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2017 (6) TMI 1105 - HC - Central ExciseRecovery of MODVAT credit - effect of amendment in rate of credit - Furnace oil - The Appellant/Assessee availed of MODVAT credit in respect of specified duty , by relying upon N/N. 5/94-CE (NT), dated 01.03.1994. The Notification dated 01.03.1994 was, however, amended, by N/N. 14/97-CE(NT), dated 03.05.1997. The net effect of the said amendment was that the credit on inputs, which, inter alia, included Furnace oil was restricted to 10% ad valorem - Whether the demand for recovery of MODVAT credit with interest as per N/N. 14 of 1997 CE(NT) dated 03.05.1997 read with Section 87 of the Finance Act, 1997 and Rule 57-I of the Central Excise Rules and Section 11A of the Central Excise Act for the period 23.07.1996 to 28.02.1997 is justified? Held that - the assertion made on behalf of the Appellant/Assessee that neither the later notification dated 03.05.1997, whereby, the credit was restricted to 10% ad valorem, nor the provisions of Section 87 would impact the Appellant/Assessee, is a submission, which, in our view, is completely unsustainable - As a matter of fact, based on the restriction brought about by the latter notification, i.e., notification dated 03.05.1997, the Appellant/Assessee, in its reply dated 26.03.1998, had indicated to the Department that it had expunged credit amounting to ₹ 2,54,701/- for the period spanning between 03.05.1997 and 19.06.1997. In this behalf, the Appellant/Assessee had given reference to the notification dated 03.05.1997. Therefore, in our view, the Appellant/Assessee cannot contend to the contrary, as it would be inconsistent with the record obtaining in the case. A careful comparison of Section 51(2)(d) of the Finance Act, 1982, with Section 87(2)(c) of the Finance Act, would show that, while, in the latter, a time frame of ninety (90) days from the date of enactment of the Bill is provided, as the period, within which, recovery of excise credit is required to be made, no such period has been provided in the former. Section 51(2)(d) of the Finance Act, 1982, simply, states that recovery shall be made of all such duties of excise, which have not been collected, or, those, which have been refunded, but ought to have been collected, or, even those that would not have been refunded, in case, amendments made, as referred to in Sub-section (1) of Section 51, had been in force at all material times - under clause (c) of Sub-section 2 of Section 87 of the Finance Act, apart from providing a period within which, recovery is to be made, it is also indicated that in case of non-payment of such excise credit, within the prescribed period, the same would be recovered with interest at the rate of 18% per annum. The interest, as per the said provision, would run from the date immediately following the expiry of the prescribed period of ninety (90) days. The interest, in effect, is payable from that date, till the date of recovery of excise credit. One cannot, but hold that Section 11A of CE Act, would have no application, while, construing the impact of Section 87 of the Finance Act - the recovery sought to be made is time barred, is unsustainable and is, accordingly, rejected. Section 87 of the Finance Act impacts not only the notification dated 03.05.1997, operable with retrospective effect, i.e., from 23.07.1996, but also validates any action or, thing taken or done or purported to have been taken or done on or after 23.07.1996, but before 03.05.1997. Appeal dismissed - decided against appellant-assessee.
Issues Involved:
1. Justification of the demand for recovery of MODVAT credit with interest. 2. Applicability of Section 87 of the Finance Act, 1997, and its impact on the Appellant/Assessee. 3. Interpretation of Section 11A of the Central Excise Act in relation to the retrospective effect of Section 87 of the Finance Act. 4. Validation of actions taken for recovery of excess credit under Section 87 of the Finance Act. Issue-wise Detailed Analysis: 1. Justification of the demand for recovery of MODVAT credit with interest: The core issue was whether the demand for recovery of MODVAT credit with interest, as per Notification No.14 of 1997 CE(NT) dated 03.05.1997, read with Section 87 of the Finance Act, 1997, and Rule 57-I of the Central Excise Rules, and Section 11A of the Central Excise Act for the period 23.07.1996 to 28.02.1997, was justified. The Tribunal sustained the decision of the Commissioner (Appeals), which upheld the demand for duty for the period from 23.07.1996 to 28.02.1997. 2. Applicability of Section 87 of the Finance Act, 1997, and its impact on the Appellant/Assessee:The Appellant/Assessee argued that MODVAT credit was availed under Rule 57D, and thus, the amendment via Notification dated 03.05.1997, issued under Rule 57A, would not impact them. However, the court found this submission unsustainable, as the Appellant/Assessee had claimed MODVAT credit based on the Notification dated 01.03.1994, issued under Rule 57A. Section 87 of the Finance Act extended the restriction on claiming MODVAT credit retrospectively from 23.07.1996 to 03.05.1997, impacting the Appellant/Assessee. 3. Interpretation of Section 11A of the Central Excise Act in relation to the retrospective effect of Section 87 of the Finance Act:The Appellant/Assessee contended that Section 87 could not override Section 11A of the CE Act, which limits the recovery period to six months unless fraud or willful misrepresentation is involved. The court, however, relied on the Supreme Court's rulings in R.C. Tobacco Pvt. Ltd. and Dharampal Satyapal Ltd., which distinguished the J.K. Spinning and Weaving Mills case. The court concluded that Section 11A of the CE Act would not apply when construing the impact of Section 87 of the Finance Act, which provided a specific period for recovery. 4. Validation of actions taken for recovery of excess credit under Section 87 of the Finance Act:The Appellant/Assessee argued that Section 87 only validated actions already initiated for recovery. The court found this submission misconceived, noting that Section 87 not only made the notification dated 03.05.1997, retrospectively effective from 23.07.1996 but also validated actions taken for recovery of excess credit during that period. Therefore, the court rejected this argument. Conclusion:The court concluded that the demand for recovery of MODVAT credit with interest for the period from 23.07.1996 to 28.02.1997 was justified. The submissions made by the Appellant/Assessee were found unsustainable. Consequently, the appeal was dismissed, and the question of law was answered in favor of the Revenue.
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