1. M/s. Jalan Containers Manufacturing Corporation, Rajpura (Punjab) being aggrieved with the order-in-original dated 7-3-1991 passed by the Additional Collector of Central Excise, Chandigarh had filed the present appeal which was received in the registry on 6-5-1991.
2. The matter relates to the availment of the MODVAT credit. The appellants were engaged in the manufacture of metal containers. During the period 8-9-1987 to 18-8-1988 inputs that is tin sheets falling under sub-heading No. 7210.20 of the Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the Tariff), were received under invoices issued by the depot of M/s. Tin Plate Company of India Ltd., Rajpura (hereinafter referred to as 'TPC'), said to be a subsidiary of the Tata Iron and Steel Company of India Ltd. (hereinafter referred to as 'TISCO'). On the strength of such invoices, the appellant had taken MODVAT credit of Rs. 635542.34. It was alleged in the show cause notice dated 14-9-1989 that the appellants were eligible only for the deemed credit of Rs. 301199.26, and thus they had taken excess MODVAT credit of Rs. 334343.08. The demand was confirmed by the Addl. Collector of Central Excise, Chandigarh under Rule 57-I of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'). No penalty was however, imposed on the ground that the RT 12 Returns for the relevant period had been assessed by the Department.
3. The matter was posted for hearing on 2-5-1995 when Ms. Archana Wadhwa, Advocate appeared for the appellant. Shri K.K. Datta, JDR represented the respondent.
4. Ms. Archana Wadhwa, the learned Advocate stated that the invoices had been issued by TPC which was a subsidiary of TISCO. Taking of MODVAT credit on the strength of such invoices, was covered by the trade notices. The learned Advocate also submitted that the demand was hit by time bar, and relied upon the Tribunal's decision in the case of Atma Steels Pvt. Ltd. v. Collector of Central Excise, Chandigarh - 1984 (17) E.L.T. 331 (Tribunal) (para 101).
5. Shri K.K. Datta, the learned JDR replied that the MODVAT credit had been taken on unauthorised documents by mis-representation, and that the demand had been rightly confirmed by the Addl. Collector of Central Excise, Chandigarh. He pleaded for the rejection of the appeal.
6. We have carefully considered the matter. In this case, the electrolite tinned sheets, the inputs, were received in the factory under invoices issued by the Rajpura Depot of TPC. TPC was said to be a subsidiary of TISCO. Under Proviso to sub-rule (2) of Rule 57G of the Rules, no credit could be taken unless the inputs were received in the factory under the cover of a gate pass, an AR 1, a bill of entry or any other document as may be prescribed by the Central Board of Excise and Customs (CBEC) in this behalf evidencing the payment of duty on such inputs. It is seen that under Chandigarh Central Excise Collectorate Trade Notice No. 68-C.E./86, dated 23-12-1986, it was provided that a certificate given by the Stock yard of SAIL and other canalizing agency/government agencies on the prescribed delivery challans would be acceptable for the purpose of granting credit under Rule 57A. Vide Trade Notice No. 3/87, dated 9-2-1987, it was clarified that the term 'stockyard of other canalizing agency' would represent stockyards of SAIL, MMTC, STC, ISCO, TISCO, State Govt, SSI Corpn., and the like. A stockyard of the subsidiary of TISCO could not be covered by the expression 'and the like', in respect of indigenous inputs. Before the Addl. Collector of Central Excise, the Counsel for the appellant had submitted that as per Annual Report 1985-86 of the TPC, it was mentioned that TISCO had taken substantial share holding of that Company after approval of the Central Government. On this score alone, the stockyard of TPC could not be covered by the provisions of the Proviso to sub-rule (2) of Rule 57G. Thus, on merit we do not consider that the appellant had any case.
7. On the question of limitation also we find that the appellant had no case. The MODVAT scheme was introduced under Notification No.176/86-C.E., dated 1-3-1986. Rules 57A to Rule 57-I were inserted in Chapter V of the Rules as Section AA. During the transitional period, no formal declaration under Rule 57G was required in respect of inputs lying in stock received on or after 1-3-1986 and received upto 31-3-1986, for availing MODVAT credit. The Asstt. Collector of Central Excise was however, required to make the necessary verification as referred under Rule 57H, before allowing the credit (refer CBEC F. No.211/74/86-CX 6, dated 11-2-1987).
