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2012 (11) TMI 864 - AT - Central ExciseCenvat credit of differential duty paid by the supplier based on the certificate issued by the superintendent of central excise additional duty - procedure for availing benefit - Certificates issued by Superintendent under Rule 57E(3) Central Excise Rules, 1944 for taking credit - old MODVAT provisions (Rules 57A to 57U) were replaced by new provisions (Rules 57AA to 57AK) through amendment of the Central Excise Rules alleged that certificates issued/revalidated by the Superintendent were not documents prescribed under Rule 9 for the purpose of availment of CENVAT credit Held that - Right which accrued under Rule 57A for taking MODVAT credit of the differential duty paid on inputs, on the basis of Rule 57E certificates, which were valid documents prescribed for the purpose under Rule 57G (3) prior to the repeal of Rule 57E was protected by Section 38A of the Central Excise Act - no dispute about satisfaction of conditions under Rule 57A ibid for claiming substantive benefit of Modvat credit; these were remained unchanged and new Rules only changed procedure, providing supplementary invoice instead of certificate of Superintendent - Department objection based on procedural change could not succeed as substantive right cannot be defeated on strict construction of procedural provisions. Effect of substitution of Modvat Rules - Validation provisiosn of section 38A - held that - The dispute regarding Rule 57E certificates originated with the Superintendent s letter dated 14-1-2000 and the same has remained alive since then. This very dispute is awaiting our decision. Therefore there is no substance in the submission made by the learned JCDR that there was no dispute with reference to Rule 57E when Rules 57A to 57U (including Rule 57E) were replaced by rules 57AA to Rules 57AK with effect from 1-4-2000 under Notification No. 11/2000-C.E. (N.T.), dated 1-3-2000 as modified by Notification No. 27/2000-C.E. (N.T.), dated 31-3-2000. The question whether IPCL was entitled to use the certificates for taking MODVAT credit of the differential duty paid by ONGC, apparently, originated in January 2000 and the same has ever remained alive till date. But this aspect is not significant insofar as clause (c) of Section 38A of the Act is concerned, though it might be relevant for clause (e) of the Section. In our considered view, it is not clause (e) (with reference to which the learned JCDR has argued) but clause (c) that is relevant to the context. By virtue of clause (c) of Section 38A of the Act, RIL can claim to enforce the right which accrued to them prior to the aforesaid amendment of Rules 57A to 57U (MODVAT Rules). Thus RIL has right to take MODVAT credit of the differential duty paid by ONGC as this right is saved by Section 38A of the Central Excise Act. Absence of supplementary Invoice - held that - The new rules prescribed a supplementary invoice in lieu of such certificate. In the absence of a transitional provision enabling a manufacturer of final product, who obtained Rule 57E certificate prior to 1-4-2000, to use the certificate for taking MODVAT credit on his inputs after the said date, the principle of restitution embodied in Section 144 of the Code of Civil Procedure and applied by the Supreme Court in both customs and excise cases can, in our opinion, be invoked to dispense justice in the present case. - The revalidation and reissue of the certificates by the Superintendent in the wake of the Tribunal s decision in favour of ONGC on the question whether they had indulged in any fraud, collusion or suppression or misstatement of facts or contravention of law with intent to evade payment of duty must be seen as restitution of their right to have such certificates under Rule 57E. It goes without saying that IPCL could also claim restitution of their right to take MODVAT credit on the strength of such certificates. Tribunal is empowered to safeguard the legal consequences of its own earlier order which was accepted by both the sides which cannot be termed grant of equitable relief . Reversal of cenvat credit - reversal of credit had been made under protest Held that - IPCL (RIL) promptly reversed the credit, although under protest, when they were directed to reverse it. Later on, when the certificates, which were issued by the Superintendent having jurisdiction over ONGC s factory and subsequently cancelled by him, were revalidated by the Superintendent as ordered by the Assistant Commissioner, IPCL used the documents for restoring the credit in their MODVAT account. On these facts, no blameworthy conduct can be attributed to IPCL - in favour of the parties - Revenue s appeal dismissed
Issues Involved:
1. Validity of the revalidation of Rule 57E certificates. 2. Applicability of sub-rule (3) of Rule 57E. 3. Entitlement of MODVAT credit by IPCL (now RIL) based on the revalidated certificates. Detailed Analysis: 1. Validity of the revalidation of Rule 57E certificates: The department argued that when the Assistant Commissioner passed Order-in-Original No. 109 dated 13-9-2004, there was no provision in the Central Excise Act or Rules for the issuance or revalidation of such certificates. The department contended that the revalidation of the certificates and the appellate Commissioner's order upholding the Assistant Commissioner's decision were unsustainable for this reason. The department also argued that the certificates were initially cancelled by the Superintendent on 14-1-2000 and that ONGC did not appeal against this cancellation, thus accepting it. 2. Applicability of sub-rule (3) of Rule 57E: Sub-rule (3) of Rule 57E stipulates that additional credit shall not be allowed where the additional amount of duty became recoverable due to fraud, collusion, willful misstatement, suppression of facts, or contravention of any provisions with intent to evade payment of duty. The department argued that the Tribunal's order dated 28-5-2004 upholding the levy of interest under Section 11AB indicated that the differential duty was due to suppression of facts by ONGC, thus attracting sub-rule (3) of Rule 57E. However, the Tribunal noted that its order dated 28-5-2004 did not address the issue of liability to pay the differential duty on the grounds of fraud or suppression of facts. It also noted that the Tribunal had explicitly found no element of fraud, collusion, or willful misstatement on ONGC's part, which was accepted by the department. 3. Entitlement of MODVAT credit by IPCL (now RIL) based on the revalidated certificates: The Tribunal held that the right to take MODVAT credit accrued to IPCL (RIL) when ONGC paid the differential duty on the inputs supplied to them. This right was protected by Section 38A of the Central Excise Act, which ensures that any right accrued under a repealed rule is not affected by such repeal. The Tribunal also noted that the procedural provisions of Rule 57E should not defeat the substantive right to take MODVAT credit under Rule 57A. The Tribunal referenced the case of Bell Ceramics, where it was held that Section 38A protected actions taken under the erstwhile rule, allowing the use of Rule 57E certificates for MODVAT credit even after the rule's repeal. Additionally, the Tribunal applied the principle of restitution, ensuring that the substantive right to take MODVAT credit was not defeated by procedural changes. Conclusion: The Tribunal concluded that sub-rule (3) of Rule 57E was not applicable as there was no finding of fraud, collusion, or suppression of facts against ONGC. It also held that the revalidation of the certificates was valid and that IPCL (RIL) was entitled to take MODVAT credit based on the revalidated certificates. The Tribunal dismissed the Revenue's appeal and allowed RIL's appeal, holding that the MODVAT credit in question was admissible to them.
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