TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1276
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Eicher Motors Ltd. & Ors. V/s Union of India & Ors, 1999(2) SCC 361 wherein the Lordships held that provisions in Rule 57-F(4-A) for lapsing of credit lying unutilized on 16.03.1995 that cannot be applied to the goods manufactured prior to 16.03.1995. A copy of the judgment be given to the learned counsel for the respondents. List this case for final hearing on 13.12.2001." 3. After a period of 4 years on 7.7.2005, the Division Bench allowed the matter with the following order:- "The facts are not in dispute that petitioner has purchased the capital goods in question on 30.07.1997 and excise duty or Rs. 20 lacs was paid on that capital goods, which is in the form of machinery. At that time the provision was that any excise duty paid on the capital goods may be adjusted against the excise duty liability on the goods, manufactured by the petitioner. On 1.8.97, a notification has been issued by the Central Government directing that if any excise duty is paid on the capital goods and yet to be adjusted against the liability of excise duty, that lapses, assessee cannot take the advantage of the excise duty paid on the capital goods i.e. manufacturing machinery. Mr. Gupt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....old that, similarity of the issue has reached to finality and points raised by the Appellant to distinguish the instant case from the Eicher Motor's case are not maintainable. 8. I also find that, Hon'ble High Court order in DB CWP No. 1413/1998 dated 26.7.2005, has directed the Adjudicating Authority "to pass a fresh order regarding excise duty/liability in the light of the direction given by their Lordship in the case of Eicher Motors ltd. & anr. Vs. UOI & Ors [(1999)2 SCC 361]. I also find that, in view of the above Judgment, the Adjudicating Authority has rightly concluded that "the Apex court have laid down law that vested right, which have already accrued to the assessee cannot be taken away", following this, the Adjudicating Authority has concluded that, A vested right had accrued to them on the date when they paid duty on capital goods and that right would continue until those goods existed or are used/disposed as per the provisions of law, thus amendments made in erstwhile rule 57S can not be applied to capital goods purchased & installed prior to 1.8.97 on which duty had been paid & credit thereto was taken for the purposes of manufacture of further goods. On the contra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the case of M/s Eicher Motors. Therefore, both the adjudicating authority and the appellate authority have wrongly applied the principle of resjudicata on the face of Board's Notification No.33/1997- CE(NT) & 34/1997-CE(NT) both dated 01.08.1997 which were in force and were to be treated as part & parcel of the statute as these were never quashed and / or declared ultra-vires by the competent court till date. Thus both the orders ie.e Order in Original passed by the Deputy Commissioner and the Order in Appeal passed by the Commissioner (Appeals) are illegal and deserve to be quashed. 6. On the basis of opinion given by two Commissioners whose name and Designation reads as under:- B. S. V. Murthy (R. K. Singh) Commissioner Commissioner Central Excise Commissionerate, Central Excise Commissionerate, Jaipur-II Jaipur-I 7. Counsel for the petitioner relied on the following decisions:- (1.) In Collector of Central Excise, Pune Etc. Etc. vs. Dai Ichi Karkaria Ltd. Etc. Etc. 1999 (112) E.L.T. 353 (SC), it has been held as under :- 17. The Central Excise Rules, in Chapter VAA, deal with "The credit of duty paid on excisable goods used as inputs". The relevant Rules are Rule 57A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the Assistant Commissioner of Central Excise having jurisdiction over factory and obtaining a dated acknowledgement of the same from the factory for home consumption or for export under bond. Provided that where the inputs are removed from the factory for homes consumption on payment of duty of excise, such duty excise shall be the amount of credit that has been availed in respect of such inputs under Rule 57A. Rule 57G provides that the manufacturer intending to take credit of duty paid on inputs must file a declaration with the concerned excise officer indicating what the final products are that are manufactured in its factory and the inputs intended to be used therein and obtain an acknowledgement thereof. The manufacturer, having filed the declaration and obtained the acknowledgement, can take credit for the duty on the inputs received by him. Rule 571 provides for the recovery of credit wrongly availed of or utilised in an irregular manner. The manufacturer is then required to show cause why he should not be disallowed such credit, or, if it has utilised it, why its value should not be recovered from him. After considering the reply, the concerned excise officer is empow....