2011 (3) TMI 4 - SC - Central Excise

Retrospective amendment legislative intention - Cenvat / Modvat Credit on HSD period 16.3.1995 to 1.4.2000 Held that - Since the product High Speed Diesel oil was excluded specifically from the list of eligible inputs in the notifications, there was no question of creation of any right in favour of the appellant to avail such benefit. Therefore, contention that a vested or accrued right is sought to be taken away by giving retrospective effect is without any merit. Consequently, in the facts of this case we are not required to answer whether a vested or accrued right could be taken away with retrospective effect. Further on a conjoint reading of all the notifications it is clearly established that the intention of the Government all along was to exclude the appellants from getting the benefit of the MODVAT credit, therefore, the contentions that the Finance Act violates the vested right is without any basis. The various decisions referred to and relied upon by the counsel appearing for the appellants in support of his contention that the vested right created in their favour could not have been divested by the respondent retrospectively is found to be based on misreading of the language of the aforesaid notifications which do not support, but in fact destroy the very basis of the case of the appellants. No credit on HSD

Issues Involved:
1. Entitlement to credit of duty paid on High Speed Diesel oil during the period from 16th March 1995 to 1st April 2000.
2. Interpretation and application of various notifications and rules under the Central Excise Rules, 1944.
3. Validity and retrospective effect of Section 112 of the Finance Act, 2000.
4. Whether MODVAT credit is an accrued and vested right.
5. The impact of judicial pronouncements on legislative changes.

Detailed Analysis:

1. Entitlement to Credit of Duty Paid on High Speed Diesel Oil:
The primary issue was whether the appellants were entitled to credit of duty paid on High Speed Diesel (HSD) oil used for generating electricity for captive consumption in their factories during the specified period. The appellants argued that HSD oil was used as an input for generating electricity, which in turn was used in the manufacture of final goods. They submitted declarations under Rule 57G and Rule 57H of the Central Excise Rules, 1944, intending to avail the credit of duty on HSD oil. However, the Assistant Commissioner of Central Excise and subsequent authorities denied the MODVAT credit on HSD oil, citing that it was not admissible under Rule 57A.

2. Interpretation and Application of Notifications and Rules:
The appellants contended that the High Court failed to distinguish between an accrued and vested right due to the operation of the Rules. They argued that MODVAT credit is an accrued and vested right governed by the prevailing Rules and cannot be taken away retrospectively. The respondents countered that the relevant notifications and rules explicitly excluded HSD oil from the list of eligible inputs for MODVAT credit. Notifications issued on 1st March 1994, 16th March 1995, and subsequent amendments specifically excluded HSD oil from eligible inputs. The court concluded that the appellants were not entitled to credit of duty paid on HSD oil as it was explicitly excluded from the list of eligible inputs under the relevant notifications.

3. Validity and Retrospective Effect of Section 112 of the Finance Act, 2000:
Section 112 of the Finance Act, 2000, explicitly denied credit of any duty paid on HSD oil during the specified period. The appellants argued that this retrospective denial was burdensome and oppressive, violating Article 14 of the Constitution of India. The respondents maintained that the Finance Act was explanatory in nature, clarifying the legal position and not a validating Act. The court upheld the validity of Section 112, stating that the legislative intention was always to exclude HSD oil from MODVAT credit, and the Finance Act merely clarified this position.

4. Whether MODVAT Credit is an Accrued and Vested Right:
The appellants claimed that MODVAT credit was an accrued and vested right that could not be taken away retrospectively. The court, however, held that since HSD oil was specifically excluded from the list of eligible inputs, no vested right to avail MODVAT credit was created. The court referenced previous decisions, including Commissioner of Central Excise, Hyderabad vs. Associated Cement Companies Ltd. and Commissioner of Central Excise, Meerut vs. Rama Vision, which established that no credit was admissible on duty paid on HSD oil during the specified period.

5. Impact of Judicial Pronouncements on Legislative Changes:
The appellants cited various judicial pronouncements that had allowed MODVAT credit on HSD oil. However, the court noted that these decisions did not consider the specific exclusions in the notifications issued under Rule 57A. The court emphasized that legislative intent, as clarified by the Finance Act, 2000, was to exclude HSD oil from MODVAT credit. The court referenced the decision in Shri Prithvi Cotton Mills Ltd. vs. Broach Borough Municipality, which stated that validating statutes must remove the cause of invalidity to be effective. The court concluded that the Finance Act, 2000, effectively clarified and validated the exclusion of HSD oil from MODVAT credit.

Conclusion:
The Supreme Court dismissed the appeals, holding that the appellants were not entitled to credit of duty paid on High Speed Diesel oil during the specified period. The court affirmed the validity and retrospective effect of Section 112 of the Finance Act, 2000, and concluded that no vested right to avail MODVAT credit on HSD oil was created. The court emphasized that legislative intent and the relevant notifications consistently excluded HSD oil from the list of eligible inputs for MODVAT credit.

← Previous Next →