  till
the date of actual payment of the outstanding amount; and

A penalty equal to such outstanding amount of duty or five thousand  rupees,
whichever is greater.”



RULE 96ZP. Procedure to be  followed  by  the  manufacturer  of  hot  rolled
products.



 (3)…….

Provided also that where a manufacturer fails to pay the whole of amount  of
duty payable for any month by the 10th  day  of  such  month,  he  shall  be
liable to pay, -

The outstanding amount of duty along with interest thereon at  the  rate  of
eighteen per cent. per annum calculated for the period from the 11th day  of
such month till the date of actual payment of the outstanding amount; and

A penalty equal to the amount of duty outstanding from him  at  the  end  of
such month or five thousand rupees, whichever is greater.

Rule 96ZQ Procedure to be followed by the independent processor  of  textile
fabrics.

 (5)  If an independent processor fails to pay the amount  of  duty  or  any
part thereof by the date specified in sub-rule (3), he shall be liable to,-

Pay the outstanding amount of duty  along  with  interest  at  the  rate  of
thirty-six per cent per annum calculated for the outstanding period  on  the
outstanding amount; and

A penalty equal to an amount of duty outstanding from  him  or  rupees  five
thousand, whichever is greater.”



28.   Shri Aggarwal in order to buttress his submission that he ought to  be
allowed to raise a pure question of law going to the  very  jurisdiction  to
levy interest cited before us the judgment in   Bhartidasan  University  and
Another v. All-India Council for Technical  Education,  2001  (8)  SCC  676,
and in particular paragraph 14 thereof which reads as follow:-

“The fact that the Regulations may have the force of law or when  made  have
to be laid down before the legislature concerned  do  not  confer  any  more
sanctity or immunity as though they  are  statutory  provisions  themselves.
Consequently, when the power to make Regulations  are  confined  to  certain
limits and made to flow in a well defined  canal  within  stipulated  banks,
those actually made or shown and found to be not made  within  its  confines
but outside them, the Courts are bound to ignore them when the  question  of
their enforcement arise and the mere fact that there was no specific  relief
sought for to strike down or declare them  ultra  vires,  particularly  when
the party in sufferance is a Respondent to the  lis  or  proceedings  cannot
confer any further sanctity or authority and validity which it is shown  and
found to obviously and patently lack. It would,  therefore,  be  a  myth  to
state  that  Regulations   made   under   Section   23 of   the   Act   have
"Constitutional" and legal status, even unmindful of the  fact  that  anyone
or more of them are found to be not consistent with specific  provisions  of
the Act itself. Thus, the Regulations in question,  which  the  AICTE  could
not have made so as to bind universities/UGC  within  the  confines  of  the
powers conferred upon it, cannot be enforced against or bind  an  University
in the matter of any necessity to seek prior  approval  to  commence  a  new
department or course and programme in technical education in any  university
or any of its departments and constituent institutions.”



29.   It would be seen that Shri Aggarwal is on  firm  ground  because  this
Court has specifically stated that rules or regulations  which  are  in  the
nature of subordinate legislation which are ultra  vires  are  bound  to  be
ignored by the courts when the question of their enforcement arises and  the
mere fact that there is no specific relief sought  for  to  strike  down  or
declare them ultra  vires  would  not  stand  in  the  court’s  way  of  not
enforcing them.  We also feel that since this is  a  question  of  the  very
jurisdiction to levy interest and is otherwise  covered  by  a  Constitution
Bench decision of this Court, it would be a travesty of justice if we  would
not to allow Shri Aggarwal to make this submission.

30.   On merits, the matter is no longer res integra.  A Constitution  Bench
decision of this Court in VVS Sugars v. Government of  A.P.,  1999  (4)  SCC
192, has held, following two earlier judgments of this Court, as follows:-

“This Court in India Carbon Ltd. v. State of Assam [(1997) 6  SCC  479]  has
held, after analysing the Constitution  Bench  judgment  in J.K.  Synthetics
Ltd. v. CTO [(1994) 4 SCC 276] that interest can be levied  and  charged  on
delayed payment of tax only if the statute that levies and charges  the  tax
makes a substantive provision in this behalf.  There  being  no  substantive
provision in the Act for the  levy  of  interest  on  arrears  of  tax  that
applied  to  purchases  of  sugarcane  made  subsequent  to  the   date   of
commencement of the amending Act, no interest thereon could  be  so  levied,
based on the application of the said Rule 45 or otherwise.”



31.   Applying the Constitution Bench decision stated above,  it  will  have
to be declared that since Section 3A which provides for  a  separate  scheme
for availing facilities  under  a  compound  levy  scheme  does  not  itself
provide for the levying of interest, Rules 96 ZO, 96 ZP and 96 ZQ cannot  do
so and therefore on this  ground  the  appellant  in  Shree  Bhagwati  Steel
Rolling Mills has to succeed.  On this ground alone therefore  the  impugned
judgment is set aside. That none of the  other  provisions  of  the  Central
Excise Act can come to the aid of the Revenue in cases like these  has  been
laid down by this Court in Hans Steel Rolling Mill v. CCE, (2011) 3 SCC  748
as follows:
                                   REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO.4280 OF 2007

M/S. SHREE BHAGWATI STEEL
ROLLING MILLS                                                       …APPELLANT

                             VERSUS

COMMISSIONER OF CENTRAL EXCISE
& ANR.                                                            …RESPONDENTS
    
                                    WITH

                        CIVIL APPEAL NO.4281 OF 2007
                        CIVIL APPEAL NO.4282 OF 2007
                        CIVIL APPEAL NO.3031 OF 2008
                        CIVIL APPEAL NO.13601 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.22134 OF 2008)
                        CIVIL APPEAL NO.4379 OF 2010
                        CIVIL APPEAL NO.13602 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.11030 OF 2010)
                         CIVIL APPEAL NO.908 OF 2011
                        CIVIL APPEAL NO.5448 OF 2011
                        CIVIL APPEAL NO.5449 OF 2011
                        CIVIL APPEAL NO.5452 OF 2011
                        CIVIL APPEAL NO.5453 OF 2011
                        CIVIL APPEAL NO.13603 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.5532 OF 2011)
                     CIVIL APPEAL NOS.8685-8686 OF 2011
                        CIVIL APPEAL NO.13605 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19964 OF 2011)
                        CIVIL APPEAL NO.13606 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19966 OF 2011)
                        CIVIL APPEAL NO.13607 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19968 OF 2011)

