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Wednesday, December 18, 2013

MODVAT - REFUND OF THE SAME WITH INTEREST AFTER 30 DAYS - the company is liable to pay MODVAT under Central Excise Act on HSD oil used in manufacturing yarns etc., and also liable to pay interest as it was not refunded with in 30 days of notice as the exemption granted to HSD oil was withdrawn by a Notification by central Govt. - High court wrongly find a fault on the government - allowed the writs - Apex court set aside the orders as there is no challange abount the vlaidity of notification or about sec.112 of Finance Act - they can not escape liability to refund the availd MODVAT with interest DESPITE OF NOTIFICATION = Union of India & Ors. Appellants Versus Maharaja Shree Umaid Mills Respondent = published in / cited in / Reported in judis.nic.in/supremecourt/filename=41098

 MODVAT -  REFUND OF THE SAME WITH INTEREST AFTER 30 DAYS -    the company is liable to pay MODVAT under Central Excise Act on HSD oil used in manufacturing yarns etc., and also liable to pay interest as it was not refunded with in 30 days of notice as the exemption granted to HSD oil was withdrawn by a Notification by central Govt. - High court wrongly find a fault on the government - allowed the writs - Apex court set aside the orders as there is no challange abount the vlaidity of notification or about sec.112 of Finance Act - they can not escape liability to refund the availd MODVAT with interest  DESPITE OF NOTIFICATION =
  
whether the company is liable to pay MODVAT under Central Excise Act on HSD oil used in manufacturing yarns etc., and also liable to pay interest as it was not refunded with in 30 days of notice as the exemption granted to HSD oil was withdrawn by a Notification by central Govt. ?


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  whereby
   MODVAT credit of the duty paid on the HSD  Oil  as  an  input,  had  been
   withdrawn.  It is not in dispute that the MODVAT credit of the duty  paid
   on the use of the HSD Oil was available in the past but the same had been
   withdrawn by the said Notification issued  in  1995.   Subsequently,  the
   office of the Commissioner of the Central Excise had also issued a  Trade
   Notice on 7.4.1997 to the effect that no MODVAT Credit in respect of  the
   duty paid on the HSD oil used as an input would be available  under  Rule
   57A and 57B of the Rules.

 It is also pertinent to note that the validity of  Section  112  of  the
   2000 Act  had  not  been  challenged  in  the  petitions  filed   by  the
   respondents and therefore, we need not go into the legality of  the  said
   Section. 
 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 said item had been specifically excluded from the  list  of  eligible
   exempted inputs.  In spite of  the  said  fact,  several  assessees  were
   claiming MODVAT credit in respect of the HSD oil used  as  an  input  and
   therefore, Section 112 of the 2000 Act had to be enacted.   Thus,  it  is
   clear that the said Section had been enacted so as to  see  that  no  one
   claims MODVAT credit in respect of the HSD Oil used as an input and those
   who had wrongfully availed MODVAT credit in respect of the HSD  oil  used
   as an input and those who had claimed the credit wrongfully,  return  the
   said amount within 30 days from the date the President  gives  assent  to
   the 2000 Act. This clearly denotes that by virtue of  the  provisions  of
   Section 112 of the 2000 Act, MODVAT credit availed on the HSD oil used as
   an input had not been withdrawn for the first time but  it  was  declared
   that if anybody had availed MODVAT credit on  the  HSD  oil  used  as  an
   input, will have to return it within 30 days  and  in  case   the  amount
   being not refunded within 30  days,  the  amount  of  the  MODVAT  credit
   wrongfully availed by the concerned assessee  had  to  be  returned  with
   interest at the rate of 24% p.a.  

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 which was legitimately claimed by the Revenue, cannot be  said  to
   be bad in law.


30. In the circumstances and for the reasons recorded  hereinabove,  we  are
   of the view that the High Court committed an error by not considering the
   aforestated factors and therefore, we quash and set  aside  the  impugned
   judgment by allowing these appeals with no order as to costs.   The  stay
   granted is vacated.


