TMI Blog2017 (6) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... letely unsustainable - As a matter of fact, based on the restriction brought about by the latter notification, i.e., notification dated 03.05.1997, the Appellant/Assessee, in its reply dated 26.03.1998, had indicated to the Department that it had "expunged" credit amounting to ₹ 2,54,701/- for the period spanning between 03.05.1997 and 19.06.1997. In this behalf, the Appellant/Assessee had given reference to the notification dated 03.05.1997. Therefore, in our view, the Appellant/Assessee cannot contend to the contrary, as it would be inconsistent with the record obtaining in the case. A careful comparison of Section 51(2)(d) of the Finance Act, 1982, with Section 87(2)(c) of the Finance Act, would show that, while, in the latter, a time frame of ninety (90) days from the date of enactment of the Bill is provided, as the period, within which, recovery of excise credit is required to be made, no such period has been provided in the former. Section 51(2)(d) of the Finance Act, 1982, simply, states that recovery shall be made of all such duties of excise, which have not been collected, or, those, which have been refunded, but ought to have been collected, or, even those that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the period, for which, MODVAT credit has been allowed, i.e., the period spanning between 01.03.1997 to 03.05.1997. 3. The aforementioned appeal was admitted on 09.04.2015, when, the following substantial question of law was framed for consideration by this Court: Whether the demand for recovery of MODVAT credit with interest as per Notification No.14 of 1997 CE(NT) dated 03.05.1997 read with Section 87 of the Finance Act, 1997 and Rule 57-I of the Central Excise Rules and Section 11A of the Central Excise Act for the period 23.07.1996 to 28.02.1997 is justified ? 4. In order to adjudicate the appeal, the following broad facts are required to be noticed : 4.1. The Appellant/Assessee is a manufacturer of Glass Bottles, which fall under sub-heading No.7007.90 of the Schedule appended to the Central Excise Tariff Act, 1985 (in short 'CETA'). 4.2. Notably, for the purpose of manufacturing Glass Bottles, the Appellant/Assessee used several inputs, including Furnace Oil. Furnace oil, was used by the Appellant/Assessee, as fuel. 4.3. The Appellant/Assessee availed of MODVAT credit in respect of specified duty , by relying upon Notification No.5/9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, the Appellant/Assessee filed a reply dated 26.03.1998 to the said SCN. In the reply, the stand taken was that, for the period falling between 03.05.1997 and 19.06.1997, it had already expunged MODVAT credit to the extent of ₹ 2,54,701/-, in consonance with Notification No.14/97 CE (NT), dated 03.05.1997. 5.2. In so far as the demand for interest was concerned, it was stated that it was premature, as under Section 87(2)(c) of the Finance Act, interest would be payable, only, if, the amount demanded was not paid within ninety (90) days of the enactment of the Bill. 5.3. As regards, penalty, reliance was placed on explanation to Section 87 of the Finance Act. The stand, which, the Appellant /Assessee appears to have taken with respect to penalty was that the alleged infraction was not an offence prior to the enactment of the Finance Act. 6. The record shows that the Adjudicating Authority was not impressed with the stand taken by the Appellant/Assessee, and thus, proceeded to pass the Order-in-Original dated 25.04.2006, whereby, the demand in the sum of ₹ 7,60,566/- was sustained, being, the excess credit availed of by the Appellant/Assessee for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave no impact, as the amendment made via the said provision was brought about in respect of the Notification dated 03.05.1997, which, as indicated above, was issued under Rule 57A of the 1944 Rules. (ii).Secondly, it was submitted that the Tribunal had failed to note that the SCN dated 01.11.1997, could relate back, at best, in point of time, by a period of six months, and therefore, demand, if any, can be sustained, only for the period falling between 01.06.1997 and 01.11.1997. In other words, according to the learned counsel, having regard to the provisions of Section 11A of the CE Act, the demand for the period spanning between 23.07.1996 and 01.05.1997, was time barred. Learned counsel contended that Section 87 of the Finance Act, could not be construed in a manner that it overrides the provisions of Section 11A of the CE Act in the absence of an express indication in that behalf in the statute. In support of this submission, learned counsel relied upon the judgement of the Supreme Court in J.K. Spinning and Weaving Mills Ltd. and Another V. Union of India and Others, 1987 (32) ELT 234 (SC) and, the judgement dated 20.07.2010, passed in the Appellant/Assessee's own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 87 would only validate those actions for recovery which had already been initiated, it was submitted that the said submission was misconceived, for the reason that, the provision not only made the restriction, imposed by notification, dated 03.05.1997, retrospective, by deeming fiction, but also validated, in addition, actions already taken for recovery of excess credit taken by the Assessees. REASONS : 11. We have heard the learned counsel for the parties and perused the record. 