Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, Haldia vs M/S. Shri Badrinarain Alloys & Steels ... on 6 September, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No.E/143/2007, CO-32/2007
(Arising out of Order-in-Appeal No.28/HAL/06 dated 30.10.2006 passed by the Commissioner (Appeal-I), Central Excise, Kolkata)
FOR APPROVAL AND SIGNATURE
Honble Shri H.K.Thakur, Member (Technical)
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
Commissioner of Central Excise, Haldia
Applicant (s)/Appellant (s)
Vs.
M/s. Shri Badrinarain Alloys & Steels Ltd.
Respondent (s)
Appearance:
Sri A.Roy, Suptd.(AR) for the Appellant (s) Sri R.S.Bajaj, CA for the Respondent (s) CORAM:
Honble Shri H.K.Thakur, Member (Technical) Date of Hearing:- 06.09.2016 Date of Pronouncement :- 08.09.2016 ORDER NO.FO/A/75996/2016 Per Shri H.K.Thakur
1. This appeal has been filed by the Revenue against Order-in-Appeal No. 28/HAL/06 dated 30.10.2006 passed by the Commissioner (Appeal-I), Central Excise, Kolkata as First Appellate Authority.
2. Sri A.Roy, Suptd.(AR) appearing on behalf of the Revenue argued that appellant has taken Modvat credit of capital goods which started commercial production only on 16.09.1997. That Sr.No.(1) of Table contained in Rule 57Q(1) of the Central Excise Rules, 1944; in the column Description of final Products, was amended by Notification No.33/97-C.E.(N.T.), dated 01.08.1997 to exclude capital goods credit if the same are used in the manufacture of Non-Alloy Steel Ingots and billets. That since on the date of commencing commercial production debarring clause was existing in table to Rule-57Q(1) of the Central Excise Rules, 1944, therefore, no capital goods credit was admissible to the appellant who was availing compounded levy scheme under Section 3A of the Central Excise Act, 1944. That further Rule-57Q(7) also prohibits taking of cenvat credit on capital goods received on or after 01.01.1996. That period of dispute when capital goods were received is from December,1996 to August, 1997. That as per Rule-57S(11) of Central Excise Rules, 1944 credit lying unutilized on 01.08.1997 shall lapse and shall not be allowed to be utilized. That capital goods credit cannot be taken during compounded levy period 01.09.1997 to 31.03.2004 as per para-5 of CBEC Circular No.522/18/2000 dated 31.03.2000.
3. Shri R.S.Bajaj (CA) appearing on behalf of the respondent argued that as per para-9 of CBEC Circular No.345/2/2000-TRU dt. 29.08.2000 credit of capital goods credit was admissible. That First Appellate Authority has correctly relied upon Apex Courts decision in the case of Eicher Motors Ltd.& Anr. v. Union of India &Ors. [1999 -(XC2)-GJX-0387-SC]. Learned CA also relied upon case law Nahar Industrial Enterprises Ltd.-vs.-CCE, Chandigarh[2004-(XC2)-GJX-2918-CESTAT].
4. As a counter to the arguments made by the Respondents CA learned AR relied upon the following case laws where such credit has been disallowed:
(i) Tijiya Steel (P) Ltd.-vs.-Commr. Of Central Excise, Kolkata-II[2003(160)E.L.T.167(Tri.-Kolkata)].
(ii) Coral Cosmetics Ltd.-vs.-Union of India [2008(225)E.L.T. 412(Bom.)] 4.1. Learned AR made the bench go through paras 30 to 36 of the case law of Coral Cosmetics Ltd.-vs.-UOI (Supra) to argue that the case law of Eicher Motors Ltd. & Anr. Vs. UOI & Ors.(Supra) has been considered by Bombay High Court and has been distinguished. That in view of this case law credit of capital goods is not admissible to the respondent and Commissioner (Appeal) order is required to be set aside.
5. Heard both sides and perused the case records. The issue involved is whether respondent is eligible to take Modvat Credit on capital goods installed and commissioned on 16.09.1997 when restricting clause got inserted in Table to Rule-57Q(1) under Notification No.33/97-C.E.(N.T.) dated 01.08.1997. Appellant submitted a Modvat declaration for taking credit on capital goods received upto 31.07.1997 for a credit of Rs.23,23,786.68. Appellant also received capital goods after 31.07.11997 involving Modvat credit of Rs.89,921/-. Total disputed credit is Rs.24,13,708.68 with respect to capital goods received prior to installation and commissioning done on 16.09.1997.
6. It is the case of the Revenue that on the date of installation compounded levy scheme was applicable to appellant, therefore, capital goods credit is not admissible and even if it was admissible prior to 16.09.1997 the same is deemed to have lapsed by virtue of Rule 57S(11) of the Central Excise Rules, 1944. Sr.No.1 of the table to Rule 57Q(1) of the Central Excise Rules, 1944, as amended by Notification No. 33/97-C.E.(N.T.) dated 01.08.1997 read as follows:
TABLE S.No. Description of capital goods falling within the Schedule to the Central Excise Tariff Act, 1985(5 of 1986) and used in the factory of the manufacturer Description of final products (1) (2) (3)
1.
