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Karnataka High Court
MODERN MILLS LIMITED, HUBLI - Appellant
Versus
UNION OF INDIA - Respondent
Decided On : 10-26-90
W.P. : 18534 of 1989
CREDIT - Central Excise Rules - Rule 57-k to 57-p - The court discussed the scheme provided in Rule 57-k to 57-p, the rates of cash credit, utilisation of the credit, disallowance of credit, and the conditions stipulated in the notification. The court highlighted the right of the manufacturer to claim a set-off of the credit earned under the scheme of the notification even after its rescission.
Fact of the Case:
The petitioner, a manufacturer of vegetable products, challenged an endorsement that rescinded a notification allowing the utilization of accumulated credit earned for payment of excise duty on final products beyond a certain date.
Finding of the Court:
The court found in favor of the petitioner, holding that the accumulated credit does not cease or vanish upon rescission of the notification, and the principle of promissory estoppel applies to the case.
Issues: The main issue was whether the petitioner could utilize the accumulated credit earned under a rescinded notification for payment of excise duty on final products beyond the rescission date.
Ratio Decidendi: The court held that the manufacturer has the right to utilize the credit earned under the notification even after its rescission, and the principle of promissory estoppel applies to protect the rights accrued to the manufacturers.
Final Decision: The writ petition was allowed, and the petitioner was directed to utilize the accumulated credit subject to verification of the amount.
( 1 ) THE petitioner is a manufacturer of vegetable products. By virtue of notification No. 27/1987, dated 1-3-1987, the petitioner was entitled to set off on fixed vegetable oils used in the manufacture of vegetable products. The fixed vegetable oils on which set off is allowed are mentioned in the table annexed to the notification. On the basis of the said notification the petitioner earns a cash credit equivalent to rs. 1000/- on each tonne of vegetable product cleared from the factory. Any amount payable in excess of rs. 1000/- is debited to his pla account and thus he earns a credit of rs. 1000/- per tonne and this credit earned by the petitioner on each tonne of vegetable product cleared, is credited to account rg 23-b, part ii.
( 2 ) CHAPTER aaa was inserted in the central excise rules with effect from1-3-1981 and special rules were framed to implement the scheme and the notification issued under Rule 57-k. Rules 57-k to 57-p prescribe the procedure to be observed by the manufacturer to earn the credit and also for utilisation of the said credit and for disallowance of the credit and other related matters. Under the scheme provided in Rule 57-k to 57-p the rates of cash credit to be given for use of notified inputs in the manufacture of final products, is to be specified in the notification to be issued by the central government under Rule 57-k.
( 3 ) UNDER sub-rule (2) of Rule 57-k credits so allowed is permitted to be utilisedfor payment of duty on the final products subject to the Provisions of the Section and the conditions stipulated in the notification.
( 4 ) RULE 57-0 prescribes the procedure to be observed by the manufacturer like filing of the declaration of the final products, taking credit on the inputs, maintenance of account relating to the credit in form rg 23-b, parts i and ii and filing of monthly returns indicating particulars of the inputs used during the month and the amount of credit taken, etc.
( 5 ) RULE 57-p provides for disallowance of credit in cases of wrong credit or excess credit, etc. Credits allowed under the rules is permitted to be utilised for payment of duty on the final products subject to the conditions stipulated in the notification. The important condition stipulated in the notification is that the credit taken during any calender month shall be utilised for payment of duty on the final products only after the commencement of the succeeding month.
( 6 ) AN illustration of the petitioner's case is given in paragraph-5 of the writ petition which is rcproduced:-"heading No. 15. 04, sub-heading No. 1504-00 in chapter 15 of the schedule to the central excise tariff Act, 1985 provides as follows:-
Heading
No.
Subheading No.
Description of goods
Rate of duty
15. 04
1504-00
Vegetable fats and oils and their fractions, partly or wholly hydrogcnated, inter-estcrified, reesterified
or elaidinised, whether or not refined but not further prepared.
Rs. 1900/-per tonne. "
vegetable fats and oils and their fractions, partly or wholly hydrogcnated, inter-estcrified, reesterified or elaidinised, whether or not refined but not further prepared. Rs. 1900/-per tonne. "
( 7 ) APPLYING the notification the petitioner earned a credit of rs. 1000/- on the fullduty of Rs. 1900/- payable on each tonne of vegetable product produced. Under the scheme of the notification, as per the table annexed to the notification, the rates and credit per tonne, to which the manufacturer is entitled is mentioned against each type of fixed vegetable product notified in the table. Though the manufacturer earned the credit on each tonne of fixed vegetable product utilised as input for producing the vegetable product he was allowed a set-off of only Rs. 1000/- per tonne under the notification. Whatever is paid in excess of this Rs. 1000/- viz. , Rs. 900/-, was debited to rg 23 account at the time of each clearance.
( 8 ) IN respect of the clearance, made upto 25-8-1989 as per the calculations given in A
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