Per S.S. Kang :

This reference application is filed by the Revenue with the request to refer the following questions of law to the Hon'ble Supreme Court for their valuable opinion.

(i) Whether Rule 57-I of the Central Excise Rules, 1944, as it stood prior to amendment effected on 06.10.88, is subject to the provisions of limitation prescribed under Section 11-A of the Central Excise Act, 1944? or

(ii) Whether Rule 57-I is independent of Section 11-A aforesaid and could be invoked for recovery of Modvat Credit covering even the period beyond six months from the date of credit before 6.10.88?

2. Ld. JDR appearing on behalf of the applicant submits that Rule 57I of the Central Excise Rules, 1944, as it is prior to amendment by Notn. No. 28/88 dated 6.10.88 did not prescribe any time limit for recovery of irregularly availed modvat credit. He further submits that Rule provides that if the credit of the duty paid on inputs has been taken wrongly the credit so taken may be disallowed by the proper officer and the amount so disallow shall be adjusted in the account or the amount currently maintained by the manufacturer and, if such adjustment is not possible for any reason then by cash recovery from the manufacturer. He submits that no time limit for disallowing the credit under Rule 57I. Therefore, he submits that question referred above may kindly be referred to the Hon'ble Supreme Court.

3. Heard Shri Jitender Kumar, Advocate on behalf of the appellant. In this Reference application the Revenue had requested to refer the question of law to the Hon'ble Supreme Court for their valuable opinion. The main argument of the Revenue is that as Rule 57I of the Central Excise Rules as it stood prior to amendment on 16.1.88 is not subject to the provision under Section 11A of the Central Excise Acts, 1944.

4. We find that this issue has been decided by the Hon'ble High Court at Bombay in the case of Fabril Gasosa Vs. Union of India reported in 1997 (96) ELT. 241. In this case the Hon'ble High Court held that provisions of Section 11A of Central Excise Act 1944 are applicable even to unamended Rule 57I of the Rules. Hon'ble High Court held as under:

5. The Rule is a subordinate legislation and is authorised by some provision in the statute under which those Rules are made. The power to frame the Rules is derived from the Act itself and the Rules owe their existence to the Act under which they are made. If there is any provision in the Act itself and even if the Rules are silent on that aspect of the matter, it will always have to be presumed that the provisions in the Act would be applicable and will have to be considered while interpreting the Rules. If there is a conflict between the Act and the Rules made under that Act, the Act would always prevail. If something is provided in the Act, it is really not necessary to repeat the same in the Rules and therefore, if the entitlement of the refund or recovery is specified in the Rules without any mention of limitation, but the Act under which the Rules have been framed makes an unequivocal provision of limitation which may be applicable to those Rules, then the Rules will have to be read along with the provisions of the Act and not in isolation. Section 11A so far as is relevant for the purpose of this petition is reproduced below :-

"Section 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded.-

(1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made requiring him to show cause why he should not pay the amount specified in the notice:

Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or