Cross-utilisation of special duty credit was barred where Cenvat rules confined use to the same duty.

Credit of additional duties of excise under the Textiles and Textile Articles Act could not be cross-utilised for payment of additional duty under the Goods of Special Importance Act or for basic excise duty, because the credit scheme restricted each credit to the same duty and the law in force at the time of utilisation controlled the entitlement. Transitional and substituted Cenvat provisions were read as saving accumulated credit only for use permitted by the later rules, so no vested right arose to continue a prohibited mode of cross-utilisation. The penalty on the individual appellant was not sustained because it was consequential to the underlying demand and was set aside.

---

---

Issues: (i) whether credit of additional duties of excise under the Textiles and Textile Articles Act could be cross-utilised for payment of additional duty under the Goods of Special Importance Act and basic excise duty; (ii) whether the transitional and substituted Cenvat credit provisions conferred any vested right to such cross-utilisation in later years; (iii) whether the penalty on the individual appellant survived.

Issue (i): whether credit of additional duties of excise under the Textiles and Textile Articles Act could be cross-utilised for payment of additional duty under the Goods of Special Importance Act and basic excise duty

Analysis: The levy under the Textiles and Textile Articles Act was held to be for Union purposes, while the levy under the Goods of Special Importance Act was meant for distribution to States. The credit scheme, both under the earlier notification-based regime and under the later Cenvat Rules, contained specific restrictions tying each type of credit to payment of the same kind of duty. The utilisation provisions were read with the restrictive clauses, and the scheme was held to exclude inter se cross-utilisation of one special duty for another, and also to exclude use of such credit for basic excise duty. The later utilisation in 2003 was governed by the law then in force, which prohibited such cross-use.

Conclusion: The cross-utilisation was not permissible. The assessee's challenge on this issue failed.

Issue (ii): whether the transitional and substituted Cenvat credit provisions conferred any vested right to such cross-utilisation in later years

Analysis: The transitional provisions were construed as saving accumulated credit only for utilisation in accordance with the rules then applicable. No vested right was recognised to continue a mode of utilisation that the later regime did not permit. The Court applied the principle that the law prevailing at the time of utilisation governs the utilisation of credit, and distinguished authorities dealing with different factual and statutory settings. The earlier interpretation in favour of cross-utilisation during a different period did not create an enduring right against the express restrictions in the later rules.

Conclusion: No vested right arose in favour of the assessee. The utilisation was governed by the restrictive law in force at the time of utilisation.

Issue (iii): whether the penalty on the individual appellant survived

Analysis: Since the penalty was consequential to the demand issues and the same relief had been granted in the connected matters, the penalty against the individual appellant was not sustained.

Conclusion: The penalty was set aside.

Final Conclusion: The principal demand relating to cross-utilisation of the special duty credit was upheld, while the connected penalty relief was granted, leaving the assessee unsuccessful on the core tax liability but successful on the individual penalty aspect.

Ratio Decidendi: Credit of a duty earmarked by statute for a particular levy cannot be cross-utilised for another levy where the governing rules restrict utilisation to the same duty and the law applicable at the time of utilisation must be applied.

---