8. The Addl. Collector had mentioned that prior to issue of Notification No. 28/88-C.E., dated 6-10-1988, no time limit was prescribed in Rule 57-I to recover the amount of the MODVAT credit wrongly taken and utilised by the assessees. In this case the show cause notice was issued on 14-9-1989 but the period involved is from 8-9-1987 to 18-8-1988. Almost identical issue came up for consideration before the High Court of Gujarat at Ahmedabad in the case of Torrent Laboratories Pvt. Ltd. v. Union of India - 1991 (55) E.L.T. 25 (Gujarat), and the Hon'ble High Court after detailed analysis held as under :- "Rule 57-I of the Rules provided for taking measures in case of wrongful availment of credit. Clause (1) of the rule has been substituted by adding fresh clause (1). By introducing this amendment, what did the legislature do? The legislature simply made detailed and precise provision with regard to period of limitation and the show cause notice to be issued and for affording an opportunity of being heard to the assessee in certain cases. As indicated hereinabove, the provisions with regard to the limitation and the provisions with regard to affording an opportunity of being heard were required to be read into the rules. Thus, that which was implicit in the rule has been made explicit with little more precision, by introducing the amendment. By introduction of the amendment in the rule, by no stretch of reasoning it can be said that the legislature wanted to give amnesty to persons who are alleged to have availed of MOVAT credit wrongfully. There is no indication whatsoever either in the history of the provisions of the Rules or in the subsequent steps taken by the legislature or in the context of the rules to indicate that the legislature desired to give pardon to the assessees who were alleged to have taken MODVAT credit wrongfully." This decision of the Gujarat High Court has been followed by the Tribunal in the case of Rock Drill (India), Jodhpur v. Collector of Central Excise, Jaipur, 1993 (48) ECR 320 (Tribunal). With regard to even repeal of an Act the Hon'ble Supreme Court in the case of P.V.Mohd. Barnay & Sons v. Director of Enforcement - AIR 1992 SCW 3609 had held, in the context of repeal of the Foreign Exchange Regulation Act, 1947, that "despite its repeal the penalty, liability forfeiture or prosecution for acts done while the repealed Act was in force were kept alive though no action thereunder was taken when the repealed Act was in force. The rights acquired or accrued or the liabilities incurred or any penalty, forfeiture or punishment incurred during the operation are kept alive. Investigations to be made or any remedy, which may have been available before the repeal be enforced are also preserved. Such rights, liabilities, penalty, forfeiture or punishment due to repeal shall not lapse". Attention is also invited to Section 6(C) of the General Clauses Act, 1897. With reference to the substitution of the old Rule 11 by the new Rule 11 from 6-8-1977, the Nagpur Bench of the Bombay High Court in the case of Universal Drinks Pvt. Ltd., Nagpur v.Union of India and Anr. 1984 (18) E.L.T. 207 (Bombay) had held that refund of payments made prior to the change was to be governed under the old rules even though refund claim was lodged subsequently. In para 11 of their judgment it was held as under:- "In these petitions, it is clear that the payment of the excise duty, of which refund is claimed, is made and a right to refund thereof arose prior to 6-8-1977 i.e. the date on which the new rule 11 has come into force. The said right to claim refund is a vested right which has accrued to the petitioner prior to new Rule 11, or at any rate is an existing right. It is a settled principle of interpreta tion of statutes that a vested right or even an existing right, including a right of action is not affected or allowed to be taken away unless it is so affected or taken away by the enactment expressly or by necessary implication. It is only a declaratory or procedural enactment which is normally held to be retrospective. A remedial Act, on the contrary, is not necessarily retrospective, it may be either enlarging or restraining and it takes effect prospectively, unless it has retrospective effect by express terms or necessary intendment. (See AIR 1960 S.C. 12 (para 29) - The Central Bank of India and Ors. v. Their Workman AIR 1973 S.C. 1227 - The Workmen of M/s. Firestone Tyre and Rubber Co. of India P. Ltd. v. The Management and Ors. It is, therefore, necessary to be seen whether the provisions of new rule 11 can be held to be retrospective so as to affect the existing or the vested right which has accrued to the petitioner prior to the said rule." This