                        CIVIL APPEAL NO.13608 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19969 OF 2011)
                        CIVIL APPEAL NO.13609 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19972 OF 2011)
                        CIVIL APPEAL NO.13610 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19975 OF 2011)
                        CIVIL APPEAL NO.13611 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19979 OF 2011)
                        CIVIL APPEAL NO.13612 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19983 OF 2011)
                        CIVIL APPEAL NO.13614 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.20667 OF 2011)
                        CIVIL APPEAL NO.13615 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.21584 OF 2011)
                        CIVIL APPEAL NO.13616 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.25881 OF 2011)
                        CIVIL APPEAL NO.13617 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.1796 OF 2012)
                        CIVIL APPEAL NO.13618 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.16249 OF 2012)
                        CIVIL APPEAL NO.13619 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.21273 OF 2012)
                        CIVIL APPEAL NO.13620 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.21402 OF 2012)
                        CIVIL APPEAL NO.13621 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.24139 OF 2012)
                        CIVIL APPEAL NO.13622 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.27752 OF 2012)
                        CIVIL APPEAL NO.13623 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.37566 OF 2012)
                        CIVIL APPEAL NO.13624 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.38588 OF 2012)
                        CIVIL APPEAL NO.13625 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.39972 OF 2012)
                    CIVIL APPEAL NOS.13626-13627 OF 2015
             (ARISING OUT OF SLP (CIVIL) NOS.1103-1104 OF 2013)
                        CIVIL APPEAL NO.13628 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.4224 OF 2013)
                        CIVIL APPEAL NO.13629 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.5877 OF 2013)
                        CIVIL APPEAL NO.13630 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.7852 OF 2013)
                        CIVIL APPEAL NO.13631 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.9796 OF 2013)
                        CIVIL APPEAL NO.13632 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.11709 OF 2013)
                        CIVIL APPEAL NO.13633 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.14097 OF 2013)
                        CIVIL APPEAL NO.13634 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.17534 OF 2013)
                        CIVIL APPEAL NO.13635 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.18902 OF 2013)
                        CIVIL APPEAL NO.13636 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.21590 OF 2013)
                    CIVIL APPEAL NOS.13637-13638 OF 2015
            (ARISING OUT OF SLP (CIVIL) NOS.27235-27236 OF 2013)
                        CIVIL APPEAL NO.13639 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.29566 OF 2013)
                        CIVIL APPEAL NO.13640 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.1269 OF 2014)
                        CIVIL APPEAL NO. 1979 OF 2014
                    CIVIL APPEAL NOS.13641-13642 OF 2015
             (ARISING OUT OF SLP (CIVIL) NOS.4511-4512 OF 2014)
                        CIVIL APPEAL NO.13643 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.20044 OF 2014)
                        CIVIL APPEAL NO.13644 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.23009 OF 2014)
                        CIVIL APPEAL NO.13645 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.26042 OF 2014)
                        CIVIL APPEAL NO.13646 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.26036 OF 2014)
                        CIVIL APPEAL NO.13647 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.30377 OF 2014)
                        CIVIL APPEAL NO.13648 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.30378 OF 2014)
                        CIVIL APPEAL NO.13649 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.30376 OF 2014)
                        CIVIL APPEAL NO.13650 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.31332 OF 2014)

                        CIVIL APPEAL NO.13651 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.36410 OF 2014)
                        CIVIL APPEAL NO.13652 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.36196 OF 2014)
                        CIVIL APPEAL NO.13653 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.36658 OF 2014)
                        CIVIL APPEAL NO.13654 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.36408 OF 2014)
                        CIVIL APPEAL NO.13655 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.36413 OF 2014)
                        CIVIL APPEAL NO.13656 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.3486 OF 2015)
                        CIVIL APPEAL NO.13657 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.6147 OF 2015)
                        CIVIL APPEAL NO.13658 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.7820 OF 2015)
                        CIVIL APPEAL NO.13659 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.33041 OF 2013)
                        CIVIL APPEAL NO.13660 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.8746 OF 2015)
                        CIVIL APPEAL NO.13661 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.10577 OF 2015)
                        CIVIL APPEAL NO.13662 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.12574 OF 2015)
                        CIVIL APPEAL NO.13663 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.21407 OF 2015)
                        CIVIL APPEAL NO.13664 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.22354 OF 2015)
                        CIVIL APPEAL NO.13665 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.27474 OF 2015)
                        CIVIL APPEAL NO.13666 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.26580 OF 2015)
                        CIVIL APPEAL NO.13667 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.27998 OF 2015)
                        CIVIL APPEAL NO.13668 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.28262 OF 2015)
                        CIVIL APPEAL NO.13669 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.27471 OF 2015)
                        CIVIL APPEAL NO.13670 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.27997 OF 2015)
                        CIVIL APPEAL NO.13671 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.28264 OF 2015)
                        CIVIL APPEAL NO.13672 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.28935 OF 2015)
                        CIVIL APPEAL NO.13673 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.29004 OF 2015)
                        CIVIL APPEAL NO.13674 OF 2015
                (ARISING OUT OF SLP (CIVIL) NO.19948 OF 2015)


                           J  U  D  G  M  E  N  T

R.F. Nariman, J.

1.    Leave granted.

2.    This batch of appeals raises questions  relating  to  the  demand  for
interest and penalty under Rules 96ZO, 96  ZP  and  96  ZQ  of  the  Central
Excise Rules, 1994, which were framed in order to effectuate the  provisions
contained in Section 3A of the  Central  Excise  Act,  1994.   Several  High
Courts have struck down the said Rules relating to penalty  as  being  ultra
vires the parent provision and violative of Articles 14 and 19(1)(g) of  the
Constitution.  Most of the appeals in this  batch  are,  therefore,  by  the
Union of India.  However, before  dealing  with  the  said  appeals,  it  is
necessary to first segregate Civil Appeal No.4280 of  2007  which  raises  a
slightly different question from the questions raised in the  other  appeals
and decide it first.

3.    The question which arises for decision  in  the  said  appeal  is  the
demand, by means of a letter dated 19.8.2005, for payment  of  interest  for
delayed payment of central excise duty  under  Section  3A  of  the  Central
Excise Act, 1944.

4.    The case of the appellant is that it took a rolling mill on lease  for
the period from 1997 to 2000 and  manufactured  rerolled  non-alloyed  steel
products. On 1.9.1997 the compounded levy scheme was introduced  by  way  of
insertion of Section 3A of the Central Excise Act.  The appellant opted  for
the aforesaid scheme under Rule 96ZP of the Central Excise Rules.  When  the
lease expired, the appellant surrendered  its  registration  certificate  on
1.6.2000.  As stated hereinabove,  on  19.8.2005  the  impugned  notice  was
issued to the appellant demanding interest for delayed payment of  duty  for
the period 1997 to 2000.

5.     The  High  Court  framed  two   questions   which   arose   for   its
consideration: (1) whether “omission” of the compounded levy scheme in  2001
wipes out the liability of the assessee for  the  period  during  which  the
scheme was in operation, and (2) whether the letter of  demand  of  interest
for delayed payment was liable to be set aside on the ground of delay.

6.    The High Court found, after distinguishing some of  the  judgments  of
this Court, and after relying upon Section 38A of the  Central  Excise  Act,
which was added vide Section 131 of the Finance Act, 2001, that on  omission
of Section 3A, the liability of the assessee was not wiped out.

7.    Shri Ajay Aggarwal, learned counsel who  appeared  on  behalf  of  the
appellant fairly submitted that a recent judgment delivered by  this  Bench,
namely, M/s Fibre Boards (P) Ltd., Bangalore v. Commissioner of Income  Tax,
Bangalore,  [2015] 376 ITR 596 (SC), would cover the matter before us  being
directly against the  appellant’s  case.  However,  he  submitted  that  for
various reasons this judgment requires a relook and ought to be referred  to
a larger Bench of three Judges. Shri Aggarwal argued the matter  with  great
ability and we listened to him with considerable interest.

8.    First, it may be stated that the judgment of this Court in  the  Fibre
Board’s case has taken the  view  that  an  “omission”  would  amount  to  a
“repeal”, after  referring  to  several  authorities  of  this  Court,  G.P.
Singh’s Principles of Statutory Interpretation, Section 6A  of  the  General
Clauses  Act,  1897,  and  a  passage  in  Halsbury’s   Laws   of   England.
Ultimately, this Court arrived at the conclusion that  an  “omission”  would
amount to a “repeal” for the purpose of Section 24 of  the  General  Clauses
Act.  Since the same expression, namely, “repeal” is used both in Section  6
and Section 24 of the General Clauses Act,  the  construction  of  the  said
expression in both sections would, therefore, include within it  “omissions”
made by the legislature.

