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Tax & Customs LawSupreme Court of India

M/s. Jayaswal Neco Ltd. v. Commissioner of Central Excise, Raipur

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 1468 of 2004)Decided 6 Aug 2015
Civil Appeal No. 1468 of 2004
Justice A.K. Sikri · Justice N.V. Ramana

Background

A pig-iron manufacturer was found to have paid its excise duty late on a few occasions, so the authorities suspended its normal fortnightly payment facility and required it to pay duty consignment-by-consignment for two months. During that period the company paid most of its dues in cash but used about Rs. 31 lakhs of credit from its Cenvat account; the tax authorities said this was not allowed during the suspended period and demanded interest at 24% per annum for the delay this caused.

Decision Breakdown

The Supreme Court agreed with the High Courts' view (which the Excise Department itself had already accepted in other cases) that, under the rules as they stood at the relevant time, nothing barred an assessee from using Cenvat credit to pay duty even during a period when the fortnightly payment facility was suspended. The Court noted that the rule-making authority itself recognized this gap and amended the rules in 2005 to specifically require payment by cash/current account during such a suspended period going forward, confirming that no such restriction existed before the amendment. Since the law at the relevant time permitted payment via Cenvat credit, the duty was not actually paid late, and no interest was properly chargeable; the Court allowed the appeals and set aside the CESTAT's decision.

Lesson Learnt

Tax rules cannot be applied retroactively as if a later clarifying amendment always existed: if the law in force at the time of the transaction permitted a particular mode of payment, a taxpayer cannot be penalized for using it, even if the rules are tightened afterward.

M/s. Jayaswal Neco Ltd. v. Commissioner of Central Excise, Raipur – Legal Case Shots | LegalAware