The High Court · 2025

Petition under Section 15 1 CPC praying that in the circumstances stated in the affidavit filed in suppo( of the petition, the High Court may be pleased to stay the utilisation of money-credit by respondent pending appeal in the interest of justice. Counsel for the Appetlant: SRl. DOMINIC FERNANDES. SENTOR STANDING COUNSEL FOR CENTRAL EIOARD OF INDIRECT TAXES, ASSISTED BY SRI ADITYA VYAS , Counsel forthe Respondent: SRI M. SRIOHAR The Court delivered the following Judgment : THE HONOURABLE SRI TTUSTICE P.SAM KOSI{Y AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA Central E:rcise A al No.48 of 2(J0,6 JUDGMEITT: (per Hon'ble Si Justice P.SAM KOSfiY) The instant Appeal has been filed by the appellalt herein under Section 35G of the Central Excise Act, 1944 aggrieved by the Final Order No.1484 dated 26.Oa.2OOS in Appeal No.E/236/20O5, passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, at Bangalore, (for short, .the impugned order'f .

2. Heard Mr.Dominic Fernandes, learned Standing Counsel for the Central Board of Indirect Taxe-s, assisted by Mr. Aditya Vyas, learned counsel for the appellant; and Mr.M. Sridhar, learned counsel for the sole respondent.

3. The question of Iaw involved in the instant appeal is : utether the Tribunal was jusdfied in rejecting the appeal filed by the appellant - Department, whereby the respondent-Assessee was allowed to avail the accumulated money credit to the tune of Rs. 17,91,63,720/-which could not be adjusted because of abolition of scheme vide Notifrcation No.37/O3 CE, dated 30.04.2003, and confirming the order dated

25.I1.2OO4 in O.I.A.No.84 of 2OO4 passed by the Commissioner of customs & Central Excise (Appeals), Hyderabad.

4. The brief facts of the case are that respondent-Assessee herein is manufacturer of vegetable oil. The manufacturers o1'r'egetable oil are entitled for availing money credit in terms of notification issued by the Government, viz., Notification No.45/89CE, dated 11.10.1989. The said scheme was introduced to encourage manufactures of Vanaspathi for use of minor oils. In the process, the responcl,:nt-Assessee also availed money credit on minor oils used by them for the manufacture of Vanaspathi at their establishment. However, the said availment of money credit by the manufacturers of Valaspathi stc,od abolished vide Notihcation No. 16l96CE dated 23.07.1996. At that point of time, ttre respondent-Assessee had an accumulated amount of Rs. 17,91,63,720/-. Thereafter, the said scheme of availing money credit was reintroduced by the Government vicl: its Notification No.37/2O03 CE, dated 3O.04.2OO3. Thereafter. the respondent- Assessee wanted to claim the accumulated lnoney credit of Rs.17,91,63,72O1- to be adjusted against duty payalrle on clearance of their final products on monthly basis, which was init.ially turned down by the OIIice of the Assistalt Commissioner of Central Excise Hyderabad - E Division, Nampa-lly Station Road, Hyderabad uide Order in Original in C.No.V/ 15 / 30 / 3 /2OO3-Tech, dated O1.O7 .2OO4.

5. However, on €rn appeal preferred by the respondent-Assessee before the Commissioner of Customs & Central Excise (Appeals), Hyderabad, the Commissioner vide Order-in_Appeal No.g4/2004 (H_n) CE, dated 25.LL.2OO4, set aside the Order in Original in C.No.V/ L5/30/3/2003-Tech, dated Ot.OZ.2OO4. Aggrieved, the appellant herein preferred appeal before the Tribunal at Bangalore. However, the Tribunal vide order dated 26.0g.2005 in Appeal No.E/236/O5 dismissed the appeal and confirmed the order passed by tlre Comrnissioner vide Order-in-Appeal No.g4/2OO4 (H_II) CE, dated 25.LL.2004. 6 Aggrieved, the instant appeal has been frled by the appellant.

7. [rarned counsel for the appeflant vehemently contended that the impugned order is bad in law for the reason that the judgments of various High Courts which have been relied upon by the learned Ttibunal as also by the Commissioner (Appeals) are all which were decided under an entirely different contextual background; and t'herefore, since the said judgments are disting,ishabre on facts, the same could not have been taken into consideration by the Tribunal as also by the Commissioner (Appeals). According to him, it was a case where once when the scheme was abolished yide Notification No.16/96cE dated 23.oz.1996, whatever amount that stood accumulated in the manufacturer,s credit would automatically get lapsed and the said amount would no longer be treated to be in existence. He therefore contended that ttre appeal which was alowed by the Commissioner (Appeals) and which was fFrrmed by the Tribunal deserves to be interfered with to the above said extent' t earned counsel for the appellant further contended that the