9.     Shri  Aggarwal,  however,  argued  that  there   is   a   fundamental
distinction between a “repeal” and an “omission” in that in the  case  of  a
“repeal” the statute is obliterated from the very beginning whereas  in  the
case of an “omission” what gets omitted is only from the date of  “omission”
and not before.  This being the case, it is clear that things  already  done
in the case of an “omission” would be saved. However, a “repeal”  without  a
savings clause like Section 6 of the General Clauses Act would not  so  save
things already done under the repealed  statute.   He  further  argued  that
Section 6A which was relied upon by the Bench in the Fibre Board’s case  did
not state that  an  “omission”  would  be  included  within  the  expression
“repeal”, but that if Section 6A were carefully read,  an  “omission”  would
only be included in an “amendment” which, under the Section, can be  by  way
of omission, insertion or substitution.   Therefore,  it  is  fallacious  to
state that Section 6A would lead to  the  conclusion  that  “omissions”  are
included in “repeals”.  He further argued that in any event, the true  ratio
decidendi of the Constitution Bench decision in Rayala Corporation (P)  Ltd.
& Ors. v. Director of Enforcement, New Delhi, 1969 (2) SCC 412, is  that  an
“omission” cannot amount to a “repeal” inasmuch as the  first  reason  given
for distinguishing the Madhya Pradesh High Court’s  judgment  in  that  case
was that Section 6 cannot apply  to  the  omission  of  a  rule  because  an
“omission” is not a “repeal”. He further argued that as the  Madhya  Pradesh
High Court’s decision was put forward by the  respondent  in  that  case  in
support of their argument, the Constitution Bench’s dealing  with  the  said
decision in order to overcome it would necessarily be  the  ratio  decidendi
of the said decision, and being a  Constitution  Bench  decision,  would  be
binding upon  this  Bench.   He  further  referred  to  Section  31  of  the
Prevention of Corruption Act, 1988, which, in his opinion,  makes  it  clear
that Parliament itself has understood that a repeal under Section 6  of  the
General Clauses Act would not apply to omissions.   He  has  further  argued
that it may be true that the expression “repeal” is normally  used  when  an
entire statute is done away with, as  opposed  to  an  “omission”  which  is
applied only when part of the statute is deleted, but said that this is  not
invariably the case, and referred to Section 1 of the  Indian  Contract  Act
in which enactments mentioned in the schedule  are  repealed  not  in  their
entirety but only to the extent provided and,  therefore,  argued  that  the
expression “repeals” will apply also to a part of an  enactment  as  opposed
to the enactment as a whole.

10.   Shri Radhakrishnan, learned senior counsel appearing on behalf of  the
revenue supported the judgment of this Court in the Fibre Board’s  case  and
said that recent judgments delivered which have clarified the law ought  not
to be disturbed in the larger public interest.

11.   Since Shri Aggarwal has made detailed submissions on why according  to
him the judgment in the Fibre Board’s case  is  not  correctly  decided,  we
propose to deal with each of those submissions in some detail.

12.   First and foremost, it is important to  refer  to  the  definition  of
“enactment” contained in Section 3(19) of  the  General  Clauses  Act.   The
said definition clause states that “enactment” shall mean the following:-

“enactment" shall include a Regulation  (as  hereinafter  defined)  and  any
Regulation of the Bengal, Madras or Bombay Code, and shall also include  any
provision contained in any Act or in any such Regulation as aforesaid.”



13.   From this it is clear that when Section 6 speaks of the repeal of  any
enactment, it refers not merely to the enactment as a whole but also to  any
provision contained in any Act.  Thus, it is clear  that  if  a  part  of  a
statute is deleted, Section 6  would  nonetheless  apply.  Secondly,  it  is
clear, as has been stated by referring to a passage in  Halsbury’s  Laws  of
England in the Fibre Board’s judgment, that  the  expression  “omission”  is
nothing but a particular form of words evincing an intention to abrogate  an
enactment or portion thereof. This  is  made  further  clear  by  the  Legal
Thesaurus  (Deluxe  Edition)  by  William  C  Burton,  1979  Edition.    The
expression “delete” is defined by the Thesaurus as follows:

 “Delete: - Blot out, cancel, censor, cross off, cross out,  cut,  cut  out,
dele, discard, do away with,  drop,  edit  out,  efface,  elide,  eliminate,
eradicate, erase, excise, expel, expunge, extirpate, get rid of, leave  out,
modify by excisions, obliterate, omit, remove, rub out,  rule  out,  scratch
out, strike off, take out, weed wipe out.”

Likewise the  expression  “omit”  is  also  defined  by  this  Thesaurus  as
follows:-

“Omit:- Abstain from inserting, bypass, cast  aside,  count  out,  cut  out,
delete, discard, dodge, drop exclude, exclude, fail to do, fail to  include,
fail to insert, fail to mention, leave out, leave undone, let go, let  pass,
let slip, miss, neglect, omittere, pass over, praetermittere, skip,  slight,
transire.”



And the expression “repeal” is defined as follows:-

“Repeal:- Abolish, abrogare, abrogate, annul,  avoid,  cancel,  countermand,
declare null and void, delete,  eliminate,  formally  withdraw,  invalidate,
make void,  negate,  nullify,  obliterate,  officially  withdraw,  override,
overrule, quash,  recall,  render  invalid,  rescind,  rescindere,  retract,
reverse, revoke, set aside, vacate, void, withdraw.”



14.   On a conjoint reading of the three expressions “delete”,  “omit”,  and
“repeal”,  it  becomes   clear   that   “delete”   and   “omit”   are   used
interchangeably, so that when the expression “repeal” refers to “delete”  it
would necessarily take within its ken an omission as well.  This  being  the
case, we do not find any substance in the argument that a  “repeal”  amounts
to an obliteration from the very beginning, whereas an  “omission”  is  only
in futuro. If the expression “delete” would amount to a “repeal”, which  the
appellant’s counsel does not deny, it is clear that a  conjoint  reading  of
Halsbury’s Laws of England and the Legal Thesaurus  cited  hereinabove  both
lead to the same result, namely that an “omission”  being  tantamount  to  a
“deletion” is a form of repeal.

