JUDGMENT
V.K. Agrawal, Member (T)
1. M/s. LML Ltd. have filed all these 19 appeals against the adjustment of amounts of refund of Central Excise duty sanctioned to them by the Revenue towards Government dues in terms of the provisions of Section 11 of the Central Excise Act.
2. Shri R. Santhanam, learned Advocate submitted that a show cause notice dated 10.6.1998 was issued to the Appellant for disallowing the MODVAT credit amounting to Rs. 22,45,973 in respect of High Speed Diesel Oil during the period from 27.12.97 to 18.3.98; that the Deputy Commissioner allowed MODVAT credit of Rs. 9,31,904 availed of prior to 2.3.1998 and disallowed the balance credit of Rs. 13,14,060 besides imposing a penalty of Rs. 2 lakhs by Order-in-Original No. 60/99 dated 30.7.99; that the disallowance of MODVAT credit taken on or after 2.3.1998 was validated by Section 112 of the Finance Act, 2000; that accordingly the Appellate Tribunal upheld the Order but reduced the penalty to Rs. 10,000; that the Appellants have challenged the constitutional validity of Section 112 of the Finance Act, 2000 before the High Court of Delhi, He, further, submitted that the Deputy Commissioner, under 19 Adjudication Orders, after sanctioning the refunds of Excise duty on different counts, has appropriated the amount against non-existing demands; that it is settled law that a non-existing demand cannot be the subject matter of recovery; that it is also well settled that even if a demand exists and the demand is the subject matter of proceedings in Appeal and stay proceedings, the outcome of the appellate proceedings must be awaited and no unilateral adjustment is permissible; that even when an adjustment is to be made under Section 11 of the Act, notice and opportunity must be given to the assessee before making any such adjustment.
3. The learned Advocate, further, mentioned that the Commissioner (Appeals), on his own, in Para 7 of the impugned Order, relying upon Section 112 of the Finance Act, 2000, has enhanced their liability to pay duty and has thus created a non-existing demand to the extent of Rs. 9,31,904 being the amount of MODVAT Credit already allowed by the Deputy Commissioner which had become final and for which no further proceedings had been taken by the Revenue in Appeal; that what was in issue before the Commissioner (Appeals) was the unilateral adjustments made by the Deputy Commissioner of an aggregate amount Rs. 11,53,827 against non-existing demands; that instead of examining whether the demands existed or not, the Commissioner (Appeals) has proceeded on the erroneous assumption that the demand, which was dropped by allowing MODVAT Credit of Rs. 9,31,904 has also become recoverable and the demand existed thereto; that the law is well settled that an Order which has once become final and which has not been agitated in appeal cannot be disregarded and the recovery ought not to have been beyond Rs. 13,14,060 towards duty and Rs. 10,000 towards penalty, confirmed by the Tribunal. He relied upon the decision in Moti Laminates Pvt. Ltd. v. Union of India, 2002 (83) ECC 293 (SC) : 2002 (144) ELT 3 (SC) and mentioned that this Judgment is the Authority for the proposition that finality to the proceedings and orders already passed cannot be disregarded to create a demand or deny the refund merely because of a judicial pronouncement or even Legislative amendment; that accordingly there can be no recovery of any amount beyond Rs. 13,14,060 towards duty and Rs. 10,000 towards penalty confirmed by the Tribunal. Finally the learned Advocate submitted that the Commissioner (Appeals) has wrongly assumed in Para 10 of the impugned Order that MODVAT Credit on HSD is inadmissible from 16.3.1995 to 12.5.2000; that it has been held by the Supreme Court in Commissioner of Central Excise, Hyderabad v. Associated Cement Companies Ltd., 2003 (85) ECC 736 (SC) : 2003 (151) ELT 12 (SC) that the MODVAT Credit was available in respect of H.S.D. Oil used for generation of electricity used in the manufacture of cement prior to amendment of Rule 57 B of the Central Excise Rules, 1944 on 2.3.1998.
4. Countering the arguments, Shri D.N. Chaudhary, learned Departmental Representative, submitted that MODVAT Credit was not available in respect of the duty paid on HSD Oil as the same had been specifically been deleted from the list of eligible inputs under the then Rule 57 A of the Central Excise Rules, 1944; that Section 112 of the Finance Act, 2000 has provided that “no credit of any duty paid on high speed diesel oil at any time during the period commencing on and from the 16th day of March, 1995 and ending with the day, the Finance Act, 2000 receives the assent of the President, shall be deemed admissible; that the said Section, further, provides that any action taken or anything done or purported to have been taken or done at any time during the said period to deny the credit of any duty in respect of high speed diesel oil shall be deemed to be and to always have been, for all purposes, as validly and effectively taken or done.” The learned Departmental Representative, thus, contended that as the Parliament has denied the MODVAT Credit of duty paid on HSD oil with effect from 16.3.1995, the Appellants were not entitled to take the credit during the period from 16.3.1995 to 12.5.2000 (when Finance Act. 2000 received the assent of the President); that accordingly the such MODVAT credit availed of them has rightly been appropriated from the amount of refund sanctioned to them; that as such Rs. 9,31,904 taken by them as credit of the duty paid on HSD Oil is recoverable from the Appellant; that Sub-section 2(c) of Section 112 of the Finance Act, 2000 empowers the Revenue to recover all the credit of duty which had been taken or utilized but which would have not been allowed to be taken or utilized if the provisions of Sub-section (1) of Section 112 had been in force.
