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TMI Blog2000 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... his Court by the Customs, Excise and Gold (Control) Appellate Tribunal, North Regional Bench, on account of conflict of views expressed in the decisions of these High Court of Gujarat reported in Torrent Laboratories Pvt. Ltd. v. Union of India [1991 (55) E.L.T 25], and that of the Karnataka High Court reported in Thungabhadra Steel Products v. Supdt. of Central Excise [1991 (56) E.L.T. 340]. 2. The factual details necessary to understand and appreciate the disputes between parties may be noticed, before adverting to the area and nature of dispute. The respondent is a holder of license in Form L-4 and a manufacturer of vegetable products falling under Chapter 15.04 of the Central Excise Tariff, at the relevant point of time. The respondent, admittedly, filed a declaration under Rule 57G of the Central Excises Rules, 1944, (hereinafter referred to as "the Rules"), on 10-3-1987 for adoption of Modvat credit in respect of certain inputs used by them in the manufacture of vegetable products and consequently became entitled to avail of the duty credit only on and after 10-3-1987. But the fact is that the respondent availed of the credit facilities in question even from 1-3-1987 and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 11A would get attracted necessitating the raising of the demand within six months. Thereupon, the Revenue moved the application for Reference and that is how the reference came to be made to this Court. 4. Mr. T.L.V. Iyer learned senior counsel for the Revenue, while placing strong reliance upon the decision reported in 1991 (55) E.L.T. 25 (supra) and the relevant provisions of the Modvat Scheme, contended that the provisions of Section 11A of the Act had no application whatsoever to the case on hand and that being a special provision with self contained machinery to enforce them reference to a general provision like Section 11A of the Act is unwarranted and consequently the orders of the Assistant Collector and the Collector (Appeals) are quite in accordance with law and did not call for any interference in the hands of the Tribunal. 5. Per contra, Mr. C. Harishankar, learned counsel for the respondent, placed reliance upon a catena of decisions reported in 1991 (56) E.L.T. 340 (supra); Advani Oerlikon Ltd. v. Assistant Collector of Central Excise [1993 (63) E.L.T. 427 (Mad. High Court)] ; Fabril Gasosa v. Union of India [1997 (96) E.L.T. 241 (Bom. High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In Thungabhadra Steel Products Ltd. case (supra), a learned Single Judge of the Karnataka High Court opined that the restriction of time limit for exercise of powers under Section 11A should govern the cases envisaged under Rule 57-I and, therefore, Rule 57-I as it stood prior to its amendment, should receive the same interpretation as it should receive after its amendment with effect from 6-10-1988, by assuming that the amendment introduced to the Rule indicated the intention of the legislature to amend the Rule to bring it in conformity with the spirit and scope of Section 11A. There is no rhyme or reasonable basis for such an assumption. The Division Bench of the Madras High Court, which decided the case in Advani Oerlikon Ltd. (supra), expressed the view that notwithstanding the omission in Rule 57-I prior to its amendment to provide for the issue of a notice, the obligation to issue such notice followed from the principles of natural justice as well as Section 11A of the Act and therefore, the period of limitation in Section 11A will be attracted to exercise the power of demand for reversing the credit wrongly availed of or utilized under Modvat Scheme. There is no justific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the question as to whether in case of a retrospective amendment creating liability to duty, the levy and collection could be made dehors the period of limitation stipulated in Section 11A, particularly in the absence of any non obstante clause to override Section 11A of the Act. This case really dealt with the question of limitation relating to the levy, demand and recovery of duty in respect of deemed removal of certain goods the moment they come into existence on production/manufacture introduced with retrospective effect and, therefore, really and in substance concerned the imposition and payment of excise duty. Since the Rules considered in that was only made by virtue of the rule-making power on 20-2-1982 and the same was also, by a statutory provision brought into force with retrospective effect from 28-2-1944, the demand and recovery for the retrospective period would actually partake the character of an exercise for collecting duty not levied or not paid envisaged under Section 11A of the Act. The decision in 1989 (3) SCR 465 (supra) dealt with a question as to whether the mere absence of any period of limitation enables the authority concerned to exercise its power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the proper officer and the amount so disallowed shall be adjusted in the credit account or the amount-current maintained by the manufacturer or if such adjustments are not possible for any reason, by cash recovery from the manufacturer of the said goods : Provided that such manufacturer may take such adjustments on his own in the credit account or the account-current maintained by him under intimation to the proper officer. (2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this section the manufacturer shall upon a written demand being made by the Assistant Collector of Central Excise pay the duty leviable on such inputs within 10 days of the notice of demand." 11. After amendments effected on 5-10-1988, the relevant portion of the Rule stands as follows : "Rule 57-I - Recovery of credit wrongly availed of or utilized in an irregular manner. - (1)(i)Where credit of duty paid on inputs has been taken on account of an error, omission or misconstruction, on the part of an officer or a manufacturer, or an assessee, the proper officer may, within six months from the date of such cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, therefore, must be specifically enacted and prescribed therefor. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. Section 11A is not an omnibus provision which provides any period of limitation for all or any and every kind of action to be taken under the Act or the Rules but will be attracted only to cases where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded. The section also provides for an extended period on certain contingencies and situations. The situation on hand and the one which has to be dealt with under Rule 57-I, as it stood unamended, does not fall under any one of those contingencies provided for in Section 11A of the Act. Part AA of the Rules in which Rule 57-I is found included provides a special scheme for earning credit and adjustment of duty paid on excisable goods used as inputs in the manufacture of what is referred to as 'final product', and thereby enable the manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf sufficient to answer the question in favour of the Revenue and against the manufacturer, even de hors the applicability or otherwise of the principle of construction - Generalia specialibus non derogent, they do not operate on the same field or cover the same area, to be reconciled in order to avert any clash or inconsistency. That apart, even if it is to be assumed that they relate to one and the same nature of demand from the manufacturer of any amount due from him to the State, the provisions contained in Section 11A are general in nature and application and the Modvat Scheme being a specific and special beneficial scheme, with self-contained procedure, manner and method for its implementation, providing for its own remedies to undo any mischief committed by the manufacturer in abuses thereof, the provisions of the said special scheme alone will govern such a situation and there is no scope for reading the stipulations contained in a general provision like Section 11A into the provision of the rules in question which alone will govern in its entirety the enforcement of the Modvat Scheme. The question as to the relative nature of the provisions general or special has to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a misconception of the fundamentals underlying the working of the Modvat Scheme and the powers of the Proper Officer to set right irregularities, if any, committed by the manufacturer in availing of the same. The utilization and adjustment depends upon proper and valid earning of the credit strictly in accordance with the terms and conditions of the Scheme and while making unilateral credit in the course of maintenance of the accounts in the prescribed form and manner, a gross illegality has been committed in crediting something to which a manufacturer was not legitimately entitled to, not only the Proper Officer has the right, power and authority to direct reversal of credit but on such direction, the extent and quantum of credit and consequent adjustment also would get necessarily and automatically readjusted making it obligatory under the Scheme for the manufacturer, as long as the credit account or the amount-current is maintained by the manufacturer under the Scheme, to reverse the credit and set right the accounts. Lawful earning of a credit is a sine qua non for proper and valid utilization of the same and once the credit side gets diminished the very basis of adjustment dis ..... 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