2002 (5) TMI 49 - SC - Central Excise

Second proviso to Rule 57G is procedural time-limit, applies prospectively; prior claimed credits remain valid

OSRAM SURYA (P) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

SC upheld that the second proviso to Rule 57G imposes a procedural time-limit, not a substantive deprivation, and operates prospectively. Manufacturers ... Interpretation of the second proviso to Rule 57G - Whether the proviso to the rule in question is applicable to the cases of manufacturers who had received their inputs prior to the introduction of the said proviso and are seeking to take credit in regard to the said inputs beyond the period of six months? Held that:- In the instant case by the introduction of the second proviso to Rule 57G, the credit in the account of a manufacturer was not taken away but only the manner and the time within which the said credit was to be taken or utilized alone was stipulated. It is to be noted at this juncture that the substantive right has not been taken away by the introduction of the proviso to the rule in question but a procedural restriction was introduced which, in our opinion, is permissible in law. Therefore, in our opinion, the law laid down by this Court in Eicher's case (1999 (1) TMI 34 - SUPREME COURT OF INDIA) does not apply to the facts of these cases. Appellants want us to interpret the rule to mean that the rule in question is not applicable in regard to credits acquired by a manufacturer prior to the coming into force of the rule. This we find it difficult because in our opinion the language of the proviso concerned is unambiguous. It specifically states that a manufacturer cannot take credit after six months from the date of issue of any of the documents specified in the first proviso to the said sub-rule. A plain reading of this sub-rule clearly shows that it applies to those cases where a manufacturer is seeking to take the credit after the introduction of the rule and to cases where the manufacturer is seeking to do so after a period of six months from the date when the manufacturer received the inputs. This sub-rule does not operate retrospectively in the sense it does not cancel the credits nor does it in any manner affect the rights of those persons who have already taken the credit before coming into force of the rule in question. It operates prospectively in regard to those manufacturers who seek to take credit after the coming into force of this rule. Therefore, in our opinion, the Tribunal was justified in holding that the rule in question only restricts a right of a manufacturer to take the credit beyond the stipulated period of six months under the rule. Therefore, this appeal will have to fail. Issues:Interpretation of the second proviso to Rule 57G of the Central Excise Rules, 1944 regarding Modvat credit limitation.Analysis:The judgment pertains to conflicting views by different Benches of the Customs, Excise & Gold (Control) Appellate Tribunal regarding the interpretation of the second proviso to Rule 57G of the Central Excise Rules, 1944. The Tribunal held that manufacturers cannot take Modvat credit after six months from the date of specified documents. The appellants challenged this order, arguing that the limitation introduced by the proviso should not apply to credits accrued before its introduction on 29-6-1995. They contended that the proviso did not explicitly state it was retrospective and should not affect vested rights. The Revenue argued that the proviso's language was clear, preventing manufacturers from availing credit after six months. The Court noted that none challenged the proviso's validity, focusing on whether it applied to manufacturers who received inputs before its introduction and sought credit beyond six months.The Court analyzed the impact of the proviso on vested rights, distinguishing it from cases where rules led to the lapse of unutilized credits. It held that the proviso did not take away substantive rights but imposed procedural restrictions, which were permissible. The Court rejected arguments questioning the rule's validity and the arbitrariness of the time limit, emphasizing that the language of the proviso was unambiguous. It clarified that the proviso applied prospectively to manufacturers seeking credit after its introduction and did not cancel existing credits. The Court upheld the Tribunal's decision that the rule restricted a manufacturer's right to take credit beyond the stipulated period.In a separate issue, the Court addressed penalties imposed on appellants in connected appeals. It noted that the Tribunal had not considered the penalty issue but set it aside in similar cases. The Court agreed that the penalty should be set aside in these cases as well. Additionally, the appellants raised a plea regarding their company being before the Board for Industrial & Financial Reconstruction (BIFR), arguing against recovery except as per the BIFR scheme. The Court left this question for the concerned authorities in recovery proceedings, stating that the appellant could raise it when facing recovery actions.In conclusion, the Court dismissed one appeal while allowing the others to set aside penalties. The judgment clarified the application of the proviso to Rule 57G, emphasizing its prospective nature and the distinction between substantive rights and procedural restrictions.