TMI Blog2016 (6) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court also rejected the contention of the appellants therein that Section 112 of the Act had the effect of taking away vested rights. Appellant is correct when he contends that the constitutional validity of Section 112 of the Act was not challenged in Sangam Spinners Limited. However, as noted above, the contention whether any vested right was created in favour of the appellants was considered by the Supreme Court and the same was expressly rejected. The Supreme Court had further held that Section 112 of the Act was clarificatory and the appellants were not entitled to credit for duties paid on HSD by virtue of the express exclusion in notifications dated 1st March, 1994 and 16th March, 1995. Thus, the very basis on which the Petitioner advanced its contentions stands eroded. Therefore, the contention that the provisions of Section 112 of the Act are expropriatory must be rejected, as squarely covered by the decision of the Supreme Court in Sangam Spinners Limited v. Union of India and Ors. [2011 (3) TMI 4 - Supreme Court]. The Petitioner’s contention that a separate adjudication was required for raising a demand for recovery of MODVAT credit availed on HSD al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods with effect from 1st March, 1994. According to the Petitioner, MODVAT Credit was available in respect of duties paid on 'inputs' used for the manufacture of excisable goods and, HSD was one such input in respect of which MODVAT credit was available in terms of Notification No. 4/94-C.E. (N.T.) dated 1st March, 1994. 4. On 16th March, 1995, another Notification No. 11/95-C.E. (N.T.) came to be issued, by virtue of which, an explanation was introduced in Rule 57A of the Rules to define the scope of 'inputs' as used in Rule 57A(1) of the Rules. The said explanation read as under:- Explanation . - For the purposes of this rule, inputs includes; (a) inputs which are manufactured and used within the factory of production, in or in relation to, the manufacture of final products, (b) paints and packaging materials, (c) inputs used as fuel, and (d) inputs used for generation of electricity, used within the factory of production for manufacture of final products or for any other purpose, but does not include - (i) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the scope of inputs by the said Notification No. 8/95-C.E. (N.T.) dated 16th March, 1995, the Petitioner claimed that by virtue of the scope of inputs, as defined under Explanation to Rule 57A read with the proviso to Rule 57D, it would be entitled to MODVAT credit on the duty paid on HSD which was specifically used for generation of electricity which in turn was used to manufacture excisable goods. According to the Revenue, MODVAT credit was not available in respect of HSD, since the same was specifically excluded under the Notification No. 5/94-C.E.(N.T.) dated 1st March, 1994, which expressly excluded goods falling under heading or sub-heading Nos. 2710.11, 2710.12, 2710.13, 2710.19 (except Natural gasoline liquid), 2710.31, 36.05 or 37.06 of the Schedule to the said Act. , and Notification No. 8/95-C.E. (N.T.) dated 16th March, 1995 issued thereafter, which also specifically excluded HSD classifiable under Heading No.27.10 of the Schedule to the Central Excise Tariff Act, 1985. 8. By a Notification dated 1st March, 1997, the provisos to Rule 57D were deleted. However, according to the Petitioner, it was still entitled to MODVAT credit on the duty paid on HSD by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es paid on HSD is limited to the period 1st March, 1994 to 1st March, 1998. 13. The Petitioner being aggrieved by the decisions, denying MODVAT credit on duties paid on HSD, unsuccessfully appealed before the Commissioner of Customs and Central Excise (Appeals) and, thereafter, carried the matter before the Customs, Excise and Gold (Control) Appellate Tribunal (hereafter 'the Tribunal'). By an order dated 4th December, 1998, the Tribunal set aside the orders passed by the authorities below and held that MODVAT credit was available in respect of duties paid by the Petitioner on HSD for the period 1st March, 1994 till 28th February, 1997. Similarly, by an order dated 5th February, 1999, the Tribunal allowed the Petitioner's appeal against order denying MODVAT credit in respect of period after 1st March, 1997. 14. Against the aforementioned orders dated 4th December, 1998 and 5th February, 1999 passed by the Tribunal, the Revenue filed applications for making a reference to the High Court. The Revenue also filed an appeal before the Supreme Court. 