                                                    REPORTABLE


                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                       CIVIL APPEAL NO. 5634  OF 2008


Union of India & Ors.                   Appellants

                                   Versus


Maharaja Shree Umaid Mills              Respondent
                                    With

C.A. No. 5635/2008,  C.A.  No.  5636/2008,  C.A.  No.  5922/2008,  C.A.  No.
6506/2008, C.A. No. 11175 OF 2013 @  SLP  (C)  No.  28055  /2008,  C.A.  No.
6886/2008,   C.A. No. 906/2009,    C.A. No.  895/2009,  C.A.  No.  1296/2009
AND C.A. No. 11174 OF 2013 @ SLP (C) No. 938/2010




                              1 J U D G M E N T




1 ANIL R. DAVE, J.



1. Leave granted in SLP (C) No 28055 of 2008 and SLP (C) No. 938 of 2010.
2. As a common question of law is involved in  all  these  appeals,  at  the
   request of the learned counsel appearing for the parties, all the appeals
   were heard together and they are decided by this common judgment.
3. The issue involved in all these appeals is with regard to  the  liability
   to pay interest under the provisions of Section 112 of the  Finance  Act,
   2000 (hereinafter referred to as  ‘the  2000  Act’),  which  pertains  to
   liability of the assessee to pay interest under the Central Excise Rules,
   1944 (hereinafter referred 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  whereby
   MODVAT credit of the duty paid on the HSD  Oil  as  an  input,  had  been
   withdrawn.  It is not in dispute that the MODVAT credit of the duty  paid
   on the use of the HSD Oil was available in the past but the same had been
   withdrawn by the said Notification issued  in  1995.   Subsequently,  the
   office of the Commissioner of the Central Excise had also issued a  Trade
   Notice on 7.4.1997 to the effect that no MODVAT Credit in respect of  the
   duty paid on the HSD oil used as an input would be available  under  Rule
   57A and 57B of the Rules.
7. What is relevant here is that the respondent as well as other  assessees-
   respondents, whose cases are being decided by this common  judgment,  had
   availed the MODVAT credit of the duty paid on the HSD Oil, which was used
   as an input even though it was not permissible in view of the aforestated
   Notification followed by the Trade Notice.   So it is not in dispute that
   though MODVAT credit was not to be availed in respect of the duty paid on
   the HSD oil used as an input, all the assessees who are respondents,  had
   availed the MODVAT credit.
8. In the aforestated circumstances, show cause notices had been  issued  to
   all the respondents calling upon them as to why the MODVAT credit availed
   by them during the period for which they were  not  entitled  to  such  a
   credit, should not be withdrawn and why interest at the rate of 24%  p.a.
   be not charged on the amount of credit already availed by them.
9. It is pertinent to note that in the meantime Section 112 of the 2000  Act
   had been enacted and by virtue of which, interest at the rate of 24% p.a.
   had to be paid on the MODVAT credit wrongfully availed by the respondents
   in respect of the duty paid on the  HSD  Oil  used  as  an  input  for  a
   particular period.  Similarly, Rule 57 (I) of the Rules also enables  the
   Revenue to recover interest on the amount  of  MODVAT  credit  wrongfully
   availed by the assessee.
10.   The case of the Revenue  is  that  by  virtue  of  the  provisions  of
   Section 112 of  the 2000 Act, interest becomes payable on such wrongfully
   availed MODVAT credit  after 30 days from the date on which the 2000  Act
   received the assent of the President.  On the other hand,   according  to
   the respondents, the  amount  of  interest  becomes  payable  only  after
   determination of the amount through an adjudication order or an order-in-
   original after issuance of a show cause notice to the concerned  assessee
   and if the amount of 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  this  Court.   So  as  to  understand  and
   appreciate the issue, it would be pertinent to look at the provisions  of
   Section 112 of the 2000 Act and Rule 57 (I) of the Rules, which have been
   reproduced hereinbelow:

