2015 (7) TMI 302 - HC - Central Excise

Effective Date of beneficiary provisions - whether should be retrospective - Disallowance of utilization of the credit of Additional Excise Duty (GSI) on goods of special importance paid after 1 April 1996, but prior to 1 April 2000 for payment of duty for First and Second Schedule to Central Excise Tariff Act, 1985 - violative of Article 14 of the Constitution of India - constitutional validity. Held that - The amended Rule with effect from 1 March 2003 has permitted utilization of the cenvat credit in respect of Act of 1957 for payment of duty of excise leviable under the First or the Second Schedule of the Tariff Act, 1985. Thus, as per the amended Rule, credit of Additional Excise Duty leviable under section 3 of the 1957 Act may be utilized towards the payment of duty of excise leviable under the First or Second Schedule of the Tariff Act. There is substance in the contention of the Respondents that in the Amendment Act no date was prescribed for availing and utilization of the Cenvat credit of the additional duty of excise paid. With the result that number of manufacturers had utilized cenvat credit lying with them as on 1 March 2003, for payment of cenvat credit duty payable on finished products/goods under section 3 of the 1957 Act. On realizing this, the Government amended the provision of the Cenvat Credit Rules 2000 retrospectively with section 88 of the Finance Act allowing utilization of Cenvat Credit of AED paid on or after 1 April 2000. That is how the explanation was substituted. We do not see how we can uphold the argument of the Petitioners that the restrictions placed by the Explanation should be interfered with any other stipulation as desired by them so as to make the provision operational from 1 April 1996. Manifestly arbitrary exercise of power or manifestly erroneous exercise of power is something which can be interfered with in judicial review. We do not find that any assistance can be derived from the judgment in Sitaram (1990 (3) TMI 358 - SUPREME COURT) and for the purpose of the present case. In the present case, once the co-relation could not be established, then the Petitioners derive no benefit of the Constitutional provisions and selection of the date, namely, 1st April 1996 for they being brought into effect. We have noted as to how the argument based on this is misconceived and untenable. - Decided against assessee.

Summary

Issues Involved:
1. Constitutional validity of Section 88 of the Finance (No.2) Act, 2004.
2. Classification and cut-off date of 1 April 2000 in Section 88 of the Finance (No.2) Act, 2004.
3. Utilization of Additional Excise Duty (GSI) credit for payment of Basic Excise Duty (BED) and Special Excise Duty (SED).

Detailed Analysis:

1. Constitutional Validity of Section 88 of the Finance (No.2) Act, 2004:
The petitioners challenged the constitutional validity of Section 88 of the Finance (No.2) Act, 2004, arguing that it is violative of Article 14 of the Constitution of India. They contended that the classification made by this section, which disallows the utilization of the credit of Additional Excise Duty (GSI) paid before 1 April 2000 for the payment of BED and SED, but allows it for duty paid on or after 1 April 2000, is arbitrary and lacks rationale.

2. Classification and Cut-off Date of 1 April 2000:
The petitioners argued that the cut-off date of 1 April 2000 is arbitrary and should be 1 April 1996. They based this argument on the recommendations of the 10th Finance Commission and the Constitution (80th Amendment) Act, 2000, which amended Articles 270 and 272 of the Constitution effective from 1 April 1996. They claimed that the amendment should consider the retrospective effect of these constitutional amendments.

3. Utilization of Additional Excise Duty (GSI) Credit:
The petitioners utilized the accumulated credit of AED (GSI) for the payment of BED and SED on tyres cleared during March to May 2003. They argued that the amendment to Rule 3(6)(b) of the Cenvat Credit Rules, 2002, effective from 1 March 2003, allowed such utilization. However, the respondents contended that only AED (GSI) paid on or after 1 April 2000 could be utilized for this purpose, based on the clarification provided in the Finance Act, 2004.

Judgment Analysis:

Constitutional Validity:
The court examined the constitutional validity of Section 88 of the Finance (No.2) Act, 2004, and found no merit in the petitioners' arguments. The court held that the classification made by this section is not arbitrary and has a rational basis. The court emphasized that the choice of the cut-off date is within the legislative domain and does not violate Article 14 of the Constitution.

Classification and Cut-off Date:
The court observed that the classification and the cut-off date of 1 April 2000 were chosen based on the need for separate accounting of AED (GSI) before this date. The court noted that the amendment to the Constitution and the recommendations of the 10th Finance Commission were considered, but they did not mandate a retrospective effect from 1 April 1996 for the utilization of AED (GSI) credit. The court upheld the cut-off date of 1 April 2000 as rational and justified.

Utilization of AED (GSI) Credit:
The court found that the petitioners' utilization of AED (GSI) credit for the payment of BED and SED on tyres cleared during March to May 2003 was not in accordance with the law. The court noted that the amendment to Rule 3(6)(b) of the Cenvat Credit Rules, 2002, allowed such utilization only for AED (GSI) paid on or after 1 April 2000. The court upheld the respondents' contention that the petitioners' utilization of AED (GSI) credit for the period before 1 April 2000 was incorrect.

Conclusion:
The court dismissed the writ petition, upholding the constitutional validity of Section 88 of the Finance (No.2) Act, 2004, and the cut-off date of 1 April 2000. The court found that the classification made by this section is rational and justified, and the petitioners' utilization of AED (GSI) credit for the period before 1 April 2000 was not in accordance with the law. The court discharged the rule and imposed no order as to costs.