All goods falling under heading Nos.82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985(5 of 1986), other than the following, namely:-
(i) all goods falling under Chapter24;and
(ii) all goods falling under heading Nos.36.05 or 37.06.
(iii) ingots and billets of non-alloy steel falling under sub-heading Nos.7206.90 and 7207.90, manufactured in an induction furnace unit , whether or not any other goods are produced in such induction furnace, and hot re-rolled products of non-alloy steel falling under sub-heading No.s 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 on which duty is paid under section 3A of the Central Excise Act, 1944 (1 of 1944).] 6.1. Rule 57Q(7) of the Central Excise Rules 1944 read as follows:
(7) The credit of the specified duty on capital goods [other than those capital goods covered under S.Nos.5,7,10,11 and 12 of column (2) of the Table below sub-rule(1)] and received in the factory on or after the 1st day of January, 1996, shall not be taken on a date prior to the date on which such capital goods are installed or, as the case may be, used for manufacture of excisable goods, in the factory of the manufacturer as certified by such manufacturer or a person designated by him for this purpose. 6.2. Rule 57S(11) of the Central Excise Rules, 1944 read as follows:
RULE 57S. Manner of utilization of the capital goods and the credit allowed in respect of duty paid thereon.-
(1) .
(2) .
(3) .
(4) .
(5)..
(6)..
(7)..
(8).. (9)..
(10) [(11) Notwithstanding anything contained in sub-rule (3) of rule 57Q, any credit of specified duty lying unutilised,-
(a) on the first day of August, 1997, with the manufacturer of ingots and billets of non-alloy steel falling under sub-heading Nos.7206.90 and 7207.90 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), and who is required to pay duty under section 3A of the Central Excise Act, 1944 (1 of 1944), shall lapse and shall not be allowed to be utilized for payment of duty on any excisable goods, whether cleared for home consumption or for export;
(b) on the first day of August, 1997, with the manufacturer of hot re-rolled products of non-alloy steel falling under sub-heading Nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), and who is required to pay duty under section 3A of the Central Excise Act, 1944 (1 of 1944), shall lapse and shall not be allowed to be utilised for payment of duty on any excisable goods, whether cleared for home consumption or for export.]
7. Amendments/insertions to Sr.No.1 of Table to Rule 57Q(1) and Rule 57 S(11) were made simultaneously under Notification No. 33/97-C.E.(N.T.) dated 01.08.1997. From the above provisions of MODVAT scheme under Central Excise Rules, 1994 it transpires that intention of the legislature behind above amendments was not to allow credit on capital goods if received by an assessee, who is paying duty on Iron and Steel finished goods under compounded levy scheme as per Section 3A of the Central Excise Act, 1944. Further as per Rule 57 S (11), if any, credit is lying unutilised the same shall lapse.
8. First Appellate Authority has relied upon Apex Courts decision in the case of Eicher Motors Ltd. vs. Union of India (Supra) which was delivered when Section 37(1) (xxviii) was not existing. It was introduced in the Central Excise Act, 1944 as per Sections 131 and 132 of the Finance Act, 1999 with retrospective effect. Learned AR has correctly relied upon the case law of Coral Cosmetics Ltd. vs. Union of India (Supra) where Bombay High Court has noted Apex Courts decision in the case of Eicher Motor Ltd. vs. Union of India (Supra) and made following observations /distinction :-
30.?Before we proceed to consider the contentions raised on behalf of the petitioner, it would be useful to reiterate the circumstances leading to the enactment of the impugned validating legislation. The Apex Court, in the case of Eicher Motors Ltd. v. Union of India (cited supra) noticed infirmities and vitiating factors leading to the absence of power to frame rule enabling lapsing of credit balance in the Modvat account. The Apex Court had held that the assessee had a vested right in the credit balance which was not taken away by substantive legislation. This lacunae came to be removed by Sections 131 and 132 of the Finance Act, 1999 and said sections have only made small repairs by adopting permissible mode of legislation.
31.?The Central Government by Notification No. 57/97-C.E. (N.T.) dated 18th September, 1997 amended Rule 57-F by inserting clause (e) in sub-Rule (17) whereby unutilised Modvat credit lying to the credit of the assessee as on 1st October, 1997 was allowed to lapse. Section 37(2)(xxviii) of the said Act read with Rule 57-F(17)(e) of the Rules as amended by Sections 131 and 132 of the Finance Act with retrospective effect have provided legislative teeth to make it abundantly clear that credit of duty lying unutilised as on 1st October, 1997 shall stand lapsed.
