TaxTMI 
TaxTMI 
2016 (6) TMI 311
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....of Polyester Chips, Polyester Films, Polyester Filament Yarn, etc. The dispute in the present case concerns the denial of MODVAT credit claimed by the Petitioner in respect of the excise duty paid on High Speed Diesel Oil (hereafter 'HSD') which was consumed by the Petitioner for generation of electricity used for the manufacture of excisable goods in its factory. 3. It is not in dispute that by virtue of Notification No. 5/98-C.E. (N.T.) dated 2nd March, 1998 issued by the Central Government, MODVAT Credit on excise duty paid on HSD was inadmissible. The disputes in the present case essentially concern the MODVAT credit which was claimed and allowed to the Assessee for the period 16th March, 1995 till 1st March, 1998. The Petitioner claims MODVAT Credit under Rule 57A of the Rules in respect of HSD consumed as fuel for generation of electricity used for the manufacture of excisable goods with effect from 1st March, 1994. According to the Petitioner, MODVAT Credit was available in respect of duties paid on 'inputs' used for the manufacture of excisable goods and, HSD was one such input in respect of which MODVAT credit was available in terms of Notification No....
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.... No. 8/95-C.E. (N.T.) was issued which contained a Table describing the inputs and the final products in respect of which MODVAT credit was available. In the said Table 'inputs' were defined as under:- "All goods falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the following, namely, - (i) goods classifiable under any heading of Chapter 24 of the Schedule to the said Act; (ii) goods classifiable under heading Nos. 36.05 or 37.06 of the Schedule to the said Act; (iii) goods classifiable under sub-heading Nos. 2710.11, 2710.12, 2710.13 or 2710.19 (except Natural gasoline liquid) of the Schedule to the said Act; (iv) high speed diesel oil classifiable under heading No. 27.10 of the Schedule to the said Act." 7. Although, HSD was specifically excluded from the scope of inputs by the said Notification No. 8/95-C.E. (N.T.) dated 16th March, 1995, the Petitioner claimed that by virtue of the scope of inputs, as defined under Explanation to Rule 57A read with the proviso to Rule 57D, it would be entitled to MODVAT credit on the duty paid on HSD which was specifically used for generation of electricity which in turn ....
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....titioner, nonetheless, claims that it was entitled to MODVAT credit on inputs by virtue of Explanation to Rule 57A of the Rules read with Rule 57D and 57B of the Rules. However, it is not disputed that duty paid on HSD would not be admissible as MODVAT credit with effect from 2nd March, 1998, since the Notification (Notification No.5/98-C.E.(N.T.) dated 2nd March, 1998) expressly clarified that the term 'inputs' would refer to only such inputs as may be specified in a notification issued under Rule 57A of the Rules. Thus, admittedly the word 'inputs' as used in Rule 57B(1), no longer included inputs that were expressly excluded by Notification No.8/95-C.E. (N.T.) dated 16th March, 1995. 12. In view of the above, the dispute whether MODVAT credit was available on duties paid on HSD is limited to the period 1st March, 1994 to 1st March, 1998. 13. The Petitioner being aggrieved by the decisions, denying MODVAT credit on duties paid on HSD, unsuccessfully appealed before the Commissioner of Customs and Central Excise (Appeals) and, thereafter, carried the matter before the Customs, Excise and Gold (Control) Appellate Tribunal (hereafter 'the Tribunal'). By....
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....nwhile, the Parliament enacted Section 112 of the Finance Act, 2000 (hereafter 'the Act') which reads as under:- "112. Validation of the denial of credit of duty paid on high speed diesel oil.-(1) Notwithstanding anything contained in any rule of the Central Excise Rules, 1944, no credit of any duty paid on high speed diesel oil at any time during the period commencing on and from the 16th day of March, 1995 and ending with the day, the Finance Act, 2000 receives the assent of the President, shall be deemed to be admissible. (2) Any action taken or anything done or purported to have been taken or done at any time during the said period under the Central Excise Act or any rules made thereunder to deny the credit of any duty in respect of high speed diesel oil, and also to disallow such credit to be utilised for payment of any kind of duty on any excisable goods shall be deemed to be, and to always have been, for all purposes, as validly and effectively taken or done, as if the provisions of sub-section (1) had been in force at all material times and, accordingly, notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authori....