15. By an order dated 3rd January, 2001, the Supreme Court allowed the appeal (Civil Appeal No. 14/2001) filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh speed diesel oil, and also to disallow such credit to be utilised for payment of any kind of duty on any excisable goods shall be deemed to be, and to always have been, for all purposes, as validly and effectively taken or done, as if the provisions of sub-section (1) had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority- (a) no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for allowing the credit of the duty paid on high speed diesel oil and no enforcement shall be made by any court, tribunal or other authority of any decree or order allowing such credit of duty as if the provisions of sub-section (1) had been in force at all material times; (b) recovery shall be made of all the credit of duty, which have been taken or utilised but which would not have been allowed to be taken or utilised, if the provisions of sub-section (1) had been in force at all material times, within a period of thirty days from the date on which the Finance Act, 2000 receives the assent of the President and in the event of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue, countered the arguments advanced by Mr Santhanam, and contended that the issues raised were no longer res integra in view of the decisions of the Supreme Court in Sangam Spinners Limited v. Union of India and Ors.: (2011) 11 SCC 408 and Union of India and Ors. v. Maharaja Shree Umaid Mills: (2014) 13 SCC 783. 22. Mr Santhanam disputed the aforesaid contention and contended that neither in the case of Maharaja Shree Umaid Mills (supra) nor in Sangam Spinners Limited (supra) was the question as to the constitutional validity of Section 112 of the Act considered or decided. 23. In Sangam Spinners Limited (supra), the Supreme Court considered the question whether appellants therein were entitled to credit for duty paid on HSD for the period commencing from 16th March, 1995 till 12th May, 2000 (the date on which the Finance Act, 2000 received the assent of the President). 24. The Supreme Court noticed the Notification No. 5/94-C.E. (N.T.) dated 1st March, 1994 and Notification No.8/95-C.E. (N.T.) dated 16th March, 1995 issued under Rule 57A of the Rules and held that the appellants were not entitled to credit for the duty paid on HSD. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maharashtra (2004) 5 SCC 783, this Court observed that retrospective withdrawal of the benefit of set-off only for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality. However, in the present case the ratio of Tata Motors case [supra] would not be applicable as the Appellants in this case never had a right with regard to availment of MODVAT credit. Hence, the contentions of the Appellants that their vested and accrued right cannot be taken away with retrospective effect cannot be held as just and proper. xxxx xxxx xxxx xxxx So far the contention with regard to concept of MODVAT is concerned, the intention regarding availment of the credit under MODVAT would be guided and governed by the aforesaid notifications which specifically excluded the benefit of availment of such credit, as high speed diesel is specifically excluded from the list of eligible inputs as per the notification under Rule 57-A of the Central Excise Rules. Since it was specifically excluded, such credit though may be otherwise available, could not have created any vested right. In our considered opinion the intention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue has become harsh in imposing interest at the rate of 24% p.a. on the amount of MODVAT credit availed on HSD oil used as an input without any adjudication of the amount payable or without even issuance of a show cause notice. In fact if we look at the provisions of Section 112 of the 2000 Act along with other notifications which had been issued earlier in 1995 and 1994, whereby availment of MODVAT credit on HSD oil used as fuel in generation of electricity had been ordered to be discontinued, we would feel that the first impression that one would gather upon perusal of Section 112 of the 2000 Act would not be correct. It is necessary to look at the background and the circumstances in which Section 112 of the 2000 Act had been enacted. By virtue of the Notifications issued on 1-3-1994 and 16-3-1995 issued under Rule 57A of the Rules, the Central Government had specifically declared that MODVAT credit on HSD oil used as an input would not be available as the said item had been specifically excluded from the list of eligible exempted inputs. In spite of the said fact, several assessees were claiming MODVAT credit in respect of HSD oil used as an input and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e MODVAT credit had been wrongly availed by the Respondents, in our opinion, the Revenue cannot be blamed, if the amount wrongly availed by way of MODVAT credit by the respondents is recovered with interest thereon. It is also pertinent to note that the Revenue had given 30 days time to return the said amount to the Respondents who had wrongly availed MODVAT credit on the HSD oil used as an input. If anyone who had repaid the amount wrongly availed within 30 days from the date on which Section 112 of the 2000 Act got the President s assent, that Assessee had not to pay any interest on the amount of duty availed by him wrongly. But those who had availed the MODVAT credit on the HSD oil used as an input and did not return the said amount even within 30 days from the date on which the President had given assent to the enactment of Section 112 of the 2000 Act, had to return the amount wrongfully retained by them with interest at the rate of 24% p.a. In our opinion, such a course, adopted by the Revenue for recovery of the amount which was legitimately claimed by the Revenue, cannot be said to be bad in law. 30. It is clear from the aforesaid decisions that Section 112 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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