Akil Abdul Hamid Kureshi, J.

1. Revenue has filed this appeal challenging the judgment of Customs, Excise and Service Tax Appellate Tribunal (for short 'CESTAT') dated 16-3-2010, raising following questions for our consideration:

(A) Whether in the facts and circumstances of this case, the Hon'ble CESTAT was correct in law denying the levy of interest in terms of Section 18(3) of the Customs Act, 1962 on the duty difference arrived at on the basis of the finalization of the provisional assessment prior to the enactment of the Taxation Laws (Amendment) Act, 2005 (29 of 2006) i.e. 13-7-2006?

(B) Whether in the facts and circumstances of the case, the Hon'ble CESTAT was correct in law in merely relying on the decision of CESTAT, SZB, Chennai in the case of M/s. Sterlite Industries (India) Ltd. [2008 (223) E.L.T. 623 (Tri-Chennai)] and Order No. A/971-1059/WZB/AHD/2009, dated 22-4-2009/29-5-2009 of CESTAT, WZB, Ahmedabad in the case of M/s. Kamdar Associates and Others, ignoring the fact that MCA No. 454 of 2007 has already been filed with Madras High Court against the order of CESTAT, SZB, Chennai in the case of M/s. Sterlite Industries (India) Ltd. and ROM-application has been filed before CESTAT, WZB, Ahmedabad against the order of CESTAT, WZB, Ahmedabad in case of M/s. Kamdar Associates and Others?

Brief facts are as follows:

1.1 The respondent is engaged in the business of ship breaking. Respondent imported ship for breaking and filed the bill of entries for clearance of vessel on or around 24-1-2005 with the customs authorities. There was a dispute between the department and the respondent with respect to fuel and oil contained in the tanks situated outside the engine Room and the fuel and oil in the tanks situated inside the engine room. With respect to such dispute we may not go any deeper since ultimately the question of charging customs duty on such fuel and oil was decided in favour of the department. Suffice it to note that in view of this dispute, the ship was not cleared upon final assessment. The department resorted to provisional assessment and upon such assessment duty of Rs. 2,83,41,495/- was provisionally assessed. The goods were cleared on or around 2-5-2005 upon payment of such provisional duty and fulfilling the other usual formalities.

1.2 Ultimately, upon the question of proper customs duty being decided by the High Court of Gujarat, the department issued a notice proposing to finalize classification according to such decision. Personal hearing was granted on 6-10-2008. Ultimately, the final assessment order was passed on 30-1-2009 by the Assistant Commissioner demanding differential duty of Rs. 2,99,428/-. The Assistant Commissioner in the said order directed the respondent to pay interest as per sub-section (3) of Section 18 of the Customs Act, 1962.

1.3 The order of the Assistant Commissioner dated 30-1-2009 was carried in appeal. The Commissioner (Appeals) allowed the respondent's appeal following the decision of CESTAT, SZB, Chennai in case of Sterlite Industries (I) P. Ltd. v. CC, Tuticorin [2007 (216) E.L.T. 564 (Tri.-Chennai)]. The Commissioner was of the opinion that the provisional assessment in the present case was made prior to 13-7-2006 i.e. the date with effect from which sub-section (3) of Section 18 was introduced in the present form permitting charging of interest on the differential duty.

1.4 The department carried the issue in appeal. CESTAT, by the impugned judgment, followed the decision in case of Sterlite (supra) and dismissed the department's appeal in following terms:

2. The learned SDR submits that the decision of the Tribunal in this case has been appealed against in Hon'ble High Court of Chennai. He fairly agrees that he is not aware as to whether any stay has been granted. Learned advocate on behalf of the respondent submits that in addition to the decision in case of M/s. Sterlite Industries (India) Ltd., the decision in case of M/s. Kamdar Associates & Others had also held that no interest is payable on duty which arose as a result of provisional assessment.

3. In view of the Tribunal's decisions cited by the learned advocate, I find that the issue is covered by the precedent decisions of the Tribunal and accordingly reject the appeal. The cross-objection filed by the respondent also gets disposed of.

2. Before us, learned counsel for the department vehemently contended that the Tribunal committed error in deleting the interest. She submitted that at least for the period subsequent to 18-7-2006 when sub-section (3) of Section 18 of the Customs Act permitted charging of interest, the levy of interest ought to have been upheld.