15.   Learned counsel’s second argument that Section 6A when  it  speaks  of
an “omission” only speaks of an “amendment” which omits and, therefore  does
not refer to a repeal is equally fallacious. In Bhagat Ram Sharma  v.  Union
of India, 1988  Supp  SCC  30,  this  Court  held  that  there  is  no  real
distinction between a repeal and an amendment and that  “amendment”   is  in
fact a wider term which includes deletion of  a  provision  in  an  existing
statute.  In the said judgment, this Court held:-

“17. It is a matter of legislative practice to  provide  while  enacting  an
amending law, that  an  existing  provision  shall  be  deleted  and  a  new
provision substituted. Such  deletion  has  the  effect  of  repeal  of  the
existing provision. Such a law may also provide for the  introduction  of  a
new provision.  There  is  no  real  distinction  between  'repeal'  and  an
'amendment'. In Sutherland's Statutory Construction, 3rd Edn., Vol. 1 at  p.
477, the learned author makes the following statement of law:

The distinction between repeal and amendment as these terms are used by  the
Courts is arbitrary. Naturally the use of these terms by the Court is  based
largely on how the Legislature have developed and  applied  these  terms  in
labelling their enactments. When a section is being added to  an  Act  or  a
provision added to a section, the Legislatures commonly entitled the Act  as
an  amendment....  When  a  provision  is  withdrawn  from  a  section,  the
Legislatures call the Act an amendment  particularly  when  a  provision  is
added to replace the one withdrawn. However, when an entire Act  or  section
is abrogated and no new section is added to replace it,  Legislatures  label
the  Act  accomplishing  this  result  a  repeal.  Thus  as  used   by   the
Legislatures, amendment and repeal may differ in kind - addition as  opposed
to withdrawal or only in degree -abrogation of part of a section as  opposed
to abrogation of a whole section or Act; or more commonly, in both kind  and
degree - addition of a provision to a section to replace a  provision  being
abrogated as opposed by abrogation of  a  whole  section  of  an  Act.  This
arbitrary distinction has  been  followed  by  the  Courts,  and  they  have
developed separate rules  of  construction  for  each.  However,  they  have
recognised that frequently an Act purporting to  be  an  amendment  has  the
same qualitative effect  as  a  repeal  -  the  abrogation  of  an  existing
statutory provision -and have therefore applied the  term  "implied  repeal'
and the rules of construction applicable to repeals to such amendments.

18. Amendment is in fact,  a  wider  term  and  it  includes  abrogation  or
deletion of a provision in an existing  statute.  If  the  amendment  of  an
existing law is small, the Act professes to amend; if it  is  extensive,  it
repeals a law and re-enacts it. An  amendment  of  substantive  law  is  not
retrospective unless  expressly  laid  down  or  by  necessary'  implication
inferred.” (at para 17 & 18)



16.   It is clear, therefore, that when this Court referred  to  Section  6A
in Fibre Board’s case and held that Section 6A shows that a  repeal  can  be
by way of an  express  omission,  obviously  what  was  meant  was  that  an
amendment which repealed a provision could  do  so  by  way  of  an  express
omission.  This being the case, it is clear  that  Section  6A  undisputedly
leads to the conclusion that a repeal would include a repeal by  way  of  an
express omission.

17.   Learned counsel then  argued  that  while  distinguishing  the  Madhya
Pradesh High Court’s judgment in Rayala Corporation,  a  Constitution  Bench
of this Court expressly held as the first  reason  that  Section  6  applies
only to repeals and not  to  omissions.   The  Fibre  Board’s  judgment  has
clearly held as follows:

“First and foremost, it will be noticed  that  two  reasons  were  given  in
Rayala Corporation (P) Ltd.  for  distinguishing  the  Madhya  Pradesh  High
Court judgment.  Ordinarily, both reasons would  form  the  ratio  decidendi
for the said decision and both reasons would be  binding  upon  us.  But  we
find that once it is held that Section 6 of the General  Clauses  Act  would
itself not apply to a rule which is subordinate legislation  as  it  applies
only to a Central Act or Regulation,  it  would  be  wholly  unnecessary  to
state that on a construction of the  word  “repeal”  in  Section  6  of  the
General Clauses Act, “omissions”  made  by  the  legislature  would  not  be
included.  Assume, on the other hand, that the Constitution Bench had  given
two reasons for the non-applicability of Section 6 of  the  General  Clauses
Act. In such a situation, obviously both reasons would  be  ratio  decidendi
and would be binding upon a subsequent bench.  However,  once  it  is  found
that Section 6 itself would not apply, it would  be  wholly  superfluous  to
further state that on an interpretation of the word “repeal”, an  “omission”
would not be included.  We are, therefore, of the view that the  second  so-
called ratio of the  Constitution  Bench  in  Rayala  Corporation  (P)  Ltd.
cannot be said to be a ratio decidendi at all and is really  in  the  nature
of obiter dicta.” (at para 27)



18.   Merely because  the  Constitution  Bench  referred  to  a  repeal  not
amounting to an omission as the first reason given  for  distinguishing  the
Madhya Pradesh High Court’s judgment would not undo the effect of  paragraph
27 of Fibre Board’s case which, as has already been  stated,  clearly  makes
the distinction between Section 6 not applying at all and  Section  6  being
construed in a particular manner.  Obviously, if the  Section  were  not  to
apply at all, any construction of the Section would necessarily  be  in  the
nature of obiter dicta.

19.   We also find that Section 6 could not possibly apply to the  facts  in
Rayala Corporation’s case for yet another reason. Clause 2 of the  amendment
rules which was referred to in  paragraph  14  of  the  judgment  in  Rayala
Corporation reads as follows:-

“In the Defence of India Rules, 1962, rule 132A (relating to prohibition  of
dealings in foreign exchange) shall be omitted  except  as  respects  things
done or omitted to be done under that rule.”



20.   A cursory reading of clause 2 shows that after omitting Rule  132A  of
the Defence of India Rules, 1962, the  provision  contains  its  own  saving
clause.  This being the case, Section 6 can in any case have no  application
as Section 6  only  applies  to  a  Central  Act  or  regulation  “unless  a
different intention appears”.  A different intention clearly  appears  on  a
reading of clause 2 as only a very limited savings  clause  is  incorporated
therein.  In fact, this aspect is  noticed  by  the  Constitution  Bench  in
paragraph 18 of its judgment, in which the Constitution Bench states:-

“As we have indicated earlier, the notification  of  the  Ministry  of  Home
Affairs omitting Rule 132-A of the D.I.Rs. did not make any  such  provision
similar to that contained in Section 6 of the General Clauses Act.”



21.   It was then urged before us that  Section  31  of  the  Prevention  of
Corruption Act, 1988 would also  lead  to  the  conclusion  that  Parliament
itself is cognizant of the fact that an omission cannot amount to a  repeal.
Section 31 of the Prevention of Corruption Act, 1988, states as follows:-

“Section 31 - Omission of certain sections of Act 45 of 1860

Sections 161 to 165A (both inclusive) of the Indian Penal Code, 1860 (45  of
1860) shall be omitted, and section 6 of the General Clauses Act,  1897  (10
of 1897), shall apply to such omission as if  the  said  sections  had  been
repealed by a Central Act.”



22.   It is settled law that Parliament is presumed to know the law when  it
enacts a particular piece of legislation. The  Prevention of Corruption  Act
was passed in the year 1988, that is long after 1969 when  the  Constitution
Bench decision in Rayala Corporation had been delivered. It  is,  therefore,
presumed that Parliament enacted Section 31 knowing  that  the  decision  in
Rayala Corporation had stated that an omission would not amount to a  repeal
and it is for this reason that Section 31 was enacted.  This again does  not
take us further as this statement of the law in  Rayala  Corporation  is  no
longer the law declared by the Supreme  Court  after  the  decision  in  the
Fibre  Board’s  case.   This  reason  therefore  again  cannot  avail    the
appellant.

