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Madhya Pradesh High Court · body

2006 DIGILAW 572 (MP)

MIDLAND PLASTICS LTD v. UNION OF INDIA

2006-04-20

RAJENDRA MENON

body2006
Judgment ( 1. ) BEING aggrieved by rejection of the petitioners claim for grant of interest on delay in refund of Modvat credit amount allowed to the tune of rs. 29,03,971/-, petitioner has filed this petition. ( 2. ) PETITIONER is a company incorporated and registered under the provisions of Companies Act having its registered office at industrial area malanpur, Distt. Bhind and factory also in the same premises. It is stated that the establishment of the petitioner is engaged in manufacturing and sale of woven sacks made out of high density polyethylene/polypropylene (HDPE/pp ). The aforesaid item is said to be important packing material. It is stated that the petitioner is exporting the material manufactured and is earning substantial foreign exchange for the country. According to the petitioner the product in question is classified under Chapter 39 (Plastics and Articles) as per schedule to the Central Excise Tariff Act, 1985 and are chargeable to Central Excise accordingly. Govt. of India had introduced the Modvat (Modified Value Added tax Scheme) with effect from 1-3-86 thereby allowing certain benefits for duty paid on inputs for discharging Central Excise duty on the final product in the manufacture of which the said inputs are used. Government was empowered to issue notification in this regard under Rule 57-A of Central Excise Rules, 1944 for specifying the inputs and final product on which the scheme of Modvat was applicable. ( 3. ) IT is the case of the petitioner that from time to time various notification have been issued enlarging the scope of Modvat Scheme. When the new tariff came into force with effect from 1-3-86, the goods manufactured by the petitioner namely HDPE/pp tapes, fabrics and sacks were classified under chapters 54 and 63 i. e. , Textiles and Textile Articles and since these products were not specified in the notification issued under Rule 57-A of the Central excise Rules, petitioner was not entitled to avail of the Modvat credit. However, it was the case of the petitioner that the product in question should be classified under the category of plastic and thereafter admitted to benefit under the modvat Scheme. Petitioner, therefore, approached this Court and this Court vide order dated 18-2-93 direct respondent No. 2 to approve classification of the items manufactured by the petitioner under Chapter 39 i. e. , the classified category of plastics. Petitioner, therefore, approached this Court and this Court vide order dated 18-2-93 direct respondent No. 2 to approve classification of the items manufactured by the petitioner under Chapter 39 i. e. , the classified category of plastics. Since the aforesaid item was classified in the notification issued under Rule 57-A, Modvat Scheme became available to the petitioner and, therefore, in consequence to the order passed on 18-2-93 by this Court, petitioner became entitled to benefit under the Modvat Scheme whereby the duty paid on inputs used in relation to the manufacture of final products was available as credit for the purpose of discharging duty on the clearance of the goods in question. ( 4. ) IT is the case of the petitioner that in view of the aforesaid petitioner was not required to make cash deposit in the current account for payment of duty and as the department has not classified the product properly under chapter 39 petitioner was deprived of the aforesaid benefit. ( 5. ) AGAINST the order passed by this Court as contained in Annexure B on 18-2-93 S. L. P. filed before the Supreme Court was dismissed on 13-7-94 vide annexure C. It is the case of the petitioner that the respondent department unnecessarily delayed the matter and by making incorrect classification deprived the benefit of Modvat Credit Scheme to the petitioner. Petitioner, therefore, vide letter dated 2-7-90 Annexure F claimed grant of Modvat credit on duty paid for the period of 25-11-86 to 25-7-89 and claimed refund of the amount of Rs. 32,34,650/ -. On receipt of this notice respondent No. 2 issued a show-cause notice on 13-10-95 vide Annexure G calling upon the petitioner to show-cause as to why the claim should not be rejected. Petitioner replied to the aforesaid show-cause vide Annexure H on 2-11-95 and as respondent No. 2 did not dispose the claim of the petitioner for grant of Modvat credit, petitioner approached this Court by filing W. P. No. 501/98. This petition was disposed of by this Court vide order dated 30-11-99 directing respondent No. 2 to decide the claim of