11.1. According to us, it is quite clear, on a perusal of the record that the Appellant/Assessee had claimed MODVAT credit on Furnace oil at the rate of 15% ad valorem, based on the Notification dated 01.03.1994. A bare perusal of this notification would show that it was issued under Rule 57A of the 1944 Rules. Therefore, the assertion made on behalf of the Appellant/Assessee that neither the later notification dated 03.05.1997, whereby, the credit was restricted to 10% ad valorem, nor the provisions of Section 87 would impact the Appellant/Assessee, is a submission, which, in our view, is completely unsustainable. 11.2. As a matter of fact, based on the restriction brought about by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s obtained at the intermediate stage as well, and thereafter, subjected to integrated process for manufacture of various kinds of fabric. This was resisted by JK. The Department, towards this end, relied upon a Circular dated 24.09.1980, to interpret Rules 9 and 49 of the 1944 Rules (as they obtained at the relevant point in time), in a manner, which empowered the Excise authorities to levy duty even on yarn generated at the intermediate stage. Since, the said Circular was so interpreted by the Excise authorities, albeit, to the detriment of JK, a writ petition was instituted by it in Delhi High Court. 11.9. During the pendency of the writ petition, the Central Government issued a Notification No.20/82-CE, dated 20.02.1982, whereby, Rules 9 and 49 were amended. Furthermore, via Section 51 of the Finance Act, 1982, it was provided that the amendments made to Rules 9 and 49, shall be deemed to have and to have always had the effect on and from the date on which the rules came into force . The said rules came into force on 28.02.1944. In other words, the amendments were given retrospective effect. 12. Consequently, JK amended its pending writ petition and challenged the constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid or erroneously refunded beyond the period of six months, the proviso to Section 11-A not being applicable in the present case. Thus although Section 51 of the Finance Act, 1982 has given retrospective effect to the amendments of Rules 9 and 49, yet it must be subject to the provision of Section 11-A of the Act. We are unable to accept the contention of the learned Attorney-General that as Section 51 has made the amendments retrospective in operation since 28-2-1944, it should be held that it overrides the provision of Section 11-A. If the intention of the legislature was to nullify the effect of Section 11-A, in that case, the legislature would have specifically provided for the same. Section 51 does not contain any non obstante clause, nor does it refer to the provision of Section 11-A. In the circumstances, it is difficult to hold that Section 51 overrides the provision of Section 11-A. .... 13. Mr.Srinivas, has however, argued that the judgement of the Supreme Court in JK case, is distinguishable, in as much as while Section 51 of the Finance Act, 1982 made a declaration that the amended Rules 9 and 49 would apply retrospectively, it did not provide for a recovery mecha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97, which was issued in exercise of the powers conferred by rule 57A of the Central Excise Rules, 1944, to restrict credit of duties paid on specified petroleum products used as inputs in the manufacture of final products shall- (a) be deemed to have, and to have always had, effect on and from the 23rd day of July, 1996; and (b) be deemed to prevail, and to have always prevailed, over all notifications issued on or after the 23rd day of July, 1996, but before the 3rd day of May, 1997, under rule 57A of the said rules in relationg to specified petroleum products. Explanation - For the purposes of this section, specified petroleum products means naphtha, furnace oil, low sulphur heavy stock light diesel oil, bitumen and paraffin wax falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985. (2) xxxxx (a) xxxxx (b) xxxxx (c) recovery shall be made of the credit of duties, which have not been restricted but which would have been so restricted if the provisions of this section had been in force at all material times, within a period of ninety days from the date of enactment of this Bill and in the event of non-payment of such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in fact, carrying out job work for large tobacco companies, and for this purpose, they had set up units, based on agreements entered into with such companies for production of cigarettes under their brand names. 