       “112. Validation of the denial of credit of duty paid on high  speed
       diesel oil. - (1) Notwithstanding anything contained in any rule  of
       the Central Excise Rules, 1944, no credit of any duty paid  on  high
       speed diesel oil at any time during the  period  commencing  on  and
       from the 16th day of March,  1995  and  ending  with  the  day,  the
       Finance Act, 2000 receives the assent of  the  President,  shall  be
       deemed to be admissible.


       (2) Any action taken or anything done  or  purported  to  have  been
       taken or done at any time during the said period under  the  Central
       Excise Act or any rules made thereunder to deny the  credit  of  any
       duty in respect of high speed diesel oil, and also to disallow  such
       credit to be utilised for  payment  of  any  kind  of  duty  on  any
       excisable goods shall be deemed to be, and to always have been,  for
       all purposes, as validly and effectively taken or done,  as  if  the
       provisions of sub-section (1) had been  in  force  at  all  material
       times and, accordingly, notwithstanding anything  contained  in  any
       judgment, decree or order of any court, tribunal or other authority,-




       (a) no suit or other proceedings shall be maintained or continued in
       any court, tribunal or other authority for allowing  the  credit  of
       the duty paid on high speed diesel oil and no enforcement  shall  be
       made by any court, tribunal or other  authority  of  any  decree  or
       order allowing such credit of duty as  if  the  provisions  of  sub-
       section (1) had been in force at all material times;


       (b) recovery shall be made of all the credit  of  duty,  which  have
       been taken or utilised but which would not have been allowed  to  be
       taken or utilised, if the provisions of sub-section (1) had been  in
       force at all material times, within a period of thirty days from the
       date on which the Finance Act,  2000  receives  the  assent  of  the
       President and in the event of non-payment of  such  credit  of  duty
       within this period, in addition to the amount of credit of such duty
       recoverable, interest at the rate of twenty four per cent. per annum
       shall be payable, from the date immediately after the expiry of  the
       said period of thirty days till the date of payment.


       Explanation. - For the removal of doubts, it is hereby declared that
       no act 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 sub-rule (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 payment of duty, the  provisions  of
       clause (i) shall have effect as if for the words “six  months”,  the
       words ‘five years’ were substituted.


          iii) the proper officer, after considering the representation, if
               any, made by the manufacturer or the assessee on whom notice
               is served under clause (i), shall determine  the  amount  of
               such credit to be disallowed (not being  in  excess  of  the
               amount specified in the show  cause  notice)  and  thereupon
               such  manufacturer  or  assessee  shall   pay   the   amount
               equivalent to the credit disallowed, if the credit had  been
               utilised, or shall not utilised the credit thus disallowed.


       Explanation : where the service of the notice is stayed by an  order
       of a court of law, the period of such stay shall  be  excluded  from
       computing the aforesaid period of six months or five years,  as  the
       case may be.


          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  Commissioner  of
             Central Excise, pay the duty leviable  on  such  inputs  within
             three months from the date of receipt of the notice of demand.
          3) Where a manufacturer or an assessee fails  to  pay  the  amount
             determined under sub rule  (1) or sub  rule  (2)  within  three
             months from the date of receipt of demand notice, he shall pay,
             in addition to the amount so determined, interest at such rate,
             as may be fixed, by the Central Board  of  Excise  and  Customs
             under Section 11 AA of the Act, from the date immediately after
             the expiry of the said period of three months till the date  of
             payment.
          4) Where the credit of duty paid on inputs has been taken  wrongly
             by  reason  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  a  penalty
             equal to the credit so disallowed.


       Explanation I : where  the  credit  disallowed  is  reduced  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 reduced amount of credit disallowed.


