Case: Sangam Spinners Ltd Vs. Union of India &amp; Others

In Civil Appeal No. 476 of 2003:The appellants are engaged in the business of manufacturing and selling Man Made PV Blended Yarn and have installed a diesel generating set for generation of electricity for captive consumption in their factory premises. It is the case of the appellants that they purchased High Speed Diesel oil for generation of electricity from Indian Oil Corporation Ltd. / Hindustan Petroleum Corporation Ltd. through their sales office/depots in Rajasthan, which was cleared under heading 27.10 (sub heading 2710.90) on payment of central excise duty.In Civil Appeal No. 477-478 of 2003:The appellants are engaged in the business of manufacturing and selling Portland cement and have installed a diesel generating set for generation of electricity for captive consumption in their factory premises. It is the case of the appellants that they purchased High Speed Diesel oil for generation of electricity from Indian Oil Corporation Ltd. / Hindustan Petroleum Corporation Ltd. through their sales office/depots in Rajasthan, which was cleared under heading 27.10 (sub heading 2710.90) on payment of central excise duty.In Civil Appeal No. 479 of 2003 :The appellants are engaged in the business of manufacturing and selling Cotton Yarn and Yarn of Synthetic/Artificial Staple Fiber and have installed a diesel generating set for generation of electricity for captive consumption in their factory premises. It is the case of the appellants that they purchased High Speed Diesel oil for generation of electricity from Indian Oil Corporation Ltd. / Hindustan Petroleum Corporation Ltd. through their sales office/depots in Rajasthan, which was cleared under heading 27.10 (sub heading 2710.90) on payment of central excise duty.2. In all these Appeals, identical issues are involved and therefore, we propose to dispose of all these appeals by this common judgment and order.3. The case of the appellants is that the said diesel oil is used as input/goods in the said diesel generation set for generation of electricity which is used in the manufacture of final goods or for other purposes in the factory of the appellants. They submitted a declaration in respect of the diesel as well as oil and lubricants as required under Rule 57G read with Rule 57B of the Central Excise Rules 1944, [for short "the Rules"] intending to avail the credit of duty on the said goods/inputs on 17/18.3.1997 with the Assistant Commissioner, Central Excise, Ajmer. But the Assistant Commissioner informed the appellants that after 1.3.1997, MODVAT credit was not available on high speed diesel oil and therefore no action could be taken on the declaration submitted by the company. The appellant company submitted declaration under Rule 57(H) of the Rules declaring the stock position of HSD oil as on 17.3.1997. They also prayed for condonation of delay in submitting the declaration. The Superintendent, Central Excise Range Beawar vide letter dated 25.6.1997 informed the appellant company that the MODVAT credit was not admissible on high speed diesel oil under Rule 57(A) of the Rules.4. After denial of MODVAT credit, the appellant company was given a show cause notice by Superintendent Central Excise Range, Beawar to project as to why the credit given should not be disallowed to the appellant.5. The appellant filed a writ petition in the year 1997 seeking direction to quash the Trade Notice No. 26/27, the entry regarding the explanation of the HSD Oil in the Notification No. 5/94 and also the order dated 2.9.1997.6. The said writ petition came up for consideration before the Rajasthan High Court and by the impugned judgment and order dated 3.4.2002, the writ petition was dismissed.7. Aggrieved by the aforesaid judgment and order, the present appeals were filed on which we heard the learned counsel appearing for the parties.

Reasoning: 41. In the light of the aforesaid decisions and legal position which emanates from reading of the provisions of the Act and the Rules framed there under and notifications which are issued from time to time, the contentions of the counsel appearing for the appellants are found to be without any merit. Since the product High Speed Diesel oil was excluded specifically from the list of eligible inputs in the notifications, there was no question of creation of any right in favour of the appellant to avail such benefit. Therefore, contention that a vested or accrued right is sought to be taken away by giving retrospective effect is without any merit. Consequently, in the facts of this case we are not required to answer whether a vested or accrued right could be taken away with retrospective effect. Further on a conjoint reading of all the notifications it is clearly established that the intention of the Government all along was to exclude the appellants from getting the benefit of the MODVAT credit, therefore, the contentions that the Finance Act violates the vested right is without any basis. The various decisions referred to and relied upon by the counsel appearing for the appellants in support of his contention that the vested right created in their favour could not have been divested by the respondent retrospectively is found to be based on misreading of the language of the aforesaid notifications which do not support, but in fact destroy the very basis of the case of the