the petitioner and the show-cause notice Annexure G dated 2-11-95 within a period of two months from the date of receipt of certified copy of this order. Copy of the order passed by this Court on 30-11-99 is Annexure I to this petition. Copy of the order passed by this Court on 30-11-99 is Annexure I to this petition. Accordingly, the matter was taken up for personal hearing on 1-12-99 and the show-cause notice was disposed of vide order dated 10-12-99. By this order petitioner was allowed Modvat credit of Rs. 3,30,644/- out of the total claim of Rs. 32,34,650/- and remaining claim of the petitioner for Modvat credit amounting to Rs. 29,03,971/- was disallowed. Copy of this order dated 10-12-99 is Annexure J. Aggrieved by this order, petitioner again preferred a Writ petition No. 418/00 before this Court and it is the grievance of the petitioner that even though this petition was filed on 18-2-00 the matter was not heard as the respondents failed to file reply in time. Finally the said writ petition was allowed vide Annexure K dated 10-5-02 and respondents were directed to grant similar benefits to the petitioner as was granted to other similarly situated assessees in the light of the judgment rendered by the Division Bench of this court in the case M/s Primo Pick N Pack Limited Vs. Union of India (Writ petition No. 4486/99, decided on 15-12-2000 ). Respondents were directed to take action and pass appropriate orders within 6 weeks. ( 6. ) IT is the case of the petitioners that after orders were passed petitioners applied for certified copy, submitted the same before the respondents on 15-5-02 and requested for refund of the remaining amount of modvat credit amounting to Rs. 29,03,971/- and interest at the rate 18% per annum for the date of the filing of the claim under Rule 57-H, i. e. , 1-10-90. A copy of the claim made is Annexure L. Petitioner thereafter, sent reminders on 17-6-02, 25-6-02 and 1-7-02. Respondent No. 2 Assistant Commissioner, central Excise, Division Gwalior finally decided the claim vide order dated 25/28-6-02 Annexure N and allowed the refund of Modvat credit amounting to (Rs. 29,03,971/ -. However, as interest for the period of 12 years, i. e. , from the date of submission of the application on 2-7-90 was disallowed, petitioner has [preferred this petition before this Court. ( 7. 29,03,971/ -. However, as interest for the period of 12 years, i. e. , from the date of submission of the application on 2-7-90 was disallowed, petitioner has [preferred this petition before this Court. ( 7. ) SHRI L. P. Asthana, learned Counsel representing the petitioner, argued that from the facts that have come on record it is clear that the benefits under the Modvat Scheme was illegally denied to the petitioner and the claim submitted by the petitioner on 2-7-1990 was admissible in law under Rule 12-H but the same was not decided in time as a result thereof petitioner had to file two writ Petition before this Court and it was only after approaching this Court that final orders were passed on 26-2-02 allowing benefit to the petitioner. Inter alia contending that petitioner is entitled to be compensated for the delay caused in settlement of his claim and interest on the amounts illegally withheld by the department Shri Asthana submits that direction be issued to the respondents to make payment of the interest in accordance with the rules. ( 8. ) REFERRING to the provisions of Section 11-B of the Central Excise act, 1944 so also the provisions of Section 11-BB of the said Act and the judgment of the Gujrat High Court in the case of Indo-Nippon Chemicals Co. Ltd. Vs. Union of India, 2005 (185) ELT 19 (Guj.), Shri Asthana argued that petitioner is entitled to interest in accordance with the provisions of Section 11-BB and the same cannot be denied by the respondents. Thereafter, referring to the various judgments of High Courts and Supreme Court in the matter of payment of interest while deciding the claim for refund of duty paid, Shri asthana argued that petitioner is entitled for refund of the amount along with interest as claimed and, therefore, seeks a direction to the respondents to pay interest to the petitioner. Judgments relied upon in this regard by Shri Asthana are:- (i) Elpro International Ltd. , and others Vs. Joint Secretary, Govt. of india, Ministry of Finance and others, 1985 (19) ELT 3 (SC); (ii) Judgment of Calcutta High Court in the case of Collector of customs (Preventive) Vs. Kuljit Singh, 1993 (67) ELT 238 (Cal.); (iii) Judgment of Supreme Court in the case of Sandvik Asia Ltd. Vs. Joint Secretary, Govt. of india, Ministry of Finance and others, 1985 (19) ELT 3 (SC); (ii) Judgment of