decision of the Divn. Bench of the Bombay High Court was followed by the Tribunal in the case of Nagarjuna Steels Ltd. v. Collector of Central Excise, Hyderabad 9. The appellant had relied upon the Tribunal's decision in the case of Atma Steels Pvt. Ltd. v. Collector of Central Excise, Chandigarh, 1984 (17) E.L.T. 331 (Tribunal). The point for consideration before the larger Bench, among others was that for short levy or non-levy which occurred prior to 6-8-1977 and for which show cause notice was issued after 6-8-1977, what Rule should be invoked, the Rule as existed before 6-8-1977 or the substituted Rule. In this case we are concerned with the wrong availment and utilisation of MODVAT credit, and the amount of MODVAT credit already taken and enjoyed has been sought to be recovered under Rule 57-I, with its own limitation. The decision of the Tribunal was based on the ground that in respect of a demand by the department for payment of central excise duty there was no question of any vested right that could be claimed by the department and therefore, there was no question of such vested rights being saved (in the absence of any specific saving provision), when the concerned Rule stood substituted or deleted. These considerations could not apply in the case of reversal of MODVAT credit taken by the manufacturer in respect of the inputs on which duty had been paid by his suppliers, and utilisation of such credit is to discharge his own duty liability on his finished products. Thus, that decision would not be any authority for the contentions raised before us in this case. In this connection, reference may also be made to the subsequent Tribunal's decision in the case of Nagarjuna Steels Ltd. v. Collector of Central Excise, Hyderabad 1985 (21) E.L.T. 854 (Tribunal) in which the larger Bench's decision had been discussed in para 5.
10. Taking all the relevant considerations into account we do not find any merit in the appeal, and the same is rejected.
Sd/- 11. I have gone through the order written by my Learned Brother Shri Lajja Ram, Member (T). I agree with my Learned Brother that the stockyard of TPC could not be covered by the provisions of the proviso to sub-rule (2) of Rule 57G. However, I am of the considered opinion that the demands are barred by time and the decisions relied by the Learned Brother are clearly distinguishable. Even, to attract larger period, the allegation of suppression, misstatement, fraud and misrepresentation as stated in proviso to Section 11A is required to be established. In this case admittedly, the RT-12 returns had been assessed by the department and there being no allegation of the proviso to Section 11A, the demands are, therefore, to be considered as barred by time.
12. The Karnataka High Court has examined the recovery of duty under Rule 57-I of the Central Excise Rules, 1944 vis-a-vis Section 11A of the Act in the case of Thungabhadra Steel Products Ltd. v. Supdt. of Central Excise as reported in 1991 (56) E.L.T. 340 and has held that the demand to be time barred, in a similar circumstance like this, as can be noticed from the Para 17 of the order which is reproduced herein below : "17. Therefore, having regard to the scheme of Modvat credit, if a proper officer finds that Modvat credit had been wrongly availed of or utilised in an irregular manner, he takes steps to recover the duty which was legitimately payable by the assessee under the Act in accordance with the procedure prescribed under the relevant rules.
The scheme provides for debiting, the credit availed of to the PLA account, which is a self-removal facility provided under the scheme of the modvat credit. This credit will have to be reversed in accordance with law resulting in recovery of the duty that becomes payable as a consequence of the reversal. Under Rule 57E, the duty in respect of which credit is allowed, is adjusted in the credit account maintained by the assessee as prescribed under Rule 57G. Under 57G(4), the manufacturer of final product is required to submit monthly return indicating the particular inputs received during the month and the amount of duty taken as credit along with extracts of Parts I and II of Form RG23A, and, also make available the documents evidencing the payment of duty on the inputs taken, to the proper officer. Therefore, having regard to this scheme, any reversal of credit availed of by the manufacturer wrongly, results in withdrawal of the allowance of the credit and the proper officer proceeds to recover the amount equivalent to the disallowance in the manner prescribed in Rule 57-I. It, therefore, stands to reason why restriction was placed by the Central Govt. on Rule 57-I, as amended with effect from 6-10-1988.
