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PETITIONER: TUNGABHADRA INDUS.  LTD.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT:       05/05/2000

BENCH: S.N.Variava, Doraiswamy, G.B.Pattanaik

JUDGMENT:

PATTANAIK,J.

     This  appeal  is directed against the  Division  Bench Judgment  of Andhra Pradesh High Court in Writ Petition  No. 4059 of 1994, wherein, following the earlier judgment of the said Court in Writ Petition No.11311 of 1991, the High Court dismissed the writ petition.

     The appellant is the manufacturer of hydrogenated oil. The  appellant  filed  a   Reference  before  the  Assistant Collector, Central Excise, Kurnool, claiming that they would be  entitled to utilise the accumulated credit, available to them  under the Money Credit Scheme, as per Rule 57K of  the Central  Excise Rules, 1944 (hereinafter referred to as the rules),  at the time of rescinding of the Notification  No. 27/87  as  well  as  the  credit  available  to  them  under Notification dated 11th October, 1989, issued by the Central Government  under  Rule  57K of the  Rules.   The  Assistant Collector  disposed of the said Reference by his order dated 9.10.91,  holding that the assessee-appellant is entitled to appropriate  the  credit  available to him on  the  date  of recession of the Notification of 1987, which stood rescinded on  25th  of August, 1989 as well as the credit  which  gets accumulated, pursuant to Notification dated 11th of October, 1989, but not entitled to utilise the credit available under both  the  Notifications simultaneously and, therefore,  the credit  would  be  utilised  for  payment  of  duty  on  the manufactured  product,  which should not exceed  Rupees  one thousand  per  M.T.   It  is  because  of  this  order,  the appellant  filed  the  writ petition in the  High  Court  of Andhra  Pradesh  to  stay  the   recovery  of  excise   duty contemplated  under  Notice  dated 14.10.98  issued  by  the Superintendent  of  Central Excise, Kurnool.  The  identical question  raised by the appellant in the writ petition filed before  the Andhra Pradesh having been answered against  the assessee  in another writ petition, which stood disposed  of on  28.4.98, the present writ petition by the appellant also stood  dismissed.  Be it be stated that in disposing of writ petition  No.11311  of 1991 on 28.4.98, the High Court  also came  to the conclusion that the assessee is not entitled to adjust  the available credits under Notification of the year 1987  as  well  as  the   Notification  of  the  year  1989, simultaneously,  and therefore, there has been no illegality committed  by  the  Excise Authorities.   The  question  for

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consideration,  therefore  is whether an assessee  like  the appellant,  who  accumulated  credits  to  his  accounts  on account  of the incentive Notification issued by the Central Government in exercise of powers conferred under Rule 57K of the  Rules  by  the  date  of  the  recession  of  the  said notification  on  25th  August,  1989  can  make  adjustment towards  payment of duty in addition to the credits  earned, pursuant  to  Notification  dated   11th  of  October,  1989 simultaneously.

     Under  the  Rules,  more particularly, Rule  57K,  the Central  Government  is  empowered by  Notification  in  the Official  Gazette  to  allow credit of money in  respect  of certain  raw  materials used in the manufacture  of  certain excisable  goods.   The Notification required to  be  issued under  sub-Rule  (1) of Rule 57K must specify  the  finished excisable  goods  to  which the provisions of  the  sections would  apply  as  well as the rates at which the  credit  of money  is  to  be given for the use of such  inputs  in  the manufacture of final products.  Under Rule 57N the credit of money  allowed  in  respect  of   any  inputs  pursuant   to notification issued under Rule 57K would be utilised towards the  payment  of  duty of excise on the  final  products  in relation to manufacture of which such inputs are intended to be  used in accordance with the declaration filed under Rule 57-O.   Rule  57-O provides the procedure to be observed  by the  manufacturer.   In  accordance   with  the   provisions contained  in  Rule 57K, the Central Government  issued  the Notification  dated  20.3.1987,  which is  extracted  herein below  in  extenso for better appreciation of the  point  in issue in this case:

     Notification  No.27/87-CE., dated 1.3.1987 as amended by Notification No.  99/87-C.E., dated 20.3.1987;No.17/88-CE dated 1.3.1998 and No.295/88-CE dated 16.12.1988.