32.?The above amendment has changed the entire basis or foundation of the judgment rendered in Eicher Motors Ltd. Case (supra) which was well within the legislative competence of the Parliament. In other words, Sections 131 and 132 of the Finance Act have removed the illegality pointed out by the Supreme Court in the case of Eicher Motors Ltd. (supra), wherein the foundation on which the decision was based, has been fundamentally altered by the said provision. The Parliament, inter alia; validated clause (e) of sub-Rule (17) of Rule 57 of the said Rules with retrospective effect.
33.?It is no doubt true that in Eicher Motors Ltd. (supra) the Apex Court ruled that the Modvat credit standing to the credit of the assessee on 31st September, 1997 was a vested right; which was accrued in favour of the petitioner or, at any rate, it was an existing right. It is a settled principle of interpretation of statues that a vested right or even an existing right, including a right of action is not affected or allowed to be taken away unless it is so affected or taken away by the enactment expressly or by necessary implication. It is no doubt true that a declaratory or a procedural enactment which is, normally, held to be retrospective. A remedial Act, on the contrary, is not necessarily retrospective, it may be either enlarging or restraining and it takes effect prospectively, unless it has retrospective effect by express terms or necessary intendment, [see AIR 1960 S.C. 12 (Para 29) - The Central Bank of India and others v. Their Workman and also AIR 1973 S.C. 1227 - The Workmen of M/s. Firestone Tyre and Rubber Co. of India Pvt. Ltd. v. The Management and others.] Sometimes it becomes necessary to examine whether the enactment has a prospective or retrospective effect so as to affect the existing or vested right which has accrued to the subject prior to the enactment. Examined from this angle, it is clear from the text of Sections 131 and 132 of the Finance Act, 1999 that it has been specifically given a retrospective effect w.e.f. 1-10-1997 so as to effect existing or vested right which had accrued to the petitioner prior to the said enactment. The defect in the legislation, which was noticed by the Apex Court, stood removed by virtue of the said amendment. 8.1. Further Bombay High Court in the above case law made following observations in paragraphs 34 to 36 :-
34.?In Allied Motors (P) Ltd. v. CI.T., (1997) 3 S.C.C. 472, certain unintended consequences flowed from a provision enacted by Parliament. There was an obvious omission. In order to cure the defect, a proviso was sought to be introduced through an amendment. The Court held that literal construction was liable to be avoided if it defeated the manifest object and purpose of the Act. The rule of reasonable interpretation should apply.
A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be rad into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.
35.?In the case of Krishnamurthi & Co. v. State of Madras, (1973) 31 STC 190, the Apex Court observed:
The object of such an enactment is to remove and rectify the defect in phraseology or lacuna of other nature and also to validate the proceedings, including realisation of tax, which have taken place in pursuance of the earlier enactment which has been found by the court to be vitiated by an infirmity. Such an amending and Validating Act in the very nature of things has a retrospective operation. Its aim is to effectuate and carry out the object for which the earlier principal Act had been enacted. Such an amending and Validating Act to make small repairs is a permissible mode of legislation and is frequently resorted to in fiscal enactments.
36.?In the above view of the matter, petitioner stands denuded of its vested right by virtue of the retrospective amendment. The contention raised on behalf of the petitioner that it does not take away vested right is devoid of any substance.
9. As has been observed in paragraph-7 above the intention of the legislature was not to allow Modvat credit with respect to capital goods during the period of compounded levy or if any credit is lying unutilised before the compounded levy period the same shall lapse. The ratio laid by Bombay High Court in para- 34,35 and 36 of case law Coral Cosmetics Ltd. vs. Union of India (Supra), after relying upon Apex Courts decisions, squarely applies to the existing facts.
10. Reliance placed by the respondent on the case law Nahar Industrial Enterprises Ltd. vs. CCE, Chandigarh (Supra) will not be of any help to the respondent as lapsing clause was not existing in Notification No.19/2000 dt. 01.03.2000 and has not been discussed so by CESTAT, Delhi. Secondly, the benefit of ratio laid by the Bombay High Court in the case of Coral Cosmetics Ltd. vs. Union of India (Supra) was not available to CESTAT, Delhi while deciding the case of Nahar Industrial Enterprises Ltd. vs. CCE, Chandigarh (Supra).
11. In view of the above observations and settled proposition of law Cenvat Credit of Rs.24,13,708.68/- has been wrongly allowed by the First Appellate Authority. Accordingly, appeal filed by the Revenue is allowed by setting aside OIA No.28/HAL/06 dt. 30.10.2006 and restoring OIO No.254/Addl. Commissioner/CE/Haldia/Adjn/2006 dt. 23.03.2008 passed by the Adjudicating Authority.
(Pronounced in the open court on 08.09.2016.) SD/ (H.K.Thakur) MEMBER(TECHNICAL) SS 1 Appeal No.E/143/07, CO-32/07