This restriction is the time limit of six months for recovery of credit wrongly availed of, if it is an error on the part of the officer, and time limit of five-years is allowed if such credit has been taken on account of wilful mis-statement, collusion or suppression of facts on the part of manufacturer or an assessee.
This amendment brings about uniformity in the procedure prescribed under Rules as are applicable to both the schemes under 56A and 57A. The substantive law prescribed in the Central Excises Act for recovery of any duty payable, short levy or erroneous refund is Section 11A of the Act which places restriction of the exercise of power in the manner provided therein.
Therefore, Rule 57-I, as it stood before amendment with effect from 6-10-1988 should receive the same interpretation as it should receive after amendment and should be made applicable to the facts of the present case as well. The earliest decision of the CEGAT on this point was by the Bombay Bench in Collector of Central Excise v. Bharat Containers Pvt. Ltd. [1990 (48) E.L.T. 520 (Tri.). The Tribunal held thus (para5): "When the credit has been taken wrongly or it is in excess of the eligibility, it is a case of erroneous credit, which can be recovered by a demand. Such a demand cannot go beyond the purview of the statutory provisions of Section 11A of the Central Excises & Salt Act, 1944. Even if Rule 57-I is sought to be invoked, it is to be read with the provisions of Section 11A, which is the statutory provision for recovery of any duty either short-levy or non-levy or duty taken erroneously as proforma or MODVAT credit."Advani Oerlikon Ltd. v. Assistant Collector of Central Excise, as reported in 1993 (63) E.L.T. 427 has taken a similar view and has held the demands to be barred by time in respect of wrong availment and utilisation of MODVAT Credit, and the amount of MODVAT Credit already taken and enjoyed has been sought to be recovered under Rule 57-I and has further held that Rule 57-I does not disowned limitation and limitation has to be determined as laid down in Section 11 of the Central Excises and Salt Act, 1944.
14. The Tribunal on this particular issue has already gone into great detail and examined all the judgments on this point and has held that the demands in a circumstance like this is to be considered as barred by time and that Rule 57-I does not have its own limitation but the period of limitation would be guided by the provision of Section 11A of the Act, as rendered in the case of Hindustan Lever Ltd. v. Collector of Central Excise, as reported in 1994 (72) E.L.T. 168. Similarly the East Regional Bench of the Tribunal in the case India Linoleums Ltd. v.Collector of Central Excise, as reported in 1993 (67) E.L.T. 678 again examined all the judgments including the judgment of Gujarat High Court as rendered in the case of Torrent Laboratories Pvt, Ltd. (Supra) and has held that the demands are to be considered as barred by time on the principles as laid down in the above cases by reading the provisions of Section 11A in the provisions of Rule 57-I. The judgment also refers to the citation of Atma Steels Pvt. Ltd. and Ors. v. Collector of Central Excise, 15. In that view of the matter, I hold that the demands are barred by time and in terms of provisions of Section 11A of the Act, which applies for the recovery of duty for wrong availment and utilisation of MODVAT Credit, and appeal to be allowed.
16. In view of difference of opinion following points arises for reference to the Third Member, by Hon'ble Vice President: Whether the demands raised in the show cause notice is barred by time even for recovery under Rule 57-I as held by Member (J) The demands are recoverable for extended period for wrong availment and utilisation of MODVAT Credit under Rule 57-I as held by Member (T).
17. The arguments put forth by the ld. Counsel, Ms. Archana Wadhwa for the appellants and submissions made by Shri Y.R. Kilania, ld. D.R. have been considered. On the question of limitation, the Hon'ble Member (Technical) has relied upon the judgment of the Gujarat High Court in the case of Torrent Laboratory v. U.O.I. reported in 1991 (55) E.L.T.25 to say that the provisions of Section 11A of the Central Excises & Salt Act, 1944 regarding limitation, could not be read with the unamended Rule 57-I before its amendment on 6-10-1988. The hon'ble Member (Technical) has also sought to distinguish Larger Bench decision in the case of Atma Steel v. CCE 18. On a careful examination of the reasoning in both the proposed orders of the hon'ble Member (Technical) and hon'ble Member (Judicial), one is inclined to agree with the proposed order of the hon'ble Member (Judicial) having regard to the series of judgments of the Tribunal on this aspect and of the Karnataka High Court, a whole list of which had been furnished in the East Regional Bench decision in the case of India Linoleums Ltd. v C.C.E. reported in 1995 (67) E.L.T. 678 (Tribunal).