     Set off of duty on use of specified minor oils in the manufacture of vegetable products.  In exercise of the power conferred by rule 57K of the Central Excise Rules, 1944, the Central Government hereby specifies:- (i)the inputs, namely, fixed vegetable oils of the description in column (2) of the Table  hereto  annexed  and used in the manufacture  of  the final  products,  namely  vegetable products  falling  under sub-heading  No.   1504.000 of the Schedule to  the  Central Excise  Tariff Act, 1985 (5 of 1986);  and (ii)the rates  in the  corresponding entry in column (3) of the said Table  as the  rate  at  which credit may be granted for use  of  such inputs  in  the manufacture of the said final products,  for the  purpose  of Section AAA of Chapter V of the said  rules and  stipulates  that  the grant of credit  and  utilisation thereof  shall  in  addition to the provisions of  the  said Section,  be  subject to the following conditions,  namely:- (i)  the  credit  shall  be taken only  in  respect  of  the quantity  of oil subjected to hydrogenation on or after  the 1st day of March, 1987 for the manufacture of the said final products  and the credit shall be taken only on the date  on which  the  oils has been so hydrogenated;   (ii)the  credit taken  during  any  calender  month shall  be  utilised  for payment  of  duty on the said final products only after  the commencement  of the succeeding month;  (iii) the amount  of credit  utilised  for  payment  of duty  on  any  individual clearance of the said final products shall not exceed rupees one thousand per tonne of vegetable products cleared and the excess credit, if any, available in the credit account shall not  be refunded to the manufacturer or adjusted against  or

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utilised  for  payment of duty on any other excisable  goods under  any  circumstances;   (iv)where  the  description  in column  (2) of the Table specifies solvent extracted variety of  the oil, the manufacturer shall within 5 months from the date  of  taking  credit,  or such extended  period  as  the Assistant  Collector  of  Central Excise may allow  in  this behalf,  produce a certificate from an officer not below the rank  of  Deputy  Director in the Directorate  of  Vanaspati Vegetable,  Vegetable oils and Fats in Ministry of Food  and Civil Supplies of the Government of India to the effect that the said Oil has been manufactured by the solvent extraction method;  and (v)the credit shall be taken only in respect of indigenous  inputs  and the manufacturer shall produce  such documents  as may be required by the Assistant Collector  of Central Excise in this regard.  Provided that in the case of palm  oil  used  as input the manufacturer  shall  within  5 months  from  the  date  of taking  credit  or  within  such extended period as the Assistant Collector of Central Excise will  allow  in this behalf, produce a certificate  from  an officer  not  below  the  rank of  Deputy  Director  in  the Directorate  of  Vanaspati, Vegetable Oils and Fats  in  the Ministry  of  Food and Civil Supplies of the  Government  of India to the effect that the said oil has been of indigenous origin.

     TABLE  S.No.  Fixed Vegetable Oils Rate of credit  per tonne  of the fixed vegetable oil (1) (2) (3) 01.  Rice bran Oil Rs.6000

     02.  Mehuwe Oil Rs.6500

     03.  Water Melon Seed Oil Rs.6500

     04.  Solvent extracted cotton Seed oil Rs.4000

     05.  Solvent extracted mustard oil Rs.3250

     06.  Solvent extracted rape seed oil Rs.3250

     07.  Solvent extracted sunflower oil Rs.3250

     08.  Solvent extracted Safflower oil Rs.3250

     09.  Palm Oil Rs.3250

     Explanation   -  In   this  notification,   Vegetable products  means any vegetable oils or for which, whether by itself  or  in  admixture with any other substance,  has  by hydrogenation  or  by any other process, been  hardened  for human consumption.

