Allahabad High Court
Commissioner, Central Excise, ... vs M/S Hindalco Industries Ltd. on 6 February, 2012
Bench: R.K. Agrawal, B. Amit Sthalekar
HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved Case :- CENTRAL EXCISE APPEAL No. - 170 of 2004 Petitioner :- Commissioner, Central Excise, Allahabad Respondent :- M/S Hindalco Industries Ltd. Petitioner Counsel :- Surya Prakash Akesarwani,A K Nigam,A K Rai,K C Sinha Hon'ble R.K. Agrawal,J.
Hon'ble B. Amit Sthalekar,J.
The present appeal has been filed under Section 35G of the Central Excise Act, 1944, hereinafter referred to as "the Act", against the order dated 3rd December, 2003 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi and has been admitted vide order dated 11th April, 2007 on the following two substantial questions of law:
"(a) Whether Modvat Credit can be allowed on Invoices other than duplicate copies which, at the relevant time (November and December, 1995), was a mandatory requirement for availing Modvat Credit in terms of Rule 57G of the Central Excise Rules, 1944?"
"(b) Whether the Appellate Tribunal being a creature of the statute itself can allow Modvat Credit other wise than in accordance with Rule 57G of the Rules?"
Briefly stated the facts giving rise to the present appeal are as follows:
The respondent-assessee, which is a public limited company, is engaged in the business of manufacture and sale of Aluminium and its products falling under Chapter 76 of the Schedule to the Central Excise Tariff Act, 1985. It availed Modvat credit under Rule 57A/57Q of the Central Excise Rule, 1944, hereinafter referred to as "the Rules".
According to the Revenue, the respondent-assessee illegally and irregularly availed Modvat credit to the tune of Rs.6,67,26,672.83. Show cause notices were issued and after considering the reply filed by the respondent-assessee, the Assistant Commissioner, Central Excise Division, Mirzapur passed the orders confirming the aforesaid demand. Feeling aggrieved the respondent-assessee preferred appeals before the Commissioner(Appeals), Customs and Central Excise, Allahabad, who vide order dated 10th February, 2003 accepted the claim of the respondent-assessee to the extent of Rs.5,46,99,628.44. The Commissioner (Appeals), however, disallowed the Modvat credit of Rs.1,20,27,04.39. The respondent-assessee deposited a sum of Rs.1,13,63,610.07 and preferred an appeal for the balance amount of Rs.6,63,434.00 before the Tribunal.
The items on which the respondent-assessee claimed Modvat credit was in respect of Fabricated heaters/Fabricated tubes and Crab Assembly (Rs.4,21,316) PD Bowl Assembly(Rs.45,000/-) and Refractory and Refractory Materials (Rs.1,97,118/-). The Tribunal vide order dated 3rd December, 2003 had upheld the assessee's claim of Modvat credit in respect of Fabricated heaters/Fabricated tubes/Crab Assembly and Refractory materials. However, in respect of the claim of Modvat credit relating to PD Bowl Assembly the Tribunal had remanded the matter for further verification.
It may be mentioned here that the Assistant Commissioner, Central Excise, Mirzapur had denied Modvat credit on Fabricated heaters/Fabricated tubes/Crab Assembly on the ground that the words 'duplicate invoice' was not mentioned and in one invoice, the portion showing the words 'original and duplicate' was torn and according to Rule 57G of the Rules, as it stood during the relevant period, Modvat credit could have been allowed only on furnishing of duplicate invoice and not otherwise. The Commissioner (Appeals) has also upheld the disallowance of Modvat credit on this ground. However, the Tribunal had held that after the amendment of Rule 57G of the Rules vide Notification No.7/99-CE(NT) dated 9th February, 1999 the amended Rules would apply in all pending cases and the credit cannot be denied on minor procedural lapses in case the inputs were duty paid. The Tribunal, accordingly, held that the respondent-assessee is entitled for the benefit of Modvat credit in respect of Fabricated heaters/Fabricated tubes/Crab Assembly. So far as the Modvat credit on Refractory and Refractory materials is concerned, it was denied by the Assistant Commissioner and the Commissioner(Appeals)only on the ground that at the relevant period it was not covered under the definition of 'capital goods'. The Tribunal has held that these items are used for lining of the furnace. The furnace is used for producing the final products, being parts of furnace, the Refractory and Refractory materials are entitled for the benefit of Modvat credit.
We have heard Sri R.C. Shukla, learned Senior Standing Counsel, appearing for the Revenue and Sri Manoj Kumar Singh holding brief of Sri Nishant Misra on behalf of the respondent-assessee.