23.   The reference to the savings provision in  Section  1  of  the  Indian
Contract Act again does not take us very  much  further  as  the  expression
“repeal” as has been pointed out above can be of part of an enactment  also.
This being the case, when the legislature uses the word  “omit”  it  usually
does so when it  wishes  to  delete  a  particular  section  as  opposed  to
deleting an entire Act. As has been noticed both in Fibre Board’s  case  and
hereinabove, these are all expressions which only go  to  form  and  not  to
substance. Even assuming for the sake of argument that we were  inclined  to
agree with Shri Aggarwal, given the force  of  his  inexorable  logic,  this
Court has laid down the parameters of when it would be expedient to  have  a
relook at a particular decision in the case of  Keshav  Mills  Co.  Ltd.  v.
CIT, Bombay North, 1965 (2) SCR 908, as follows.-

“In dealing with the question as to whether the earlier  decisions  of  this
Court in the New Jehangir Mills  [1959]37ITR11(SC) case and the  Petlad  Co.
Ltd.  [1963] S.C.R. 871 case should be reconsidered and revised  by  us,  we
ought to be clear as to the approach which should be adopted in such  cases.
Mr. Palkhivala has not disputed the fact that, in proper  case,  this  Court
has inherent jurisdiction to reconsider and revise  its  earlier  decisions,
and so, the abstract question as to whether  such  a  power  vests  in  this
Court or not  need  not  detain  us.  In  exercising  this  inherent  power,
however, this would naturally like to impose certain reasonable  limitations
and would be reluctant  to  entertain  pleas  for  the  reconsideration  and
revision of its earlier decisions, unless it is  satisfied  that  there  are
compelling and substantial reasons to do so. It general judicial  experience
that in matters of law  involving  question  of  constructing  statutory  or
constitutional provisions, two views are often reasonably possible and  when
judicial approach has to make a choice between the two  reasonably  possible
views, the process of decision-making is often very difficult and  delicate.
When this Court hears appeals against decisions of the High  Courts  and  is
required to consider the propriety or correctness of the view taken  by  the
High Courts on any point of law, it would be open  to  this  Court  to  hold
that though the view taken by the High Court  is  reasonably  possible,  the
alternative view which is also reasonably possible is better and  should  be
preferred. In such a case, the choice is between the view taken by the  High
Court whose judgment  is  under  appeal,  and  the  alternative  view  which
appears to this Court to be more reasonable; and in accepting  it  own  view
in preference to that of the High Court, this  Court  would  be  discharging
its duty as Court of Appeal. But different  considerations  must  inevitably
arise where a previous decision of this Court has taken  a  particular  view
as  to  the  construction  of  a  statutory  provision  as,  for   instance,
section 66(4) of the Act. When it is urged that the view  already  taken  by
this Court should be reviewed and revised, it  may  not  necessarily  be  an
adequate reason for such  review  and  revision  to  hold  that  though  the
earlier view is a reasonably possible view, the alternative  view  which  is
pressed on the subsequent occasion is  more  reasonable.  In  reviewing  and
revising its earlier decision, this  Court  should  ask  itself  whether  in
interests of the public good or for any other valid and compulsive  reasons,
it is necessary that the earlier  decision  should  be  revised.  When  this
Court decides questions  of  law,  its  decisions  are,  under  Article 141,
binding on all courts within the territory of India, and so, it must be  the
constant endeavour and concern of this Court to introduce  and  maintain  an
element of certainty and continuity in the  interpretation  of  law  in  the
country. Frequent exercise by this Court of its power to review its  earlier
decisions on the ground that the view pressed before  it  later  appears  to
the Court  to  be  more  reasonable,  may  incidentally  tend  to  make  law
uncertain and introduce confusion which must be consistently  avoided.  That
is not to say that if on a subsequent occasion, the Court is satisfied  that
its earlier decision was clearly erroneous, it should  hesitate  to  correct
the error; but before a  previous  decision  is  pronounced  to  be  plainly
erroneous, the Court must satisfied with a fair amount of unanimity  amongst
its members that a revision of the said view is fully justified. It  is  not
possible or desirable, and in any case it would be inexpedient to  lay  down
any principles which should govern the approach  of  the  Court  in  dealing
with the question of reviewing and revising its earlier decisions. It  would
always depend upon several relevant considerations:- What is the  nature  of
the infirmity or error on which a  plea  for  review  and  revision  of  the
earlier view is based? On the earlier occasion, did some patent  aspects  of
the question remain unnoticed, or was the attention of the Court  not  drawn
to any relevant and  material  statutory  provision,  or  was  any  previous
decision of this Court bearing on  the  point  not  noticed?  Is  the  Court
hearing such plea fairly unanimous that  there  is  such  an  error  in  the
earlier view? What  would  be  the  impact  of  the  error  on  the  general
administration of law or on public good ?  Has  the  earlier  decision  been
followed on subsequent occasions either by this Court or by the High  Courts
?  And,  would  the  reversal  of  the  earlier  decision  lead  to   public
inconvenience,  hardship  or   mischief   ?   These   and   other   relevant
considerations must be carefully  borne  in  mind  whenever  this  Court  is
called upon to exercise its jurisdiction to review  and  review  and  revise
its earlier decisions.” (at page 921-922)



24.   Fibre Board’s case is a recent judgment which, as has  correctly  been
argued by Shri Radhakrishnan,  learned  senior  counsel  on  behalf  of  the
revenue, clarifies the law in holding that an omission  would  amount  to  a
repeal. The converse view of the law has led to an omitted  provision  being
treated as if it never existed, as Section 6  of  the  General  Clauses  Act
would not then apply to allow the previous operation of  the  provision   so
omitted or anything duly done  or  suffered  thereunder.  Nor  may  a  legal
proceeding in respect of any right or liability be instituted, continued  or
enforced in respect of rights and liabilities  acquired  or  incurred  under
the enactment so omitted. In the vast majority of cases,  this  would  cause
great public mischief, and the decision of Fibre Board’s case  is  therefore
clearly delivered by this Court for the public  good,  being,  at  the  very
least a reasonably possible view.  Also, no aspect of the question  at  hand
has remained unnoticed.  For this reason also  we  decline  to  accept  Shri
Aggarwal’s persuasive plea to  reconsider  the  judgment  in  Fibre  Board’s
case.   This being the case, it is clear  that  on  point  one  the  present
appeal would have to be dismissed as being concluded by the decision in  the
Fibre Board’s case.

25.   Even on the point of limitation, we find that the High  Court  noticed
that the assessee undertook to pay the amount with interest upto  31.3.2003,
on which date a last part payment was made. As the demand was raised by  the
Department on 19.8.2005 i.e. within a period of three years from  31.3.2003,
it is clear that the said recovery notice  would  not  be  beyond  the  time
limit.

26.   However, Shri Aggarwal has also argued that in this appeal as well  as
in Civil Appeal No.4281 and 4282 of 2007, the Rule providing for payment  of
interest would itself be ultra vires inasmuch as Section 3A of the Act  does
not itself provide for the payment of interest. He argued that  despite  the
fact that this point was not raised before any of the authorities  below  he
ought to be allowed to raise it for the first time in this  Court  not  only
as it is a pure question of law but also because,  according  to  him,  this
Court has held that rules which are ultra vires ought to be ignored  by  the
courts even if there is no substantive challenge to them.

27.    Shri  Radhakrishnan,  learned  senior  advocate  appearing  for   the
revenue, strongly contradicts this position and has vehemently  argued  that
since this issue was never raised before the authorities below,  this  Court
should not allow the appellant to  raise  it  at  this  belated  stage.   He
further submitted that in any  case  it  would  not  be  necessary  for  the
statute to provide for interest and  it  is  good  enough  that  subordinate
legislation in the nature of a rule could do so.  Inasmuch  as  these  cases
relate to interest and penalty leviable  under  certain  provisions  of  the
Central Excise Rules, it may be necessary to set out  the  said  provisions.
They read as follows:

 “RULE 96ZO. Procedure to be followed by  the  manufacturer  of  ingots  and
billets.

