2005 (3) TMI 113 - SC - Central Excise

Penalty - Limitation - whether the Respondent was entitled to Modvat credit of duty paid on HSD oil used as fuel for generation of electricity in the Respondent s factory - Held that - by provision Section 112 no credit is admissible on any duty paid on high speed diesel oil for the period commencing from 16th March, 1995 and ending with the day the Finance Act, 2000 received the assent of the President. We are told that the President gave his assent on 1st April, 2000. In view of validation Act, the Judgment of the Tribunal to this extent cannot be sustained and is accordingly set aside - The Respondent is absent. He will have to be given time to make payment. We, therefore, direct that the time to make payment, as provided in sub-clause 2(b) of Section 112, will only commence from the date intimation of this order is given to the Respondent by the Appellant. We are also of the view that on these facts penalty cannot be imposed. Thus the imposition of penalty is set aside - Decided partly in favour of Revenue.

Summary

Issues:
1. Entitlement to Modvat credit of duty paid on HSD oil for electricity generation.
2. Interpretation of Section 112 of the Finance Act, 2000.
3. Applicability of Validation Act on the Tribunal's judgment.
4. Imposition of penalty.

Entitlement to Modvat credit of duty paid on HSD oil for electricity generation:
The case revolved around the question of whether the Respondent was entitled to Modvat credit of duty paid on HSD oil used for electricity generation in their factory. The Tribunal had initially held in favor of the Respondent, allowing them to claim the credit. However, the Supreme Court, citing Section 112 of the Finance Act, 2000, which restricted the admissibility of such credit for a specific period, set aside the Tribunal's judgment on this issue.

Interpretation of Section 112 of the Finance Act, 2000:
Section 112 of the Finance Act, 2000, validated the denial of credit of duty paid on high-speed diesel oil for a specified period. It explicitly stated that no credit would be admissible on duty paid on HSD oil from March 16, 1995, until the Finance Act, 2000 received the President's assent. The Court noted that the President assented to the Act on April 1, 2000, and based on this provision, the Tribunal's decision allowing the credit could not be upheld.

Applicability of Validation Act on the Tribunal's judgment:
In line with the principles established in a previous case, the Court acknowledged that the Validation Act came into force after the Tribunal's judgment was delivered. Therefore, the Respondent was given time to make the necessary payment in compliance with the Act. The Court directed that the time for payment would commence upon the Respondent's intimation of the Court's order, and no penalty was imposed considering the circumstances.

Imposition of penalty:
The Court decided that penalty could not be imposed in this case, given the timing of the Validation Act and the need to allow the Respondent time to make the payment as per the statutory requirements. Consequently, the imposition of the penalty was set aside, and the Appeal was disposed of without any order as to costs. The Appellant was directed to inform the party promptly about the Court's decision.