(B.R. Gavai and Padmidighantam Sri Narasimha, JJ.)
Betts India Pvt. Ltd. ________________________________ Appellant;
v.
Commissioner of Central Excise _____________________ Respondent.
Civil Appeal No. 2022 (Arising out of SLP(C) No. of 2022) [Diary No. 15334 of 2020], decided on August 25, 2022
The Order of the court was delivered by
Order
1. Delay condoned.
2. Leave granted.
3. The appeal challenges the order passed by the Division Bench of the High Court dated 24.09.2019 vide which the High Court decided that the substantial question of law raised in the appeal filed by the appellant herein, against the assessee.
4. The question of law that was framed is thus:
“Whether proviso added in 2007 to sub-rule(5) of Rule 3 to Cenvat Credit Rules, 2004 is clarificatory in nature and, therefore, operating retrospectively as also whether in absence of said proviso the words “as such” appearing in sub-rule (5) of Rule 3 contemplated the removal of cenvated capital goods without use shall be the substantial question of law for adjudication in this appeal?
5. The High Court in the impugned judgment held that the proviso added in 2007 to sub-rule(5) of Rule 3 of the CENVAT Credit Rules, 2004 (in short “2004 Rules”) was clearly clarificatory in nature. The High Court further relying on the judgment of this Court in WPIL Ltd., Ghaziabad v. Commissioner of Central Excise, Meerut, Uttar Pradesh reported in (2005) 3 SCC 73, observed that the clarificatory notification would take effect retrospectively since such a notification merely clarifies the position of law and makes explicit what was implicit within the said Rule.
6. The factual scenario that existed in the present matter is that the appellant had purchased capital goods and brought them into its factory in Goa and had put them to use during the period from 1999 to 2004. In December, 2005, the said capital goods were removed from Goa and shifted to the appellant’s factory in Himachal Pradesh.
7. In the CENVAT Credit Rules, 2002, the proviso to sub-rule(5) of Rule 3 provided thus:
“Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by 2.5. per cent for each quarter of a year or part thereof from the date of taking the Cenvat Credit.”
8. However, when the CENVAT Credit Rules were modified in 2004, the said proviso was not there in the said Rules. Subsequently by an amendment carried in 2007, the said proviso has been added.
9. The said proviso to sub-rule (5) of Rule 3 of 2004 Rules, is in tune with Rule 57 S(2)(b) of the Central Excise Rules, 1944 (in short “1944 Rules”), which provide that:
“where capital goods are removed after being used in the factory for home consumption on payment of duty of excise or for export under rebate on payment of duty of excise, such duty of excise shall be calculated by allowing deduction of 2.5 per cent of credit taken for each quarter of a year of use or fraction thereof, from the date of availing credit under Rule 57Q.”
10. Admittedly, the appellant had used the goods in question in its factory at Goa from 1999 to 2004. As such, the appellant was entitled to the benefit of Rule 57 S(2)(b) of 1944 Rules.
11. It appears that though the said proviso to sub-rule (5) of Rule 3 existed in the 2002 Rules, by a legislature slip, it was not included in the 2004 Rules. As such, to clarify the position, an amendment was carried out in 2007 to bring it in tune with Rule 57 S(2)(b) of the 1944 Rules.
12. Having held that the amendment was clarificatory, in our view, the High Court erred in answering the question against the appellant.
13. Having held the 2007 amendment to be clarificatory, the effect would be that the said proviso existed in the statute book from 2004 itself. This being the position, the appellant was entitled to take benefit of the said proviso and make an adjustment as per the said proviso.
14. We accordingly allow this appeal and quash and set aside the impugned judgment and order of the High Court. The question of law as framed by the High Court is held in favour of the appellant. The demand issued by the revenue is quashed and set aside.
15. We are further of the view that in view of finding that the amendment is clarificatory in nature, it is not necessary to consider the effect of the words “as such. The said issue is kept open.
16. Pending applications, if any, stand disposed of.
SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 15334/2020
Betts India Pvt. Ltd _________________________________ Petitioner
v.
Commissioner of Central Excise ______________________ Respondent
(IA No. 79278/2020-CONDONATION OF DELAY IN FILING and IA No. 79279/2020-EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT IA No. 79278/2020 – CONDONATION OF DELAY IN FILING IA No. 79279/2020 – EXEMPTION FROM FILING C/C OF THE IMPUGNED JUDGMENT)
Date : 25-08-2022 These matters were called on for hearing today.
(Before B.R. Gavai and Padmidighantam Sri Narasimha, JJ.)
UPON hearing the counsel the Court made the following
ORDER
17. The appeal is allowed in terms of the signed order.
18. Pending applications, if any, stand disposed of.
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