     This  notification  stood rescinded by the  subsequent Notification   dated  25th  of   August,   1989.    Shortly, thereafter,  a  fresh  notification was issued  on  11th  of October,1989  by  the Central Government in exercise of  the same  power conferred under Rule 57K of the Rules, providing the  credit  in respect of the quantity of oil subjected  to hydrogenation  on  or  after 11th of October, 1989  for  the manufacture  of the same final product and it was stipulated that the credit could be taken only on the date on which the oil  has  been so hydrogenated.  The aforesaid  Notification

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dated 11th October, 1989 is quoted herein below in extenso:

     Government of India Ministry of Finance (Department of Revenue)

     New Delhi, dated the 11th October, 1989.

     NOTIFICATION No.45/89  Central Excise (N.T.)

     GSR (E) :- In exercise of the powers conferred by rule 57K  of  the  Central  Excise   Rules,  1944,  the   Central Government hereby specifies:

     (i)the  input;   namely, fixed vegetable oils  of  the description  in  column(2) of the Table hereto  annexed  and used  in  the  manufacture of the  final  products,  namely, vegetable products falling under sub-heading No.  1504.00 of the  Schedule  to the Central Excise Tariff Act, 1985 (5  of 1986);   and  (ii)the  rates in the corresponding  entry  in column (3) of the said Table as the rate at which credit may be  granted for use of such inputs in the manufacture of the said  final  products,  For the purpose of  Section  AAA  of Chapter V of the said Rules and stipulates that the grant of credit  and  utilisation thereof shall, in addition  to  the provisions  of the said Section, be subject to the following conditions  namely:   (i)the credit shall be taken  only  in respect of the quantity of oil subjected to hydrogenation on or  after  the  eleventh  day  of  October,  1989  for   the manufacture  of the said final products and the credit shall be  taken  only  on the date on which the oil  has  been  so hydrogenated;   (ii)the  credit  taken during  any  calender month  shall  be  utilised for payment of duty on  the  said final products only after the commencement of the succeeding month;  (iii) the quantity of credit utilised for payment of duty  on any individual clearance of the said final products shall  not exceed rupees one thousand per tonne of vegetable products cleared and the excess credit, if any, available in the credit account shall not be refunded to the manufacturer or  adjusted against or utilised for payment of duty on  any excisable  goods  under any other circumstances;   (iv)where the  description in column(s) of the Table specifies solvent extracted  variety of the oil, the manufacturer shall within five  months from the date of taking credit or such extended period  as  the  Assistant Collector of Central  Excise  may allow  in this behalf, produce a certificate from an officer not  below the rank of Deputy Director in the Directorate of Vanaspati,  Vegetable oils and Fats in the Ministry of  Food and  Civil Supplies of the Government of India to the effect that  the  said  oil has been manufactured  by  the  solvent extraction method;  and (v)the credit shall be taken only in respect  of  indigenous  inputs and the  manufacturer  shall produce  such documents as may be required by the  Assistant Collector  of Central Excise in this regard;  Provided  that in the case of Palm Oil used as input the manufacturer shall within five months from the date of taking credit, or within such  extended period as the Assistant Collector of  Central Excise will allow in this behalf, produce a certificate from an  officer  not  below the rank of Deputy Director  in  the Directorate  of  Vanaspati  Vegetable Oils and Fats  in  the Ministry  of  Food and Civil Supplies of the  Government  of India to the effect that the said oil has been of indigenous original,

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     TABLE  S.No.  Fixed Vegetable Oils Rate of credit  per tonne  of  the  fixed vegetable oil (1)  (2)  (3)  --------- ----------------------------------------------------------------------------- 01.  Ricebran Oil Rs.5000

     02.  Mahuwa Oil Rs.6500

     03.  Water Melon seed Oil Rs.6500

     04.  Solvent extracted cotton seed Oil Rs.4000

     05.  Solvent extracted mustard Oil Rs.3250

     06.  Solvent extracted repeseed Oil Rs.3250

     07.  Solvent extracted sunflower Oil Rs.3250

     08.  Solvent extracted safflower Oil Rs.3250

     09.  Palm Oil Rs.3250

     Explanation  In this notification Vegetable Product means  any  vegetable oil or which, whether by itself or  in admixture  with any other substance, has by hydrogenation or by any other process, been hardened for human consumption.

