SANGAM SPINNERS L TO. ,versusUNION OF INDIA & ORS.

                       [2011] 3 S.C.R. 1033

                   SANGAM SPINNERS LTO. ,                              A
                                  v.
                  ' UNION OF INDIA & ORS.
                 (Civil Appeal No. 476 of 2003)
                         MARCH 18, 2011
                                                                       B
             [DR. MUKUNDAKAM SHARMA AND
                    ANIL R. DAVE, JJ.]

         Central Excise Rules, 1944 - rr. 57A and 578 - High ,
   Speed Diesel Oil - MODVAT credit - Benefit of - High C
   Speed Diesel Oil used for the purpose of generation of
 , electricity.- Credit of duty paid on High Speed diesel Oil on
   17118.03.1997 - Entitlement for - Held: Not entitled as High .
 · Speed Diesel Oil was specifically excluded from the list of
   eligible inputs as per the Notifications dated 01.03.1994 and· 0
   16. 03. 1995 - Since the product High Speed Diesel Oil was · · ·
. excluded specifically from the list of eligible inputs in the ·
   Notifications, there was no question of creation of any rightin
  favour of. th~ appellant to avail such benefit - Therefore, it
   cannot be said that a vested or accrued right is sought to be E
   taken away by an Act of Parliament giving retrospective effect
· - Central Excise Act, 1944 - Finance· Act, 2000 ,...Notifications
· ..;. Notification No. 5194-CE(NT) dated 01.03.1994 and
   Notification No. 8195-CE(NT) dated 16.3.1995.                    ,'1f;
                                                                     .F
      It is the case of the appellants that they used High
 Speed Diesel Oil as input/goods in diesel generation set
 for generation of electricity which in turn is used in the
 manufacture of final goods or for other purposes In the
 factory of the appellants.· They submitted declarations· In
 respect of the diesel as well as, oil and lubricants a$               G
 required under Rule 57G read with Rule 578 as also under
 Rule 57(H) of the Central Excise Rules, 1944, Intending
 to avaUthe credit of duty on the said goods/inputs on 17/
 18.3.1997 but were informed that after 1.3.1997, MODVAT
                                1033                                   H
   1034    SUPREME COURT REPORTS             [2011} 3 S.C.R.

A credit was not available on High Speed Diesel Oil. The
  appellant was issued show cause notice as to why the
  credit given should not be disallowed to the appellant.
  Aggrieved, the appellant filed a writ petition and the same
  was dismissed.
B
      The question which arose for consideration in these
  appeals is whether the appellants are entitled to credit of
  duty paid on High Speed Diesel Oil at any time during the
  period commencing on and' from 16th March, 1995 and
C ending with the day of Finance Act, 2000 which received
  assent of the President on 1st April, 2000.

       Dismissing the appeals, the Court
       HELD: 1.1. High Speed Diesel Oil for the purpose of
o generation of electricity was specifically excluded from
  the list of eligible inputs in the Notification No. 5/94-
  CE(NT) dated 1st March, 1994 issued under Rule 57A of
  the Central Excise Rules, 1944 as also under Notification
  No. 8/95-CE(NT) dated 16.3.1995 from the list of eligible
E inputs. Therefore, on a conjoint reading of the said
  Notifications as also the amendment to Rule 57D, it is
  sufficiently indicated that the appellants are not entitled
  to credit of duty paid in respect of High Speed Diesel Oil
  which was used for the purpose of generation of
F electricity. [Para 24] [1045-G-H; 1046-A-B]

       1.2. A careful reading of the explanation to Rule 57B
  in sub-rule (1) would make it explicitly clear that by.
  adding the said explanation by Notification No. 5/98-
  CE(NT) dated 2.3.1998, the inputs mentioned in Rule 578
G refers only to such inputs as specified in the Notification
  issued under Rule 57A. Thus, the appellants are not
  entitled to get the benefit of, credit of duty paid on High
  Speed Diesel oil as High Speed Diesel 011 Is excluded
  from the list of eligible inputs as per Notification issued
H under Rule 57A of the Rules. [Para 28) [1047-D-E]
  SANGAM SPINNERS LTD. v. UNION OF INDIA & 1035
                  ORS.
     1.3. The intention regarding availment of the credit       A
under MODVAT would be guided and governed by the
said Notifications which specifically excluded the benefit
of availment of such credit as High Speed Diesel Oil is
specifically excfuded from the list of eligible inputs as per
Notification under Rule 57A of the Central Excise Rules,        s
1944. Since it was specifically excluded from the list of
eligible inputs such credit though may otherwise be
available would not have created a vested right. The
intention of the legislature is clear from the beginning to
exclude the benefit of such credit by excluding High            c
Speed Diesel Oil from the list of eligible inputs by making
substantial exclusion thereof in the Notifications. [Paras
30 and 36] (1048-8; 1050-A-8]

    Tata Motors Ltd. vs. State of Maharashtra (2004) 5 SCC
783 - Distinguished.                                            D

