1995 (1) TMI 195 - AT - Central Excise

High Court referral on Rule 57E interpretation and retrospective amendments

COLLECTOR OF C. EX., JAIPUR Versus RAJASTHAN EXPLOSIVES & CHEMICALS LTD.

COLLECTOR OF C. EX., JAIPUR Versus RAJASTHAN EXPLOSIVES & CHEMICALS LTD. - 1995 (78) E.L.T. 110 (Tribunal) Issues Involved:1. Interpretation of Rule 57E independently of Rule 57A.2. Allowance of credit for differential duty under Rule 57E before its amendment.3. Retrospective applicability of amendments to Rule 57E.Detailed Analysis:1. Interpretation of Rule 57E Independently of Rule 57A:The core issue concerns whether Rule 57E should be interpreted independently of Rule 57A or if Rule 57A has an overriding effect on Rule 57E. The Tribunal's order under review had held that respondents were entitled to adjust credit for differential duty paid up to 4-2-1986, either by adjustment in their RG 23A account, PLA, or in cash. This decision was aligned with the West Regional Bench's ruling in Hematic Motors Ltd. v. Collector of Central Excise, which applied Proviso 5 under sub-rule (2) of Rule 56A. The Tribunal found that for the period after 1-3-1986, respondents were entitled to adjustment of credit based on decisions of the East Regional Bench, which held that Modvat credit was admissible for duty payments made after the clearance of inputs, provided such payments were correctly authenticated. The Tribunal emphasized that Rule 57A's benefits could not be diminished by Rule 57E, which, prior to 1-3-1987, did not specifically provide for upward adjustment of Modvat credit.2. Allowance of Credit for Differential Duty Under Rule 57E Before Its Amendment:The Tribunal considered whether credit for differential duty due to escalation in value could be allowed under Rule 57E as it existed before its amendment by Notification No. 117/87-C.E., dated 15-4-1987. The applicant Collector cited the West Regional Bench's decision in Mahindra & Mahindra Ltd. v. Collector of Central Excise, which held that credit for differential duty paid subsequently could not be adjusted in the Modvat account before the amendment of Rule 57E. This decision argued that the Modvat scheme did not permit additional credit for subsequent duty payments on the same inputs without explicit legal backing in the rules. However, the Tribunal's earlier order in Collector of Central Excise v. SAIL supported the view that Modvat credit should be available for duty payments made after the initial clearance of inputs, as long as Rule 57A's conditions were met. The Tribunal reasoned that the absence of specific provisions for upward adjustment in Rule 57E did not negate the applicability of Rule 57A, which was the substantive provision.3. Retrospective Applicability of Amendments to Rule 57E:The Tribunal addressed whether the amendments to Rule 57E by Notifications No. 25/87, dated 1-3-1987, and 117/87, dated 15-4-1987, were clarificatory and thus retrospective. The East Regional Bench's decision in Collector of Central Excise v. Union Carbide India Ltd. supported the view that the amendments were clarificatory and should apply retrospectively from 1-3-1986. The Tribunal noted that Rule 57E, before its amendment, did not explicitly prohibit upward revision of Modvat credit for subsequent duty payments. The amendments were seen as clarifying the existing provisions rather than introducing new benefits. Therefore, the Tribunal agreed with the view that the amendments should be applied retrospectively to align with Rule 57A's substantive provisions.Conclusion:The Tribunal decided to refer three questions to the Honourable High Court of Rajasthan for authoritative rulings:1. Whether Rule 57E should be interpreted independently of Rule 57A or if Rule 57A has an overriding effect.2. Whether credit for differential duty due to escalation in value could be allowed under Rule 57E before its amendment.3. Whether the amendments to Rule 57E were clarificatory and thus retrospective in effect.Both parties agreed to the referral of these questions. The registry was directed to forward the statement of the case to the Honourable High Court with the required enclosures.