Calcutta High Court in the case of Collector of customs (Preventive) Vs. Kuljit Singh, 1993 (67) ELT 238 (Cal.); (iii) Judgment of Supreme Court in the case of Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune, 2006 (196) ELT 257 (SC)and various other judgments annexed with the petition. ( 9. ) ACCORDINGLY, Shri Asthana submits that petitioner is entitled to interest on the delay caused by the respondents in refund of the amount of modvat credit illegally withheld and a direction be issued to the respondents to make payment of the aforesaid amount. He also placed reliance on a judgment of this Court in the case of Rewa Gases Private Ltd. Vs. Union of India, 2002 (142)ELT 318 (MP) in support of his contentions. ( 10. ) SHRI V. K. Sharma, learned Assist. Solicitor General representing the Union of India resisted the aforesaid claim and it was argued on behalf the department that once the earlier petition was decided by this Court and order dated 25/28-6-2004 was passed in compliance thereof and when there is no direction in the earlier petition filed before this Court for payment of interest i petitioner is not entitled to make any claim for interest now. That apart, it is argued that the provisions of Section 11-BB of the Central Excise Act, 1944 will not apply to proceedings for claim under Rule 57-H and, therefore, on the basis of the aforesaid provisions no relief can be granted to the petitioner. ( 11. ) IT is the case of the respondents that in matters pertaining to grant of allowance of Modvat credit under Rule 57 there is no provision for grant of interest under the entire Central Excise Law and the provisions of Section 11-BB cannot be made applicable in such matters. Accordingly, on these counts respondents have resisted the claim made by the petitioner. ( 12. ) APART from the aforesaid detailed contentions advanced Shri L. P. Asthana, learned Counsel representing the petitioner has very fairly brought to the notice of this Court a judgment rendered by a Bench of this Court in the case of Kirloskar Brothers Ltd. (M/s.) and another Vs. ( 12. ) APART from the aforesaid detailed contentions advanced Shri L. P. Asthana, learned Counsel representing the petitioner has very fairly brought to the notice of this Court a judgment rendered by a Bench of this Court in the case of Kirloskar Brothers Ltd. (M/s.) and another Vs. Union of India and others, 2002 (1) JLJ 224 , wherein it is held that for claiming interest or refund of the amount of custom duty a petition under Article 226 of the Constitution is not maintainable. Shri Asthana submitted that this judgment will not apply in the facts and circumstances of the present case inasmuch as after 26-5-1995 when section 11-BB was introduced in the Central Excise Act, statutory right accrued to the petitioner to claim interest and, therefore, as interest is claimed on the basis of the aforesaid statutory provisions, the law laid down in the case of kirloskar (supra) will not apply. That apart, Shri Asthana submitted that the judgment in the case of Kirloskar (supra) was passed on the fact that claim for interest cannot be entertained in a writ petition under Article 226 of the constitution whereas in the case of the petitioners they have claimed Modvat credit under Rule 57-H when they filed the application on 2-7-90 and what has been rejected by the department is the claim for interest. That being so, it was argued by Shri Asthana that the rejection of the claim in part with regard to interest can be agitated by the petitioner now in this petition and the Law laid down in the case of Kirloskar (supra) will not apply. ( 13. ) I have heard learned Counsel for the parties at length and perused the record. ( 14. ) AS far as the factual aspect of the matter is concerned, there is not dispute between the parties. Petitioner claims interest on the amount from 2-7-90 upto the date of its payment, i. e. , 25/28-6-02, when the amount of Modvat credit to the tune of Rs. 29,03,971/- was directed to be refunded. Claim of the petitioner is based on general principle with regard to delay in settlement of the claim of the petitioner so also on the basis of Section 11 -BB of the Central Excise act. Accordingly, I will take up for consideration claims for both the periods separately. ( 15. 