3. Our attention was drawn to the decision of the Apex Court in case of Pratibha Processors v. Union of India reported in 1996 (88) E.L.T. Page 12 as well as in case of Haji Lal Mohd. Biri Works Allahabad through Abdul Hamid v. The State of U.P. and Ors. reported in 1973 (32) STC 496.

4. Though the notice was served, no one appeared for the respondent.

5. Having thus heard learned counsel for the department and haying perused the documents on record, the short controversy that calls for consideration in this tax appeal is whether in facts of the present case the department could charge interest from the respondent under sub-section (3) of Section 18 of the Customs Act for the difference between the finally assessed duty and the provisional duty.

6. As noted, the facts are not in dispute. Provisional assessment was made on or around 25-4-2005. Provisional duty as per such order was paid by the respondent and the goods were also cleared subject, of course, to final assessment. Final assessment was completed on 30-1-2009. The Assistant Commissioner in the said order raised further duty demand of Rs. 2,99,428/- and demanded the same with interest.

7. Section 18 of the Customs Act was materially amended with effect from 13-7-2006. sub-section (3) of Section 18 in the present form as it stood amended from 13-7-2006 reads as follows:

(3) The importer or exporter shall be liable to pay interest, on any amount payable to the Central Government, consequent to the final assessment order under sub-section (2), at the rate fixed by the Central Government under Section 28AB from the first day of the month in which the duty is provisionally assessed till the date of payment thereof.

8. The question is, can above-mentioned provision be applied for charging interest on the differential duty for the period prior to 13-7-2006 or even thereafter.

9. In Sterlite (supra), Chennai Bench of the Tribunal had examined this provision at length and referring to a pari materia provision of sub-rule (4) Rule 7 of the Central Excise ( No. 2) Rules, 2001 and the clarification issued by C.B.E. & C. on charging interest under such provision, the Tribunal came to the conclusion that in cases of provisional assessment made prior to 13-7-2006, no interest could be charged. The Tribunal's observations in this regard can be noted:

2. After considering the grounds of these appeals, arguments of ld. Counsel for the appellants and arguments of ld. JDR for the Revenue, we note that Section 18(3) of the Customs Act, the charging provision for interest on differential duty paid upon finalization of provisional assessment in respect of imported goods, came into force on 13-7-2006 only. All the provisional assessments, in the present cases, were made prior to the said date. The case of the Revenue, reiterated by JDR, is that Section 28AB of the Act, referred to in Section 18(3) of the Act, was in force during the period of provisional assessments and, therefore, it was open to the department to levy interest on the differential amounts of duty paid by the assessee upon finalization of such assessments. This case of the Revenue is not acceptable inasmuch as the charging provision for interest on any differential amount of duty paid on finalization of provisional assessment is Section 18(3) of the Act. This is a substantive provision of law, which, in the absence of express mention of retrospective effect, cannot be given retrospective operation so as to cover the provisional assessment made prior to 13-7-2006. In this context, it will be Apposite to refer to the Hon'ble Supreme Court's judgment in India Carbon Ltd. v. State of Assam - [1997] 106 S.T.C. 460 (S.C.), wherein it was held that interest could be levied and charged on delayed payment of tax only if the statute that levied and charged the tax made a substantive provision in this behalf. The substantive provision of law relevant to the present case, we repeat, is Section 18(3) of the Customs Act and not Section 28AB of the Act. Where any interest on duty is leviable from an assessee under Section 18(3) of the Act, it shall be recovered at the rate prescribed under Section 28AB. This does not mean that the substantive provisions of section 28ab are attracted. The case of the Revenue is, therefore, not sustainable. The appellants are also supported by the C.B.E. & C.'s letter bearing F. No. 354/66/2001-TRU, dated 21-6-2001, which laid down that interest could be charged under Rule 7(4) of the Central Excise ( No. 2) Rules, 2001 only in those cases where the provisional assessment was resorted to on or after 1-7-2001, the date on which the provision came into force. The Board, further, clarified that there could be no such levy of interest in cases where the provisional assessment was made prior to 1-7-2001 and its finalization was effected after that date. We find that sub-section (3) of Section 18 of the Customs Act and sub-rule (4) of Rule 7 of the Central Excise ( No. 2) Rules, 2001 are pari materia provisions. Ld. JDR has not cited any circular of the Board interpreting or clarifying the Customs provision differently.

