TMI Blog2005 (12) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Central Excise (Elevent Amendment) Rules came to be validated with effect from1st day of October, 1997. As a result, the credit earned by the petitioners of the duty paid on the inputs used, in, or in relation to the manufacture of final product, namely toothpaste, was made to have lapsed and not to be allowed to be utilised for payment of duty on any excisable goods cleared for home consumption, or for export, except to the extent of the credit of duty, if any, in respect of inputs lying in stock or contained in finished products lying in stock on the 1st day of October, 1997. FACTS 2. Facts giving rise to the present petition are that, the petitioners are a Company duly incorporated under the Companies Act, 1956, registered as Small Scale Industry, engaged in the manufacture of Tooth Paste, being a product re served for Small Scale Industrial Units. 3. The petitioners for the purpose of manufacture of the toothpaste bring into their factory various inputs, which are utilised in the manufacture of the said toothpaste. The petitioners have been availing of Modvat Credit on the said inputs and utiuising the same inter alia for payment of duty on their final p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise powers under Section 37 of the Act issued a notification being Notification No. 57/97-Central Excise (N.T.). By the said Notification No. 57/97 the first respondent had amended the Central Excise Rules, 1944 whereby Rule 57-F(17)(e) came to added which had the effect of disallowing Modvat credit lying to the credit of the assessee as on 1-10-1997. By the said Rule the balance credit, if any, was to lapse by a deeming fiction and was not to be allowed for the utilisation for payment of duty of any excisable goods cleared for home consumption or export. According to the petitioners, as on 1-10-1997 the Modvat Credit lying unutilised in their account amounted to Rs. 98,19,113/-. By virtue of the said amendment to the said Rule, the said credit amount was deemed to have lapsed. 10 . The petitioners being aggrieved by the aforesaid amendment, challenged the constitutional validity of Rule 57F(17)(e) of the said Rules by Writ Petition No. 2018 of 1998 filed in this Court. By an order dated 22nd June, 1998 operation of Notification 57/97-CE, (N.T.) was stayed till disposal of the said writ petition and the petitioners were permitted to utilise the credit lying in their account subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the differential amount of duty which becomes payable or refundable upon finalisation of all or any class of provisional assessments. (b) after sub-clause (xxvii), the following sub-clause shall be inserted and shall be deemed to have been inserted with effect from the 16 th day March, 1995, namely :- (xxviii) provide for the lapsing of credit of duty lying unutilised with the manufacturer of specified excisable goods on an appointed date and also for not allowing such credit to be utilised for payment of any kind of duty on any excisable goods on and from such date. 132. Validation of certain rules. - (1) In the Central Excise Rules,1944, made by the Central Government in exercise of the powers conferred under section 37 of the Central Excise Act, in Rule 57F - (a) sub-rule (4A), as inserted by the Central Excise (Fourth Amendment) Rules, 1995, shall be deemed to have and to have always had effect from the 16th day of March, 1995; (b) sub-rule (17), as inserted by the Central Excise (Amendment) Rules, 1997, shall be deemed to have and to have always had effect from the 1st day of March, 1997; (c) clauses (c) and (d) of sub-rule (17) as inserted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the day, the Finance Act, 1999 receives the assent of the President and in the event of non-payment of such credit of duties within this period, in addition to the amount of credit of such duties recoverable, interest at the rate of thirty-six per cent, per annum shall be payable, from the date immediately after the expiry of the said period of thirty days till the date of payment. Explanation: For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force." The aforesaid provisions of the Finance Act, 1999 are the subject matter of challenge in this petition on the grounds set out in the petition and canvassed before us as mentioned in the paras appearing hereinafter. SUBMISSIONS 13 . Mr. Atul Setalwad, learned Senior Counsel appearing for the petitioners proceeds on the basis that there is no dispute that the legislature has power to render ineffective an earlier decision of the Supreme Court by removing or altering or neutralising the legal basis in the unamended law on which such decision was founded, even retrospe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts had been denied a refund of input duty on goods which they had exported. The Supreme Court while dealing with two statutory appeals, where the validity of Sub-Rule 17 of Rule 57-F was not a subject matter of challenge, held that Sub-Rule 17 must be read in the manner laid down in Eicher Motors (supra) and also held that Sub-Rule 17 could not apply to vested rights and could not cover goods manufactured prior to 16th March, 1995. Mr. Setalwad submits that in the facts of that case, it was observed that the right to refund of duty got vested when the goods were exported. 