TaxTMI 
TaxTMI 
1989 (10) TMI 173
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order. 2. The undisputed facts pertaining to all these petitions are that the petitioners are manufacturers of one or other article which is subject to excise duty under the relevant provisions of the Central Excises & Salt Act, 1944 (for short 'the Act') and the Central Excise Rules, 1944 (for short 'the Rules'). The petitioners have taken benefit of MODVAT scheme contained in Rule 57A to 57P of the Rules believing that they were entitled to take credit for certain 'inputs'. The petitioners utilised these 'inputs' and manufactured their end product. The petitioners took credit for the 'inputs' utilised by them for different periods. According to the Department, these manufacturers were not entitled to take credit and they had taken the credit wrongly. Hence different show cause notices were served upon different manufacturers calling upon them to show cause as to why they should not be asked to reverse the credit or if necessary to refund the amount of credit wrongly availed of. In some of the cases, the petitioners have replied to the show cause notices and the Assistant Collector concerned has passed order after hearing the petitioners. In some cases, the petitioners ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1988 to May 1988 20-3-1989 14. 3937/89 - do - 16-5-1988 March 1986 to Feb. 1988 15-3-1989 15. 3887/89 - do - 24-3-1988 Nov. 1987 to Jan. 1988 15-3-1989 16. 3888/89 - do - 17-12-1987 July 1987 to Oct. 1987 15-3-1989 17. 3889/89 - do - 24-3-1988 Aug. 1987 to Jan. 1988 15-3-1989 18. 3890/89 - do - 17-12-1987 March 1986 to Oct. 1986 15-3-1989 19. 3891/89 - do - 24-3-1988 8-7-1988 Jan. 1988 Feb. 1988 to May 1988 15-3-1989 15-3-1989 20. 3892/89 - do - 21-3-1988 Nov. 1987 to Jan. 1988 15-3-1989 21-12-1987 Mar. 1986 to Oct. 1987 15-3-1989 8-7-1988 Feb. 1988 to May 1988 15-3-1989 21. 3893/89 - do - 24-12-1987 Mar. 1986 to Oct. 1987 15-3-1989 24-3-1988 Nov. 1987 to Jan. 1988 15-3-1989 22. 4236/89 - do - 19-10-1988 April 1988 to July 1988 15-3-1989 23. 4237/89 - do - 21-11-1988 June 1988 to Oct. 1988 20-3-1989 24. 4238/89 - do - 18-11-1988 June 1988 to Sept. 1988 15-3-1989 25. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt) Act, 1978 (25 of 1978). The provisions of Section 11-A have been brought into force with effect from November 17, 1980. Section 11-A of the Act provides for recovery of duties not levied or not paid or short-levied or short paid or erroneously refunded. (b) Rules 57A to Rule 57-I were inserted in Chapter V of the Rules as Section AA vide Notification No. 176/86, dated March 1, 1986. These rules provided for MODVAT scheme. Rule 57-I as it came into force from March 1, 1986 remained in operation till October 6, 1988. Clause 1 of Rule 57-I was amended and substituted by new clause in the same rule. Clause 2 of the Rule has not been disturbed by the amendment and it has remained unchanged. (c) Since all these petitions center round the legality and validity of Rule 57-I of the Rules as it stood prior to the amendment and the effect of amendment, it would be proper to reproduce the provisions of this rule as it stood prior to the amendment i.e. before 6-10-1988 and subsequent to the amendment i.e. after 6-10-1988. Rule 57-I before 6-10-1988 Rule 57-I after 6-10-1988 Recovery of credit wrongly availed of or utilised in an irregular manner: (1) If the credit of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand. 6. It is contended that Rule 57-I of the Rules as it stood prior to the amendment is ultra vires the provisions of Articles 14 and 19(1)(g) of the Constitution of India. The contention is based on the ground that there is no guideline in the rule as regards the period during which the provisions of the rule can be invoked. It is submitted that unlimited power is conferred on the executive authority. In absence of period of limitation the provision may be invoked at any time. Such conferment of power and exercise of the same would be not only arbitrary but would be unreasonable also. It is also contended that there is no provision with regard to providing for an opportunity of being heard to the assessee. Unless there is provision, for issuing show cause notice and provision for affording of an opportunity of being heard to the assessee, the provisions of the rule cannot be said to be in conformity with the provisions of Articles 14 and 19(1)(g) of the Constitution of India. 7. There is no dispute with regard to the fact that no period of limitation was provided in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with a duty to act judicially or impartially, is bound to act fairly. Therefore, the provision as regards applicability of principles of natural justice has got to be read into the provisions of the rule, unless it is shown that the legislature has expressly or by necessary implication excluded the observance of principles of natural justice. There is nothing in the provision of Rule 57-I as it stood then, or in any of the provisions of the Rules to indicate that the observance of principles of natural justice have been excluded and the authority invoking the provisions of Rule 57-I can ignore the principles of natural justice. 