       Explanation II : where the credit disallowed is 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  credit  disallowed  is  reduced  by  the
       Commissioner of Central Excise (Appeal), the Appellate Tribunal  or,
       as the case may be, a court of law, the interest shall be payable on
       such reduced amount of credit disallowed.


       Explanation III:  where the credit disallowed is  increased  by  the
       Commissioner of Central Excise (Appeal), the Appellate Tribunal  or,
       as the case may be, a court of law, the interest shall be payable on
       such increased or further increased, amount of credit disallowed.”

14. The learned counsel appearing for the  revenue  had  submitted  that  by
   virtue of the provisions of Section 112 of  the  2000  Act,  one  has  to
   ignore the provisions of Rule 57 (I) of the Rules, as Section 112 of  the
   2000 Act had been enacted as a one- time measure to see  that  all  those
   who had wrongly availed the MODVAT credit on the duty paid on the HSD oil
   used as an input in their factories repay the amount wrongfully  retained
   by  them  immediately.   The  learned  counsel  had   discussed   various
   provisions whereby the position with regard to the admissibility  of  the
   MODVAT credit on duty paid on the HSD oil  used  as  an  input  had  been
   changed from time to time in the past till the litigation which had  been
   finally decided by this court.  As there is no dispute with regard to the
   non-admissibility of the MODVAT credit on the HSD oil used  as  an  input
   for the period commencing from 16.03.1995 till  the  date  the  2000  Act
   received the President’s assent, we need not discuss the  relevant  rules
   and notifications in pursuance of which the MODVAT credit in  respect  of
   the duty paid on the HSD oil as an input was not admissible.
15. The learned counsel had submitted that the  provisions  of  Section  112
   (2)(b) of the 2000 Act  clearly enables the Revenue not only  to  recover
   the entire MODVAT credit which had been wrongly availed by the  concerned
   assessees within 30 days from the date on which the 2000 Act had received
   assent of the President but in the event of  non-payment  of  the  amount
   within the said period, it enables the Revenue to recover interest at the
   rate of 24% per annum from the date immediately after expiry of the  said
   period of 30 days till the date of payment of the amount by the concerned
   assessee.
16. It had been further submitted by the learned  counsel  for  the  Revenue
   that the provisions of Section 112 of the 2000 Act are merely declaratory
   in nature.  In fact MODVAT credit on the use of the 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 HSD Oil as an
   input for the period commencing from 16.03.1995 till the  date  the  2000
   Act received the President’s assent.   Among other judgments, the learned
   counsel appearing for the Revenue had mainly  relied  upon  the  judgment
   delivered in the case of  Sangam Spinners Limited v.  Union  of  India  &
   Ors. [(2011) 11 SCC 408].
19. On the other hand, the learned counsel  appearing  for  the  respondents
   had supported the reasons given by the  High  Court  while  quashing  and
   setting aside the orders passed  by  the  CESTAT  whereby  imposition  of
   interest at the rate of 24% p.a. on  the  amount  of  the  MODVAT  credit
   availed on the use of the  HSD oil as an input, for the  period  referred
   to hereinabove, was upheld.
20. The learned counsel had submitted that  Section  112  of  the  2000  Act
   cannot be read in isolation, but it must be read with the  provisions  of
   Rule 57 (I) of the Rules.    According  to  them,  in  any  case,  before
   demanding interest from any assessee, first of all the  final  liability,
   i.e. the amount payable has to be ascertained and only upon ascertainment
   of the amount payable, interest can be calculated  and  demanded  on  the
   said amount.
21. It had also been submitted by the  learned  counsel  appearing  for  the
   respondents that by virtue of the retrospective effect, liability of  the
   respondents had been increased not only by not permitting to avail MODVAT
   credit on use of the  HSD oil as an input  for  the  period  referred  to
   hereinabove but also by imposition of interest @ 24% p.a. on  the  amount
   of the MODVAT credit availed on the HSD oil used as an input with  effect