Sri Shukla, learned Senior Standing Counsel for the Revenue, submitted that under sub-rule (2) of Rule 57G of the Rules production of duplicate copy of the invoice was the only mode prescribed for taking Modvat credit and as admittedly the Modvat credit was availed much prior to 9th February, 1999, the Modvat credit on Fabricated heaters/Fabricated tubes/Crab Assembly was inadmissible and the view to the contrary that it is only a procedural lapse is not correct. According to him, the amendment of the Rules 57G of the Rules vide Notification dated 9th February, 1999 would apply prospectively and, therefore, no benefit can be derived from the aforementioned amendment. He stressed that Modvat credit could be availed only on strict fulfilment of requirements stipulated in Rule 57G of the Rules and not otherwise. He referred to Section 5 of the General Clauses Act, 1897, to press home his plea that an enactment shall come into operation from the prescribed date. In support of his aforesaid plea he has relied upon the following decisions.
1.R.Kapilanath (dead) through L.Rs. vs. Krishna, AIR 2003 SC 565
2.Commissioner of Customs, Bangalore vs. Spice Telecom, Bangalore, 2006-SCC-10
3.Commissioner of Central Excise, Bangalore vs. Mysore Electricals Industries Ltd., 2006(204) E.L.T. 517 (S.C.).
4.Suchitra Components Ltd. vs. Commissioner of Central Excise, Guntur, 2007-AIR (SCW)-0-6244.
He also relied upon a decision of the Tribunal in the case of I.T.C. Ltd. vs. Commissioner of Central Excise, Calcutta, 1997(90)E.L.T.132 (Tribunal).
Sri M.K.Singh, learned counsel appearing for the respondent-assessee submitted that it is not in dispute that the respondent-assessee had paid the duty on the purchases of Fabricated heaters/Fabricated tubes/Crab Assembly and merely because while availing Modvat credit under Rule 57G it had not given duplicate copy of the invoice as required therein, it would not come in the way of the assessee to claim the benefit of Modvat credit; more so, when vide Notification dated 9th February, 1999 Rule 57G were amended and sub-rule (11) was inserted which provides that credit under sub-rule (2) shall not be denied on the grounds that any of the documents, mentioned in sub-rule (3) does not contain all the particulars required to be contained therein under these rules, if such document contains details of payment of duty, description of the goods, assessable value, name and address of the factory or warehouse or the manufacturer failed to complete in other requirements under sub-rule (1). The only requirement is that the Assistant Commissioner, Central Excise having jurisdiction over the factory has to record his reasons for it. According to him, it is not in dispute that the duty has been paid on the inputs and they have been used in the manufacture of final products. He, thus, submitted that the view taken by the Tribunal that Modvat credit cannot be denied for procedural lapses does not require any interference. In support of his aforesaid plea he has relied upon the following decisions:
1.Kamakhya Steels (P) Ltd. vs. Commissioner of Central Excise, Meerut, 2000(121) E.L.T. 247 (Tribunal-LB.
2.Commissioner of C.Ex. Delhi-III vs. A.B. Card Clothing (Pvt.)Ltd., 2008 (222)E.L.T.359(P & H).
3.Commr. Of C.Ex. , Jalandhar vs. JCT Ltd., 2009(247) E.L.T.28 (P. & H) We have given our thoughtful consideration to the various plea raised by the learned counsel for the parties and find that it is not in dispute that the respondent-assessee while making purchases in question have paid the applicable central excise duty. The only defect/lacunae in the process of availing Modvat credit was that the invoice was not marked as 'duplicate'. Rest of the particulars mentioned in that invoice are not in dispute nor its correctness is being disputed by the Revenue. The question before us is as to whether Rule 57 G of the Rules should be taken as mandatory or directory and whether it provides for procedure for availing benefit of Modvat credit or is substantive in nature. For ready reference Rule 52A and Rule 57G of the Rules are reproduced below.
52A. Goods to be delivered on an invoice.-- (1) No excisable goods shall be delivered from a factory or a warehouse except under an invoice signed by the owner of the factory, or his authorised agent:
Provided that when the excisable goods, other than those to which the provisions of Chapter VII-A apply, are removed on payment of duty such invoice shall be required to be countersigned by the proper officer.
Explanation.--In this rule, and in any other rule, where the term invoice or gate-pass, as the case may be, is used it shall mean--
(i)assessee's own document such as invoice, challans, advice or other document of similar nature generally used for sale or removal of excisable goods and which shall contain all the particulars as required under the said Act or in these rules; or
(ii)such other form as the Central Board of Excise and Customs may notify.
(2) The invoice shall be made out in quadruplicate. The original copy shall be for the buyer, the duplicate for the transporter, and the triplicate shall be retained by the manufacturer. The manufacturer may make extra copies of the invoice for his own use and each such extra copy shall be clearly marked with its sequential number. The duplicate copy shall be produced by the transporter on demand by any officer while the goods are en route to such destination from the factory:
Provided that in respect of removal of excisable goods consumed within the factory for manufacture of other goods in a continuous process, the manufacturer may make out a single invoice, at the end of the day:
Provided further that for any excisable goods, other than those to which the provisions of Chapter VII-A apply, the invoice shall be presented to the proper officer for counter-signature at least one hour before the actual removal of goods from the factory. After counter-signature the proper officer shall return all the copies of the invoice to the manufacturer except the triplicate required for his record.
