Telangana High Court

The Commissioner Of Central Excise And ... vs M/S. Agarwal Industries Private ... on 21 August, 2025

Author: P.Sam Koshy

Bench: P.Sam Koshy

                                Page 1 of 9



           THE HONOURABLE SRI JUSTICE P.SAM KOSHY
                           AND
     THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA

                Central Excise Appeal No.48 of 2006

JUDGMENT:

(per Hon'ble Sri Justice P.SAM KOSHY)

The instant Appeal has been filed by the appellant herein under

Section 35G of the Central Excise Act, 1944 aggrieved by the Final

Order No.1484 dated 26.08.2005 in Appeal No.E/236/2005, passed

by the Customs, Excise and Service Tax Appellate Tribunal, South

Zonal Bench, at Bangalore, (for short, 'the impugned order').

2. Heard Mr.Dominic Fernandes, learned Standing Counsel for the

Central Board of Indirect Taxes, assisted by Mr. Aditya Vyas, learned

counsel for the appellant; and Mr.M. Sridhar, learned counsel for the

sole respondent.

3. The question of law involved in the instant appeal is : whether

the Tribunal was justified 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 Notification

No.37/03 CE, dated 30.04.2003, and confirming the order dated

25.11.2004 in O.I.A.No.84 of 2004 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 of vegetable 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 respondent-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 Vanaspathi stood abolished vide

Notification No.16/96CE dated 23.07.1996. At that point of time, the

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 vide its Notification

No.37/2003 CE, dated 30.04.2003. Thereafter, the respondent-

Assessee wanted to claim the accumulated money credit of

Rs.17,91,63,720/- to be adjusted against duty payable on clearance of

their final products on monthly basis, which was initially turned down

by the Office of the Assistant Commissioner of Central Excise

Hyderabad - E Division, Nampally Station Road, Hyderabad vide

Order in Original in C.No.V/15/30/3/2003-Tech, dated 01.07.2004.

5. However, on an appeal preferred by the respondent-Assessee

before the Commissioner of Customs & Central Excise (Appeals),

Hyderabad, the Commissioner vide Order-in-Appeal No.84/2004 (H-II)

CE, dated 25.11.2004, set aside the Order in Original in

C.No.V/15/30/3/2003-Tech, dated 01.07.2004. Aggrieved, the

appellant herein preferred appeal before the Tribunal at Bangalore.

However, the Tribunal vide order dated 26.08.2005 in Appeal

No.E/236/05 dismissed the appeal and confirmed the order passed by

the Commissioner vide Order-in-Appeal No.84/2004 (H-II) CE, dated

25.11.2004.

6. Aggrieved, the instant appeal has been filed by the appellant.

7. Learned counsel for the appellant 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

Tribunal as also by the Commissioner (Appeals) are all which were

decided under an entirely different contextual background; and

therefore, since the said judgments are distinguishable 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 vide Notification

No.16/96CE dated 23.07.1996, 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 the appeal which was allowed

by the Commissioner (Appeals) and which was affirmed by the

Tribunal deserves to be interfered with to the above said extent.

8. Learned counsel for the appellant further contended that the

Commissioner of Customs & Central Excise (Appeals), 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 Pradesh (undivided), as also that of the

Hon'ble Supreme Court, which have also been affirmed by the

Tribunal. According to him, the Tribunal however had not properly

appreciated the judgments which were considered by the

Commissioner of Customs & Central Excise (Appeals), Hyderabad, in

the process of passing the impugned order. According to him, even

otherwise the claim of respondent-Assessee was not sustainable for

the reason that the respondent-Assessee wanted the accumulated

credit to be used for adjusting against the duty payable on clearance

of their final products as accumulated credits could only be used as a

money credit. Therefore, the accumulated money credit could not had

been used towards payment of duty more particularly when the

accumulated money credit already stood lapsed and was no more in

existence. He further contended that in the notification by which the

money credit scheme was introduced vide notification No.45/89CE,

dated 11.10.1989, clause (3) thereof categorically envisaged that such

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 circumstance. 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 Hon'ble Supreme Court in the case of

Tungabhadra Industries Ltd. vs. Union of India 1 wherein it was held

that a manufacturer would be permitted to utilize the credit

accumulated only subject to the provisions contained in the

notification and not under any other circumstance.

