TaxTMI 
TaxTMI 
1995 (6) TMI 35
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....d the contention of the assessees in those cases, where proceedings were instituted by the department to recover the irregularly availed or utilised Modvat credit was, that the department was barred by limitation in terms of Rule 57-I of the Central Excise Rules, 1944. Likewise, alternatively the contention of the department has been right through that inasmuch as Rule 57-I as it originally stood prior to amendment on 6-10-1988 had not prescribed any period of limitation, the department would be eligible and entitled in law to initiate proceedings to recover wrong or irregular taking or utilisation of credit by the assessees without being subject to any bar of limitation. It is only in this context having regard to the controversy involved in the interpretation of Rule 57-I as it stood at the relevant time without any specific period of limitation being prescribed thereunder, and also keeping in mind the conflict of views on this issue between some High Courts such as Madras and Gujarat and also keeping in mind the conflict of view between the Benches, a Larger Bench was constituted to resolve the controversy. 2. Therefore, the issue before the Bench is with reference to the appli....
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....e by the manufacturer or the assessee on whom notice is served under clause (i), shall determine the amount of such credit to be disallowed (not being in excess of the amount specified in the show cause notice) and thereupon such manufacturer or assessee shall pay the amount equivalent to the credit disallowed, if the credit has been utilised, or shall not utilise the credit thus disallowed. (2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this section, the manufacturer shall upon a written demand being made by the Assistant Collector of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand." 3. The Division Bench of the Madras High Court in the case of Advani Oerlikon Ltd. v. Assistant Collector of Central Excise reported in 1993 (63) E.L.T. 427 (Mad.) dealing with this issue has observed as under :- "We are thus of the opinion that notwithstanding the rule, which did not contemplate any notice or any period of limitation for the demand, the rule of limitation, as found in Section 11 A of the Act, has still to be applied to the case of the petition....
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..... They are duty-bound to ensure that no one escaped the tax liability, dodged revenue and unfairly benefited himself by not paying the taxes. They are required, however, to act with caution when proceeding to implement the laws, which have far reaching consequences. They cannot, assume into themselves a finality of the judgment as to the tax liability of certain persons, without informing them of the grounds on which they have come to think that the person concerned had not paid the tax or had short-paid the tax or he had not been levied to tax or had been short-levied. It is only after knowing what is the representation of the person, who is chargeable to tax, in the situations as above, that they should decide to issue demand notice. Any ex parte decision without affording opportunity of being heard to a tax payer, in the situations of this kind, in our opinion, apart from what is stated in Section 11 A, shall be hit by the principle of audi alteram partem, one of the three well recognised rules of the principles of natural justice." 4. In respect of an identical issue as to whether Section 11A of the Central Excises & Salt Act, 1944 could be read into Rule 57-I of the Central E....
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.... 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 conformity 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 stood prior to amendment is nothing but provision with regard to recovery of duty as it is in the case of short-payment of duty, sho....
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....) 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 property of the individual citizen without authority of law and even when it is authorise....
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....f 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." 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 provision dealing with escaped assessment or under assessment. Thus whenever the legislature makes genera....
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....sal. Under Rule 57E, the duty in respect of which credit is allowed, is adjusted in the credit account maintained by the assessee as prescribed under Rule 57G. Under 57G(4), the manufacturer of final product is required to submit monthly return indicating the particular inputs received during the month and the amount of duty taken as credit along with extracts of Parts I and II of Form RG 23A, and, also make available the documents evidencing the payment of duty on the inputs taken, to the proper officer. Therefore, having regard to this scheme, any reversal of the credit availed of by the manufacturer wrongly, results in withdrawal of the allowance of the credit and the proper officer proceeds to recover the amount equivalent to the disallowance in the manner prescribed in Rule 57-I. It, therefore, stands to reason why restriction was placed by the Central Govt. on Rule 57-I, as amended with effect from 6-10-1988. This restriction is the time limit of six months for recovery of credit wrongly availed of, if it is an error on the part of the officer, and time limit of five-years is allowed if such credit has been taken on account of, wilful misstatement, collusion or suppression ....
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....sed, it would be open to the assessee to contend that the notice of demand is bad on grounds of delay and it would be for the authority concerned to consider the issue whether in the facts and circumstance of a case notice of demand for recovery of tax or dues was made within a reasonable period. We further note that this ruling of the supreme Court was not considered by the Division Bench of the Madras and Karnataka High Courts whereas it has been specifically considered by the Division Bench of the Gujarat High Court in the case of M/s. Torrent Laboratories Pvt. Ltd. in para 7 of the judgment. Since in our view the principles laid down in the ruling of the Supreme Court would be applicable in the context of Rule 57-I as it stood at the relevant time and would subserve the best interests of the department as well as the assessees and would be in consonance with the Modvat scheme in general and recovery of wrong or irregular credit by the department in particular, we are inclined to hold that a period of six months in normal circumstances and a period of five years wherever there is suppression, wilful misstatement or collusion etc. for availing of Modvat credit in contravention of....
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..... The Supreme Court negatived the contention and held that simply because the rule does not prescribe any period for the recovery of duty, the provision cannot be said to be ultra vires the provisions of Article 14 of the Constitution. In absence of any provision with regard to the specific period of limitation, the reasonable period of limitation has got to be read into it. This is how the Supreme Court has upheld the provisions of Rule 12 of the Medicinal Toilet Preparations (Excise Duties) Rules, 1956. The same principle would be applicable to the provisions of Rule 57-I of the Rules as it stood prior to the amendment. Hence, there is no substance in the contention and the same has got to be rejected." 7. Therefore, after hearing the submissions of all the parties and on consideration of all the materials on record, we hold that in respect of Rule 57-I as it stood prior to amendment without any period of limitation having been prescribed thereunder, six months period of limitation or five years period of limitation as the case may be, would be considered a reasonable period of limitation in the light of what has been set out above. We further hold that the period of limitation ....
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....T 12 return is a statutory document for assessment purpose, we hold that the relevant date for reckoning the reasonable period of limitation should commence from the date of filing the RT 12 returns are filed or should have been filed whichever is earlier. We also take note of the fact that there may be certain circumstances where Modvat credit could have been correctly taken by the assessee and also correctly utilised in respect of the end-product, yet reversal of some Modvat credit may be called for by the department on the same, on the ground that some portion of the end-product or the whole were cleared under exemption or at nil rate of duty at a later point of time utilising the duty paid inputs on which the Modvat credit had been availed of. In such a situation, we hold that the period of limitation will start running from the date of the filing of the RT 12 returns relating to the exempted goods. 8. Before parting with this case, we would like to refer to the contentions of Sh. Venkataraman, the learned Counsel, appearing for the appellant M/s. Union Carbide India Ltd. in A. No. E/174/90. The learned Counsel contended that the issue in this case is with reference to the app....