9. Here reference may be made to "Statutory Interpretation", by Francis Bennion (1984) page 725. The learned author states that "unless the contrary intention appears, the conferring by an enactment of a power or duty to make a decision by implication imports related principles and rules of law. These are the principles and rules (such as the need to observe natural justice) which have been laid down or adopted by the Courts to govern the making of such decisions in the territory to which the enactment extends." Referring to a decision in the case of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....MODVAT credit wrongfully availed of or wrongfully utilised. Provisions of Section 11A do not provide that the legislature shall not make specific provisions with regard to particular types of credit availed of by the assessee. There is nothing inconsistent in Rule 57-I which cannot be-enacted by the legislature when the provisions of Section 11A of the Act is in operation. Section 11A of the Act occupies the general field while Rule 57-I deals with specific field of wrongful availment of MODVAT credit. Rule 57-I is enacted by the legislature in exercise of powers conferred upon it under Section 37 of the Act and not under Section 11A of the Act. The provisions of Rule 57-I is to be in confirmity with the provisions of Section 37 of the Act. On March 1, 1986 when Rule 57-I was enacted and brought on the statute book the legislature was aware about the provisions of Section 11A of the Act being in force. Therefore it has got to be presumed that the legislature has made the provision with a specific purpose. It is cardinal principles of interpretation of statutes that the legislature does not indulge in exercise in futility. (2) It is over-simplification to say that Rule 57-I as it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ealt with as per the provisions of Section 11A of the Act and Rule 56A of the Rules. (b) As far as the procedure of MODVAT scheme is concerned, it is also different. While taking MODVAT credit the assessee is not required to wait for permission of the Department. He has just to make declaration and obtain acknowledgement of the declaration. After having obtained acknowledgement of the declaration, he can straightaway start taking credit in respect of the 'inputs' utilised by him for the purpose of manufacture of end product. (c) Basis of MODVAT - mutual trust and confidence. While enacting MODVAT provision, legislature has reposed a sort of trust or confidence on the assessee. The legislature expects the same type of candid and forthright behaviour on the part of the assessee. Assessee himself is required to keep proper account of the credit availed of and utilised. In case of mistake, even assessee himself can correct the mistake under intimation to the department. (d) In cases governed by Section 11A of the Act and Rule 56A of the Rules, the assessee as well as the Department may start with suspicion. The assessee may feel that the Department is trying to exact the prope....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g of men and women that when the same person gives two directions one covering a large number of matters in general and another to only some of them his intention is that these latter directions should prevail as regards these while as regards all the rest the earlier direction should have effect." 12A. Similar view is taken by the Supreme Court in the case of State of Gujarat v. Patel Ramjibhai Danabhai reported in (1979) 3 Supreme Court Cases 347. In that case, the legality and validity of provisions of Section 33(6) of the Bombay Sales Tax Act, 1959 [corresponding to Section 14(6) of Bombay Sales Tax Act, 1953] came up for consideration before the Supreme Court. It was contended that no time-limit was provided in this specific provision, while for taking actions in other cases, Section 35 provided time-limit and therefore the provisions should be held to be ultra vires. The Supreme Court applied the maxim - GENERALIA SPECIALIBUS NON DEROSANT and negatived the contention. The Supreme Court held that the provision of S. 33(6) of the Bombay Sales Tax Act, 1959 was confined to a particular class of tax evaders while Section 35 of the Bombay Sales Tax Act, 1959, was a general....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1) of Rule 57-I was substituted by introducing fresh sub-rule (1). Sub-rule (2) of Rule 57-I has not been touched by the amendment and there is no saving clause in the amendment of the Rules. In view of this change in law, it is submitted that the proceedings initiated under the provisions of Rule 57-I of the Rules as it stood prior to the amendment would lapse. In support of this contention, the learned counsels appearing for the petitioners have relied upon a decision of the Supreme Court in the case of Royala Corporation Pvt. Ltd. v. The Director of Enforcement & Ors., reported in AIR 1970 SC 494. In that case the Supreme Court was concerned with the effect of a repeal (by efflux of time) of the provisions of temporary statute. Certain provisions of Defence of India Rules, 1962 ceased to be in operation by efflux of time. Thereafter, under the provisions of law which had ceased to be in operation, criminal