(3) The copies of the invoices shall be marked at the top in bold capital letters in the following manner, namely:-
(i)the original copy shall be marked as ORIGINAL FOR BUYER;
(ii)the duplicate copy shall be marked as DUPLICATE FOR TRANSPORTER(to be used for taking credit under Rule 57G and Rule 57T);
(iii)the triplicate copy shall be marked as TRIPLICATE FOR ASSESSEE.
(4)If all the packages comprising a consignment are despatched in one lot at any one time, only one invoice shall be made out in respect of the consignment. If, however, a consignment is split up into two or more lots each of which is despatched separately either on the same day or on different days, a separate invoice shall be made out in respect of each such lot. In case a consignment is loaded on more than one vehicle, vessel, pack animal or other means of conveyance which do not travel together but separately or at intervals, a separate invoice shall be made out in respect of each vehicle, vessel, pack animal or other conveyance.
(5)Invoice shall be maintained in two sets--
(i)one for clearance for home consumption; and
(ii)the other for clearances for export.
(6) Each invoice shall bear a printed serial number running for the whole financial year beginning on the 1st April of each year. Only one invoice book of each type shall be used by a factory for removal of excisable goods at any one time unless otherwise specially permitted by the Commissioner in writing.
(7) Each foil of the invoice book shall be authenticated by the owner or working partner or Managing Director/Company Secretary, as the case may be, before being brought into use by the manufacturer. The serial number of the invoice, before being brought into use, shall be intimated to the Assistant Commissioner of Central excise and dated acknowledgement of receipt of such intimation shall be retained by the manufacturer.
Provided that the Commissioner may, by a general or special order, exempt an assessee or class of assessees from pre-authentication of each foil of invoice book and from intimating the serial number of the invoice.
(8) If any person--
(a) caries or transports excisable goods from a factory or warehouse without a valid invoice, or
(b) while carrying or removing such goods from a factory or warehouse does not on request by an officer, forthwith produce a valid invoice, or
(c) enters any particulars in the invoice which are, or which he has reason to believe to be false, he shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in clauses (a), (b) or (c) has been committed and such excisable goods shall be liable to confiscation.
Rule 57G. Procedure to be observed by the manufacturer.- (1) Every manufacturer intending to take credit of the duty paid on inputs under Rule 57A or Rule 57B shall file a declaration with the Assistant Commissioner of Central Excise having jurisdiction over his factory, indicating the description of the final products manufactured in his factory and the inputs intended to be used in the said final products and such other information as the said Assistant Commissioner may require, and obtain a dated acknowledgement of the said declaration.
(2) A manufacturer who has filed a declaration under sub-rule (1) may, after obtaining the acknowledgement aforesaid, take credit of the duty on the inputs received by him.
(3) No credit under sub-rule(2), shall be taken by the manufacturer unless the inputs are received in the factory under the cover of any of the following documents, namely:-
(a) an invoice issued by a manufacturer of inputs under Rule 52A or 100E of the said rules;
(b) an invoice issued by the manufacturer of inputs from his depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer provided the depot or the premises, as the case may be, is registered under Rule 174;
(c) triplicate copy of a bill of entry;
(d) a certificate issued by an Appraiser of Customs posted in foreign post office;
(e) an invoice issued by a first stage dealer of excisable goods, registered under Rule 174;
(f) an invoice issued by a second stage dealer of excisable goods, registered under Rule 174 and duly authenticated by the proper officer;
(g) an invoice issued by a dealer on or before the 31st day of August, 1996;
(h) an invoice issued by an importer registered under Rule 174 and duly authenticated by the proper officer;
(i) an invoice issued by an importer from his depot or from the premises of the consignment agent of the said importer provided the said depot or the premises, as the case may be, is registered under Rule 174 and duly authenticated by the proper officer;
(j) an invoice issued by a first stage or second stage dealer of imported goods registered under Rule 174 and duty authenticated by the proper officer;
(k) duplicate copy of a bill of entry generated on Electronic data Interchange System installed in any Customs or central Excise Commissionerate;
(l) a certificate issued by the Superintendent of Central Excise or by the proper officer in the Customs area under Rule 57E; and
(m) an invoice issued by a manufacturer of final product under sub-rule (3) of Rule 57F or sub-rule (1) of Rule 57S Explanation.--For the purposes of this section,--
(i) "first stage dealer" means a dealer who purchases the goods directly from--
(a) the manufacturer under the cover of an invoice issued under Rule 52A or Rule 100E or from the depot of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer, under cover of an invoice issued under Rule 57G; or
(b) an importer or from the depot of an importer or from the premises of the consignment agent of the importer, under cover of an invoice issued under Rule 57G.
(ii) "second stage dealer" means a dealer who purchases the goods from a first stage dealer.
