9911796707
Advanced Search 
TMI Blog2000 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Excise Tariff, at the relevant point of time. The respondent, admittedly, filed a declaration under Rule 57G of the Central Excises Rules, 1944, (hereinafter referred to as "the Rules"), on 10-3-1987 for adoption of Modvat credit in respect of certain inputs used by them in the manufacture of vegetable products and consequently became entitled to avail of the duty credit only on and after 10-3-1987. But the fact is that the respondent availed of the credit facilities in question even from 1-3-1987 and, therefore, the authorities were of the view that wrong credit had been availed of to the tune of Rs. 62,710.61 on the inputs received and utilized from 1-3-1987 to 10-3-1987. On being pointed out though they debited a credit of Rs. 20, 828.93 relating to furnace oil and filter cloth, not covered under the Modvat Scheme, the balance of Rs. 41,872.68, in respect of other outputs was not debited, in spite of the communication dated 10-8-1987 and reminders dated 29-12-1987 and 1-2-1988 for the reversal of the credit issued by the Range Officer. 3. As against the communication dated 1-2-1988, the respondent filed an appeal before the Collector (Appeals) who by his order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted and consequently the orders of the Assistant Collector and the Collector (Appeals) are quite in accordance with law and did not call for any interference in the hands of the Tribunal. 5. Per contra, Mr. C. Harishankar, learned counsel for the respondent, placed reliance upon a catena of decisions reported in 1991 (56) E.L.T. 340 (supra); Advani Oerlikon Ltd. v. Assistant Collector of Central Excise [1993 (63) E.L.T. 427 (Mad. High Court)] ; Fabril Gasosa v. Union of India [1997 (96) E.L.T. 241 (Bom. High Court)]; Collr. of C. Ex., Patna v. Tata Engineering & Locomotive Co. Ltd. [1999 (111) E.L.T. 9 (Pat. High Court)]; J.K. Spinning & Weaving Mills Ltd. & Another v. Union of India & Others [1987 (32) E.L.T. 234 (S.C.)] and Govt. of India v. Citedal Fine Pharmaceuticals Madras & Others Etc. [1989 (42) E.L.T. 515 (S.C.) = 1989 (3) SCR 465]; and vehemently contended that the impugned proceedings involve recovery and consequently a demand of an amount not paid, Section 11A of the Act would necessarily get attracted and, therefore, the view taken by the other High Courts, different from the one taken by the Gujarat High Court, would more accord with law and, therefore, the Refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adras High Court, which decided the case in Advani Oerlikon Ltd. (supra), expressed the view that notwithstanding the omission in Rule 57-I prior to its amendment to provide for the issue of a notice, the obligation to issue such notice followed from the principles of natural justice as well as Section 11A of the Act and therefore, the period of limitation in Section 11A will be attracted to exercise the power of demand for reversing the credit wrongly availed of or utilized under Modvat Scheme. There is no justification in law to equate the notice expected to be issued to satisfy the principles of natural justice with the one ordained by the statutory provision to be issued within a stipulated time for one or the other of the purposes specified in such a provision, and that in order to suffer a limitation on the very exercise of the power. A Division Bench of the Bombay High Court also held in the decision reported in Fabril Gasosa's Case (supra) that the power to frame rules since was derived from the Act itself and the rules owe their existence to the Act, as long as there is any provision in the Act, even if the rules are silent on that aspect of the matter, it will have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by virtue of the rule-making power on 20-2-1982 and the same was also, by a statutory provision brought into force with retrospective effect from 28-2-1944, the demand and recovery for the retrospective period would actually partake the character of an exercise for collecting duty not levied or not paid envisaged under Section 11A of the Act. The decision in 1989 (3) SCR 465 (supra) dealt with a question as to whether the mere absence of any period of limitation enables the authority concerned to exercise its powers at any point/length of time without any time-limit whatsoever and it was held that even in the absence of any specific period of limitation, powers conferred have to be exercised and action thereof taken within a reasonable period. This decision cannot be of any help to the respondent in this case because, neither is there any challenge to Rule 57-I on such ground of absence of limitation nor the period involved could be held to be so unreasonable on the facts and circumstances of the case where factually an earlier notice has been issued within even by that time by the Department though not by the proper officer and this only necessitated a fresh action, the valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise pay the duty leviable on such inputs within 10 days of the notice of demand." 