Retrospective denial of diesel duty credit upheld, but penalty exposure removed by the saving explanation.

Section 112(1) of the Finance Act, 2000 retrospectively declared that credit of duty paid on high speed diesel oil during the specified period was not admissible, and the credit was therefore treated as invalid. The accompanying Explanation provided that conduct would not be punishable as an offence if it would not have been punishable before the section came into force, so penalties imposed for the same conduct were held unsustainable. The provision thus operated to deny the credit claim while preserving protection against penal consequences where the pre-existing law did not treat the conduct as punishable.

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Issues: (i) Whether credit of duty paid on high speed diesel oil was inadmissible in view of section 112(1) of the Finance Act, 2000. (ii) Whether the penalties imposed in the impugned orders could survive in view of the Explanation to section 112 of the Finance Act, 2000.

Issue (i): Whether credit of duty paid on high speed diesel oil was inadmissible in view of section 112(1) of the Finance Act, 2000.

Analysis: Section 112(1) of the Finance Act, 2000 declared that no credit of duty paid on high speed diesel oil during the specified period shall be deemed admissible, and the provision was stated to have come into force from 12-5-2000.

Conclusion: The credit was held to be inadmissible.

Issue (ii): Whether the penalties imposed in the impugned orders could survive in view of the Explanation to section 112 of the Finance Act, 2000.

Analysis: The Explanation declared that no act or omission would be punishable as an offence if it would not have been so punishable had the section not come into force.

Conclusion: The penalties were held to be unsustainable.

Final Conclusion: The appeals were disposed of against the challenge to credit, but the penalty component was held unsustainable.

Ratio Decidendi: A statutory provision that retrospectively declares credit inadmissible may validate denial of credit, but an accompanying saving explanation can prevent penal consequences for conduct that was not punishable before the provision came into force.

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