3. As already indicated, all the provisional assessments in the present cases were made prior to 13-7-2006 and the same were finalized after the said date. Hence the view rightly taken by the Board in relation to Rule 7(4) ibid must be squarely applicable in principle to these cases.

4. In the result, the decision of the lower authorities to levy interest from the assessee on the amounts of differential duty paid upon finalization of the provisional assessments made prior to 13-7-2006 cannot be upheld. Any levy incidental to finalization of a provisional event will be governed by the law which was in force at the time of the provisional event. On this basis, we hold that no interest can be levied under Section 18(3) of the Customs Act on the differential amounts of duty paid by the appellants upon finalization of the provisional assessments which were made prior to 13-7-2006, the date on which Section 18(3) ibid came into force. In other words, the impugned orders are liable to be set aside. It is ordered accordingly. All these appeals stand allowed.

10. We may notice that similar view has been taken by the Tribunal in several other cases including the present one.

11. It is not in dispute that prior to 13-7-2006, there was no provision under which the authorities could levy interest on the differential duty i.e. between finally assessed customs duty and provisionally assessed duty. Along with other provisions contained in Section 18, sub-section (3) was therefore introduced to enable the department to levy such interest. We may also notice that simultaneously other changes were also made in Section 18 relating to the question of unjust enrichment and refund of duty already collected under certain circumstances.

12. The answer to the question posed before us would depend on whether sub-section (3) of Section 18 of the Act in the present form creates a new liability. In other words, the said provision can be stated to be a substantive provision creating fresh liability and not a mere procedural provision.

13. It is, by now, well settled that the statutory amendments, either creating fresh liability hitherto no existing or extinguishing accrued rights would be considered prospective unless statute either specifically or by necessary implication gives such provision retrospective effect.

14. In other words, it is a well established principle of construction that a statute inconsistent with substantive rights is prima facie considered prospective unless it is expressly or by necessary implication may have been given retrospective operation (refer to the decision of Apex Court in case of Keshavan Madhava Menon v. State Of Bombay. - AIR 1951 SC 128).

15. Particularly, in fiscal legislation imposing liabilities generally governed by the normal rule is that it is not retrospective in nature. It is, however, equally undisputed that a procedural provision when made applicable to pending proceedings would not be viewed as given retrospective operation to the liability. In case of Govinddas and Ors. v. The Income Tax Officer and Anr. - AIR 1977 Supreme Court 552, the Apex Court was considering provision of Section 171 of Income-tax Act, 1961, in which the Legislature under sub-section (6) provided that even when no claim of total or partial partition is made at the time of making assessment under Section 143 or 144 of the Act, if it is found after the completion of assessment that the family has already effected as partition, total or partial, all the members shall be jointly and severally liable for the tax as payable by the joint family and the tax liable shall be apportioned among the members according to the portion of the joint family property allotted to each of them. The Apex Court was of the opinion that sub-section (6) of Section 171 thus, for the first time, imposed in the case of this kind joint and several liability on the members for the tax assessed on Hindu Undivided family and thus was personal liability as distinguished from the liability limited to the joint family property received on partition. The Apex Court thereupon held and observed that:

We cannot, therefore, consistently with the rule of interpretation which denies retrospective operation to a statute which has the effect of creating of imposing a new obligation or liability, construe sub-section (6) of Section 171 as embracing a case where assessment of a Hindu undivided family is made under the provisions of the old act. Here in the present case, the assessments of the Hindu Undivided Family for the assessment years 1950-51 to 1956-57 were completed in accordance with the provisions of the old act which included Section 25A and the Income Tax officer was, therefore, not entitled to avail of the provision enacted in sub-section (6) read with sub-section (7) of Section 171 of the new Act for the purpose of recovering the tax or any part thereof personally from any members of the joint family including the petitioners.