11. After amendments effected on 5-10-1988, the relevant portion of the Rule stands as follows : "Rule 57-I - Recovery of credit wrongly availed of or utilized in an irregular manner. - (1)(i)Where credit of duty paid on inputs has been taken on account of an error, omission or misconstruction, on the part of an officer or a manufacturer, or an assessee, the proper officer may, within six months from the date of such credit, serve notice on the manufacturer or the assessee who has taken such credit requiring him to show cause why he should not be disallowed to such credit and where the credit has already been utilized why the amount equivalent to such credit should not be recovered from him : Provided that where such credit has been taken on account of wilful mis-statement, collusion or suppression of facts on the part of a manufacturer or an assessee, the provisions of this clause shall have effect as if for the words "six months", the words "five years" were substituted. (ii) The proper officer, after considering the representation, if any made by the manufacturer or the assessee on whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an extended period on certain contingencies and situations. The situation on hand and the one which has to be dealt with under Rule 57-I, as it stood unamended, does not fall under any one of those contingencies provided for in Section 11A of the Act. Part AA of the Rules in which Rule 57-I is found included provides a special scheme for earning credit and adjustment of duty paid on excisable goods used as inputs in the manufacture of what is referred to as 'final product', and thereby enable the manufacturer to utilize the credit so allowed towards payment of duty of excise leviable on the final products, in the manner and subject to the terms and conditions stipulated therein. The manufacturer, in this case while removing the final product manufactured has adjusted against payment of excise duty on such final product a part or portion of the credit earned by him under the special scheme and what is sought to be really and in substance done is to inform the manufacturer that the adjustment he purported to have made was with an amount not legitimately or factually earned by or due to him. For this purpose, the irregularity and impropriety committed by the manufacturer in maintaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its implementation, providing for its own remedies to undo any mischief committed by the manufacturer in abuses thereof, the provisions of the said special scheme alone will govern such a situation and there is no scope for reading the stipulations contained in a general provision like Section 11A into the provision of the rules in question which alone will govern in its entirety the enforcement of the Modvat Scheme. The question as to the relative nature of the provisions general or special has to be determined, with reference to the area and extent of their application either generally in all circumstances or specially in particular situations and not on the ground that one is a mere provision in the Act and the other is a provision in the Rule. We are not also concerned in this case with any challenge to the inconsistency of a rule with any statutory provision in the Act. 15. On going through very carefully the decisions of the Gujarat High Court on the one hand and those of the other High Courts noticed above, we are of the view that the Gujarat view is more reasonable and quite accord with the purpose, object, aim and successful implementation of the Modvat Scheme and the fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch direction, the extent and quantum of credit and consequent adjustment also would get necessarily and automatically readjusted making it obligatory under the Scheme for the manufacturer, as long as the credit account or the amount-current is maintained by the manufacturer under the Scheme, to reverse the credit and set right the accounts. Lawful earning of a credit is a sine qua non for proper and valid utilization of the same and once the credit side gets diminished the very basis of adjustment disappears ipso fecto. By adopting a defiant attitude in the matter, the manufacturer cannot take advantage of his misdeed to gain an advantage by contending that the action to be taken involve only a recovery of duty and therefore, should be within the period of limitation provided under Section 11A of the Act. Even when the recovery is ordered, as a last resort, as envisaged under Rule 57-I, as observed earlier, it is only recovery of the money value equivalent to the unlawful credit availed of and adjusted under the Scheme and not the demand or recovery of any duty as such. 17. For all reasons stated above, we are of the view that the provisions of Section 11A of the Central Excises ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