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idity is upheld by reading down that provision, then it is not necessary that in all subsequent proceedings the validity must again be challenged. It is sufficient if a party claims that the provision has to be read in the manner laid down by a judgment of this Court. In the light of the judgment of this Court in Eicher Motors case (supra), Sub-rule 17 cannot apply to vested rights. Therefore to the extent that the goods have already been exported, prior to March, 1997, the assessee would be entitled to a refund. (3). In Eicher Motors Limited & Anr. vs. Union of India & Ors. Etc. 1999 (106) E.L.T. 3 (SC), it has been held as under :- 5. Rule 57F(4A) was introduced into the Rules pursuant to Budget for 1995-96 providing for lapsing of credit lying unutilised on 16.3.95 with a manufacturer of tractors falling under heading No. 87.01 or motor vehicles falling under heading No. 87.02 and 87.04 or chassis of such tractors or such motor vehicles under heading No. 87.06. However, credit taken on inputs which were lying in the factory on 16.3.95 either as parts or contained in finished products lying in stock on 16.3.95 was allowed. Prior to 1995-96 Budget, central excise/additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oducts have already been cleared from the factory before 16.3.95, Thus the right to the credit has become absolute at any rate when the input is used in the manufacture of the final product. The basic postulate, that the scheme is merely being altered and, therefore, does not have any retrospective or retro-active effect, submitted on behalf of the State, does not appeal to us. As pointed out by us that when on the strength of the rules available certain acts have been done by the parties concerned, incidents following thereto must take place in accordance with the scheme under which the duty had been paid on the manufactured products and if such a situation is sought to be altered, necessarily it follows that right, which had accrued to a party such as availability of a scheme, is affected and, in particular, it loses sight of the fact that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assessees concerned. Therefore, the scheme sought to be introduced cannot be made applicable to the goods which had already come into existence in respect of which the earlier sch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 and 87.04 or chassis of such tractors or such motor vehicles under Heading No. 87.06. Prior to budget of 1995-96 the credit of BED was allowed to be used for payment of duty on the final products, in which the inputs were used. In 1995-96, the Modvat claim was liberalised/ simplified and condition that credit of duty paid on the inputs could have been used for discharging duty liability only in respect of above final products was removed. The credit then can be utilised for J.V.Salunke,PACEXA.101.102.103.2014.Judgm ent.doc payment of duty on any final product manufactured in that factory. That is how the subject Rule providing for lapsing of credit unutilised with the manufacturer of tractors was referred. The Assessee contended that this amounts to taking away a vested right acquired by the manufacturer under the existing law and taking away such right by Rule 57F(4A) is beyond powers of the Central Government. It is in that context that the Revenue's stand was negatived by the Hon'ble Supreme Court. We cannot read the observations and conclusions of the Hon'ble Supreme Court de-hors this factual position and controversy. Once we have arrived at a conclusion that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t Pvt. Ltd. v. CCE, Jaipur) came to the conclusion that in view of Rule 57H(7) read with 57F(17)(c) and since the assessee had come under the Compounded Levy Scheme and since they had not opted for exemption from payment of duty, their case was covered by the decision cited supra and allowed the appeal. 2. The Department moved the Customs, Excise and Service Tax Appellate Tribunal, Chennai, which held that the issue no longer res Integra. Against that, the present appeal has been filed by the Department on the following substantial question of law :- 1. Whether the Commissioner (Appeals) and Appellate Tribunal are correct in interpreting the Modvat Credit Rules vis-a-vis Section 3A of the Central Excise Act, 1944? and 2. Whether the credit of duty attributable to the inputs, after the introduction of Section 3A can be recovered under Rule 57(1) of erstwhile Central Excise Rules 1944 or not? Rule 57F(17)(c) of The Central Excise Rules, 1944 reads as follows : Rule 57F(17) (a)... (b)... (c) on the first day of August, 1997, with the manufacturer of ingots and billets of non-alloy steel falling under heading Nos. 7206.90 and 7207.90 of the Schedule to the Central ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....India and Ors. : AIR1997SC3640 . in this context, the learned Counsel for the respondents referred to several decisions. However, in our opinion, all these decisions either arising under the Income Tax Act in relation to special mode of collection of tax or excise duty on timber dealers or other enactments have no relevance. What can be seen is that the charge under the Section is clearly on production of the goods but the measure of tax is dependent on either actual production of goods or on some other basis. The incidence of tax is, therefore, on the production of goods. It cannot be said that collection of tax based on the annual furnace capacity is not relatable to the production of goods and does not carry the purpose of the Act. In holding whether a relevant rule to be ultra vires it becomes necessary to take into consideration the purpose of the enactment as a whole, starting from the preamble to the last provision thereto. If the entire enactment is read as a Whole indicates the purpose and that purpose is carried out by the rules, the same cannot be stated to be ultra vires of the provisions of the enactment. Therefore, it is made clear that the manufacturers, if they have....