Tungabhadra
Indus. Ltd. Vs. Union of India & Ors [2000] INSC 295 (5 May 2000)
S.N.Variava,
Doraiswamy, G.B.Pattanaik PATTANAIK,J.
This
appeal is directed against the Division Bench Judgment of Andhra Pradesh High
Court in Writ Petition No.
4059
of 1994, wherein, following the earlier judgment of the said Court in Writ
Petition No.11311 of 1991, the High Court dismissed the writ petition.
The
appellant is the manufacturer of hydrogenated oil.
The
appellant filed a Reference before the Assistant Collector, Central Excise, Kurnool,
claiming that they would be entitled to utilise the accumulated credit,
available to them under the Money Credit Scheme, as per Rule 57K of the Central
Excise Rules, 1944 (hereinafter referred to as the rules), at the time of
rescinding of the Notification No.
27/87
as well as the credit available to them under Notification dated 11th October,
1989, issued by the Central Government under Rule 57K of the Rules. The
Assistant Collector disposed of the said Reference by his order dated 9.10.91,
holding that the assessee-appellant is entitled to appropriate the credit
available to him on the date of recession of the Notification of 1987, which
stood rescinded on 25th of August, 1989 as well as the credit which gets
accumulated, pursuant to Notification dated 11th of October, 1989, but not
entitled to utilise the credit available under both the Notifications
simultaneously and, therefore, the credit would be utilised for payment of duty
on the manufactured product, which should not exceed Rupees one thousand per
M.T. It is because of this order, the appellant filed the writ petition in the
High Court of Andhra Pradesh to stay the recovery of excise duty contemplated
under Notice dated 14.10.98 issued by the Superintendent of Central Excise, Kurnool.
The identical question raised by the appellant in the writ petition filed
before the Andhra Pradesh having been answered against the assessee in another
writ petition, which stood disposed of on 28.4.98, the present writ petition by
the appellant also stood dismissed. Be it be stated that in disposing of writ
petition No.11311 of 1991 on 28.4.98, the High Court also came to the
conclusion that the assessee is not entitled to adjust the available credits
under Notification of the year 1987 as well as the Notification of the year
1989, simultaneously, and therefore, there has been no illegality committed by
the Excise Authorities. The question for consideration, therefore is whether an
assessee like the appellant, who accumulated credits to his accounts on account
of the incentive Notification issued by the Central Government in exercise of
powers conferred under Rule 57K of the Rules by the date of the recession of
the said notification on 25th August, 1989 can make adjustment towards payment
of duty in addition to the credits earned, pursuant to Notification dated 11th
of October, 1989 simultaneously.
Under
the Rules, more particularly, Rule 57K, the Central Government is empowered by
Notification in the Official Gazette to allow credit of money in respect of
certain raw materials used in the manufacture of certain excisable goods. The
Notification required to be issued under sub-Rule (1) of Rule 57K must specify
the finished excisable goods to which the provisions of the sections would
apply as well as the rates at which the credit of money is to be given for the
use of such inputs in the manufacture of final products. Under Rule 57N the
credit of money allowed in respect of any inputs pursuant to notification
issued under Rule 57K would be utilised towards the payment of duty of excise
on the final products in relation to manufacture of which such inputs are
intended to be used in accordance with the declaration filed under Rule 57-O.
Rule 57-O provides the procedure to be observed by the manufacturer. In
accordance with the provisions contained in Rule 57K, the Central Government
issued the Notification dated 20.3.1987, which is extracted herein below in extenso
for better appreciation of the point in issue in this case:
Notification
No.27/87-CE., dated 1.3.1987 as amended by Notification No. 99/87-C.E., dated
20.3.1987;No.17/88-CE dated 1.3.1998 and No.295/88-CE dated 16.12.1988.