15.3. It appears that prior to the aforementioned notification, in December 1997, the Government of India had announced a separate industrial policy for the North Eastern Region of the country. The policy targeted synergetic development of industries in the region, by giving them various incentives, which included exemption from excise duty. For this purpose, a number of notifications were issued by the concerned Ministries in the Government of India. 15.4. In so far as the petitioners before the Supreme Court were concerned, they had set up units in specified growth centres and, thus, proceeded to claim benefit under the notification, i.e., Notification No.32/99-C.E., dated 08.07.1999. The procedure established under the notifications was that the manufacturer, in the first instance, had to pay the excise duty, and thereafter, claim refund. In the facts of that case, the petitioners were, over a period of time, granted refund of excise duty, which was stopped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently of Section 11-A under Section 154(4). 37. There are two aspects to this dispute. The first is the question of limitation and the second the question of notice. As far as the first aspect is concerned, refund of duty under the Act has been provided for by Section 11-B. The section specifies the manner and circumstances under which refunds of duty may be made. It is neither of the parties' case that the refund made to the petitioners of the excise duty paid by them was under this section. 38. xxxxx 39. xxxxx 40. Although Section 11-A does not refer to Section 11-B, it speaks of duties erroneously refunded . It cannot therefore refer to the refunds made to the petitioners under the notifications as there was no error in the provisional refunds made under the notifications to the appellants. What was sought to be recovered under Section 154 was not an erroneous refund but a benefit provisionally granted. 41. In J.K. Cotton Spg. Wvg. Mills Ltd. v. Union of India, 1987 Supp SCC 350, relied upon by the petitioners, by virtue of the retrospective amendment of Rules 9 and 49 of the Central Excise Rules in 1982, commodities obtained at an interme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph 40 of the judgment are set out hereafter : 40. With this we advert to the last submission of Mr Sorabjee that the judgment in R.C. Tobacco, (supra) (which is a two-Judge Bench decision) is in conflict with the three-Judge Bench judgment in J.K. Cotton (supra). This argument is not even open to the appellant for the simple reason that the judgment in J.K. Cotton (supra), was specifically taken note of and discussed in R.C. Tobacco (supra). Para 13 of the judgment in R.C. Tobacco (supra) would reflect that the appellant therein had specifically relied upon the judgment in J.K. Cotton (supra), in support of the submission that retrospectivity was harsh and excessive since there is, in fact, a retrospective imposition of excise duty. It was also argued that justification of such retrospective imposition of tax must be overwhelming and no such overriding consideration had been disclosed. The submission went to the extent of pleading that if the appellant is called upon to pay the excise duty now it will cripple its unit. More pertinent was another submission, which is relevant for our purpose, that the demand which was raised could not be sustained as it was made without iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts to be recovered within a period of thirty days from the day Finance Bill, 2003 received the assent of the President. It cannot but be held therefore that the period of six months provided under Section 11-A would not apply. 40A. In the aforesaid scenario, when the Court was conscious of the principle laid down in J. K. Cotton (supra) and explained the same in a particular manner while deciding the appeal in R.C. Tobacco (supra), it cannot be argued that the judgement in R.C. Tobacco (supra) runs contrary to J.K. Cotton (supra). (Emphasis is ours) 16.1. Having regard to the aforesaid position, one cannot, but hold that Section 11A of CE Act, would have no application, while, construing the impact of Section 87 of the Finance Act. 16.2. Therefore, the submissions advanced by Mr.Saravanan that the recovery sought to be made is time barred, is unsustainable and is, accordingly, rejected. 17. This bring us to the next submission, which is, that the judgement of the Supreme Court in Jindal Poly Films case. To our minds, as correctly argued by Mr.Srinivas, the judgement in Jindal Poly Films case, will not apply to the period in issue. 17.1. In that case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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