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the said tax can be levied at a convenient stage so long as the character of the impost, that is, it is a duty on the manufacture or production, is not lost." In a passage which was quoted with approval by the Supreme Court in Jail's case, Gwyer, C.J., in Boddu Paidanna's case said that although in theory there is nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, but "a taxing authority will not ordinarily impose such a duty because it is much more convenient administratively to collect the duty (as in the case of most of the Indian Excise Acts) when the commodity leaves the factory for the first time." In Jail's case, the Supreme Court was dealing with Section 2 of the Coal Production Fund Ordinance, 1944 which imposes a cess as a duty of excise on all coal and coke despatched from collieries in India. By the rules framed under the Ordinance in case of consignments where the freight charges are not prepaid, the duty is recovered from the consignee along with the freight by the railway administration. It was held by the Supreme Court that the duty was in the nature of excise tax and that the mac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gument that Section 3 impliedly applies the rates of duty as in force on the date of manufacture or production for the reason that though excise duty is a tax on manufacture or production it need not necessarily be levied at the stage of manufacture or production and it may even be levied at the stage the excisable article reaches the retailer. This inference is further supported from Section 4 of the Act which deals with determination of value for purposes of duty. The material point of time with reference to which the value is determined under that Section is the time of removal of the article chargeable with duty from the factory and not the time when it is manufactured or produced. As Section 3 or any other provision of the Act does not expressly or impliedly lay down that excise duty must be levied at the rate prevailing on the date of manufacture or production, it was open to the Central Government to make rules for fixing the time with reference to which the rate of duty must be applied. Rule 9-A(l)(ii) which applies the rate prevailing on the date of actual removal of the goods from the factory or warehouse is valid under Section 37(1) as it carries out the purpose of the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3, the continuance of Rule 9-A from 1945 making the date of removal as the crucial date for application of the rate of duty is a very strong factor for holding that the rule is not contrary to the provision made by Parliament in Section 3. The conclusion that Section 3 does not provide as to the time with reference to which the rate of duty is to be applied is also supported by the decision of the Supreme Court in Orient Paper Mills v. Union of India-AIR 1967 SC. 1564. In that case the Supreme Court observed : "The emphasis in Section 4 is on the time of removal of the article chargeable with duty from the factory. This is the only guidance which the Act furnishes." These observations impliedly mean that except Section 4 there is no provision in the Act regarding the time with reference to which the rate of duty is to be applied. In face of Rule 9A when Parliament alters the rate of duty by amending the schedule or when the Central Government alters the extent of exemption by issuing notifications under Rule 8, it must be inferred that the intention is to apply the new rate in accordance with the provision of Rule 9-A. In our opinion, the said Rule is "valid and the Excise authorit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the explanation memorandum to the Finance Bill, 2015 and the TRU letter. It would not be correct to understand and interpret the word "subsumed" used as asserted by the petitioners. A Finance Bill or a Budget has financial and tax implications. It is an economic, political and policy statement. Interplay of politics and economics gets reflected in the statement made and relied. Raising or increasing taxes often meets resistance, and on most occasions has to be justified and explained. The statements and explanations given in the present context would show that the Government had decided to increase excise duty and service tax marginally and at the same time had decided to withdraw or abolish EC and SHE. Any exercise of increasing taxes and withdrawing a cess or a tax is undertaken keeping in mind several aspects. This can include revenue collection in the form of increased taxes on one hand, and withdrawal or reduction of cess or another tax so as to curtail the adverse impact due to increase. Budgets do, and are, a balancing exercise. We would not read and hold that EC and SHE for excisable goods and taxable services had continued and were applicable even after 1st March, 2015 ....