(4) No credit shall be taken by the manufacturer in respect of invoices referred to in clause (g) of sub-rule (3) after the 30th September, 1996.
(5) Credit shall also not be taken by the manufacturer after six months of the date of issue of any document specified in sub-rule (3) and where the intermediate products manufactured by the user of inputs specified under Rule 57J are received by the manufacturer, after nine months.
(6) Notwithstanding anything contained in sub-rule (3) or Rule 52A--
(i)a manufacturer may take credit on inputs received in his factory; or
(ii)a person registered under Rule 174 for issue of invoice under Rule 57G, or as the case may be , under Rule 57T may make receipt entries in register maintained under Rule 57GG.
On the basis of--
(a) original invoice, if duplicate copy of the invoice has been lost in transit; or
(b) a certificate issued by the proper officer of Customs at the port/airport of the importation of such goods, if triplicate copy of bill of entry or duplicate copy of bill of entry generated on Electronic Data Interchange System installed in any Customs or Central Excise Commissionerate, as the case may be, has been lost in transit, subject to the satisfaction of the Assistant Commissioner of Central Excise that the inputs have been received in the factory of the said manufacturer or, as the case may be, the said person registered under Rule 174, and the duty was paid on such inputs:
Provided that no credit or receipt entry, shall be allowed under this sub-rule after six months of the date of issue of the said invoice or bill of entry, as the case may be, and where the intermediate products manufactured by the user of inputs specified under Rule 57J are received by the manufacturer, after nine months.
(7) A manufacturer of the final products shall maintain,--
(a) an account in Form R.G.23A, Parts I and II;
(b) in respect of duty payable on final products, an account-current with adequate balance to cover the duty of excise payable on the final products cleared at any time.
(8)A manufacturer of final products shall submit within five days after the close of each month to the Superintendent of Central Excise, a monthly return indicating the particulars of the inputs received during the month and the amount of credit taken. The manufacturer shall also submit original duty paying documents and extracts of Part I and Part II of For R.G. 23A maintained along with the monthly return to the Superintendent of Central Excise, who shall after verifying their genuineness, deface such documents and return the same to the manufacturer:
Provided that the Commissioner may, having regard to the nature, variety and extent of production or manufacture or frequency of removals--
(i)fix in relation to any assessee or class of assesses a period shorter than one month for filing the aforesaid return;
(ii)permit that the aforesaid return may be filed by the assessee within a period not exceeding twenty-one days after the close of each month:
Provided further that in respect of a manufacturer availing of any exemption based on the value or quantity of clearances in a financial year, the provisions of this sub-rule shall have effect in that financial year as if for the expression "month", the expression "quarter" were substituted.
(9) Where a manufacturer was, for sufficient reasons, not in a position to make a declaration under sub-rule (1) and makes the declaration subsequently, the Assistant Commissioner may, subject to the provisions of sub-rule (10) and for reasons to be recorded in writing, condone the delay in filing of such declarations and allow the manufacturer to take credit of the duty already paid on the inputs.
(10) The Assistant Commissioner shall not condone the delay unless he is satisfied that:
(i)the inputs were received in the factory not before a period of six months from the date of filing of such declaration;
(ii)the amount of duty for which credit is sought has actually been paid on such inputs; and
(iii)the inputs have actually been used or are to be used in the manufacturer of final products.
From a reading of the aforesaid Rules we find that Rule 52A states that goods are to be supplied on an invoice. According to clause (2) of that Rule, invoice should be in quadruplicate. Clause (3) provides as to how the various copies of the invoice are to be dealt with. The original copy of the invoice should be marked as "original for buyer". Duplicate copy should be marked as 'duplicate for transporter'. The third sub-clause of clause (3) states that the triplicate copy of the invoice should be marked as "triplicate for Central Excise". Lastly, it provides that the quadruplicate copy shall be marked as "quadruplicate for the assessee". Here the assessee is the person who issues the invoice. Procedure to be observed by the manufacturer who wants to avail Modvat credit is provided by Rule 57G. The manufacturer who intends to take credit of the duty paid on inputs should file a declaration with the Assistant Commissioner having jurisdiction over his factory indicating the inputs intended to be used in the final product. Such a manufacture who has filed a declaration is allowed to take credit of the duty paid on the inputs received by him. Clause (2)states that no credit shall be taken unless the inputs are received in his factory or any other document as may be prescribed by the Central Government by notification in the Official Gazette in this behalf evidencing payment of duty on such inputs. By Notification No.23/94 dated 20.5.1994, it was provided that this duplicate copy is the one to be used for taking credit under Rule 57G and Rule 57T.