 (3)……..

Provided also that where a manufacturer  fails  to  pay  the  whole  of  the
amount payable for any month by the 15th day or the last day of such  month,
as the case may be, he shall be liable to,-

Pay the outstanding amount of duty along with interest thereon at  the  rate
of eighteen per cent. per annum, calculated for the  period  from  the  16th
day of such month or the 1st day of next month, as the  case  may  be,  till
the date of actual payment of the outstanding amount; and

A penalty equal to such outstanding amount of duty or five thousand  rupees,
whichever is greater.”



RULE 96ZP. Procedure to be  followed  by  the  manufacturer  of  hot  rolled
products.



 (3)…….

Provided also that where a manufacturer fails to pay the whole of amount  of
duty payable for any month by the 10th  day  of  such  month,  he  shall  be
liable to pay, -

The outstanding amount of duty along with interest thereon at  the  rate  of
eighteen per cent. per annum calculated for the period from the 11th day  of
such month till the date of actual payment of the outstanding amount; and

A penalty equal to the amount of duty outstanding from him  at  the  end  of
such month or five thousand rupees, whichever is greater.

Rule 96ZQ Procedure to be followed by the independent processor  of  textile
fabrics.

 (5)  If an independent processor fails to pay the amount  of  duty  or  any
part thereof by the date specified in sub-rule (3), he shall be liable to,-

Pay the outstanding amount of duty  along  with  interest  at  the  rate  of
thirty-six per cent per annum calculated for the outstanding period  on  the
outstanding amount; and

A penalty equal to an amount of duty outstanding from  him  or  rupees  five
thousand, whichever is greater.”



28.   Shri Aggarwal in order to buttress his submission that he ought to  be
allowed to raise a pure question of law going to the  very  jurisdiction  to
levy interest cited before us the judgment in   Bhartidasan  University  and
Another v. All-India Council for Technical  Education,  2001  (8)  SCC  676,
and in particular paragraph 14 thereof which reads as follow:-

“The fact that the Regulations may have the force of law or when  made  have
to be laid down before the legislature concerned  do  not  confer  any  more
sanctity or immunity as though they  are  statutory  provisions  themselves.
Consequently, when the power to make Regulations  are  confined  to  certain
limits and made to flow in a well defined  canal  within  stipulated  banks,
those actually made or shown and found to be not made  within  its  confines
but outside them, the Courts are bound to ignore them when the  question  of
their enforcement arise and the mere fact that there was no specific  relief
sought for to strike down or declare them  ultra  vires,  particularly  when
the party in sufferance is a Respondent to the  lis  or  proceedings  cannot
confer any further sanctity or authority and validity which it is shown  and
found to obviously and patently lack. It would,  therefore,  be  a  myth  to
state  that  Regulations   made   under   Section   23 of   the   Act   have
"Constitutional" and legal status, even unmindful of the  fact  that  anyone
or more of them are found to be not consistent with specific  provisions  of
the Act itself. Thus, the Regulations in question,  which  the  AICTE  could
not have made so as to bind universities/UGC  within  the  confines  of  the
powers conferred upon it, cannot be enforced against or bind  an  University
in the matter of any necessity to seek prior  approval  to  commence  a  new
department or course and programme in technical education in any  university
or any of its departments and constituent institutions.”



29.   It would be seen that Shri Aggarwal is on  firm  ground  because  this
Court has specifically stated that rules or regulations  which  are  in  the
nature of subordinate legislation which are ultra  vires  are  bound  to  be
ignored by the courts when the question of their enforcement arises and  the
mere fact that there is no specific relief sought  for  to  strike  down  or
declare them ultra  vires  would  not  stand  in  the  court’s  way  of  not
enforcing them.  We also feel that since this is  a  question  of  the  very
jurisdiction to levy interest and is otherwise  covered  by  a  Constitution
Bench decision of this Court, it would be a travesty of justice if we  would
not to allow Shri Aggarwal to make this submission.

30.   On merits, the matter is no longer res integra.  A Constitution  Bench
decision of this Court in VVS Sugars v. Government of  A.P.,  1999  (4)  SCC
192, has held, following two earlier judgments of this Court, as follows:-

“This Court in India Carbon Ltd. v. State of Assam [(1997) 6  SCC  479]  has
held, after analysing the Constitution  Bench  judgment  in J.K.  Synthetics
Ltd. v. CTO [(1994) 4 SCC 276] that interest can be levied  and  charged  on
delayed payment of tax only if the statute that levies and charges  the  tax
makes a substantive provision in this behalf.  There  being  no  substantive
provision in the Act for the  levy  of  interest  on  arrears  of  tax  that
applied  to  purchases  of  sugarcane  made  subsequent  to  the   date   of
commencement of the amending Act, no interest thereon could  be  so  levied,
based on the application of the said Rule 45 or otherwise.”



31.   Applying the Constitution Bench decision stated above,  it  will  have
to be declared that since Section 3A which provides for  a  separate  scheme
for availing facilities  under  a  compound  levy  scheme  does  not  itself
provide for the levying of interest, Rules 96 ZO, 96 ZP and 96 ZQ cannot  do
so and therefore on this  ground  the  appellant  in  Shree  Bhagwati  Steel
Rolling Mills has to succeed.  On this ground alone therefore  the  impugned
judgment is set aside. That none of the  other  provisions  of  the  Central
Excise Act can come to the aid of the Revenue in cases like these  has  been
laid down by this Court in Hans Steel Rolling Mill v. CCE, (2011) 3 SCC  748
as follows:

“13. On going through  the  records  it  is  clearly  established  that  the
appellants are availing the  facilities  under  the  compound  levy  scheme,
which they themselves opted for and filed  declarations  furnishing  details
about the annual capacity of production and duty payable  on  such  capacity
of production. It has to be taken into  consideration  that  the  compounded
levy scheme for collection of duty based on annual  capacity  of  production
under Section 3 of the Act and the 1997 Rules is a separate scheme from  the
normal scheme for collection of Central excise duty  on  goods  manufactured
in the country. Under the same, Rule  96-ZP  of  the  Central  Excise  Rules
stipulate the method of payment and Rule 96-ZP contains  detailed  provision
regarding time and  manner  of  payment  and  it  also  contains  provisions
relating to payment of interest and penalty in event of delay in payment  or
non-payment of dues. Thus, this is a  comprehensive  scheme  in  itself  and
general provisions in the Act and the Rules are excluded.” (at page 751)


32.   We now come  to  the  other  appeals  which  concern  themselves  with
penalties that are leviable under Rules 96 ZO, 96 ZP and 96 ZQ.   Since  the
lead judgment is a detailed judgment by a  Division  Bench  of  the  Gujarat
High Court reported in Krishna Processors v. Union of India, 2012 (280)  ELT
186 (Guj.) and followed by other High Courts, we will  refer  only  to  this
decision.

33.   On the facts before the Gujarat High Court,  there  were  three  civil
applications each of which challenged the  constitutional  validity  of  the
aforesaid rules insofar as they  prescribed  the  imposition  of  a  penalty
equal to the amount of duty outstanding without  any  discretion  to  reduce
the same depending upon the time taken to deposit  the  duty.   The  Gujarat
High Court struck down the aforesaid Rules on the basis that not  only  were
they ultra vires the Act  but  they  were  arbitrary  and  unreasonable  and
therefore violative of Articles 14 and 19(1)(g) of the Constitution.

