Union Of I vs Maharaja Shree Umaid Mills

5. As the HSD oil is being used as an input in the process of generation of electricity so as to manufacture the final produce i.e. yarn and fabrics, the respondent was claiming the MODVAT credit of the duty paid on the HSD oil used as an input under the provisions of Rules 57A and 57B of the Rules.

6. The Central Government issued a Notification on 16th March, 1995 whereby MODVAT credit of the duty paid on the HSD Oil as an input, had been withdrawn. It is not in dispute that the MODVAT credit of the duty paid on the use of the HSD Oil was available in the past but the same had been withdrawn by the said Notification issued in 1995. Subsequently, the office of the Commissioner of the Central Excise had also issued a Trade Notice on 7.4.1997 to the effect that no MODVAT Credit in respect of the duty paid on the HSD oil used as an input would be available under Rule 57A and 57B of the Rules.

12. Being aggrieved by the order passed by the Assistant Commissioner, an appeal had been filed before the Commissioner (Appeals), Central Excise, Jodhpur, which had been dismissed and therefore, the assessee had filed an appeal before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as ‘the CESTAT’). The said appeal had also been dismissed by the CESTAT and therefore, the assessee was constrained to approach the High Court of Rajasthan by way of Central Excise Appeal No. 3 of 2003, which has been allowed by the impugned order and therefore, the Revenue has filed the present appeal.

2) If any inputs in respect of which credit has been taken are not fully accounted for as having been disposed of in the manner specified in this Section, the manufacturer shall upon a written demand being made by the Assistant Commissioner of Central Excise, pay the duty leviable on such inputs within three months from the date of receipt of the notice of demand.

3) Where a manufacturer or an assessee fails to pay the amount determined under sub rule (1) or sub rule (2) within three months from the date of receipt of demand notice, he shall pay, in addition to the amount so determined, interest at such rate, as may be fixed, by the Central Board of Excise and Customs under Section 11 AA of the Act, from the date immediately after the expiry of the said period of three months till the date of payment.

Explanation I : for the removal of doubts, it is hereby declared that the provisions of this sub rule shall not applied to cases where the credit disallowed became payable before the 23rd day of July, 1996.

23. Upon perusal of the impugned judgment and the judgments referred to by the learned counsel appearing for both sides, we are of the view that the impugned judgment deserves to be quashed and set aside for the reasons recorded hereinafter.

28. It is also pertinent to note that the validity of Section 112 of the 2000 Act had not been challenged in the petitions filed by the respondents and therefore, we need not go into the legality of the said Section.

30. In the circumstances and for the reasons recorded hereinabove, we are of the view that the High Court committed an error by not considering the aforestated factors and therefore, we quash and set aside the impugned judgment by allowing these appeals with no order as to costs. The stay granted is vacated.