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....nullify final orders already passed by Courts or Tribunal. And since in the present case, the dispute has stood concluded in favour of the Petitioner, the MODVAT credit could not be denied by way of a retrospective provision. 20. Mr Santhanam also contended that the Petitioner could not be asked to pay back the MODVAT credit that was claimed and allowed to the Petitioner on the basis of a mere letter. A demand could be raised only pursuant to a valid order passed after issuing a show cause notice and affording the Petitioner a reasonable opportunity to be heard. He, thus, contended that the impugned letter dated 13th July, 2000 was liable to be set aside. 21. Mr Rahul Kaushik, learned senior standing counsel for the Revenue, countered the arguments advanced by Mr Santhanam, and contended that the issues raised were no longer res integra in view of the decisions of the Supreme Court in Sangam Spinners Limited v. Union of India and Ors.: (2011) 11 SCC 408 and Union of India and Ors. v. Maharaja Shree Umaid Mills: (2014) 13 SCC 783. 22. Mr Santhanam disputed the aforesaid contention and contended that neither in the case of Maharaja Shree Umaid Mills (supra) nor in San....
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....s specifically excluded from the list of eligible inputs such credit though may otherwise be available would not have created a vested right." 25. The Supreme Court further noticed that although the appellants were not entitled to claim MODVAT credit on the duties paid on HSD, the Tribunals had held otherwise and "therefore, there was a necessity for the Finance Act to be brought in whereby a clarificatory explanation to the legal position was laid down". The Supreme Court also rejected the contention of the appellants therein that Section 112 of the Act had the effect of taking away vested rights. The Supreme Court held as under:- "In the case of Tata Motors Ltd. v. State of Maharashtra (2004) 5 SCC 783, this Court observed that retrospective withdrawal of the benefit of set-off only for a particular period should be justified on some tangible and rational ground, when challenged on the ground of unconstitutionality. However, in the present case the ratio of Tata Motors case [supra] would not be applicable as the Appellants in this case never had a right with regard to availment of MODVAT credit. Hence, the contentions of the Appellants that their vested and accrued right ca....
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...., that is, 12th May, 2000. The assessees, on the other hand, contended that the effect of Section 112 of the Act was to increase the liability of the assessees with retrospective effect by denying them MODVAT credit on the duties paid on HSD and also an imposition of 24% interest thereon. The assessees further contended that no interest was payable till the amount payable had been ascertained and interest could only be payable from the date the said amount was demanded. In the aforesaid context, the Supreme Court held as under:- "Upon perusal of the impugned judgment as well as the provisions of Section 112 of the 2000 Act, one might have an impression that the Revenue has become harsh in imposing interest at the rate of 24% p.a. on the amount of MODVAT credit availed on HSD oil used as an input without any adjudication of the amount payable or without even issuance of a show cause notice. In fact if we look at the provisions of Section 112 of the 2000 Act along with other notifications which had been issued earlier in 1995 and 1994, whereby availment of MODVAT credit on HSD oil used as fuel in generation of electricity had been ordered to be discontinued, we would feel that the....
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.... benefit, which had been wrongly availed by any manufacturer, the benefit wrongfully availed had to be returned." 29. The Petitioner's contention that a separate adjudication was required for raising a demand for recovery of MODVAT credit availed on HSD also cannot be accepted. The said issue was considered by the Supreme Court in Maharaja Shree Umaid Mills (supra) wherein the Court held as under: "In the aforestated circumstances, in our opinion, there was no issue with regard to any adjudication because the Respondents had availed MODVAT credit on the HSD oil used as an input though it was not permissible. Once it is certain that the MODVAT credit had been wrongly availed by the Respondents, in our opinion, the Revenue cannot be blamed, if the amount wrongly availed by way of MODVAT credit by the respondents is recovered with interest thereon. It is also pertinent to note that the Revenue had given 30 days' time to return the said amount to the Respondents who had wrongly availed MODVAT credit on the HSD oil used as an input. If anyone who had repaid the amount wrongly availed within 30 days from the date on which Section 112 of the 2000 Act got the President's assen....