TMI Blog1991 (9) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 57-I of the Central Excise Rules, 1944, as it stood prior to amendment effected on 6-10-1988. The appeals from the Revenue were dismissed based on the decisions given earlier on the same issue under this Bench s Order No. 1667 to 1670/90-WRB, dated 28-9-1990 reported in 1990 (31) ECR 680 (CEGAT-WRB). In the said order, we have rejected various contention of the Department to the effect that during the period, when Rule 57-1 did not provide a specific time limit for demanding irregular MODVAT Credit taken, no time limit is applicable and demand under Rule 57-I cannot be subject to the period of limitation provided under Section 11A of the Central Excises Act. We held, in the said order, that MODVAT Credit in respect of duty paid on inputs is available for payment of duty on the final products. Hence, if there is any wrong availment of MODVAT Credit and the said credit has been utilised towards payment of duty on final product, it results in short levy of duty on the final product and hence provisions of Section 11A would come into operation. We also took note of the fact that East Regional Bench of the Tribunal had also taken the same view as ours in the TELCO case reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fairly stated that they can be combined into one question, which can be formulated thus : Whether, during the period prior to amendment of Rule 57-I (i.e. prior to 6-10-1988) when no specific time limit was provided for recovery of MODVAT credit taken irregularly, show cause notice is required to be issued within the period of limitation as laid down under Section 11A of the Central Excises Act? This is the only question to be referred and the other two questions formulated are in the form of arguments to find an answer to the main question. Thereupon, he dealt with the arguments supporting the application as follows :- (i) MODVAT Scheme was a special scheme introduced in 1986 and the rules framed for the implementation of the scheme are totally independent of the provision of other provisions of the Act and other Rules. The Rules governing the MODVAT Scheme are dealt with in a separate Chapter (Chapter V-AA of the Central Excise Rules). From these provisions, it is clear that these rules being independent in their application, cannot be read in conjunction with Section 11A of the Central Excise Act. (ii) Even the subsequent amendment carried out to Rule 57-I providing f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. JDR, adopted the same arguments of Shri K.M. Mondal, and urged for the reference to be made. 4. None represented the Respondents excepting in the case of M/s. Mahindra and Mahindra for whom Mrs. Dina Wadia, the ld. Advocate appeared and pleaded as below: (i) It is needless to emphasise that Rules are in the nature of subordinate legislation and they are always subject to the provisions of the Act enacted by the Parliament. (ii) Hence, if there is an omission to provide for specific time limit in the Rule 57-I, it is always necessary to read the provisions of Section 11A into that rule, especially when the MODVAT Credit availed of also results in short levy of duty on the final product. (iii) Karnataka High Court, in the case of Thungabadra Steel Products v. U. O.I. reported in 1991 (56) E.L.T. 340 (Kar.) = 1991 (33) ECC 140 (Kar.) have upheld the view of the Tribunal on the very same issue. (iv) The aforesaid decision of the Karnataka High Court takes into account the decision of the Supreme Court in J.K. Spg. Wvg. Mills v. U.O.I, reported in 1987 (32) E.L.T. 234, wherein the Supreme Court held that notwithstanding the amendment of Rules 9 and 49 of the Central E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Civil Application filed by the assessees contending that Rule 57-I was ultra vires, since it did not provide for issue of a show cause notice and no period of limitation was prescribed for demanding credit and whatever action taken under Rule 57-I prior to amendment was void and consequent on the amendment, no action can lie against the assessees under the Rule 57-I in respect of the period prior to its amendment. However, while dealing with the Sp. C.A. in Paras 11,12,12A and 13 also the Hon. High Court specifically went into the question as to whether Rule 57-I prior to amendment had to be read in conjunction with Section 11A of the CESA and rejected the contention of the Petitioners urging that Rule 57-I prior to amendment had to be subject to the provisions of Section 11A of the CESA. Instead of reproducing the entire aforesaid paras, referred to above, we would deem it sufficient to reproduce some excepts from the aforesaid paragraphs :- Quote ........... It is over-simplification to say that Rule 57-I as it stood prior to amendment is nothing but provision with regard to recovery of duty as it is in the case of short payment of duty, short levy or under assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I did not provide for issue of show cause notice and hence is not violative of the principle of natural justice, the Hon ble High Court of Gujarat held that: In the absence of specific provision containing principles of natural justice in the rule does not mean that the provisions of the rule excludes the observance of principles of natural justice. The principles of natural justice is nothing but fair play in action.................. There is nothing in the provision of Rule 57-I as it stood then, in any of the provisions of the Rules to indicate that the observance of principles of natural justice have been excluded and the authority invoking the provisions of Rule 57-I can ignore the principles of natural justice. 8. Dismissing the argument that the proceedings under Rule 57-I prior to its amendment are not valid and only after the amendment, proceedings can be initiated for recovery of Modvat Credit, the Gujarat High Court observed : Rule 57-I of the Rules provided for taking measures in case of wrongful availment of credit. Clause (1) of the Rule has been substituted by adding fresh clause (1). By introducing this amendment, what did the legislature do? The legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be any period to be decided on discretion depending on the merits of the case, which may vary from case to case? or can it be only six months in the normal course and 5 years in the case of fraud etc. as provided for in the amendment, which has made the earlier position explicit? 11. We are of the view that Gujarat High Court could not have conceived of a reasonable period with our precision, leaving it to the discretion of the officers for deciding it on the basis of facts and circumstances of each case. The question may also arise as to when a specific time limit is prescribed in the particular statute itself under Section 11A, can recourse be made to the period prescribed in the general law of limitation, especially when the Gujarat High Court itself have held that amendment to Rule 57-I makes it explicit, what was implicit earlier. If we read the amendment to Rule 57-I, it runs more or less on similar lines as that laid down under Section 11A, excepting that the relevant date for recovery of Modvat credit is specified as the date of credit. Even Section 11A prescribes different relevant dates for different contingencies but the period of six months or 5 years is a common fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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