     Mr.   Dushyant  A.  Dave, the learned senior  counsel, appearing  for  the  appellant contended before us  that  an assessee,   who   has   earned   the  credit   pursuant   to notification,  is entitled to get the same adjusted  towards the  payment  of  duty  of  excise  on  the  final  products notwithstanding  the  recession  of the  notification  under which  the  credits  stood  accumulated   in  favour  of  an assessee.   According to the learned counsel, this being the position,  when  the  same assessee  earns  further  credits pursuant  to a fresh notification, issued by the  Government under  Rule  57K, he will be entitled to utilise, both,  the credits  accumulated in favour of the assess towards payment of  duty  of  excise on the final products and as  such  the excise  authorities  committed error in allowing  adjustment only  to the extent of Rs.1000/- per M.T.  and refusing  the adjustment  of both the credits accumulated  simultaneously. In  support  of this contention, reliance was placed on  the decision  of  the  Gujarat High Court in the case  of  Dipak Vegetable Oil Industries Ltd.  Vs.  Union of India, 1991(52) E.L.T.222(Guj.),  as well as the decision of Andhra  Pradesh High  Court  in  the case of Agarwal  Industries  Ltd.   Vs. Union  of  India, 1992(57) E.L.T.  561 (A.P.).  The  learned counsel  also  contended  that against the decision  of  the Gujarat  High  Court  an SLP has been filed in  this  Court, which  SLP stood dismissed and such dismissal tantamounts to confirmation  of the view taken by the Gujarat High Court by this  Court.  The said order of dismissal has been  reported in  1998 (100) E.L.T.  Page A-175.  Mr.  Dave also contended that  under the Modvat Scheme, a rule had been introduced to Rule  57F,  which  is  read  as  Rule  57F(4A),  which  rule stipulated   that  any  credit  of  specified   duty   lying unutilised  on  16th of March, 1995 with a  manufacturer  of tractor, would lapse and shall not be allowed to be utilised for payment of duty of any excisable goods and this Court in the  case  of  Eicher  Motors Ltd.   Vs.   Union  of  India, 1999(106)  E.L.T.3 (SC), came to the conclusion that a right which had been accrued to a party under any available scheme cannot  be  affected by any subsequent Rule or  Notification

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and  the  assessee would be entitled to avail of the  credit which  had not been utilised on the date, Rule 4A came  into existence.   Mr.  Dave contends that though this decision is not  of  direct  application but  the  principle  enunciated therein  should be made applicable and the appellant  should be  permitted to utilise the credit of money already accrued in  respect  of  the inputs prior to the rescinding  of  the notification in paying of the duty of excise leviable on the final product.  Mr.  Dave also referred to the speech of the Finance  Minister  and  pressed the same in support  of  his contention.

     Mr.  T.L.V.Iyer, the learned senior counsel, appearing for the Union of India did not dispute the position that the credits  already acquired could be utilised  notwithstanding rescinding  of  the relevant notification, even  though  the stand  taken by the Union of India in the counter  affidavit filed  in  this Court is to the contrary.  But according  to Mr.   Iyer the accumulated credit in favour of the  assessee under  the old notification of the year 1987 can be utilised subject  to  the  conditions mentioned in  the  notification itself  and  in that view of the matter, an assessee is  not entitled  to  utilise the accumulated credit under  the  old notification  as  well as the credits earned under  the  new notification   of   the  year    1989   simultaneously   and accordingly,  the  authorities of the department have  taken the  correct view.  In support of this contention,  reliance has  been placed on the decision of the Karnataka High Court in  the  case  of  Union of India vs.   Modern  Mills  Ltd., 1994(72) E.L.T.  246 (Kar.).