The East Regional Bench in that case has considered in detail a catena of decisions has also considered Torrent Laboratories decision (supra).
Paras 8 & 9 of the ERB decision is reproduced below: "The Tribunal decision in 1990 (47) E.L.T. 132, 1990 (42) E.L.T. 700 and 1990 (48) E.L.T. 520 relied upon by Shri Biswas had been taken note of by the Court and the reasoning in the last mentioned Tribunal decision (Bharat Containers Pvt. Ltd.) was fully agreed to in their judgment. Though the Gujarat judgment in the Torrent Laboratories case was not brought to their notice, they took note of the Supreme Court judgment in Citadel Fine Chemicals and J.K. Spg. & Wvg. Mills Ltd. cases. In the latter case, which was with reference to recovery of short levied excise duty, it was held by the Supreme Court that the same would be subject to the time limit stipulated in Section 11A of the Central Excises & Salt Act. It is significant that such a finding was reached even though the same was not referred to in Section 51 of the Finance Act, 1982, under which short levy arose and which carried no time limit stipulation in it.
In view of this judgment of the Supreme Court laying down the applicability of the time limit under Section 11A even for recovery of short-levied/non-levied duty under other provisions which were themselves free from time limit restrictions, Section 11A will [loom] large This judgment was taken note of in the Tungabhadra judgment of the Karnataka High Court but not brought to the notice of the Gujarat High Court in the Torrent case. It is incidentally to be noted that even in the Gujarat High Court judgment, they had observed that by amendment of Rule 57-I, the legislature simply made detailed and precise provision with regard to period of limitation and the show cause notice to be issued and for affording an opportunity of being heard to the assessee in certain cases. The provisions with regard to the limitation and the opportunity of being heard were required to be read into the Rules. Thus, that which was implicit in the rules has been made explicit with a little more precision by introducing the amendment. It is in the background of this observation of theirs that their finding that the provisions of Section 11A cannot be read into Rule 57-I prior to its amendment has to be noted. Accordingly, the contrary decision of the Karnataka High Court, relied upon by Sh. Biswas has to be preferred and applied.
The above finding apart, the reliance placed by he Collector on the judgment of the Gujarat High Court in the Torrent Laboratories case is misplaced as the said judgment was with reference to demands issued in the pre-amended period. When the demand in the present case has been issued only on 8-9-1989, after the amendment of Rule 57-I, it is only the amended Rule that will be relevant. The decision of the Larger Bench of the Tribunal in the Atma Steel case 1984 (17) E.L.T. 331 will be applicable. The same has been followed by the West Regional Bench in the Apar Limited case. I respectfully follow the said decisions and hold that the demand in this case is hit by limitation." 19. It is clear therefrom that consistent view in this aspect on limitation for recovery of rnodvat credit under Rule 57-I has been that the limitation thereunder would continue to be governed by the provisions of Section 11A of the Central Excises & Salt Act, 1944.
Moreover the ratio of the Larger Bench decision in Atma Steel case is also relevant wherein it has been laid down that the law which is in force on the date of issue of show cause notice will govern the case covered by the show cause notice and in this case the show cause notice has been issued in 1989 when the amended provisions of Rule 57-I were in force. That Atma Steel decision was with reference to the provisions relating to short-levy or non-levy will not make any material difference to an issue where the question is one of statutory limitation for a prescribed purpose. In the result, the order proposed by the hon'ble Member (Judicial) holding that the demand raised in the show cause notice is barred by limitation under Rule 57-I, is concurred with.
20. In terms of the majority order, the demand raised in the show cause notice is barred by time even for recovery under Rule 57-I as held by Member (J) in his order and hence, the appeal is allowed.