Set
off of duty on use of specified minor oils in the manufacture of vegetable
products. In exercise of the power conferred by rule 57K of the Central Excise
Rules, 1944, the Central Government hereby specifies:- (i)the inputs, namely,
fixed vegetable oils of the description in column (2) of the Table hereto
annexed and used in the manufacture of the final products, namely vegetable
products falling under sub-heading No. 1504.000 of the Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986); and (ii)the rates in the corresponding
entry in column (3) of the said Table as the rate at which credit may be
granted for use of such inputs in the manufacture of the said final products,
for the purpose of Section AAA of Chapter V of the said rules and stipulates
that the grant of credit and utilisation thereof shall in addition to the
provisions of the said Section, be subject to the following conditions,
namely:- (i) the credit shall be taken only in respect of the quantity of oil
subjected to hydrogenation on or after the 1st day of March, 1987 for the
manufacture of the said final products and the credit shall be taken only on
the date on which the oils has been so hydrogenated; (ii)the credit taken
during any calender month shall be utilised for payment of duty on the said
final products only after the commencement of the succeeding month; (iii) the
amount of credit utilised for payment of duty on any individual clearance of
the said final products shall not exceed rupees one thousand per tonne of
vegetable products cleared and the excess credit, if any, available in the
credit account shall not be refunded to the manufacturer or adjusted against or
utilised for payment of duty on any other excisable goods under any
circumstances; (iv)where the description in column (2) of the Table specifies
solvent extracted variety of the oil, the manufacturer shall within 5 months
from the date of taking credit, or such extended period as the Assistant
Collector of Central Excise may allow in this behalf, produce a certificate
from an officer not below the rank of Deputy Director in the Directorate of Vanaspati
Vegetable, Vegetable oils and Fats in Ministry of Food and Civil Supplies of
the Government of India to the effect that the said Oil has been manufactured
by the solvent extraction method; and (v)the credit shall be taken only in
respect of indigenous inputs and the manufacturer shall produce such documents
as may be required by the Assistant Collector of Central Excise in this regard.
Provided that in the case of palm oil used as input the manufacturer shall
within 5 months from the date of taking credit or within such extended period
as the Assistant Collector of Central Excise will allow in this behalf, produce
a certificate from an officer not below the rank of Deputy Director in the
Directorate of Vanaspati, Vegetable Oils and Fats in the Ministry of Food and
Civil Supplies of the Government of India to the effect that the said oil has
been of indigenous origin.
TABLE S.No.
Fixed Vegetable Oils Rate of credit per tonne of the fixed vegetable oil (1)
(2) (3) 01. Rice bran Oil Rs.6000
02. Mehuwe
Oil Rs.6500
03.
Water Melon Seed Oil Rs.6500
04.
Solvent extracted cotton Seed oil Rs.4000
05.
Solvent extracted mustard oil Rs.3250
06.
Solvent extracted rape seed oil Rs.3250
07.
Solvent extracted sunflower oil Rs.3250
08.
Solvent extracted Safflower oil Rs.3250
09.
Palm Oil Rs.3250 Explanation - In this notification, Vegetable products means
any vegetable oils or for which, whether by itself or in admixture with any
other substance, has by hydrogenation or by any other process, been hardened
for human consumption.
This
notification stood rescinded by the subsequent Notification dated 25th of
August, 1989. Shortly, thereafter, a fresh notification was issued on 11th of
October,1989 by the Central Government in exercise of the same power conferred
under Rule 57K of the Rules, providing the credit in respect of the quantity of
oil subjected to hydrogenation on or after 11th of October, 1989 for the
manufacture of the same final product and it was stipulated that the credit
could be taken only on the date on which the oil has been so hydrogenated. The
aforesaid Notification dated 11th October, 1989 is quoted herein below in extenso:
Government
of India Ministry of Finance (Department of Revenue) New Delhi, dated the 11th October, 1989.