34.   Shri Radhakrishnan, learned senior advocate  appearing  on  behalf  of
the revenue found  it  extremely  difficult  to  argue  that  the  aforesaid
judgment was wrong.  He therefore asked  us  to  limit  the  effect  of  the
judgment when it further held that after omission  of  the  aforesaid  Rules
with  effect  from  1.3.2001  no  proceedings  could  have  been   initiated
thereunder.  In this submission he is correct for  the  simple  reason  that
the  Gujarat  High  Court  followed  Rayala  Corporation  in  holding   that
“omissions” would not  amount  to  “repeals”,   which  this  Court  has  now
clarified is not the correct legal position.

35.   However, insofar the reasoning of the High Court is concerned  on  the
aspects stated hereinabove,   we  find  that  on  all  three  counts  it  is
unexceptionable.  First  and  foremost,  a  delay  of  even  one  day  would
straightaway, without more, attract a penalty of  an  equivalent  amount  of
duty, which may be in crores of rupees.  It is clear that as has  been  held
by this  Court,  penalty  imposable  under  the  aforesaid  three  Rules  is
inflexible and mandatory in nature.  The High Court is,  therefore,  correct
in saying that an assessee who pays the delayed amount  of  duty  after  100
days is to be on the same footing as an assessee  who  pays  the  duty  only
after one day’s delay and  that  therefore  such  rule  treats  unequals  as
equals and would, therefore, violate  Article  14  of  the  Constitution  of
India. It is also correct in saying  that  there  may  be  circumstances  of
force majeure which may prevent a bonafide assessee from paying the duty  in
time, and on certain given factual circumstances,  despite  there  being  no
fault on the part of the assessee in making the deposit of duty in  time,  a
mandatory penalty of an equivalent amount  of  duty  would  be  compulsorily
leviable and recoverable  from  such  assessee.   This  would  be  extremely
arbitrary and violative of Article 14 for this reason as well.  Further,  we
agree with the High Court in stating that this would also  be  violative  of
the appellant’s fundamental rights under Article 19(1)(g) and would  not  be
saved by Article 19(6), being an unreasonable restriction on  the  right  to
carry on trade or business.  Clearly the levy of penalty in these  cases  of
a mandatory nature for even  one  day’s  delay,  which  may  be  beyond  the
control  of  the  assessee,  would  be  arbitrary  and  excessive.  In  such
circumstances, this Court has held in Md. Faruk v. State  of  M.P.,  1970(1)
SCR 156:

“The Court must in considering the validity of the impugned law  imposing  a
prohibition on the carrying on of  a  business  or  profession,  attempt  an
evaluation of its direct and immediate impact upon  the  fundamental  rights
of the citizens affected thereby and the larger public  interest  sought  to
be ensured in the light of the object sought to be achieved,  the  necessity
to restrict the citizen's freedom, the inherent  pernicious  nature  of  the
act prohibited or its capacity or tendency to  be  harmful  to  the  general
public, the possibility of achieving the object by imposing a  less  drastic
restraint, and  in  the  absence  of  exceptional  situations  such  as  the
prevalence of a state of emergency-national or  local-or  the  necessity  to
maintain essential supplies, or the necessity to stop activities  inherently
dangerous, the existence  of  a  machinery  to  satisfy  the  administrative
authority that no case for imposing the restriction is made out  or  that  a
less drastic restriction may ensure the object  intended  to  be  achieved.”
(at page 161)

 

36.   The direct and immediate impact upon  the  fundamental  right  of  the
citizen is that he is exposed to a huge liability  by  way  of  penalty  for
reasons which may in given circumstances be beyond his  control  and/or  for
delay which may be minimal.  The possibility  of  achieving  the  object  of
deterrence in such  cases  can  be  achieved  by  imposing  a  less  drastic
restraint.  In point of fact when we contrast these provisions with  Section
37 of the Act, it becomes clear how arbitrary and excessive they are.

37.   Section 37(3) and 37(4) of the Central Excise Act reads as follows:-

“Section 37. Power of Central Government to make rules. —

(3) In making rules under this section, the Central Government  may  provide
that any person committing a breach  of  any  rule  shall,  where  no  other
penalty is provided by this Act, be liable to a penalty not  exceeding  five
thousand rupees.

(4) Notwithstanding anything  contained  in  sub-section  (3),  and  without
prejudice to the provisions  of  section  9,  in  making  rules  under  this
section, the  Central  Government  may  provide  that  if  any  anufacturer,
producer or licensee of a warehouse —
(a) removes any excisable goods in contravention of the  provisions  of  any
such rule, or
(b) does not account for all such goods manufactured, produced or stored  by
him, or
(c) engages in the manufacture, production or storage of such goods  without
having applied for the registration required under section 6, or
(d) contravenes the provisions  of  any  such  rule  with  intent  to  evade
payment of duty,
then, all such goods shall be liable to confiscation and  the  manufacturer,
producer or licensee shall be liable to a penalty  not  exceeding  the  duty
leviable on such goods or ten thousand rupees, whichever is greater;”


38.   Under Section 37(3), the statute itself provides in  all  cases  where
no other penalty is provided  by  the  Act  that  a  penalty  not  exceeding
Rs.5,000/- alone can be levied.  Sub-Section(4) is even more  telling.  Even
in cases where there is a clandestine removal of excisable goods, and  cases
where the assessee intends to evade payment of duty, the assessee is  liable
to a penalty not exceeding the duty leviable on such  goods  or  Rs.10,000/-
whichever is greater.  It will be noticed that the Act is  very  circumspect
in laying down penalty provisions.  Penalties in given circumstances  extend
only to Rs.5,000/- and Rs.10,000/- which are small  amounts.  Further,  even
where clandestine removal and intent to evade  duty  are  present,  yet  the
authorities are given a discretion to levy a penalty higher than Rs.10,000/-
 but not exceeding the duty leviable.  In  a  given  case,  therefore,  even
where there is willful intent to evade duty and the  duty  amount  comes  to
say a crore of rupees, the authorities can in the  facts  and  circumstances
of a given case, levy a penalty of  say  Rs.25,00,000/-  or  Rs.50,00,000/-.
This being  the  position,  it  is  clear  that  when  contrasted  with  the
provisions  of  the  Central  Excise  Act  itself,  the  penalty  provisions
contained in Rules 96ZO, 96 ZP and 96 ZQ are both arbitrary and excessive.

39.   A penalty can only be  levied  by  authority  of  statutory  law,  and
Section 37 of the Act, as  has  been  extracted  above  does  not  expressly
authorize the Government  to  levy  penalty  higher  than  Rs.5,000/-.  This
further shows that imposition of a mandatory penalty equal to the amount  of
duty not being by statute would itself make rules 96ZO,  96  ZP  and  96  ZQ
without authority of law.  We,  therefore,  uphold  the  contention  of  the
assessees in all these cases and strike down rules  96ZO, 96 ZP  and  96  ZQ
insofar as they impose a mandatory penalty equivalent to the amount of  duty
on the ground that these provisions are violative of  Article  14,  19(1)(g)
and are ultra vires the Central Excise Act.