10. However, in the case of Madhusudan Industries Ltd. vs. Union

of India 2 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 the 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 manufacturers and observed that a vested right has accrued in favour of the manufacturers and that the money credit was a monetary right earned by the manufacturers on purchasing and utilizing unconventional / minor oils and for that the manufacturers had changed the manufacturing process and plants hoping to get money

[2000 (118) E.L.T. 545 (SC)]

2014 SCC OnLine Guj 4587

credit, and, therefore, the aforesaid right cannot be taken away due to rescinding of the notification. This Court also held that the accumulated money credit would not lapse and the manufacturers were entitled to utilize the same in future. Special leave petitions filed by the Revenue as well as the manufacturers have been dismissed by the Supreme Court, and therefore, the contention of the respondent that the scheme of money credit has been rescinded subsequently and / or the same is not in force cannot be sustained.

13. .........

14. It is, therefore, held that the manufacturers were entitled to utilize the accumulated money credit in terms of the notification and the money credit scheme. Further, the learned single judge rejected the claim of the manufacturers to get the accumulated 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 and the Supreme Court dismissed both special leave petitions. Therefore, the view taken by the Kolkata High Court that the manufacturers were entitled to utilize the accumulated money credit has been upheld by the Supreme Court. In view of the above, the action on the parts of the respondents in restraining the petitioners from utilizing the accumulated money credit lying in RG- 23B as on July 21, 1996 cannot be sustained and consequently any further order trying to recover the same also deserves to be quashed and set aside."

11. Further, the judgment rendered by the Division Bench of the

Gujarat High Court, at Ahmedabad, in the case of Madhusudan

Industries Ltd. (2 supra), was subjected to challenge before the

Three-Judge Bench of the Hon'ble Supreme Court vide Special Leave

Petition Nos.7160-7161/2015. However, vide order dated 05.05.2015,

the Hon'ble Supreme Court dismissed the said Special Leave Petitions.

12. What is also worth taking note is that, after taking into

consideration the decision of the Hon'ble Supreme Court in the case of

Tungabhadra Industries Ltd. vs. Union of India 3, a learned single

Judge of the High Court of Calcutta in the case of Rasoi Limited vs.

Union of India 4 had dealt with similar issue and held at paragraph

Nos.11 to 13 as under, viz.,

"11. Before I proceed to consider the respective submissions of the 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 the very inception, i.e. 1944. The said provision is quoted below:

"Section 38A. Effect of amendments, etc., of rules, notifications or orders.-- Where any rule, notification or order made or issued under this 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 anything in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or

(b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded: or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed under or in violation of any rule, notification or order so amended, repealed, superseded or rescinded; or

[2000 (118) E.L.T. 545 (SC)]

(2004) 176 E.L.T. 101 (Cal)

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be has not been amended, repealed, superseded or rescinded."

12. In view of the aforesaid provisions contained in Section 38A of the Act, I find substance in the contention of Mr. Bajoria that by reason of the omission of the rule, the right of the petitioner no. 1 to have money-credit in terms of the notification under the rule cannot lapse. As pointed out by the Supreme Court in the case of Tungabhadra Industries Limited (supra), Central Excise Act does not permit divestment of any accrued right of a person acquired by virtue of any of the provisions contained in the Act, rules, notification, order, etc. Moreover it is rightly pointed out by Mr. Bajoria that even in cases, where by specific enactment a vested right is taken away in violation of the provisions contained in Section 38A of the Act, the Apex Court has unhesitatingly preserved such accrued right, [see the cases of Samtel India Ltd. and Eicher Motors Ltd. (supra)].

13. In this case, there is no dispute that the petitioner no. 1 had 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 the petitioner no. 1 to utilise such credit for an amount not exceeding Rs. 1000/- per MT at any time after the succeeding month in which the money-credit accrued. Thus, the petitioner no. 1 is entitled to invoke such vested right in accordance with the conditions mentioned in the notification as it then stood. The aforesaid point is, thus, answered in favour of the petitioner no. 1."

13. In view of the aforesaid judicial precedents which have been

relied upon by the Tribunal as also by the Commissioner (Appeals),

and also taking into consideration the decision of the Hon'ble Supreme

Court in the case of Tungabhadra Industries Ltd. (1 supra), 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

considered opinion that it is difficult 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.

14. Therefore, the question of law proposed by the appellant is

answered in the negative against the appellant and in favour of the