NOTIFICATION
No.45/89 Central Excise (N.T.) GSR (E) :- In exercise of the powers conferred
by rule 57K of the Central Excise Rules, 1944, the Central Government hereby
specifies:
(i)the
input; namely, fixed vegetable oils of the description in column(2) of the
Table hereto annexed and used in the manufacture of the final products, namely,
vegetable products falling under sub-heading No. 1504.00 of the Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986); and (ii)the rates in the
corresponding entry in column (3) of the said Table as the rate at which credit
may be granted for use of such inputs in the manufacture of the said final
products, For the purpose of Section AAA of Chapter V of the said Rules and
stipulates that the grant of credit and utilisation thereof shall, in addition
to the provisions of the said Section, be subject to the following conditions
namely: (i)the credit shall be taken only in respect of the quantity of oil
subjected to hydrogenation on or after the eleventh day of October, 1989 for
the manufacture of the said final products and the credit shall be taken only
on the date on which the oil has been so hydrogenated; (ii)the credit taken
during any calender month shall be utilised for payment of duty on the said
final products only after the commencement of the succeeding month; (iii) the
quantity of credit utilised for payment of duty on any individual clearance of
the said final products shall not exceed rupees one thousand per tonne of
vegetable products cleared and the excess credit, if any, available in the
credit account shall not be refunded to the manufacturer or adjusted against or
utilised for payment of duty on any excisable goods under any other
circumstances; (iv)where the description in column(s) of the Table specifies
solvent extracted variety of the oil, the manufacturer shall within five months
from the date of taking credit or such extended period as the Assistant
Collector of Central Excise may allow in this behalf, produce a certificate
from an officer not below the rank of Deputy Director in the Directorate of Vanaspati,
Vegetable oils and Fats in the Ministry of Food and Civil Supplies of the
Government of India to the effect that the said oil has been manufactured by
the solvent extraction method; and (v)the credit shall be taken only in respect
of indigenous inputs and the manufacturer shall produce such documents as may
be required by the Assistant Collector of Central Excise in this regard;
Provided that in the case of Palm Oil used as input the manufacturer shall
within five months from the date of taking credit, or within such extended
period as the Assistant Collector of Central Excise will allow in this behalf,
produce a certificate from an officer not below the rank of Deputy Director in
the Directorate of Vanaspati Vegetable Oils and Fats in the Ministry of Food
and Civil Supplies of the Government of India to the effect that the said oil
has been of indigenous original, TABLE S.No. Fixed Vegetable Oils Rate of
credit per tonne of the fixed vegetable oil (1) (2) (3) ---------
-----------------------------------------------------------------------------
01. Ricebran
Oil Rs.5000
02. Mahuwa
Oil Rs.6500
03.
Water Melon seed Oil Rs.6500
04.
Solvent extracted cotton seed Oil Rs.4000
05.
Solvent extracted mustard Oil Rs.3250
06.
Solvent extracted repeseed Oil Rs.3250
07.
Solvent extracted sunflower Oil Rs.3250
08.
Solvent extracted safflower Oil Rs.3250
09.
Palm Oil Rs.3250 Explanation In this notification Vegetable Product means any
vegetable oil or which, whether by itself or in admixture with any other
substance, has by hydrogenation or by any other process, been hardened for
human consumption.
Mr. Dushyant
A. Dave, the learned senior counsel, appearing for the appellant contended
before us that an assessee, who has earned the credit pursuant to notification,
is entitled to get the same adjusted towards the payment of duty of excise on
the final products notwithstanding the recession of the notification under
which the credits stood accumulated in favour of an assessee. According to the
learned counsel, this being the position, when the same assessee earns further
credits pursuant to a fresh notification, issued by the Government under Rule
57K, he will be entitled to utilise, both, the credits accumulated in favour of
the assess towards payment of duty of excise on the final products and as such
the excise authorities committed error in allowing adjustment only to the
extent of Rs.1000/- per M.T. and refusing the adjustment of both the credits
accumulated simultaneously.
In
support of this contention, reliance was placed on the decision of the Gujarat
High Court in the case of Dipak E.L.T.222(Guj.), as well as the decision of
Andhra Pradesh Union of India, 1992(57) E.L.T. 561 (A.P.). The learned counsel
also contended that against the decision of the Gujarat High Court an SLP has
been filed in this Court, which SLP stood dismissed and such dismissal tantamounts
to confirmation of the view taken by the Gujarat High Court by this Court. The
said order of dismissal has been reported in 1998 (100) E.L.T. Page A-175. Mr.
