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Commissioner Of Central Excise, Hyderabad v. Associated Cement Companies Limited .
Factual and Procedural Background
The Commissioner of Central Excise had filed Civil Appeal No. 2355 of 2000 challenging an order dated 8-9-1999 of the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT). The Tribunal had allowed the assessee Modvat credit on high-speed diesel oil (HSD) used to generate electricity for a cement plant, relying on its earlier decisions. By judgment dated 28-11-2002, the Supreme Court dismissed the Revenue’s appeal.
The Commissioner filed the present review petition contending that the Court’s earlier decision had been rendered without its attention being drawn to Section 112 of the Finance Act, 2000, a retrospective provision that expressly bars Modvat credit on HSD for the period 16-3-1995 to 1-4-2000. The review petition sought recall of the Court’s 28-11-2002 judgment and reversal of the Tribunal’s order.
Legal Issues Presented
- Whether Section 112 of the Finance Act, 2000 retrospectively denies Modvat credit on high-speed diesel oil for the relevant period, overriding Rule 57-B of the Central Excise Rules, 1944.
- Whether the omission to bring Section 112 to the Court’s notice justified recalling the Supreme Court’s earlier judgment under its review jurisdiction.
- Consequent to the retrospective bar, whether the assessee remained liable for penalty and interest, and from what date such liability should commence.
Arguments of the Parties
Petitioner (Commissioner of Central Excise)
- Section 112 unequivocally prohibits credit of duty paid on HSD during 16-3-1995 to 1-4-2000, “notwithstanding anything contained in any rule.”
- The Tribunal’s reliance on unamended Rule 57-B and earlier CEGAT decisions was rendered untenable by the retrospective validation in Section 112.
- Because Section 112 was overlooked, the Supreme Court’s earlier dismissal of the Revenue’s appeal was an error apparent on the face of the record warranting review.
Respondent (Assessee)
- Attempted to challenge the constitutional validity of Section 112; the Court ruled such a challenge could not be entertained in the present appeal and must be raised separately.
- Previously relied on the fact that Rule 57-B had not been amended and on earlier Tribunal rulings permitting credit on HSD.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court examined Section 112(1) of the Finance Act, 2000, which retroactively disallows any Modvat credit on HSD for the period between 16-3-1995 and the date the Finance Act received Presidential assent (1-4-2000). It held that:
- The assessee’s claim squarely fell within the barred period.
- Section 112 operates “notwithstanding anything contained in any rule,” thereby overriding Rule 57-B and any contrary Tribunal decisions.
- Because Section 112 was not brought to the Court’s attention earlier, its prior judgment dismissing the Revenue’s appeal constituted an error apparent on the record, meeting the threshold for review.
- While restoring the Assessing Commissioner’s order, equity required adjustment: the 30-day period for payment under Section 112(2)(b) would run from the date of the present order, given that the Tribunal’s favorable order had stood until today.
- The Rs 50,000 penalty imposed by the Assistant Commissioner was set aside due to the circumstances.
- The Court declined to entertain the assessee’s constitutional challenge to Section 112 within this proceeding, leaving it open for a separate challenge.
Holding and Implications
Review Allowed; earlier Supreme Court order dated 28-11-2002 recalled. Civil Appeal No. 2355 of 2000 is allowed; the Tribunal’s order dated 8-9-1999 is set aside; the Assessing Commissioner’s original order is restored, except that the penalty of Rs 50,000 is deleted and the 30-day period for payment/interest under Section 112(2)(b) starts from the date of this judgment.
Implications: The assessee must repay the inadmissible Modvat credit with interest, but no penalty is payable. The decision enforces the retrospective bar created by Section 112, reaffirming that statutory validations can override prior judicial and quasi-judicial determinations. No new legal principle is created beyond applying Section 112’s retrospective effect.
Order
1. This review petition has been filed by the Commissioner of Central Excise seeking review of the order dated 28-11-2002 (2003) 9 SCC 74 passed by this Court in Civil Appeal No. 2355 of 2000.
2. The challenge in the said appeal filed by the Commissioner of Central Excise was to the judgment and order dated 8-9-1999 passed by the Customs, Excise and Gold (Control) Appellate Tribunal, whereby the Tribunal allowed the appeal of the assessee holding that in previous decisions rendered by the Tribunal, it was decided that Modvat credit is available on high speed diesel oil used as fuel for generation of electricity which in turn is used for running cement plant. By the order of which review is sought, it was held that the Tribunal was fully justified in arriving at the conclusion that the assessee was entitled to get the benefit of the notification till Rule 57-B was amended.
3. By this petition it has been pleaded that inadvertently the attention of the Court was not drawn to the provisions of Section 112 of the Finance Act, 2000. Section 112 reads as under:
“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 validity 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.”
4. A bare reading of sub-section (1) of Section 112 shows that no credit is admissible on 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 received the assent of the President. The President gave assent on 1-4-2000. It is not in dispute that the period in question comes under the purview of Section 112(1). The contention that Rule 57-B was not amended is of no avail since the aforesaid provision provides that notwithstanding anything contained in the Rules, the credit is not admissible. As Section 112 was not brought to the notice of the Court, the appeal of the Revenue was dismissed. In view of this statutory provision, the appeal of the Revenue could not have been dismissed since the assessee was not entitled to get the benefit of Rule 57-B.
5. Though the assessee is not entitled to the benefit as aforesaid, yet we cannot ignore the fact that the aforesaid amendment came into force on 1st April, 2000 when the order of the Tribunal dated 8-9-1999, in favour of the assessee was holding the field and it is being set aside today by this order. In this view, the time to make payment under Section 112(2)(b) has to commence only from today. Further, having regard to the facts and circumstances of the case, it would be appropriate to set aside the penalty of Rs 50,000 imposed on the assessee by the Assistant Commissioner in the order dated 22-9-1998.
6. Before parting, we may also note that a submission was sought to be made by the learned counsel for the assessee challenging the constitutional validity of Section 112 of the Finance Act but in this appeal, we cannot permit such a contention to be raised. As and when a petition is filed challenging the validity of the provision, it would, of course, be dealt with in accordance with law.
7. For the aforesaid reasons, we allow the review petition. The order dated 28-11-2002 (2003) 9 SCC 74 is recalled. Civil Appeal No. 2355 of 2000 is allowed. The order of the Tribunal dated 8-9-1999 is set aside and that of the Assessing Commissioner is restored subject to the aforesaid direction regarding deletion of imposition of penalty and the time for payment of interest.
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