16. In the present case, we find that prior to introduction of sub-section (3) of Section 18 of the Act in the present form, there was no liability to pay interest on difference between finally assessed duty and provisionally assessed duty upon payment of which the assessee may have cleared the goods. It was only with effect from 13-7-2006 that such charging provision was introduced in the statute. Upon introduction therefore such provision created interest liability for the first time w.e.f. 13-7-2006. In absence of any indication in the statute itself either specifically or by necessary implication giving retrospective effect to such a statutory provision, we are of the opinion that the same cannot be applied to cases of provisional assessment which took place prior to the said date. Any such application would in our view amount to retrospective operation of the law.

17. In case of Commissioner of Customs v. Hindalco Industries Ltd, reported in 2008 (231) E.L.T. Page 36, Division Bench of this Court was called upon to interpret some of the other provisions of section 18 which were also introduced by virtue of the same amendment i.e. Taxation Laws (Amendment) Act No. 29 of 2006. This Court, of course, was considering the provisions of unjust enrichment in context of its applicability to pending proceedings as on 13-7-2006. The Division Bench taking note of the statutory provisions of Section 18, including subsection (3) and the post-amendment formed an opinion that the amendments made by virtue of the said act 29 of 2006 were substantive in nature. The Bench was also of the opinion that the same were not clarificatory and therefore could not be made applicable to pending proceedings. Observations of the Bench in this regard were as follows:

18. On a plain reading it becomes apparent that sub-sections (3) and (4) relate to liability to pay interest or entitlement to claim interest consequent upon final assessment order. However, sub-section (5) is the material amendment which indicates that the proviso appearing below sub-section (2) of Section 27 of the Act has now been incorporated as a part of Section 18 of the Act. On a plain reading the distinction between Section 18 as it stood prior to amendment i.e. upto 12-7-2006 and subsequent to the amendment i.e. with effect from 13-7-2006 becomes apparent. The difference is stark and revealing and it is not possible to agree with the contention of revenue that such amendment has to be understood as clarificatory in nature, This is more so, when one reads the amendments made in 1998 and the amendment made in Rule 9B of the Central Excise Rules in 1999 considering the pronouncement of the Apex Court as to the distinction between making of a refund and claiming of a refund; the amendment cannot be considered to be retrospective in nature; and cannot be made applicable to pending proceedings.

19. This can be considered from a slightly different angle. While introducing the Taxation Laws (Amendment) Bill, 2005 (Bill No. 74 of 2005) the Notes on Clauses in relation to Section 18 of the Act indicate that sub-sections (3), (4) and (5) to Section 18 of the Act, have been inserted to provide for a mechanism to regularize the payments of duty short levied and interest thereon and duties that are to be refunded on finalization of provisional assessment and in this context in the report of the Standing Committee on Finance it has specifically been noted that this amendment became necessary because Section 18 of the Act which provides for provisional assessment of duty presently (i.e. upto 12-7-2006) does not provide for various issues arising from the finalization of provisional assessment. Thus it becomes apparent that the amendment in question is substantive in nature when one find that various provisions have been inserted which were not forming part of the original Section 18 of the Act as it stood upto 12-7-2006. It is not possible to state that the provisions for payment of interest on duty short levied or entitlement to interest on duty paid in excess of the finally assessed duty can be considered to be clarificatory provisions and in the same vein the newly inserted sub-section (5) deserves consideration. Thus in effect upto 12-7-2006 no provision existed in Section 18 of the Act which would permit revenue to invoke principles of unjust enrichment in relation to duty paid in excess, found to be so, upon finalization of provisional assessment under Section 18 of the Act.

18. The decision of the Apex Court in case of Pratibha Industries laid down that interest in Section 61(2) of the Customs has no independent or separate existence and if the principal is not recovered or payable so also interest on it. We do not find the said decision has any application in the present case.

19. Similarly in case of Hajilal (supra), Apex Court was examining the provision of U.P. Sales Tax Act. Considering the statutory provision it was held that interest to be added in the amount of tax was only for the purpose of recovery which can be done through the process of recovery of loan revenue. It was in this context observed that liability to pay interest is created by the statute and the CESTAT has no discretion to grant any examination from payment of interest. Facts in the present case are very different therefore, ratio would not apply. Under the circumstances, we are of the opinion that the Tribunal has not committed any error in deciding the issue in favour of the respondent. Tax appeal is therefore dismissed.