     In  view of the rival submissions at the Bar, the only question  that  falls  for   consideration  is  whether  the decisions  of the Gujarat and Andhra Pradesh High Courts, on which  reliance has been placed by Mr.  Dave are susceptible of  a  construction that the Courts came to  the  conclusion that   the   accumulated  credits    under   two   different notifications  one of the year 1987 and another of the  year 1989  could be availed of by the assessee for the purpose of payment  of duty on the manufactured goods simultaneously or the  condition No.  3 of the notification issued in the year 1987, providing that the amount of credit utilised shall not exceed  Rs.1000/-  per  M.T.  of available  products,  would operate.   Answer  to  this question would  depend  upon  an interpretation  of  the scheme itself and  the  notification issued  as well as the ratio of the decisions of these  High Courts  on  which  the  counsel  for  the  appellant  placed reliance.

     Chapter   AAA  of  the   Rules  contains   provisions, providing  for  credit  of money in respect of  certain  raw materials  used  in  the manufacture  of  certain  excisable goods.  Rule 57K(1) itself stipulates accumulation of credit of  money  for  use of inputs in the  manufacture  of  final products  can  be  availed of only, when a  notification  is issued  by  the  Central Government  and  that  notification itself  would  provide  the rates at which credit  could  be accumulated and also allowing such credit to be utilised for payment  of  duty  on the final products and  this  must  be subject  to  the conditions, if any, stipulated in the  very notification  itself.   In  the   aforesaid  scheme  of  the provision, the notification issued by the Central Government in  exercise  of powers conferred under Rule 57K,  plays  an important role.  If the notification that had been issued in the  year  1987 is examined, it would appear that  paragraph

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(iii)  unequivocally,  provides  that the amount  of  credit utilised  for payment of duty shall not exceed Rs.1000/- per tonne of vegetable products on any individual clearance.  It is thus clear that credits may be accumulated in favour of a manufacturer   of  vegetable  products,   pursuant  to   the notification  on  the  basis  of   rates  provided  in   the notification on the inputs and that credit could be utilised for payment of duty while clearing the final product and the accumulated  credit  will  not ipso facto get  exhausted  or lapsed  on  the rescinding of the notification issued  under Rule  57K  of the Rules, and therefore, notwithstanding  the rescinding  of  the notification issued in the year 1987  by the  notification dated 25th of August, 1989, a manufacturer would  continue  to  utilise the credit accumulated  in  his favour  for payment of duty, even after the recession of the notification,  but  subject to the provision,  contained  in Clause   (iii)  of  the   notification,  which  granted  the accumulation  of  credit  and utilisation of  the  same  for payment  of duty.  When a fresh notification is issued as in this  case,  the notification dated 11th of  October,  1989, certainly  the manufacturer would be entitled to  accumulate credits on the basis of the said notification and would also be  entitled to utilise the same for payment of duty on  the final  products,  but  even  under  that  notification,  the similar provision as in the earlier one, namely clause (iii) is  there, indicating, that the quantity of credit  utilised for payment of duty on any individual clearance of the final products  shall not exceed rupees one thousand per tonne  of vegetable  products  cleared.  This being the  position,  we really  fail  to  understand as to how  a  manufacturer  can contend  that he would be entitled to the advantages of both the   notifications  simultaneously  in   respect   of   one transaction   for  payment  of   duty,  while  clearing  the transaction  in question.  Before the Gujarat High Court  in Dipak  Vegetable Oil Industries case, after the notification of  the  year 1987 was withdrawn by the  Central  Government under  Notification  No.   39/89  on  25.8.89,  the   Excise Authorities  being of the view that the manufacturer  cannot avail  of the accumulated credit for payment of excise duty, intimated  the  manufacturer  that they  should  file  fresh classification  list.  It is this intimation from the excise authorities  which  had been assailed before the High  Court and  the High Court on an analysis of the provisions of  the Rules,   more   particularly,  Rule    57K,   dealing   with applicability  and  extent of credit and Rule  57N,  dealing with  the  manner  of  utilisation of credit,  came  to  the conclusion  that the credits already accrued and acquired on the  basis  of  the  notification   issued  by  the  Central Government in the year 1987 in exercise of powers under Rule 57K,  the  same  cannot  be taken  away  by  rescinding  the notification  in  question and the effect of the  rescinding notification  is from the date of the said notification, the manufacturer  would  cease to earn the benefit of credit  of money,  but not deprived of the right to utilise the  credit of money which they have already earned validly and could be used  for payment of excise duty and the excise  authorities were  in  error.  In the penultimate paragraph of  the  said judgment,  the  Court  has  observed that  the  benefits  in question  will  be  in addition to the benefits  which  have again  been  made available to them under  Notification  No. 45/89  and 46/89 dated 11th of October, 1989 and it is  this observation  on which Mr.  Dave, the learned counsel for the appellant  strongly  relied upon for his contention that  it tantamounts  to  a conclusion that the benefit earned  under both the notifications can be availed of simultaneously.  We