Dave also contended that under the Modvat Scheme, a rule had been introduced to
Rule 57F, which is read as Rule 57F(4A), which rule stipulated that any credit
of specified duty lying unutilised on 16th of March, 1995 with a manufacturer
of tractor, would lapse and shall not be allowed to be utilised for payment of
duty of any excisable goods and this Court in 1999(106) E.L.T.3 (SC), came to
the conclusion that a right which had been accrued to a party under any
available scheme cannot be affected by any subsequent Rule or Notification and
the assessee would be entitled to avail of the credit which had not been utilised
on the date, Rule 4A came into existence. Mr. Dave contends that though this
decision is not of direct application but the principle enunciated therein
should be made applicable and the appellant should be permitted to utilise the
credit of money already accrued in respect of the inputs prior to the
rescinding of the notification in paying of the duty of excise leviable on the
final product. Mr. Dave also referred to the speech of the Finance Minister and
pressed the same in support of his contention.
Mr. T.L.V.Iyer,
the learned senior counsel, appearing for the Union of India did not dispute
the position that the credits already acquired could be utilised
notwithstanding rescinding of the relevant notification, even though the stand
taken by the Union of India in the counter affidavit filed in this Court is to
the contrary. But according to Mr. Iyer the accumulated credit in favour of the
assessee under the old notification of the year 1987 can be utilised subject to
the conditions mentioned in the notification itself and in that view of the
matter, an assessee is not entitled to utilise the accumulated credit under the
old notification as well as the credits earned under the new notification of
the year 1989 simultaneously and accordingly, the authorities of the department
have taken the correct view. In support of this contention, reliance has been
placed on the decision of the Karnataka High Court in the case of Union of
India vs. Modern Mills Ltd., 1994(72) E.L.T. 246 (Kar.).
In
view of the rival submissions at the Bar, the only question that falls for
consideration is whether the decisions of the Gujarat and Andhra Pradesh High
Courts, on which reliance has been placed by Mr. Dave are susceptible of a
construction that the Courts came to the conclusion that the accumulated
credits under two different notifications one of the year 1987 and another of
the year 1989 could be availed of by the assessee for the purpose of payment of
duty on the manufactured goods simultaneously or the condition No. 3 of the
notification issued in the year 1987, providing that the amount of credit utilised
shall not exceed Rs.1000/- per M.T. of available products, would operate.
Answer to this question would depend upon an interpretation of the scheme
itself and the notification issued as well as the ratio of the decisions of
these High Courts on which the counsel for the appellant placed reliance.
Chapter
AAA of the Rules contains provisions, providing for credit of money in respect
of certain raw materials used in the manufacture of certain excisable goods.
Rule 57K(1) itself stipulates accumulation of credit of money for use of inputs
in the manufacture of final products can be availed of only, when a
notification is issued by the Central Government and that notification itself
would provide the rates at which credit could be accumulated and also allowing
such credit to be utilised for payment of duty on the final products and this
must be subject to the conditions, if any, stipulated in the very notification
itself. In the aforesaid scheme of the provision, the notification issued by
the Central Government in exercise of powers conferred under Rule 57K, plays an
important role. If the notification that had been issued in the year 1987 is
examined, it would appear that paragraph (iii) unequivocally, provides that the
amount of credit utilised for payment of duty shall not exceed Rs.1000/- per tonne
of vegetable products on any individual clearance. It is thus clear that
credits may be accumulated in favour of a manufacturer of vegetable products,
pursuant to the notification on the basis of rates provided in the notification
on the inputs and that credit could be utilised for payment of duty while
clearing the final product and the accumulated credit will not ipso facto get
exhausted or lapsed on the rescinding of the notification issued under Rule 57K
of the Rules, and therefore, notwithstanding the rescinding of the notification
issued in the year 1987 by the notification dated 25th of August, 1989, a
manufacturer would continue to utilise the credit accumulated in his favour for
payment of duty, even after the recession of the notification, but subject to
the provision, contained in Clause (iii) of the notification, which granted the
accumulation of credit and utilisation of the same for payment of duty. When a
fresh notification is issued as in this case, the notification dated 11th of
October, 1989, certainly the manufacturer would be entitled to accumulate
credits on the basis of the said notification and would also be entitled to utilise
the same for payment of duty on the final products, but even under that
notification, the similar provision as in the earlier one, namely clause (iii)