Vide Notification dated 9th February, 1999 Rule 57G of the Rules amended as follows:
"2. In the Central Excise Rules, 1944,-
(a) in rule 57G, after sub-rule (10), the following sub-rule shall be inserted, namely:-
"(11) Credit under sub-rule (2) shall not be denied on the grounds that
(i)any of the documents, mentioned in sub-rule (3) does not contain all the particulars required to be contained therein under these rules, if such document contains details of payment of duty, description of the goods, assessable value, name and address of the factory or warehouse;
(ii)the declaration filed under sub-rule (1) does not contain all the details required to be contained therein or the manufacturer fails to comply with any other requirements under sub-rule (1);
Provided that the Assistant Commissioner of Central Excise having jurisdiction over the factory of manufacturer intending to take credit is satisfied that duty due on the inputs has been paid and such inputs have actually been used or are to be used in the manufacture of final products, and such Assistant Commissioner shall record the reasons for not denying the credit so in each case."
The Notification has been published in the gazette on 9th February, 1999.
We find that the Central Board of Excise and Customs has issued a Circular No.441/7/99-CX dated 23rd February, 1999 giving guidelines to be followed in respect of Notification No.7/99 regarding amendment made to Rules 57G and 57T of the Rules. The Circular is reproduced below:
"Circular:441/7/99-CX dated 23-Feb-1999 Modvat Rules-Guidelines to be followed in respect of Notification No.7/99- C.E.(N.T.) or amendment to Rule 57G and 57T.
Circular No.441/7/99-CX., dated 23-2-1999 [From F.No.267/135/96-CX.8] I am directed to refer to Notification No. 7/99-CE(NT) dated 9/2/1999 issued to amend Modvat Rules. The aforesaid notification has been issued to insert sub-rule (11) in Rule 57G and sub-rule(13) in Rule 57T of the Central Excise Rules, 1944 so as to empower the Assistant commissioner of Central Excise having jurisdiction over the factory of the manufacturer to allow credit of duty paid on inputs/capital goods ignoring minor procedural lapses in falling the declaration or the invoice/document based on which credit is to be taken. However, the Assistant Commissioner should ensure that inputs/capital goods have suffered duty and are being used/are to be used in the process of manufacture. The Assistant Commissioner is also required to record the reasons in file for allowing Modvat credit in each case.
2. The Assistant Commissioner, before issuing Show Cause Notice for wrong availment of Modvat Credit by the assessee on any procedural grounds, shall conduct enquiries with regard to duty paid nature of the goods at the suppliers end, ensure that necessary information as mentioned in the Notification are available on the invoice and satisfies himself whether the goods have been used or are intended to be used as contemplated in the Modvat Rules. In case the assessee's invoice contains the details viz. description of the goods, assessable value, name and address of the factory or warehouse where the goods are to be received, and if the assessee has filed a declaration as contemplated in the Modvat Rules, the Assistant Commissioner having jurisdiction over the factory would allow the credit of duty so paid after making enquiries as above.
3. It should hereafter be ensured that Show Cause Notices are not issued for procedural lapses as mentioned in the Notification without making proper enquiries. Wherever the Assistant Commissioner, after making enquiry due, is satisfied that the Modvat credit taken by the assessee is incorrect, adjudication proceedings in the normal course should be initiated. Efforts, however, should be directed toward reduction of litigation.
4.All pending cases may be disposed off accordingly.
5.Trade and field formations may be suitably informed."
The question for consideration before us is whether Rule 57G is a mandatory provision and its amendment on 7.2.199 only prescribes the procedure for availing Modvat credit or creates any right. If it is former then the amendment shall apply retrospectively otherwise it shall be prospective in its operation.
The basis of distinction between statutes affecting rights and those affecting merely procedure is well-recognised. Dixon, C.J. In Maxwell v. Murphy, (1957) 96 CLR 261, 267, drawing upon the following words of Lord Justice Mellish in Republic of Costa Rica v. Erlanger, (1876)3 ChD 62, 69, said:
"No suitor has any vested interest in the course of procedure, nor any right to complain, if during the litigation the procedure is changed, provided, of course, that no injustice is done."
It is true that if one traces any substantive right back far enough it will be found secreted in the interstices of procedure.
In W.H. Cockerline & Co. v. IRC, 16 TC 1, 19 : (1930) 47 TLR 13, Lord Hanworth quoted with approval the following passage from the judgment of Sargent, LJ.:
"The liability is imposed by the charging section, namely, Section 38 the words of which are clear. The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified and when quantified to be enforced against the subject, but the liability is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately."
In Halsbury's Laws of England (Fourth Edn., Vol.23, para 29) referring to the machinery provisions it is stated:
"It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions, which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a charge elsewhere clearly imposed."
The distinction between substantive law and procedural provisions has been indicated in Black's Law Dictionary (Sixth Edn., p.1203) as follows:
"As a general rule, laws which fix duties, establish rights and responsibilities among and for persons, natural or otherwise, are 'substantive laws' in character, while those which merely prescribe the manner in which such rights and responsibilities may be exercised and enforced in a court are 'procedural laws'."
