1999 (2) TMI 366 - AT - Central Excise

Summary

Issues Involved:
1. Denial of Modvat credit under Rule 57G due to the expiry of the six-month time limit.
2. Retrospective application of the amendment to Rule 57G.
3. Vested rights of taking Modvat credit.
4. Procedural versus substantive law in the context of amendments.

Detailed Analysis:

Denial of Modvat Credit:
The appellants, National Steel Industries Ltd., were denied Modvat credit on the grounds that the credit was taken after the six-month time limit specified in the proviso to sub-rule (2) of Rule 57G of the Central Excise Rules, 1944, which was amended by Notification No. 28/95 dated 29-6-1995.

Retrospective Application of the Amendment:
The appellants argued that the amendment to Rule 57G, which introduced the six-month time limit, should not be applied retrospectively. They relied on the decision of the Larger Bench of CEGAT in the case of Tata Engineering Locomotive Co. v. Collector of Central Excise, Bombay, where it was held that the amendment has no retrospective effect and cannot apply to situations that crystalized before 29-6-1995. The Tribunal in the present case agreed with this view, stating that the amendment is neither declaratory nor clarificatory but a pure and simple amendment to Rule 57G. The Tribunal concluded that the amendment does not have retrospective effect and cannot apply to credits that accrued before 29-6-1995.

Vested Rights of Taking Modvat Credit:
The appellants contended that taking Modvat credit is a substantive right, and such a right cannot be divested by any subsequent amendment unless expressly provided. The Tribunal supported this argument, noting that a right to take Modvat credit, which accrued before the amendment, is a vested right or at least an existing right. The Tribunal cited several judicial decisions to reinforce the principle that a pre-existing right cannot be destroyed by an amendment unless the amendment is shown to have retrospective effect by express words or necessary implication.

Procedural versus Substantive Law:
The Tribunal analyzed whether the amendment to Rule 57G was procedural or substantive. It concluded that while the law of limitation is generally considered procedural, it can be retrospective or procedural depending on the situation or the words used in the amended provision. The Tribunal emphasized that fiscal legislation imposing liability is generally presumed not to be retrospective. The limitation prescribed under the taxing statute cannot be considered mere procedural law since it curtails the right of an assessee.

Conclusion:
The Tribunal concluded that the amendment to Rule 57G, which introduced the six-month time limit, is not retrospective and does not apply to credits that accrued before 29-6-1995. The right to take Modvat credit, which accrued before the amendment, is a vested right and cannot be curtailed by the amended provisions. Consequently, the Tribunal set aside the impugned order, allowing the appeal with consequential relief.