is there, indicating, that the quantity of credit utilised for payment of duty
on any individual clearance of the final products shall not exceed rupees one
thousand per tonne of vegetable products cleared. This being the position, we
really fail to understand as to how a manufacturer can contend that he would be
entitled to the advantages of both the notifications simultaneously in respect
of one transaction for payment of duty, while clearing the transaction in
question. Before the Gujarat High Court in Dipak Vegetable Oil Industries case,
after the notification of the year 1987 was withdrawn by the Central Government
under Notification No. 39/89 on 25.8.89, the Excise Authorities being of the
view that the manufacturer cannot avail of the accumulated credit for payment
of excise duty, intimated the manufacturer that they should file fresh
classification list. It is this intimation from the excise authorities which
had been assailed before the High Court and the High Court on an analysis of the
provisions of the Rules, more particularly, Rule 57K, dealing with
applicability and extent of credit and Rule 57N, dealing with the manner of utilisation
of credit, came to the conclusion that the credits already accrued and acquired
on the basis of the notification issued by the Central Government in the year
1987 in exercise of powers under Rule 57K, the same cannot be taken away by
rescinding the notification in question and the effect of the rescinding
notification is from the date of the said notification, the manufacturer would
cease to earn the benefit of credit of money, but not deprived of the right to utilise
the credit of money which they have already earned validly and could be used
for payment of excise duty and the excise authorities were in error. In the
penultimate paragraph of the said judgment, the Court has observed that the
benefits in question will be in addition to the benefits which have again been
made available to them under Notification No.
45/89
and 46/89 dated 11th of October, 1989 and it is this observation on which Mr.
Dave, the learned counsel for the appellant strongly relied upon for his
contention that it tantamounts to a conclusion that the benefit earned under
both the notifications can be availed of simultaneously. We are unable to
accept this submission of Mr. Dave. The question whether the benefits of both
the notifications can be availed of simultaneously was not a subject matter of
consideration before the Gujarat High Court and in fact the credit accumulated
under the subsequent notification of 11th of October, 1989 was not a matter for
consideration at all.
That
apart, Clause (iii) of both the notifications, clearly provides that the amount
of credit utilised for payment of duty shall not exceed rupees one thousand per
tonne of vegetable products on any individual clearance. When the credits get
accumulated in accordance with the rates indicated in the notification itself
then the same can be utilised also in accordance with the terms and conditions
contained in that notification and, therefore, it is not permissible to
construe the judgment of Gujarat High Court that it has been held therein that
the manufacturer could avail of the credits accumulated under both the
notifications simultaneously. To the said effect also is the judgment of the
Andhra Pradesh High Court on which Mr.
Dave
placed reliance. The only thing what both the High Courts have held is that the
rights acquired or money credit accumulated, is not taken away by rescinding of
the notification in question. In fact the decision of the Karnataka High Court
in the case of Union of India vs.
Modern
Mills Ltd., 1994(72) E.L.T.246 (Kar.), considers and approves the aforesaid
decision of the Gujarat High Court and Andhra Pradesh High Court and holds that
the accumulated credit would not be ceased with the rescinding of the
notification and on the other hand, could be utilised by the assessee towards
excise duty payable on its final products thereafter. But it has been further
held that the said accumulated credit could be utilised only subject to the
conditions of the notification and consequently, it is not open to the
manufacturer to insist on clearing his finished products, without paying any
amount of excise duty by merely effecting two debit entries of the accumulated
credits. In other words, what has been held by the Karnataka High Court in the
aforesaid decision is that though the manufacturer would be entitled to utilise
the accumulated credits under the rescinded notification and can also
accumulate further credits on the basis of the fresh notification of the year
1989, but is not entitled to claim adjustment on the basis of both the
accumulated credits simultaneously. We approve the views taken by the Karnataka
High Court and we further hold that neither in the decision of the Gujarat High
Court nor in the decision of the Andhra Pradesh High Court, anything contrary
has been said, so far as the question of utilisation of the credit for payment
of duty on the manufactured goods are concerned. In this view of the matter,
the Excise Authorities have rightly dealt with the matter of utilisation of the
accumulated credit in favour of the appellant-manufacturer and we see no
infirmity in the same. This appeal accordingly fails and is dismissed, but in
the circumstances, there will be no order as to costs.
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