In Salmond's Jurisprudence (Twelfth Edn., p.462), the distinction between substantive law and law of procedure is indicated in the following words:
"What, then, is the true nature of the distinction? The law of procedure may be defined as that branch of the law which governs the process of litigation. It is the law of actions-jus quot ad actiones pertinet- using the term action in a wide sense to include all legal proceedings, civil or criminal. All the residue is substantive law, and relates, not to the process of litigation, but to its purposes and subject matter. Substantive law is concerned with the ends which the administration of justice seeks. Procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated.
'...What facts constitute a wrong is determined by the substantive law; what facts constitute proof of a wrong is a question of procedure.' '..So far as the administration of justice is concerned with the application of remedies to violated rights, we may say that the substantive law defines the remedy and the right, while the law of procedure defines the modes and conditions of the application of the one to the other'."
In Izhar Ahmad Khan v. Union of India, 1962 Supp 3 SCR 235 it is observed: (SCR p.251) "The division of law into two broad categories of substantive law and procedural law is well known. Broadly stated, whereas substantive law defines and provides for rights, duties and liabilities, it is the function of the procedural law to deal with the application of substantive law to particular cases and it goes without saying that the Law of Evidence is a part of the law of procedure."
In Kesoram Industries and Cotton Mills Ltd. v. CWT (Central), AIR 1966 SC 1370, the Apex Court observed:(AIR p.1384, para 56) "Section 7(2) merely provides machinery in certain special cases for valuation of assets, and it is from the aggregate valuation of assets that the net wealth chargeable to tax may be ascertained.. This is an artificial rule adopted with a view to avoid investigation of a mass of evidence which it would be difficult to secure or, if secured, may require prolonged investigation."
Though this was the part of the minority opinion, there is, however, nothing said to the contrary in the majority view.
In Murarilal Mahabir Prasad v. B.R. Vad, (1975) 2 SCC 736, the Apex Court laid down as follows: (SCC p.749, para 30) "We are concerned in this case to determine not whether a particular turnover can be brought to sales tax but whether if the turnover was liable to be charged to sales tax, the firm can be assessed to tax after its dissolution. In other words, we are concerned with a provision which prescribes the machinery for the computation of tax and not with a charging provision of the Sales Tax Acts."
In Associated Cement Co.Ltd. v. CTO, (1981) 4 SCC 578, the Apex Court laid down:(SCC p.602, para 27) "It is settled law that a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed. While charging provisions are construed strictly , machinery sections are not generally subject to a rigorous construction. The courts are expected to construe the machinery sections in such a manner that a charge to tax is not defeated."
Bennion's Statutory Interpretation (First Edn., p.446, para 191) lays down as follows:
"Because a change made by the legislator in procedural provisions is expected to be for the general benefit of litigants and others, it is presumed that it applies to pending as well as future proceedings."
At page 447 it is stated:
"Procedure and practice is the mere machinery of law enforcement. As Ormrod, LJ. said:
'The object of all procedural rules is to enable justice to be done between the parties consistently with the public interest'."
In Jose Da Costa v. Bascora Sadasiva Sinai Narcornim, (1976) 2 SCC 917, the Apex Court laid down as follows:(SCC p.925, para 31) "Before ascertaining the effect of the enactments aforesaid passed by the Central Legislature on pending suits or appeals, it would be appropriate to bear in mind two well-established principles. The first is that while provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment(see Delhi Cloth and General Mills Co.Ltd. v. CIT, AIR 1927 PC 242) The second is that a right of appeal being a substantive right the institution of a suit carries with it the implication that all successive appeals available under the law then in force would be preserved to the parties to the suit throughout the rest of the career of the suit. There are two exceptions to the application of this rule, viz., (1) when by competent enactment such right of appeal is taken away expressly or impliedly with retrospective effect and (2) when the court to which appeal lay at the commencement of the suit stands abolished(see Garkapatti Veeraya v. N.Subbah Choudhury, AIR 1957 SC 540 and Colonial Sugar Refining Co.Ltd. v. Irving, 1905 AC 369) Halsbury's Laws of England(Fourth Edn. Vol.44, para 925) states:
"The presumption against retrospection does not apply to legislation concerned merely with matters of procedure or of evidence; on the contrary, provisions of that nature are to be construed as retrospective unless there is a clear indication that such was not the intention of Parliament."
The Apex Court in the case of Commissioner of Wealth Tax, Meerut vs. Sharvan Kumar Swarup & Sons, (1994) 6 SCC 623 had occasion to consider as to whether Rule 1BB of the Wealth Tax Rules, 1957, which came to be inserted by the Wealth Tax (Amendment) Rules, 1979 w.e.f. 1.4.1979 would be applicable to all proceedings pending at its enactment. The relevant part of the Rule reads as under:
"1-BB.(1) For the purposes of sub-section (1) of Section 7, the value of a house which is wholly or mainly used for residential purposes shall be aggregate of the following amounts, namely:
(a) the amount arrived at by multiplying the net maintainable rent in respect of the part of the house used for residential purposes by the fraction 100/8; and
(b) the amount arrived at by multiplying the net maintainable rent in respect of the remaining part of the house, if any, by the fraction 100/9:
Provided that in relation to a house which is built on leasehold land, this sub-rule shall have effect as if for the fraction 100/8 in clause (a) or as the case may be, the fraction of 100/9 in clause (b), the fractions 100/9 and 100/10, respectively, had been substituted."
