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TMI Blog2013 (12) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as 'the Rules'). The facts of Civil Appeal No.5634 of 2008 (Union of India and others vs. Maharaja Shree Umaid Mills) are taken into consideration for better understanding of the issue involved in all these appeals. 4. All these appeals have been filed by the Union of India against the respondents under the Central Excise Act, 1944. The respondent-assessee, Maharaja Shree Umaid Mills, whose case is being considered, is a manufacturer of yarn and fabrics, which are covered under Chapters 52, 54 & 55 of the Schedule to the Central Excise Tariff Act, 1985. In the process of the manufacture of yarn and fabrics, the respondent-assessee uses High Speed Diesel Oil (hereinafter to as the 'HSD Oil') as fuel for generation of electricity i.e. power, with which manufacturing unit of the respondent is operated. 5. As the HSD oil is being used as an input in the process of generation of electricity so as to manufacture the final produce i.e. yarn and fabrics, the respondent was claiming the MODVAT credit of the duty paid on the HSD oil used as an input under the provisions of Rules 57A and 57B of the Rules. 6. The Central Government issued a Notification on 16th March, 1995 whereb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the MODVAT credit availed is not repaid within 30 days from the date of the order. 11. In the case of Maharaja Shree Umaid Mills, the Assistant Commissioner, Central Excise, Jodhpur, vide an order dated 27.05.2002, called upon the said assessee to pay interest at the rate of 24% p.a. with effect from 30 days from the date on which the 2000 Act had received the assent of the President. 12. Being aggrieved by the order passed by the Assistant Commissioner, an appeal had been filed before the Commissioner (Appeals), Central Excise, Jodhpur, which had been dismissed and therefore, the assessee had filed an appeal before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as 'the CESTAT'). The said appeal had also been dismissed by the CESTAT and therefore, the assessee was constrained to approach the High Court of Rajasthan by way of Central Excise Appeal No. 3 of 2003, which has been allowed by the impugned order and therefore, the Revenue has filed the present appeal. 13. Similarly, in all other cases, the assessees had succeeded before the High Court in their respective cases and therefore, the Revenue has filed the present appeals before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force." Rule 57 (I) Recovery of credit wrongly availed of or utilised in an irregular manner,- (1)(i) Where credit of duty paid on inputs has been taken on account of an error, omission or mis-construction on the part of an officer or a manufacturer or an assessee, the proper officer may, within six months from the date of filing the return as required to be submitted in terms of subrule (8) of rule 57G, and where no such return as aforesaid is filed, within six months from the last date on which such return is to be filed under the said rule, serve notice on the manufacturer or the assessee who has taken such credit requiring him to show cause why he should not be disallowed such credit and where the credit has already been utilised, why the amount equivalent to such credit should not be recovered from him. (ii) where a manufacturer has taken the credit by reason of fraud, wilful mis-statement, collusion, or suppression of facts, or contravention of any of the provisions of the Acts or the rules made thereunder with intent to evade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increased or further increased by the Commissioner of Central Excise (Appeals), the Appellate Tribunal or, as the case may be, a court of law, the penalty shall be payable on such increase or further increased, amount of credit disallowed. (5) Notwithstanding anything contained in clause (iii) of sub rule (1) or sub rule (3), where the credit of duty paid on inputs has been taken wrongly on account of fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the rules made thereunder with intent to evade payment of duty, the person who is liable to pay the amount equivalent to the credit disallowed as determined under clause (iii) of sub rule (1) shall also be liable to pay interest at such rates as may be fixed by the Board under Section 11 AA of the Act from the first day of the month succeeding the month in which the credit was wrongly taken, till the date of payment of such amount. Explanation I : for the removal of doubts, it is hereby declared that the provisions of this sub rule shall not applied to cases where the credit disallowed became payable before the 23rd day of July, 1996. Explanation II : where the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e HSD oil as an input was not permissible by virtue of Notifications issued in 1995. In spite of the fact that the MODVAT credit was not available on the HSD oil, several assessees were claiming credit on the HSD oil as an input and therefore, by virtue of Section 112 of the 2000 Act it was declared that no MODVAT credit would be available on the HSD oil, used as an input. He had, therefore, submitted that in fact there was no retrospective increase in the liability of the assessees by virtue of Section 112 of the 2000 Act. 17. According to the learned counsel, the aforestated provisions, in an unambiguous language, authorizes the Revenue to recover interest at the rate of 24% p.a. without any reference to any show cause notice or any other condition and therefore, as per his submission, the assessee was bound to pay interest as demanded by the Assistant Commissioner, Central Excise by the order dated 27.05.2002 and the High Court was in error in setting aside the orders whereby the amount of interest was sought to be recovered from the respondents. 18. The learned counsel had relied upon judgments which restrained the manufacturers from claiming the MODVAT credit on use of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be quashed and set aside for the reasons recorded hereinafter. 24. Upon perusal of the impugned judgment as well as the provisions of Section 112 of the 2000 Act, one might have an impression that the Revenue has become harsh in imposing interest at the rate of 24% p.a. on the amount of MODVAT credit availed on the HSD oil used as an input without any adjudication of the amount payable or without even issuance of a show cause notice. In fact if we look at the provisions of Section 112 of the 2000 Act along with other notifications which had been issued earlier in 1995 and 1994, whereby availment of MODVAT credit on the HSD oil used as fuel in generation of electricity had been ordered to be discontinued, we would feel that the first impression that one would gather upon perusal of Section 112 of the 2000 Act would not be correct. 25. It is necessary to look at the background and the circumstances in which Section 112 of the 2000 Act had been enacted. By virtue of the Notifications issued on 01.03.1994 and 16.03.1995 issued under Rule 57A of the Rules, the Central Government had specifically declared that MODVAT credit on the HSD oil used as an input would not be available as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adjudication because the respondents had availed MODVAT credit on the HSD oil used as an input though it was not permissible. Once it is certain that the MODVAT credit had been wrongly availed by the respondents, in our opinion, the Revenue cannot be blamed, if the amount wrongly availed by way of MODVAT credit by the respondents is recovered with interest thereon. It is also pertinent to note that the Revenue had given 30 days' time to return the said amount to the respondents who had wrongly availed MODVAT credit on the HSD oil used as an input. If anyone who had repaid the amount wrongly availed within 30 days from the date on which Section 112 of the 2000 Act got the President's assent, that assessee had not to pay any interest on the amount of duty availed by him wrongly. But those who had availed the MODVAT credit on the HSD oil used as an input and did not return the said amount even within 30 days from the date on which the President had given assent to the enactment of Section 112 of the 2000 Act, had to return the amount wrongfully retained by them with interest at the rate of 24% p.a. In our opinion, such a course, adopted by the Revenue for recovery of the amount whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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