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are  unable  to  accept this submission of Mr.   Dave.   The question  whether the benefits of both the notifications can be  availed  of simultaneously was not a subject  matter  of consideration  before the Gujarat High Court and in fact the credit accumulated under the subsequent notification of 11th of  October, 1989 was not a matter for consideration at all. That  apart, Clause (iii) of both the notifications, clearly provides  that the amount of credit utilised for payment  of duty  shall  not  exceed rupees one thousand  per  tonne  of vegetable  products  on any individual clearance.  When  the credits  get  accumulated  in   accordance  with  the  rates indicated  in  the notification itself then the same can  be utilised  also  in accordance with the terms and  conditions contained  in  that notification and, therefore, it  is  not permissible  to construe the judgment of Gujarat High  Court that  it  has been held therein that the manufacturer  could avail   of   the   credits   accumulated  under   both   the notifications  simultaneously.   To the said effect also  is the  judgment of the Andhra Pradesh High Court on which  Mr. Dave  placed  reliance.  The only thing what both  the  High Courts have held is that the rights acquired or money credit accumulated,  is  not  taken  away   by  rescinding  of  the notification  in  question.   In fact the  decision  of  the Karnataka  High  Court  in the case of Union  of  India  vs. Modern  Mills Ltd., 1994(72) E.L.T.246 (Kar.), considers and approves  the  aforesaid decision of the Gujarat High  Court and Andhra Pradesh High Court and holds that the accumulated credit  would  not  be  ceased with the  rescinding  of  the notification and on the other hand, could be utilised by the assessee  towards excise duty payable on its final  products thereafter.   But  it  has been further held that  the  said accumulated  credit  could be utilised only subject  to  the conditions  of the notification and consequently, it is  not open  to the manufacturer to insist on clearing his finished products, without paying any amount of excise duty by merely effecting  two debit entries of the accumulated credits.  In other  words, what has been held by the Karnataka High Court in  the  aforesaid decision is that though the  manufacturer would  be entitled to utilise the accumulated credits  under the  rescinded notification and can also accumulate  further credits  on the basis of the fresh notification of the  year 1989,  but is not entitled to claim adjustment on the  basis of  both the accumulated credits simultaneously.  We approve the  views taken by the Karnataka High Court and we  further hold  that neither in the decision of the Gujarat High Court nor  in  the  decision  of the Andhra  Pradesh  High  Court, anything  contrary has been said, so far as the question  of utilisation  of  the  credit  for payment  of  duty  on  the manufactured  goods  are  concerned.  In this  view  of  the matter,  the Excise Authorities have rightly dealt with  the matter of utilisation of the accumulated credit in favour of the  appellant-manufacturer  and we see no infirmity in  the same.   This appeal accordingly fails and is dismissed,  but in the circumstances, there will be no order as to costs.