   from 30 days from the date on which the President  had  given  assent  to
   Section 112 of the 2000 Act.  The learned counsel had relied upon several
   judgments including the judgments delivered in  the  cases  of  State  of
   Rajasthan & Ors. v. Ghasilal [(1965) 2 SCR  805]  and  Harshad  Shantilal
   Mehta v.  Custodian and Ors. [(1998)  5  SCC  1]  to  substantiate  their
   submissions to the effect that till the amount of tax is  determined,  no
   interest can be levied on the amount of tax.
22. Thus,  the learned counsel appearing  for  the  respondents  had  prayed
   that the appeals should be dismissed for the sound  reasons  recorded  by
   the High Court in the impugned judgment.
23. Upon perusal of the impugned judgment and the judgments referred  to  by
   the learned counsel appearing for both sides, we are of the view that the
   impugned judgment deserves to 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 said item had been specifically excluded from the  list  of  eligible
   exempted inputs.  In spite of  the  said  fact,  several  assessees  were
   claiming MODVAT credit in respect of the HSD oil used  as  an  input  and
   therefore, Section 112 of the 2000 Act had to be enacted.   Thus,  it  is
   clear that the said Section had been enacted so as to  see  that  no  one
   claims MODVAT credit in respect of the HSD Oil used as an input and those
   who had wrongfully availed MODVAT credit in respect of the HSD  oil  used
   as an input and those who had claimed the credit wrongfully,  return  the
   said amount within 30 days from the date the President  gives  assent  to
   the 2000 Act. This clearly denotes that by virtue of  the  provisions  of
   Section 112 of the 2000 Act, MODVAT credit availed on the HSD oil used as
   an input had not been withdrawn for the first time but  it  was  declared
   that if anybody had availed MODVAT credit on  the  HSD  oil  used  as  an
   input, will have to return it within 30 days  and  in  case   the  amount
   being not refunded within 30  days,  the  amount  of  the  MODVAT  credit
   wrongfully availed by the concerned assessee  had  to  be  returned  with
   interest at the rate of 24% p.a.
26. The aforestated factual aspect would clarify that  Section  112  of  the
   2000 Act is in fact not having  any  retrospective  effect  but  it  only
   enables the Government to get back the wrongly availed MODVAT  credit  on
   the HSD oil used as an input.
27. A somewhat similar issue had arisen before this Court  in  the  case  of
   Sangam  Spinners  Limited   (supra)   and   after   considering   earlier
   Notifications issued by the Government, it had been held that Section 112
   of the 2000 Act did  not  take  away  any  right  of  any  assessee  with
   retrospective effect.  This court held in the said case that the HSD  oil
   had been specifically excluded from the  list  of  eligible  inputs  with
   effect from 16th March, 1995 and therefore, no assessee  had  any  vested
   right to avail benefit of MODVAT credit on the HSD oil used as  an  input
   and therefore, if any benefit, which had  been  wrongly  availed  by  any
   manufacturer, the benefit wrongfully availed had to be returned.
28. It is also pertinent to note that the validity of  Section  112  of  the
   2000 Act  had  not  been  challenged  in  the  petitions  filed   by  the
   respondents and therefore, we need not go into the legality of  the  said
   Section.


29. In the aforestated circumstances, in our opinion,  there  was  no  issue
   with regard to any  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 which was legitimately claimed by the Revenue, cannot be  said  to
   be bad in law.


30. In the circumstances and for the reasons recorded  hereinabove,  we  are
   of the view that the High Court committed an error by not considering the
   aforestated factors and therefore, we quash and set  aside  the  impugned
   judgment by allowing these appeals with no order as to costs.   The  stay
   granted is vacated.

                                  ………......................................J.


                                                       (ANIL R. DAVE)







                            ……..........................................J.
                                   (DIPAK MISRA)

New Delhi
December 17,  2013.

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