8. Commissioner of Customs & Central Excise (Appeal:;), Hyderabad, in the process of deciding the appeal has relied upon numerous judgments rendered by various High Courts, including that of the erstwhile State of Andhra Fradesh (undivided), as also that of the Hon'ble Supreme Court, which have a-lso been alfirmed by the Tribunal. According to him, the Tribunal however had not properly appreciated the judgments which were cons idered by the Commissioner of Customs & Central Excise (Appeat's)' Hyderabad, in the process of passing the impugned order. Accorcling to him, even otherwise the claim of respondent-Assessee was nct sustainable for the reason that the respondent-Assessee wanted the accumulated credit to be used for adjus[ing against the duty pay:rble on clearance of their hnal products as accumulated credits could rnly be used as a money credit. Therefore, the accumulated money crt'dit could not had been used towards payment of duty more partir:ularly when the accumulated money credit already stood lapsed arrrl was no more in existence. He further contended that in the notification by which the money credit scheme was introduced, vide notificat ion No'45/89CE' dated 11.10.1989, clause (3) thereof categorically enrisaged that such I '- \\ accumulated credit shall not be permitted to be refunded to the manufacturer, or adjusted or utilized for payment of duty on any excisable goods under any other circumstalce. Thus, the order passed by the Commissioner (Appeals) and which was confirmed by the Tribunal was liable to be interfered with.

9. In support of his contentions, learned counsel for the appellant relied on a decision of the Honble Supreme Court in the case of Tungabhadra Industries Ltd. vs. Union of Indiar wherein it was held that a manufacturer would be permitted to utilize the cred.it accumulated only subject to the provisions contained in the notification and not under any other circumstance.

10. However, in *re case of Madhusudan Industries Ltd. vs. Unlon of tndia z the Division Bench of the High Court of Gujarat at Ahmedabad, under somewhat similar circumstances, held at paragraph Nos. 12 and 14 as under, viz., "12- Heard the learned counsel for t]re respective parties, at length. At the outset, it is required to be noted that in the earlier round of litigation, this Court had specifically held in favour of the martufacturers and observed that a vested right has ac.crued in favour of the manufacturers and that the money credit was a monetar5r right earned by tl.e manufacturers on purchasing and utilizing unconventional / rninor oils and for that the manufacturers had changed the manufacturing process and plants hoping to get money '[zooo (rra) r.lr. sas (sc)l '1 2014 SCC OnLineGuj 4587 credit, and, d:erefore, the aforesaid right cannot be taken away due to rescinding of the notification. Ttris Court also ht ld that the accumulated money credit would not Iapse and the manufacturers were entitled to utilize the same in future. Special leave 1:etitions hled by the Revenue as well as the manufacturers have been dismissed by the Supreme Court, and therefore, the contention of th3 respondent that the scheme of money credit has been rescinded subsequentl)' arrd / or the same is not in force cannot be sustained. 13

