Court Upholds Accumulated Credit Rights Under Notification No. 45/89, Limited to Excise Duty Adjustment Only

The court held that the accumulated credit in favor of the petitioners under Notification No. 45/89 does not lapse. However, the mode of adjustment of the accumulated credit, which allowed credit utilization only by adjusting excise duty on banaspati, was extinguished. The court emphasized that no other mode of adjustment or refund of credit is possible. While no tangible relief was granted, the court stated that if excise duty is reimposed on the product in the future, the petitioners would be entitled to exemption to the extent of unadjusted credit, citing the principle that rights accrued under an earlier scheme must be honored even if the scheme is altered.

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Issues Involved:
1. Whether the notification rescinding and/or withdrawing the Notification No. 45/89 can take away the benefit already granted in terms thereof or not, in other words, whether the credit which has already accrued in favor of the petitioners stood lapsed or not.
2. Whether in view of the abolition of payment of excise duty on banaspati the petitioners are entitled to get any other mode of adjustment of the credit or not.
3. Whether the Notification No. 45/89 insofar as it relates to the mode of adjustment of the accumulated credit can be read down that the accumulated credit could be adjusted.

Summary:

Issue 1: Lapse of Accumulated Credit
The court held that the benefit of credit given by Notification No. 45/89 cannot be taken away, meaning that the accumulated credit in favor of the petitioners does not lapse. This conclusion is supported by a previous judgment by Justice Ruma Pal, which applied the principle of promissory estoppel. The court emphasized that giving retrospective effect to an administrative order without mentioning a date is an absurd proposition and settled law prohibits such retrospective effect.

Issue 2: Mode of Adjustment of Accumulated Credit
The court examined the conditions stipulated in Notification No. 45/89, which allowed credit utilization only by adjusting the excise duty on the finished product banaspati to the extent of Rs. 1000/- per tonne. The petitioners had accepted these conditions without objection. The court noted that the scheme did not envisage any other mode of liquidation of credit, nor did it provide for a refund of credit in terms of money. The court found that the removal of the mode of liquidation of credit does not constitute unconstitutional or arbitrary action, as the petitioners have not suffered any loss. The court concluded that no other mode of adjustment or refund of credit is possible.

Issue 3: Reading Down the Notification
The court addressed the validity of the "no refund" clause in Notification No. 45/89, stating that the notification is a policy decision rather than a piece of legislation. The court held that the policy decision was adopted to incentivize the use of minor oils by extending certain benefits, and it was optional for manufacturers to accept these conditions. The court found that the arguments against the legality and constitutionality of the notification were misplaced, as the notification did not affect anyone's rights and was accepted voluntarily by the manufacturers.

Conclusion:
The court held that the accumulated credit did not lapse but the mode of adjustment stood extinguished. The court did not grant any tangible relief in the writ petition but stated that if excise duty is reimposed on the same product in the future, the petitioners would be entitled to exemption to the extent of unadjusted credit. The court cited the Supreme Court's decision in Eicher Motors Ltd. v. Union of India, which emphasized that rights accrued under an earlier scheme must be honored even if the scheme is altered.

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