29,03,971/- was directed to be refunded. Claim of the petitioner is based on general principle with regard to delay in settlement of the claim of the petitioner so also on the basis of Section 11 -BB of the Central Excise act. Accordingly, I will take up for consideration claims for both the periods separately. ( 15. ) SECTION 11-BB of the Central Excise Act, 1944 with regard to interest on delayed payment was inserted by Section 75 of the Finance Act of 1995 with effect from 26-5-1995 and, therefore, with effect from the date three months subsequent thereof petitioner claims interest on the basis of notification issued by the Central Govt. in accordance with the aforesaid provision. This benefit is being resisted by the respondents on the ground that in a claim for modvat credit made under Rule 57-H the provisions of Section 11-B and section 11-BB of the Central Excise Act will not apply. This question is considered by the Gujrat High Court in the case of Indo-Nippon (supra ). That was a case where the assessee had made a contention that provisions of Section 11-B and Section 11-BB are not attracted to Modvat credit whereas it was the case of the department that the said provisions are applicable even to Modvat credit. After considering the provisions of sub-section (2) of Section 11-B in paras 28 and 29 of the aforesaid judgment a Division Bench of the Gujrat High court has held that the language of Clause (C) to the provisions of sub-section (2) is very clear and it has been held that the claim for refund based on Modvat credit is maintainable in accordance with the procedure and limitation prescribed in sub-section (1) of Section 11-B of the Central Excise Act. This judgment of the Division Bench of the Gujrat High Court has been upheld by the Supreme Court and the S. L. P. filed by the department being S. L. P. (Civil)No. 658/02 has been dismissed by the Supreme Court on 26-8-2002. From a complete reading of the aforesaid judgment it is clear that it is held in the aforesaid judgment that the provisions of Rule 57-H and the notification issued thereunder enable refund under the Modvat credit scheme but even in such cases the procedure and limitation for claiming such refund would be governed by the provisions of Section 11-B of the Central Excise Act. That being so, the arguments advanced on behalf of the department to be contrary has to be rejected and it has to be held that with effect from the date the provisions of section 11-BB came into force petitioner was entitled to interest on the amount due in accordance with the notification issued by the department. Accordingly, with effect from 26-8-1995 till the date of settlement of the claim, i. e. , 28-6-2002 petitioner was entitled to interest at the rate notified by the Central Govt. in accordance with the provisions of Section 11-BB of the Central Excise Act. To that extent relief claimed for by the petitioner has to be allowed. ( 16. ) THE next part of the claim pertains to the period 2-7-1990 upto 21-8-1995. Even though in the cases referred to by Shri Asthana and in particular in the case of Rewa Gas Private Limited (supra) a Bench of this Court has allowed interest but the fact remains that another Bench of this Court in the case of Kirloskar (supra) has held that in case the claim for interest is not based on any statutory provision like Section 11-BB but is based on general principles, a writ petition claiming the aforesaid benefit under Article 226 of the constitution is not maintainable. The question, therefore, is can this Court consider the claim for interest for this period in these proceedings under Article 226 of the Constitution. The judgment in the case of Rewa Gas Private Limited has been stayed by the Supreme Court in Union of India Vs. Rewa Gas Private limited, 2003 (153) ELT 168 (SC) and, therefore, relief claimed on the basis of this judgment cannot be considered as the judgment in question is stayed by the supreme Court. That apart, in this case the earlier judgment in the case of kirloskar (supra) is not taken note of. In the case of Kirloskar (supra) similar claim seeking a writ of Mandamus for interest on delayed payment of excise duty was made. In the said case various judgments were cited by the assessee to show that on delayed payment interest can be claimed. Series of judgments cited in the matter were referred to by the learned Judge in Para 4 of the aforesaid judgment. However, considering the law laid down by the Supreme Court in the case of Union of India Vs. In the said case various judgments were cited by the assessee to show that on delayed payment interest can be claimed. Series of judgments cited in the matter were referred to by the learned Judge in Para 4 of the aforesaid judgment. However, considering the law laid down by the Supreme Court in the case of Union of India Vs. M/s Orient Enterprises, AIR 1998 SC 1729 , it has been held by the Court that a writ petition under Article 226 of the Constitution seeking a relief for payment of interest on delayed refund of amount towards custom duty is not