The Apex Court, in paragraphs 18, 23 to 25 of the judgment, which are reproduced below, has held as follows:
"18. Procedural law, generally speaking, is applicable to pending cases. No suitor can be said to have a vested right in procedure. It must, however, be noted that a provision can be partly substantive and partly procedural."
"23.We may not turn to the scope and content of Rule 1-BB. The said rule merely provides a choice amongst well-known and well-settled modes of valuation. Even in the absence of Rule 1-BB it would not have been objectionable, nor would there by any legal impediment, to adopt the mode of valuation embodied in Rule 1-BB, namely, the method of capitalisation of income on a number of years' purchase value. The rule was intended to impart uniformity in valuations and to avoid vagaries and disparities resulting from application of different modes of valuation in different cases where the nature of the property is similar."
"24. Rule 1-BB thus partakes of the character of a rule of evidence. It deems the market value to be the one arrived at on the application of a particular method of valuation which is also one of the recognised and accepted methods. Even if a law raises a presumption and renders the presumption irrebuttable it is yet in the domain of the law of evidence. In Izhar Ahmad Khan case, it was pointed out by this Court: (SCR pp.258-59) "It would be noticed that as in the case of rebuttable presumption, so in the case of an irrebuttable presumption, the rule purports to assist the judicial mind in appreciating the existence of facts. In one case the probative value is statutorily strengthened but yet left open to rebuttal, in the other case, it is statutorily strengthened and placed beyond the pale of rebuttal. Considered from this point of view, it seems rather difficult to accept the theory that whereas a rebuttable presumption is within the domain of the law of evidence, irrebuttable presumption is outside the domain of that law and forms part of the substantive law."
"25. On a consideration of the matter we are persuaded to the view that Rule 1-BB is essentially a rule of evidence as to the choice of one of the well accepted methods of valuation in respect of certain kinds of properties with a view to achieving uniformity in valuation and avoiding disparate valuations resulting from application of different methods of valuation respecting properties of a similar nature and character. The view taken by the High Courts, in our opinion, cannot be said to be erroneous."
In the case of R.Kapilanath (supra), the Apex Court in paragraph 4 of the Report has held as follows:
"....Where a change in forum is brought during the pendency of the proceedings, the correct approach to be adopted in such cases is that a new law bringing about a change in forum does not affect pending actions unless a provision is made in it for change over of proceedings or there is some other clear indication that pending actions are affected. Moreover by the time the amendment came into force, the proceedings before the Munsif had already stood concluded and the case was pending at the stage of revision before the Additional District Judge..."
In the case of Spice Telecom, Bangalore (supra) the Apex Court has held that the subsequent notification defining the scope of ancillary equipment is effective only from 1st March, 2002 and does not have retrospective effect and in the absence of any express provision contained in the notification ordinarily it cannot be presumed that the same is retrospective in nature and the Revenue has failed to show that the subsequent notification is clarificatory in nature.
In the case of Mysore Electricals Industries Ltd.(supra) the Apex Court has held that an approved classification list when it is proposed to be revised, the re-classification can take effect only prospectively from the date of communication of show cause notice proposing re-classification.
In the case of Suchitra Components Ltd.(supra), the Apex Court has followed its earlier in the case of Mysore Electricals Industries Ltd.(supra).
In the case of I.T.C.Ltd.(supra), the Tribunal has held that the notification imposing Special Excise Duty and enhancing rate of Basic and Additional Excise Duties on Cigarettes would come into effect from the date of issuance thereof i.e.25th March, 1985 by referring Section 38 of Central Excise Act, 1944 and Section 5 of the General Clauses Act.
In the case of Kamakhya Steels (P) Ltd.(supra), the Tribunal had applied the amendment made in Rule 57G and 57T as per Notification No.7/99 dated 9th February, 1999 and the Circular dated 23rd February, 1999 and directed the Jurisdictional Assistant Commissioner to examine the admissibility of Modvat credit.
