IMPORTANT POINT
Section 11A of the Central Excise and Salt Act, 1944, would have no application to any action taken under Rule 57-I of the Central Excise and Salt Rules, 1944, prior to its amendment on 6.10.88, and Rule 57-I of the Rules are not in any manner subject to Section 11A of the Act.

Headnote:Central Excise and Salt Act, 1944-Section 11-A-Central Excise Rules-Rules 57-G and 57-I-Modvat credit-Wrong availment-Recovery of-Limitation-Position prior to amendment on 6.10.1988-Section 11A would have no application to any action taken under Rule 57-I prior to its amendment on 6.10.1988 and Rule 57-I of Rules are not in any manner subject to Section 11A of the Act.
       Any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, 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 manufacturer to utilise the credit so allowed towards payment of duty of excise leviable on the final products, in the manner and subject to the terms and conditions stipulated therein. The manufacturer, in this case while removing the final product manufactured has adjusted against payment of excise duty on such final product a part or portion of the credit earned by him under the special scheme and what is sought to be really and in substance done is to inform the manufacturer that the adjustment he purported to have made was with an amount not legitimately or factually earned by or due to him. For this purpose, the irregularity and impropriety committed by the manufacturer in maintaining the accounts and the error in the calculation of the credit said to have been earned by him is pointed out, and the manufacturer is only directed to reverse the credit so wrongly and undeservedly made by readjustment and if need be, to recover the amount equivalent to such credit wrongly availed of and disallowed by the proper officer. The recovery of credit availed of and utilised in utter breach of the faith and mutual trust and confidence which is the raison d etre for the proper and successful working of the MODVAT Scheme and that too in gross violation of the mandatory requirements necessarily to be fulfilled before ever claiming or availing of such benefits cannot be said to be the same as the demand for payment to be made under Section 11A of the Act of any excise duty not levied or paid or has been short-levied or short-paid. They fall into two distinct and different categories altogether with basic as well as substantial differences to distinguish them from each other. As a matter of fact, Rule 57-I envisages disallowance of the credit and consequential adjustment in the credit account or the amount-current maintained by the manufacturer and if only any such adjustments are not possible proceed to recover the amount equivalent to the credit illegally availed of. Consequently, the situation postulated to be dealt with under Rule 57-I cannot be said to involve a case of manufacture and removal of excisable goods without subjecting such goods to levy or payment of the various nature and category enumerated in Section 11A. Hence, Section 11A of the Act on its own terms will have no application or operation to cases covered under Rule 57-I of the Rules. (Para 13)
       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 abuse 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 determined, as observed earlier, with reference to the area and extent of their application either generally in all circumstances or specially in particular situations and not on the ground that one is a mere provision in the Act and the other is a provision in the Rule. The restricted operation of the provisions contained in Section 11A is found inherently in-built due to the specification of the various categories of cases enumerated in the provision itself to be dealt with. The Scheme of MODVAT, introduced for the first time in 1986, did not consider it necessary either to have its own period of limitation in-built in the Rules nor has the enforcement of the scheme been made subject to Section 11A of the Act. The fact that even when an amendment was made on 6.10.88, it was prospective in nature and the amendment was not given any retrospective effect indicates the intention unmistakably that the subsequent amendment should have no impact on the construction to be placed on the provisions as it existed before such amendment. Therefore Section 11A of the Central Excise and Salt Act, 1944, would have no application to any action taken under Rule 57-I of the Central Excise and Salt Rules, 1944, prior to its amendment on 6.10.88, and Rule 57-I of the Rules are not in any manner subject to Section 11A of the Act. (Paras 14, 15 & 17)
       The utilisation 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 utilisation of the same and once the credit side gets diminished the very basis of adjustment disappears ipso fecto. By adopting a defiant attitude in the matter, the manufacturer cannot take advantage of his misdeed to gain an advantage by contending that the action to be taken involve only a recovery of duty and, therefore, should be within the period of limitation provided under Section 11A of the Act. Even when the recovery is ordered, as a last resort, as envisaged under Rule 57-I, as observed earlier, it is only recovery of the money value equivalent to the unlawful credit availed of and adjusted under the Scheme and not the demand or recovery of any duty as such. (Para 16)

JUDGMENT

Raju, J.-This Reference under Section 35H of the Central Excises and Salt Act 1944, (hereinafter referred to as the Act ) came to be directly made at the instance of the Revenue to this Court by the Customs, Excise and Gold (Control) Appellate Tribunal, North Regional Bench, on account of conflict of views expressed in the decisions of the High Court of Gujarat reported in Torrent Laboratories Pvt. Ltd. v. Union of India1, and that of the Karnataka High Court reported in Thungabhadra Steel Products Ltd. v. Supdt. of Central Excise2.

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 licence in Form L-4 and a manufacturer of vegetable products failing 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 10.3.87. But the fact is that the respondent availed of the credit facilities in question even from 1.3.87 and, therefore, the authorities were of the view that wrong credit had been availed of to the tune of Rs. 62,710.61 on the inputs received and utilised from 1.3.87 to 10.3.87. On being pointed out though they debited a credit of Rs. 20,828.93 relating to furnace oil and filter cloth, not covered under the MODVAT Scheme, the balance of Rs. 41,872.68, in request of other outputs was not debited, in spite of the communication dated 10.8.87 and reminders dated 29.12.87 and 1.2.88 for the reversal of the credit, issued by the Range Officer.

3. As against the communication dated 1.2.88, the respondent filed an appeal before the Collector (appeals) who by his order dated 21.12.89 set aside the same and remitted the matter to the Assistant Collector, the competent Authority, for the purposes of Rule 57G. In the meantime, the Assistant Collector, Central Excise, Jaipur, issued a show cause notice as to why the sum of Rs. 41,872.68 should not be recovered from the respondent under Section 11A of the Act read with Rule 57-I of the Rules. After considering the submissions of the respondent, the Assistant Collector by his order dated 3.8.90 directed the reversal of the credit of Rs. 41,872.68 wrongly taken, in their RG-23A. The said Authority held that filing of a declaration being a statutory necessity and condition precedent to avail of credit under the scheme, the respondent was not eligible to take credit for the period prior to the filing of the declaration. As a matter of fact, the respondent did not appear to have contested the case on merit but only raised a plea of limitation that notice has not been issued within a period of six months, as envisaged under Section 11A. The plea based on limitation came to be also rejected on the ground that the Range Officer issued a letter dated 10.8.87 calling upon the respondent to debit the credit wrongly taken and this was well within the six months period. This was challenged on appeal and the Collector (appeals) by his order dated 12.12.91 rejected the appeal repelling the plea of limitation. The matter was further pursued before the Tribunal by way of an appeal, and by an order dated 3.2.94, it was held that the show cause notice issued by the Assistant Collector on 5.8.88 was beyond a period of six months and that even for demanding reversal of credit already taken, in exercise of Rule 57-I, the 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,

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2000 Supreme(SC) 1032

IMPORTANT POINTSection 11A of the Central Excise and Salt Act, 1944, would have no application to any action taken under Rule 57-I of the Central Excise and Salt Rules, 1944, prior to its amendment on 6.10.88, and Rule 57-I of the Rules are not in any manner subject to Section 11A of the Act.

Cases Referred (5)

IMPORTANT POINT
Section 11A of the Central Excise and Salt Act, 1944, would have no application to any action taken under Rule 57-I of the Central Excise and Salt Rules, 1944, prior to its amendment on 6.10.88, and Rule 57-I of the Rules are not in any manner subject to Section 11A of the Act.