26th August, 2002.
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
Subject: Retrospective application of Section 11 AB of the Central Excise Act, 1944.
I am directed to say that doubts have been raised as to whether provisions of Section 11 AB of Central Excise Act, 1944, will apply to past clearances or not.
2. The Board had clarified vide F.No.354/118/96-TRU dated 6.1.97 (Para 3) that it would apply even to past cases where duty u/s.11A(2) is determined on or after 28.9.96.
3. Further, on the matter being referred to the Solicitor General of India (SG), in his detailed opinion dated 3.1.2000, he had opined that sec. 11AB would apply to all adjudication orders passed on or after 28.9.96 irrespective of the fact whether it relates to clearances made before 28.9.96 or after. A copy of the SG”s opinion was sent to all Chief Commissioners vide Board”s letter F.No.387/90/98-JC dated 27.3.2001.
4. However, in CEGAT Order No.1375/97 dated 22.4.97 in the case of M/s.M.P.Tapes Vs. CCE, Coimbatore, it has, inter alia, been held that provisions of section 11 AB, inserted w.e.f. 28.9.96, are in the nature of penal interest and would apply only to those cases where clearances were affected after 28.9.96. The reference Application filed by the Commissioner before the CEGAT was dismissed by the CEGAT on 28.05.1998 [reported in 1998 (103) ELT 128 (TRIB)]. The Reference Application before the Madras High Court (RCP No.1/99) against the High Court Order was dismissed by the Apex Court on 27.1.2000. The Deptt.”s SLP (CC 7698/2000) against the High Court order was dismissed by the Apex Court on 27.11.2000.
5. The matter has been examined in the Board. It is seen that Section 11AB (2), when it was introduced on 28.9.96, inter alia, stated that the provisions of sec. 11AB(1) – i.e. for charging interest – would not apply to cases where duty become payable before the Finance Bill, 1996, received the assent of the President (which was on 28.9.96). A view was taken by the Department in its Circular dated 6.1.97 and by the SG in his opinion dated 3.1.2000, that duty becomes “payable” only after adjudication and therefore sec.11AB(2) would apply to all cases where adjudications are done on and from 28.9.96, irrespective of the fact whether it relates to clearances of an earlier period. The Apex Court has, however, confirmed a contrary view in the case of M/s.M.P.Tapes.
6. Section 11AB(2) [as well as section 11AB(1)] has been substituted w.e.f. 11.5.2001 by the Finance Act, 2001, making it now very clear that Section 11 AB will apply only to cases where duty had become payable or ought to have been paid after 11.5.2001. Further, proviso to section 11AB(1), as inserted w.e.f. 11.5.2001, makes it quite clear that duty becomes “payable” o the basis of instructions or directions of the Board also and not necessarily because of adjudication of a case.
7. Thus, the net effect of the judgement in the case of M.P.Tapes and the amendment made to section 11AB w.e.f. 11.5.2001 is that the said section can be invoked only in respect of clearances affected after 28.9.96, irrespective of the date of passing of the adjudication of a case.
8. Trade notices may be issued for the information of the Trade.
9. Hindi version will follow.
10. Receipt of these instructions may kindly be acknowledged.