LML LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(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.