40.   It now  remains  to  deal  with  SLP(civil)  No.22134  of  2000,  (APS
Associates v. Commissioner of Central Excise).  In this SLP, the Punjab  and
Haryana High Court has passed a judgment on 20.5.2008 in which it  construed
Rule 3(2) of the Induction  Furnace  Annual  Capacity  Determination  Rules,
1997. The said Rule is set out hereinbelow:-

“3.   The annual capacity of production referred  to  in  Rule  2  shall  be
determined in the following manner, namely :-

The  Commissioner  of  Central  Excise  (hereinafter  referred  to  as   the
Commissioner) shall call for an authenticated  copy  of  the  manufacturer’s
invoice or trader’s invoice, who have supplied or installed the  furnace  or
crucible to the induction furnace unit, and ascertain   the  total  capacity
of the furnaces installed in the factory on the basis  of  such  invoice  or
document;

If the invoice or document referred to in sub rule (1) is not available  for
any reason with the manufacturer then the Commissioner shall  ascertain  the
capacity of the furnaces installed in the  induction  furnace  unit  on  the
basis of the capacity of comparable furnaces installed in any other  factory
in respect of which the manufacturer’s invoice or other document  indicating
the capacity of the furnace is available or, if  not  so  possible,  on  the
basis of any other material  as  may  be  relevant  for  this  purpose.  The
Commissioner may, if he so desires,  consult  any  technical  authority  for
this purpose;”

 

41.   On the facts in this case,  the  assessee  made  a  declaration  dated
9.9.1997 that they will pay lump sum duty on the basis that their  induction
furnace has a capacity of only 3.2 metric  tons.  As  they  were  unable  to
trace out the original bill, they worked out their capacity on the basis  of
a Chartered Engineer’s Certificate dated 7.9.1997 which stated as follows:-

“REF. : Js  CE/97                       DATED   07.09.97
                 197

                       TO WHOM IT MAY CONCERN

On the request of M/s. A.P.S. ASSOCIATES PVT LIMITED, I visited their works
at D-133, Phase V. Focal Point. Ludhiana for inspection of the INDUCTION
FURNACE and assessing the capacity thereof.

The party has ONE FURNACE of following specifications:-

MAKE        GEC            CAPACITY            3200 KG/1600 KW/1200 V.

While assessing the capacity of a FURNACE for a  particular  heat.   It  may
please be noted that besides crucible  size,  other  factors  affecting  the
capacity are as follows:

Incoming Power to the crucible from the Power Pack  System  of  the  FURNACE
and its quality.

Power fed to the crucible from the Power Pack System of the FURNACE and  its
quality.

Quality/Mix of Scrap.

Lining quality and its thickness.

The heatwise capacity may vary for a crucible out over  a  given  period  of
time, the average output/Capacity shall remain almost same.

However, in this case, it may please be noted that  at  present,  this  unit
has a sanctioned load of 1680 KVA (Photocopy enclosed) resulting in  a  load
of 1428 KW, that can be utilized by the unit.  After allowing  for  an  Aux.
load of approximately 125 KW,  the  load  available  for  melting  shall  be
approximately 1300 KW.  As such, the unit shall not be able to  utilize  the
full capacity of the furnace i.e. 1600 KW.”

 

42.   The said declaration and Chartered Engineer Certificate have not  been
accepted by the authorities below, and the High Court  rejected  it  on  the
footing that Rule 3(2) of the aforesaid Rules did not, in  terms,  refer  to
the sanctioned load of electrical units, and therefore  this  could  not  be
taken into account for the purpose  of  ascertaining  the  capacity  of  the
furnaces installed  in  the  induction  furnace  unit.   We  find  that  the
Karnataka High Court Bhuwalka  Steel  Industries  Ltd.  v.  Union  Of  India
2003(159) ELT  147  (Kar.),  after  quoting  the  aforesaid  Rule,  held  as
follows:-

“11. Section 3-A of the Central Excise Act provides for a  power  to  change
the excise duty on the basis of capacity of production  in  respect  of  the
notified goods. This has been  introduced  with  a  view  to  safeguard  the
interest of Revenue and to  arrest  evasion  of  duty.  Sub-section  (2)  of
Section 3-A provides for framing of Rules in the matter of determination  of
the  annual   capacity.   It   specifically   provides   for   taking   into
consideration such  factor  or  factors  relevant  for  annual  capacity  of
production of the factory in which goods are produced.  Therefore,  relevant
factor  like  power  factor  is  not  alien  for  determination  of   annual
production capacity in terms of Section 3-A of the Act. At this stage it  is
to be noticed that the formula provided in Rule 3 of the  Induction  Furnace
Annual Capacity Determination Rules provides for  three  contingencies.  The
first contingency is the determination on the basis  of  authenticated  copy
of the manufacturers  invoice  or  traders  invoice  who  have  supplied  or
installed the furnace. The second contingency is that in the absence of  the
invoice document being available for any reason with the  manufacturer  that
the Commissioner is to ascertain the capacity on the basis of  the  capacity
of  the  comparable  furnaces  available  in  similar  industry.  The  third
contingency is determination of the annual capacity of production of  ingots
by formula. The formula is ACP = TCF × 3200. ACP is nothing but  the  annual
capacity of production of the factory. TCF is also  again  referred  to  the
total capacity. Therefore, capacity plays a vital role in terms of  levy  of
excess duty.

 

12. In the case on hand, the petitioner has sought for an  option  that  the
annual capacity is to be determined on pro rata basis in terms of  Rule  96-
ZO(3) of the Rules. Petitioner has produced sufficient material with  regard
to power factor being a relevant one. As I mentioned earlier, it is not  the
case of the respondents that power factor is not a relevant factor in  terms
of the endorsement. Helplessness is the answer  given  in  the  endorsement.
There is no prohibition under the rules for taking  into  consideration  the
power factor for determination of the annual capacity. So long as the  power
factor is not said to be irrelevant factor, that factor has to go  into  the
process of determination in terms of Section 3-A read with the Rules.”

 

43.   We are in broad agreement with the Karnataka High Court view as it  is
clear that the load capacity of  an  induction  furnace  unit  is  certainly
relevant material referred to in Rule 3(2) to determine the capacity of  the
furnace installed. It is obvious that it is  not  necessary  to  state  such
load capacity in terms for  it  to  be  included  in  Rule  3(2).   Agreeing
therefore with the Karnataka High Court’s view we set aside the judgment  of
the Punjab and Haryana High Court and  declare  that  a  Chartered  Engineer
Certificate dealing with the sanctioned electrical load for a furnace  is  a
relevant consideration which can be  looked  at  in  the  absence  of  other
factors mentioned in Rule 3.  This appeal is disposed of accordingly.

 

44.   Conclusion

We have declared in this judgment that the interest and  penalty  provisions
under the Rules 96ZO, ZP, and ZQ of  the  Central  Excise  Rules,  1994  are
invalid for the reasons assigned in the judgment. Accordingly,  the  appeals
filed by the Revenue are dismissed and the appeals filed  by  the  assessees
are allowed to the extent indicated above.  It  may  be  noted  that  in  an
appeal from a judgment of the Allahabad High Court dated  8.11.2012  in  SLP
(C) No. 9796/2012, it has been held that  the  levy  of  penalty  under  the
aforesaid provisions is mandatory in character. In view  of  what  has  been
held by us today, this appeal will also have  to  be  allowed  in  the  same
terms as the other assessees’ appeals  which  have  been  allowed.  All  the
aforesaid appeals are disposed of accordingly.


                                                                   ……………………J.
                                                                (A.K. Sikri)

 

                                                                   ……………………J.

New Delhi;                                                    (R.F. Nariman)

November 24, 2015.