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LML Ltd. Versus Union of India And Others

2016 (4) TMI 449 - DELHI HIGH COURT

Demand of Modvat credit - Wrongly availed - Manufacturer of two wheeler scooters - Duty paid on High Speed Diesel oil (HSD) used both for generating electricity and as fuel - Held that:- the order dated 15.9.2003 records the considered stand of the Department in the matter. In other words the statement made by the Department before the Supreme Court that "refund has already been given" to the Petitioner holds good and reflects the position that the Department has accepted the orders of the Dy CE .....

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y the Petitioner prior to 1.3.1998. Therefore, the Respondent is restrained from seeking to recover from the Petitioner the MODVAT credit on HSD availed by it for the period prior to 1st March, 1998. The impugned demand notices to that effect are set aside. - Constitutional validity of Section 112 of the Finance Act 2000 as received the assent of the President - Denial of credit of duty paid on HSD "at any time during the period commencing on and from the 16th day of March 1995 and ending wi .....

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nding Counsel with Mr. Bhavishya Sharma, Advocates ORDER 1. The challenge in this petition by LML Ltd. is to the demand raised by the Central Excise Department ('Department') consequent upon adjudication orders, confirmed by an order dated 27th June 2000 passed by the Central Excise Gold Control Appellate Tribunal (CEGAT), holding that the Petitioner had wrongly availed, during the period prior to 2nd March 1998, of MODVAT credit of the duty paid on High Speed Diesel oil (HSD) used both .....

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ident. 2. The background facts are that the Petitioner is a manufacturer twowheeler scooters which are excisable goods. In the course of manufacture the Petitioner uses as input High Speed Diesel oil (HSD) for the generation of electricity as well as fuel. The Petitioner claimed MODVAT credit for the duty paid on HSD under Rules 57A and 57B read with Rule 57D of the Central Excise Rules, 1944 (CE Rules). 3. By Notification No. 5/94-CE(NT) dated 1st March 1994, issued in exercise of the powers co .....

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ed from the list of eligible inputs. 4. Simultaneously however, by Notification No. 11/95-CE (NT) dated 16th March 1995, Rule 57D of the CE Rules was amended and a second proviso was inserted therein in terms of which the benefit of MODVAT credit in respect of inputs used for generation of the electricity within a factory became admissible in addition to the inputs used as fuel. A further set of amendments were made by Notification No. 6/97-CE (NT) dated 1st March, 1997 whereby the proviso to Ru .....

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a notification issued under Rule 57-A CE Rules. The net result was that on and from 2nd March, 1998, MODVAT Credit on HSD was disallowed. 5. Since MODVAT credit was nevertheless claimed by a large number of manufacturers in respect of duty paid on HSD used as fuel or for generating electricity, for the period from 16th March 1995 to 1st March 1998, Section 112 of the Finance act 2000 was enacted with effect from 1st April 2000 to validate the denial of credit of duty paid on HSD from 16th March .....

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asis. This amendment has become necessary to overcome certain judicial pronouncements." 6. A show cause notice (SCN) dated 10th June 1998 was issued to the Petitioner demanding the MODVAT credit of ₹ 22,45,973 availed on duty paid HSD during the period between December 1997 and March 1998. By an order-in-original dated 30th July, 1999 passed by the Deputy Commissioner of Central Excise Kanpur (Dy CE), the Petitioner was allowed MODVAT credit to the extent of ₹ 9,31,904. The dema .....

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27th June 2000. The CEGAT confirmed the orders of the Dy CE and CCE (A) but reduced the penalty to ₹ 10,000. The CEGAT too therefore impliedly affirmed the order of the Dy CE that the MODVAT credit availed prior to 1st March 1998 was permissible. This was despite the CEGAT taking note of Section 112 of the Finance Act, 2000 which validated the denial of MODVAT credit in respect of duty paid on HSD from 16th March 1995 onwards. 9. Even prior to the above order of the CEGAT, letters were is .....

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Union of India. v. Maharaja Shree Umaid Mills (2014) 13 SCC 783 the Supreme Court applied Section 112 of the Finance Act 2000, and interpreted the notifications referred to hereinabove to hold that denial of MODVAT credit in respect of duty paid on HSD with effect from 16th March 1995 was legally justified. 11. Mr Santhanam, learned counsel for the Petitioner, however contends that in the above decisions the Supreme Court was not called upon to decide the constitutional validity of Section 112 .....

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es that in view of the developments subsequent to the filing of the present writ petition, the Petitioner will not press for a decision on the constitutional validity of Section 112 as long as it is clarified that no coercive steps will be taken by the Department to recover the MODVAT credit availed by the Petitioner on HSD prior to 2nd March 1998. 12. Reverting to the facts of the present case, it is pointed out that although in terms of the order dated 27th June 2000 passed by the CEGAT, a sum .....

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ount. 13. For the second time, the Petitioner went before the CEGAT against the above order of the CCE (A). By an order dated 25th February, 2003, the CEGAT allowed the Petitioner's appeals and held that the only ₹ 13,14,060/- and ₹ 10,000/- as penalty was recoverable from the Petitioner. It was held that an aggregate amount of ₹ 9,31,904/- that had been allowed by the Dy CE by the order dated 30th July, 1999 cannot be recovered since that order had not been challenged by t .....

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smissed. The question of law is accordingly left open." 15. When the present appeal was heard on 1st March 2016, it was submitted by Mr Santhanam that in view of the above statement made by the Department before the Supreme Court, the demands sought to be enforced by the letters dated 30th May 2000 and 12th June 2000 do not survive. At that stage, Mr Rahul Kaushik, learned counsel for the Respondent Department sought time to obtain instructions. 16. Today, Mr Kaushik informs the Court that .....

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