17. Mr. Setalwad, turning to the facts of the present case, submits that the right accrued and was vested when duty was paid on the inputs, and the inputs were received. In his submission, Sections 131 and 132 of the Finance Act, 1999, do not, at all, vary the basis of the judgment of the Supreme Court in Eicher Motors (Supra), but merely purport to retrospectively validate sub-Rule 17 of Rule 57F. He submits that seeking to retrospectively validate the Rule by which the vested right was taken away, is an interference with the law laid down by the Supreme Court under Article 141 of the Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Mr. Jetly submits that no person can acquire a vested right from a defect in the statute and seek a windfall from the mistakes of the legislature. In his submission, the validity of legislations retroactively curing defects in taxing statutes is well recognized. He reiterates that the power of Parliament to make retrospective legislation is well settled. Such legislation per se is not unreasonable. There is no particular feature of the impugned legislation which can be said to create any unreasonable restriction upon the fundamental or statutory rights of the petitioners. He submits that Sections 131 and 132 of the Finance Act, 1999 are only making small repairs and that is a permissible mode of legislation. In his submission, Sections 131 and 132 of the Finance Act, 1999 do not act harshly nor there is any scope for arbitrariness or discrimination so as to violate Articles 14 and 19(1) (g) of the Constitution of India. 22. In the submission of Mr. Jetly, Sections 131 and 132 of the Finance Act, 1999 have removed voidness, disability or other defects which were existing in the legislation. A retrospective effect un disputably can be given in case of curative and vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Act did not enable authorities to frame a rule enabling the lapsing of the balance in Modvat account. The Parliament by enacting Section 131 of the Finance Act, 1999 inserted clause (xxviii) in Section 37(2) of the said Act with retrospective effect and has removed the defect pointed out by the Supreme Court. By Section 132 of the Finance Act, 1999 Parliament has inter alia; retrospectively validated clause (e) of Sub-Rule (17) of Rule 57F of the said Rules. 26. It is submitted that Sections 131 and 132 of the Finance Act, 1999 giving retrospective effect by inserting clause (xxviii) in Section 37(2) of the said Act and validating clause (e) of sub-Rule (17) of Rule 57-F of the said Rules were passed to effectuate intention of the Government. It is, thus, reiterated that Parliament is competent to make retrospective law taking away the basis of the Supreme Court judgment and validating earlier actions. That is how Mr. Jetly appearing for the respondents - Revenue tried to justify the validity of the impugned Finance Act, 1999. STATUTORY PROVISIONS 27 . Before proceeding to consider the rival submissions, it is necessary to turn to the relevant statutory pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in this clause shall apply to credit of duty, if any, in respect of inputs lying in stock or contained in finished products lying in stock on the first day of October, 1997." LEGAL SCENARIO 28 . It is well settled that the legislature cannot directly over-rule judicial decision, it can retrospectively cure the defect noticed by the Judicial decision and, thus, render the judgment ineffective by means of the validating legislation, [ see Saksena v. State of M.P. AIR (1976) S.C. 2250] 29 . In Bengal Immunity Co. Ltd. v. State of Bihar , (1955) 2 SCR 603 : AIR 1955 S.C. 661, Heydon's case, (1954) 3 CO Rep 7a (V) was cited with approval; wherein it was said: "………for the sure and true interpretation of all Statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered: 1st. What was the common law before the making of the Act. 2nd. What was the mischief and defect for which the common law did not provide, 3rd. What remedy Parliament hath (sic) resolved and appointed to cure the disease of the Commonwealth, and 4th. The true reason of the remedy; and then the office of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e credit of the assessee on 31st September, 1997 was a vested right; which was accrued in favour of the petitioner or at any rate, it was an existing right. It is a settled principle of interpretation of statues that a vested right or even an existing right, including a right of action is not affected or allowed to be taken away unless it is so affected or taken away by the enactment expressly or by necessary implication. lit is no doubt true that a declaratory or a procedural enactment which is, normally, held to be retrospective. A remedial Act, on the contrary, is not necessarily retrospective, it may be either enlarging or restraining and it takes effect prospectively, unless it has retrospective effect by express terms or necessary intendment, [ see AIR 1960 S.C.12 (Para 29) - The Central Bank of India and others v. Their Workman and also AIR 1973 S.C. 1227 - The Workmen of M/s. Firestone Tyre and Rubber Co. of India Pvt. Ltd. v. The Management and others.] Sometimes it becomes necessary to examine whether the enactment has a prospective or retrospective effect so as to affect the existing or vested right which has accrued to the subject prior to the enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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