complaint was filed against the accused. The accused challenged the maintainability of the complaint itself on the ground that the statute under which he is alleged to have committed offence was no longer in force when the complaint was filed. In this context, the Supreme Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. Ltd. (supra). For the reasons stated hereinabove the decision of the Supreme Court in the case of Royala Corporation (supra) is not applicable to the facts and circumstances of the cases on hand. For the same reasons, these two decisions of this High Court are also not relevant and not applicable to the facts and circumstances of the cases on hand. These decisions cannot be treated as precedent for deciding the question as to what is the effect of partial amendment of Rule 57-I of the Rules. (2) In the instant case, the Court is concerned with the amendment of the Rules and not with the repeal of the Rules. These two rules (Rules 10 and 10A) were repealed entirely with effect from November 16, 1980 and it was not the case of amendment of part of a rule. (3) The Court is not to consider the effect of repeal of Rules 10 and 10A of the Rules. The Court is concerned with the effect of amendment of part of Rule 57-I brought in operation from October 6, 1988. Thus the provision which came up for consideration before two different Division Benches of this High Court was altogether different. (4) There is difference between amendment of rule and repeal of rule or for that matte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons for not following the aforesaid two decisions. However, we may make it clear that we have reservations about the correctness of these two decisions, and we prima facie feel that the relevant decisions of the Supreme Court on the point were not brought to the notice of this Court. However, since these two decisions are not on the point at issue and since the learned counsel appearing for the petitioners made concession as stated above, we are not making elaborate discussion on this point. 17. Here it would not be out of place to refer to a decision of the Supreme Court in the case of State of Orissa v. H.A. Tulloch & Co., reported in AIR 1964 SC 1284. Five Judges Bench of the Supreme Court has, in that case, considered this aspect in Para 21 of the judgment in detail. The Supreme Court has considered the principle on which the saving clause in Section 6 of the General Clauses Act, 1897 is based. The Supreme Court inter alia observed as follows :- "So far as the statutory construction is concerned, it is one of the cardinal principles of the law that there is no distinction or difference between an express provision and a provision which is necessarily implied, for it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he words of Mukherjee, J. in State of Punjab v. Mohar Singh, (1955) 1 SCR 893, 'the new Act expressly keeps alive old rights and liabilities under the repealed Ordinance but whether it manifests an intention to destroy them'." In view of the aforesaid decisions of the Supreme Court, what is required is to ascertain the intention of the legislature in bringing about the amendment in Rule 57-I of the Rules. The question to be posited, examined and answered is:- Did the legislature manifest an intention to destroy all that was done under the unamended provision of Rule 57-I? Did the legislature intend to grant general amnesty to all those who were alleged to have taken MODVAT credit wrongfully or had utilised the same in wrongful manner? 18A. Rule 57-I of the Rules provided for taking measures in case of wrongful availment of credit. Clause (1) of the rule has been substituted by adding fresh clause (1). By introducing this amendment, what did the legislature do? The legislature simply made detailed and precise provision with regard to period of limitation and the show cause notice to be issued and for affording an opportunity of being heard to the assessee in certain cases....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... into the details of factual aspects in each and every case? There is no dispute with regard to the fact that the Assistant Collector can and he is bound to decide the disputes with regard to the show cause notices issued against each one of the assessee. Similarly, appeal is provided against the order of the Assistant Collector. Therefore, it would not be proper for us to go into individual facts of the case of each assessee and decide as to whether the petitioner had rightly availed of the credit or wrongly availed of the same as alleged by the Department. For the reasons stated by us in the case of Gujarat Heavy Chemicals Ltd. (Special Civil Application No. 6149 of 1989, decided on September 12, 1989) wherever there is an alternative remedy available under the provisions of the statute, it would be proper to direct the petitioners to approach before the appropriate departmental authority and to agitate their grievance before such departmental authority. In cases where the petitioners have not filed appeal against the order passed by the Assistant Collector, it would be open to the respective petitioners to file appeal before the appropriate appellate authority. If such appeal is....