In the case of A.B. Card Clothing (Pvt) Ltd.(supra), the Punjab and Haryana High Court has held that no substantial question of law arises where the Tribunal has given benefit of the amended Rule 57G (11) and 57T(11) of the Rules and the Circular dated 23rd February, 1999. The same view has been taken by the Punjab and Haryana High Court in the case of JCT Ltd.(supra) We find that the Madhya Pradesh High Court in the case of Union of India vs. Kataria Wires Ltd., 2009(241)E.L.T.31(M.P.), has held that the claim cannot be defeated in the cases where original and the duplicate copies are lost if the receipt of the goods, their use in the manufacture of final product and duty paid character of inputs is not disputed. The paragraph 4 of the judgment is reproduced below:-
"4. We have perused the impugned order, heard the learned counsel and carefully considered the requirement of Rule 57G of the Rules. Though Rule 52A in Sub. R. 3 lays down requirement of production of original and in absence thereof, a duplicate, one cannot oblivious of the fact that in some cases if original and the duplicate, both are lost, the claim cannot be defeated especially when department did not dispute receipt of the goods, their use in the manufacture of final product and duty paid character of inputs. Since the duty was paid for' the inputs and inputs were used in captive consumption for manufacture of final product, merely because original and duplicate copy as required by Rule 52A/ C, (i)(ii) were lost, the claim could not have been defeated especially when certified copy duly issued by the jurisdictional Superintendent was produced. Under these circumstances, we do not perceive any error in the order passed by the CESTAT. Accordingly, we do not find that the case involves any substantial question of law, much less the question formulated by the appellant. The appeal is dismissed summarily."
In the case of Union of India vs. Bharat Aluminium Co.Ltd., 2011(263) E.L.T.48(Chhattisgarh), the Chhattisgarh High Court has held that non-observance of a procedural condition of a technical nature is condonable whereas non-observance of a substantive condition would disentitle the assessee any exemption and refund. The paragraph 13 of the judgment of the Chhatishgarh High Court is reproduced below:
"13. Modvat credit was denied to the assessee by the Joint Commissioner and confirmed by the Commissioner (Appeals) only on the basis of information furnished by the Superintendent, Central Office, Vishakhapatna, on 9-8-1999 to the effect that the supplier did not submit the subject invoices along with their monthly return and details of the goods received and sold were not entered in RG 23D Register. The above procedural lapse, if any, is attributable to the supplier. The ratio of law laid down by the Hon'ble Supreme Court in Mangalore Chemicals & Fertilizers Ltd.(supra) is not applicable to the facts of the present case as in the cited judgment, while considering the entitlement for exemption and refund, it was held that there is a distinction between non-observance of a procedural condition of a technical nature and non-observance of a procedural condition of a technical nature and non-observance of a substantive condition. Non-observance of procedural condition of technical nature is condonable, whereas non-observance of substantive condition would disentitle the assessee any exemption and refund under the Statute. In the present case, the Tribunal has held that there is no dispute regarding duty payment and use of goods in manufacture of final product and the credit has been denied only on the ground that necessary particulars were not mentioned in the invoices and the supplier, which issued those invoices, did not enter the particulars in their statutory records. The appeal has been allowed in view of the amendment made in Rule 57G and the Board's Circular, which was issued in light of the amended rules"
Applying the principles laid down by the Apex Court in the aforesaid cases to the facts of the present case, we are of the considered opinion that the amendment made in Rules 57G of the Rules by insertion of sub-rule (11) vide Notification No.7/99 dated 9th February, 1999 relates to procedure for availing Modvat credit and does not affect any substantive right. The view which we are taking is similar with the view taken by the Punjab & Haryana High Court as also Madhya Pradesh High Court and Chhatisgarh High Court as also the Circular issued by the Central Board of Excise and Customs dated 23rd February, 1999.
From the conjoint reading of the Rules 52A, 57G and the amendment made by Notification No.7/99 dated 9th February, 1999 by which sub-rule (11) was inserted in Rule 57G, we are of the considered opinion that filing of the documents for availing Modvat credit is only a procedural matter and the amendment made vide Notification No.7/99 dated 9th February, 1999 which inserted sub-rule (11) in Rule 57G the position was made clear that Modvat credit should not be denied only on the ground that the documents referred to in sub-rule (2) does not strictly comply with the said Rule but contains the details of payment dues, description of goods, assessable value, name and address of the factory or warehouse etc. This position has also been clarified by the Central Board of Excise and Customs by issuing a circular in exercise of its power under Section 37B of the Act and made it applicable to all pending cases.
The submission of Sri Shukla that the Notification No.7/99 dated 9th February, 1999 would come into effect on the date of its publication i.e. 9th February, 1999 only, may be correct but the benefit of that Notification as directed by the Central Board of Excise and Customs has been extended to all the pending cases. As already mentioned hereinbefore the provision of sub-rule (2) is procedural for availing Modvat credit, we are of the considered opinion that the benefit of sub-rule (11) is available to the respondent-assessee.
So far as the second question is concerned we may mention here that the learned counsels did not advance any argument on the same. Hence we are not called upon to decide it.
We, therefore, hold that the Tribunal had rightly given benefit of Modvat credit to the respondent-assessee and the order of the Tribunal does not suffer from any legal infirmity.
In view of the foregoing discussion we do not find any merit in this appeal. The appeal fails and is hereby dismissed.
Order Date :- 6.2.2012 mt