14. It is, therefore, held that the manufalturers were entitled to utilize the accumulated money credit in .:erms of the notification and the money credit scheme. Further, t].e Iearned single judge rejected the claim of the manufacturers to get thr: at:cumulated money credit in cash. It is reported that against the said decision both the Revenue as well as the manufacturers had approached the Supreme Court zrnd the Supreme Court dismissed both sllecial leave petitions. 1'herefore, the view taken by the Kolkata HiE;h Court that the manufacturers were entitled to utilize the accumr.tlated money credit has been upheld by the Supreme Court. In vierv cf ttre above, the action on the parts of t]1e respondents in rer;training the petitioners from utilizing tJ:e accu-nnulated money credit liing in RG- 23B as on July 2 1, 1996 cannot be sustained and consierluentlv any further order trying to recover tl"e same also deserves t,r be quashed and set aside." I l. Further, the judgment rendered by ttre Dirrision Bench of the Gujarat High Court, at Ahmedabad, in the case of Madhusudan Industries Lfd. 12 suprel, was subjected to challenge before the Three-Judge Bench of the Hon'ble Supreme Court vicie Special Leave Petition Nos.7 i6O-7 I 6l I 2015. However, vide order <tated O5.O5.20 1 5, the Hon'ble Supreme Court dismissed the said Special kave Petitions. / Page 7 of9 L2. What is also worth taking no!9 is that, .{!91,-,tg$iggjl!q consideration the decision of the Hon'ble Supreme court in the case of Tungabhadra Industries Ltd. vs. union of rndia3, a rearned singre Judge of the High court of calcutta in the case of Rasoi Limited vs. Union of Indiaa had dealt with simitar issue and held at paragraph Nos. 1 I to l3 as under, i-t2., '11. Before I proceed to consider the respective submissions of ttre learned Counsel of the parties, it will be profitable to refer to the provisions contained in Section 38A of the Central Excise Act, 1944, which was retrospectively introduced by way of an amendment with effect from tlre very inception, i.e. L944. The said provision is quoted below: *Seetioa 38A. EIfect of amendrnents, etc., of rules, aotilicatioas or orders.- Where anv rule. notification or order made oi issued under t]'is Act or any notification or order issued under such rule is amended repealed, superseded or rescinded , then, unless a different intention appears, such amendments, repeal, supersession or rescinding shall not- (a) revive anyttring in force or existing at the time at which the arnendraent, repeal, supersession or rescind.ing takes effect; or (b) atrect tl.e previous operation of any rule, notifrcation or order so amended, repealed, superseded or rescinded or anything duly done or sulfered thereunder; or (c) affect any risht. privileee, obligation or liability acquired. accrued or incurred under any rule, notifrcation or order so a-rnended repealed , superseded or rescinded: or (d) alfect any penalty, forfeiture or punishment incurred in respect of any olfence committed under or in violation of any rule, notifrcation or order so amended, repealed, superseded or rescinded; or '1zooo 1rra1 r.ur. s+s 1scyl '(zooa) rzs r.lr. ror (cat) Page E of 9 (e) allect any investigation, Iegal proceeding or rernedy in respect of any such right, privilege, obligation, tiability, penaltl', forfeiture or punishrnent as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any sucfr penaltl/, forfeiture or punishment may be impo sed as if the rule notification or order as the case mav be has not been amended, reDealed, su or rescinded." In view of the aforesaid provisions contained in Section 38A of L2. the Act, I find substance in the contention of Mr. Bajoria that by reason of the omission of the rule, the riglrt of the petitioner no l to have money-credit in terms of the notifrcation under the rule cannot lapse' As pointed out by the Supreme Court in the case of Tungabh adra Industries Limited (supra), Central Excise Act does not permit divestrnent of any accrued right of a person acquired by virtue of any o{ the provisions contained in the Act, rules, notilication, order, etc. Morer>ver it is rightly pointed out by Mr. Bajoria that even in cases, where by specific enactment a vested right is taken away in violation ol the provisions contained in Section 38A of the Act, the Apex Court har; unhesitatingly preserved such accrued right, [see the cases cf Samtel India Ltd. and Eicher Motors Ltd. (supra)]. In this case, ttrere is no dispute that the petirioner no' t had 13. acquired money-credit to the extent of Rs. 17,32,78,689,/ - in terms of the notification under the money-credit scheme. Such money' credit scheme permitted t]:e pelitioner no. 1 to utilise such credit fc,r an anount not exceeding Rs. 10OO/- per MT at any time after the succr:eding month in which the money-credit accrued. Thus, t.I:e petitioner no. 1 is entitled to invoke such vested right in accordance with the conditrons mentioned in the noLificaLion as it then stood. The aforesaid point is, tt.us, answered in favour ofthe petitioner no. 1."

13. In view of the a-foresaid judicial precedents which have been relied upon by the Tribunal as also by'the Commissioner (Appeals), ( \ \ Page 9 of9 and also taking into consideration the decision of theJ{on'ltrlt"?:l:.:T,: Court in the case of Tungabhadra tndustries Ltd. (1 supraf, and also the law laid down in the above judgments which have not been reversed by the Hon'ble Supreme Court, this Bench is of the consid.ered opinion that it is diflicult to answer the question of law proposed by the appellant to be answered in favour of the appellant- Department, or to interdict the impugned order passed by the Tribunal by holding it to be bad in law. L4. Therefore, the question of law proposed by the appellant is answered in the negative against the appellant and in favour of the respondent herein. Accordingly, the appeal fails and the same deserves to be and is accordingly dismissed. No costs' Sd/- B. SATYAVATHI JOINT REGISTRAR //TRUE COPY// E TION OFFICER o,T 1 Zonal Bench, Bangalore

1. The Customs, Excise and Service Tax Appellate Tribunal, South 2 The Commissioner OF Customs and Central Excise Appeals Hyderabad. 3 91e CC to SRl. DOMINIC FERNANDES (Senior Standing Counset for cBrc) [oPUC]

4. One CC to SRl. M. SRIDHAR, Advocate IOPUCI 5. Two CD Copies kul/psl HIGH COURT DATED:21108/2025 , 23 \,. .t. 'r\", '; i. (- ,\( iiEPffi ?r( '.:. ,,j 1, .i' ., - /:.. '::" ORDER CEA.No.48 of 2006 DISMISSING l'tIE CI.],A. WITIJOIJT COSTS q \D