maintainable. All the judgments cited on behalf of the assessee were considered and the judgments were distinguished on the ground that they were cases where interest was allowed when the orders of recovery or assessment were quashed and refund was ordered alongwith interest. In Para 8 of the aforesaid judgment learned Judge has reproduced the observations made by the Supreme Court in the case of Orient Enterprises (supra) and the legal principle that emerges from a complete reading of the aforesaid judgment is that until and unless the claim for interest is based on some statutory provision a writ petition directly claiming the amount of interest is not maintainable. Even though Shri L. P. Asthana had argued that the aforesaid judgment in the case of kirloskar (supra) will not apply in the case of the petitioner I am unable to accept the aforesaid contention of learned Counsel for the petitioner. Merely because petitioner had made a claim for Modvat credit under Rule 57-H on 2-7-1990 that will not make any difference. Even while making his claim on 2-7-1990 petitioner had sought interest not on the basis of any statutory provision but on the general principle that for the delay caused by the department he is entitled to be compensated by payment of interest. This principle has been considered by the Supreme Court in the case of Orient Enterprises (supra) so also by this Court in the case of Kirloskar (supra) and I see no reason to take a different view in the matter. That being so, it has to be held that claim for interest for the period 2-7-1990 to 21-8-1995 is not based on any statutory provision and, therefore, a writ petition under Articles 226 and 227 of the Constitution is not maintainable. ( 17. That being so, it has to be held that claim for interest for the period 2-7-1990 to 21-8-1995 is not based on any statutory provision and, therefore, a writ petition under Articles 226 and 227 of the Constitution is not maintainable. ( 17. ) AT this juncture it would be appropriate to take note of the law laid down by the Supreme Court in the case of Sandvik Limited (supra) reliance on which was placed by Shri Asthana for claiming interest on the ground that for delay caused by the department the assessee is entitled to be suitably compensated. In the case of Sandvik Asia Ltd. (supra) Supreme Court was considering the question of delayed payment of interest made to a assessee under the Income Tax Act and while considering the aforesaid claim in view of the provisions of Section 244-1 of the Income Tax Act and various other statutory provisions providing for grant of interest under the Income Tax Act, claim for interest was allowed by the Supreme Court. In this case claim for interest was made on the basis of statutory provision as contained in the Income tax Act and, therefore, said judgment will not help the petitioner to claim interest for the period when there was no statutory provision for payment of interest. There is nothing on record to indicate that for the period prior to 26-8-1995 claim of the petitioner was based on any statutory provision or law. That being so, I am of the considered view that the law laid down in the case of sandvik Asia Ltd. (supra) does not help the petitioner as it is based on specific provision contained in the Income Tax Act of 1961 for granting interest. ( 18. ) ACCORDINGLY, in the facts and circumstances of the case and in view of the law laid down in the case of Kirloskar (supra) it has to be held that the claim for interest made from 2-7-1990 to 21-8-1995 is not maintainable in these proceedings under Article 226 of the Constitution. ( 19. ) ACCORDINGLY, for the grounds and reasons indicated herein above this petition is allowed in part. Claim made for interest for the period 2-7-1990 to 21-8-1995 is rejected on the ground that for the said relief a writ petition under Articles 226 and 227 of the Constitution is not maintainable. ( 19. ) ACCORDINGLY, for the grounds and reasons indicated herein above this petition is allowed in part. Claim made for interest for the period 2-7-1990 to 21-8-1995 is rejected on the ground that for the said relief a writ petition under Articles 226 and 227 of the Constitution is not maintainable. However, respondents are directed to make payment of interest to the petitioner in accordance with the notification issued by the Central Govt, fixing the rate of interest under Section 11-BB of the Central Excise Act for the period 26-8-1995 till payment of the amount of Rs. 29,03,971/- made vide order dated 28-6-2002. ( 20. ) PETITION stands allowed to the extent indicated herein above, without any order as to cost. Writ Petition partly allowed.