5. We have considered the submissions of both the sides. The facts which are not in dispute are that the Appellants had availed of MODVAT Credit of duty amounting to Rs. 22,45,978 paid on HSD Oil during the period from December 1997 to March 1998. The Deputy Commissioner, under Adjudication Order No. 66/99 dated 30.7.99, allowed the MODVAT Credit amounting to Rs. 9,31,904 availed by the Appellants under Rule 57B prior to its amendment on 2.3 1998 and disallowed the MODVAT Credit amounting to Rs. 13,14,060 in terms of Notification No. 5/98 which excluded HSD Oil from the eligible list of inputs for the purposes of MODVAT Credit. The Appellate Tribunal, vide Final Order No. A/568/2000 NB dated 27.6.2000, upheld the denial of credit of duty paid on HSD Oil in view of insertion of Section 112 of the Finance Act, 2000. Nothing has been brought on record by the Revenue that any Appeal was filed by the Revenue against the decision of the Deputy Commissioner allowing the MODVAT Credit. Thus the amount realisable from the Appellants, as per Adjudication Order passed by the Deputy Commissioner is only Rs. 13,14,060 and Rs. 10,000 penalty as confirmed by the Appellate Tribunal. On a query from the Bench, the learned Departmental Representative has intimated that the appropriation of refund amount sanctioned is only on account of the MODVAT Credit availed of by the Appellants in respect of HSD Oil. Section 11 of the Central Excise Act provides that in respect of duty and any other sums of any kind payable to the Central Government, the Central Excise Officers may deduct the amount from any money owing to the person from whom such sums may be recoverable or due. Thus the Revenue is entitled to recover the sums due from the Appellants out of the amount sanctioned as refund to them. We agree with the learned Advocate that the Revenue cannot recover the amount of MODVAT Credit of duty paid on HSD Oil which had been allowed by the Deputy Commissioner and which was not challenged by the Revenue by way of filing Appeal before the Appellate Authority. Section 112 of the Finance Act, 2000 validates the action taken or anything done to deny the credit in respect of HSD Oil during the material period and no suit or other proceeding shall be maintained or continued in any Court, Tribunal or any other Authority for allowing the Credit, no enforcement shall be made by any Court/Tribunal of any decree or Order allowing such credit and recovery shall be made of all the credit of duty within a period of 30 days from the date on which the Finance Act, 2000 receives the assent of the President. The amount of MODVAT Credit which has been allowed by the Deputy Commissioner, under Adjudication Order No. 66/99 dated 30.7.99, has attained finality as the same was not challenged by the Revenue. Section 112 of the Finance Act, 2000 does not automatically reverse the Adjudication Order allowing the MODVAT Credit of duty paid on HSD Oil. The Revenue has to initiate action to recover the said amount of credit in accordance with law. It has been held by the Supreme Court in J.K. Spinning & Weaving Mills Ltd. v. Union of India, 1987 (14) ECC 239 (SC) : 1987 (32) ELT 234 (SC) that “in the absence of any specific provision overriding Section 11A, it will be consistent with Rules of Harmonious Construction to hold that Section 51 of the Finance Act, 1982 in so far as it gives retrospective effect to the amendments made to Rules 9 and 49 of the Rules, is subject to the provisions of Section 11A”. The Appellants are not seeking the enforcement of any Order allowing them the MODVAT credit. It is the Revenue which is effecting the recovery of MODVAT Credit which stands allowed by the Deputy Commissioner in 1999 without getting the said Adjudication Order set aside. It has been held by the Supreme Court in Moti Laminates (P) Ltd. (supra) that once the Judgment having become final, the assessee is entitled to a refund. We thus hold that the Revenue is entitled to appropriate Rs. 13,14,060 towards the amount payable and Rs. 10,000 towards penalty only from the amount of the refunds sanctioned to the Appellants. The Revenue cannot appropriate Rs. 9,31,904 out of the amount sanctioned to the Appellants. The Appeals are disposed of in the above terms with consequential relief, it any.