1990 (2) TMI 66 - HC - Central Excise

Credit of duty - Vanaspati (Hydrogenated Vegetable Oil) and/or soap - Interpretation of Statute - Change in law - Retrospective effect

Summary

Issues Involved:
1. Withdrawal of Notifications and Utilization of Accumulated Credit
2. Interpretation of Rules 57K and 57N
3. Right to Utilize Earned Credit Post-Rescission of Notifications
4. Precedent Cases and Principles of Retrospective Operation

Detailed Analysis:

1. Withdrawal of Notifications and Utilization of Accumulated Credit:
The petitioners, manufacturers of Vanaspati and soap, were availing of excise duty rebates for using minor oils as per Notifications No. 27/87 and 40/87, which were subsequently amended and replaced. On 25-8-1989, these notifications were rescinded by Notification No. 39/89. Following the rescission, excise officers instructed the petitioners to file fresh classification lists and stop utilizing the accumulated credit for excise duty payment on Vanaspati and soap. The petitioners challenged this directive, seeking a writ of Mandamus to restrain the respondents from preventing the utilization of the earned credit.

2. Interpretation of Rules 57K and 57N:
The court examined Rules 57K and 57N to determine the rights conferred upon manufacturers. Rule 57K enabled the government to specify final products, raw materials, and credit rates. Rule 57N stipulated the manner of credit utilization. The court noted that these rules were enabling provisions allowing manufacturers to earn and utilize credit for excise duty payments on final products if specified conditions were met.

3. Right to Utilize Earned Credit Post-Rescission of Notifications:
The court held that the right to utilize earned credit did not end with the rescission of the notifications. The rescission only halted the accrual of new credit but did not nullify the right to use already earned credit. The manufacturers had a vested right to utilize the credit earned before 25-8-1989, as the rules and notifications did not specify a period for credit utilization. The court emphasized that the manufacturers, having complied with the rules and notifications, had a crystallized monetary right that could not be retrospectively nullified by rescinding the notifications.

4. Precedent Cases and Principles of Retrospective Operation:
The court referred to several precedents, including:
- London Star Diamond Co. (India) Pvt. Ltd. v. Union of India: The Bombay High Court held that benefits earned before a policy change could not be retrospectively denied.
- Collector of Central Excise v. Ashoka Mills Ltd.: The Supreme Court ruled that withdrawal of a concessional rate could not retrospectively apply to goods cleared before the withdrawal.
- Shri Vijayalakshmi Rice Mills v. State of M.P.: The Supreme Court stated that notifications take effect from their issue date, not retroactively.
- Govinddas v. Income-tax Officer: The Supreme Court reiterated that retrospective operation should not impair existing rights unless explicitly stated.

The court concluded that the manufacturers' right to utilize the earned credit persisted despite the rescission of the notifications. The petitions were allowed, and a writ of Mandamus was issued directing the respondents to permit the utilization of the earned credit for excise duty payments on Vanaspati and soap. The court also discharged the bank guarantees furnished by the petitioners and denied the respondents' request for a stay of the judgment.

Conclusion:
The court ruled in favor of the petitioners, affirming their right to utilize the accumulated credit earned before the rescission of the notifications. The judgment emphasized the principles of non-retrospective operation and the protection of vested rights under statutory provisions.