     1.4. When the Central Excise Act and the Rules made
thereunder, and the various Notifications issued by the
Government of India, are read collectively in the aforesaid
context the only conclusion that can be drawn is that the E
appellants are not entitled to the credit of duty as High
Speed Dies1o.l Oil is specifically excluded from the list of
eligible inputs as per the Notification issued under Rule
57A of the Central Excise Rules 1944. Therefore, the
submission that explanation to Section 57-8 not being F
clarificatory, and to whittle down the width of non-
obstante clause of Section 57-8, cannot be accepted. The
submission that the provisions of Rule 578 prevails over
Rule 57A and consequently, the inputs enumerated under
Rule 578 would be inputs for the availment of MODVAT G
credit in spite of any provision to the contrary which may
be contained in Rule 57A, is misreading of the provisions,
for the said explanation added to the Notification No. 5/
98 dated 2.3.1998, clearly intends that the inputs
mentioned in Rule 578 refers only to such inputs as
                                                             H
    · 1036   SUPREME COURT REPORTS               [2011] 3 S.C.R.

A specified in a Notification issued under Rule 57 A. [Para
  35] [1049-C-F]
       1.5. It was held in Associated Cement Companies
  Ltd.'s case and Rama Vision's case that no credit is
  admissible on any duty paid on High Speed Diesel Oil for
8
  the period commencing from 16.3.1995 and ending with
  the day of Finance Act, 2000 which received the assent
  of the President on 1st April, 2000. Despite the said fact,
  since the Tribunal held othEUWise, therefore, there was a
  necessity for the Finance Act to be brought in giving a
C clarificatory explanation to the legal position which is·
  being prevailing all alone and established by the long list
  of the Notifications which were issued from time to time.
  [Paras 37 and 38] [1050·D·E]
D        Commissioner of Central Excise, Hyderabad vs.
    Associated Cement Companies Ltd. (2005) 180 ELT 3
    (S.C.); Commissioner of Central Excise, Meerut Vs. Rama
    Vision (2005) 181 ELT 201 - referred to.
E       Shri Prithvi Cotton Mills Ltd. and Anr. vs. Broach Borough
    Municipality and Ors. (1969) 2 SCC 283; D.G. Gose and
    Co.(Agents) Pvt. Ltd. vs. State of Kera/a and Anr. (1980) 2
    sec 410 - referred to.
       1.6. Since the product High Speed Diesel 011 was
F excluded specifically from the list of eligible inputs In the
  Notifications, there was no question of creation of any
  right in favour of the appellant to avail such benefit.
  Therefore, contention that a vested or accrued right Is
  sought to be taken away by giving retrospective effect Is
G without any merit. The submission Is based on
  misreading of the language of the said Notifications
  which do not support, but in fact destroy the very basis
  of the case of the appellants. Further on a conjoint
  reading of all the Notifications, it is clearly established that
H the intention of the Government all along was to exclude
    SANGAM SPINNERS LTD. v. UNION OF INOIA & 1037
                    ORS.
  the appeUants from getting the benefi.t of the MODVAT            A
.·credit, therefore, the submission thatthe Finance Act
  violates the .vested ·rightis without any basis. [Para 41)
  (1053-A-D) .

      M/s; Gujarat Ambuja Cement vs. UOl 2005 (182) ELT 33         8
 (SC); India Cements Ltd. vs. Commissioner of Customs and
 C.Ex. Hyderabad 1997 (95). E.L.T. 520; Jindal Polymers vs.
 Commissioner of C. Ex., Indore 1999 (114) E.L.T. 322;
 Commissioner of Central Excise, Shillong vs. Vinay Cement
 Ltd. 1999 (114) E.L.T. 753 - referred to.
                                                                   c
                      Case Law Reference:
      2005 (181) ELT 201 (SC) Referred to             Para 11
      2005 (182) ELT 33 (SC)      Referred to ·       Para 12
                                                                   D
      1997 (95) .E.L.T. 520       Referred to         Para 29
      1999 (114) E.L.T. 322       Referred to ·       Para 29
      1999 (114) E.L.T. 753       Referred to         Para 29
      2005 (180) ELT 3 (S.C.)     Referre~ to         Para 31      E

      2005 (181) ELT 201          Referred to         Para 31
      2004 (5) sec 783            Distinguished       Para 34
      2005 (180) ELT 3 (S.C.)     Referred to         Para 36      F
      2005 (181) ELT 201          Referred to         Para 36
      1969 (2) sec 283            Referred to         Para 39
      ~980 (2)   sec 410          Referred to         Para 40
                                                                   G
       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 476
  of 2003.
       From the Judgment & Order dated 3.4.2002 of the High
. Court of Judicature for Rajasthan at Jodhpur in .DB Civil Writ
  Petition No. 4112 of 1997.                                       H
    1038    SUPREME COURT REPORTS                 [2011] 3 S.C.R.

A                               WITH
    C.A. Nos. 477-478. 479 and 1436 of 2003.

        Manish Singhvi, D.K. Devesh, Naresh Kumar, Gagrat &
    Co. and Vijay K. Jain for the Appellant.
B
          P.P. Malhotra, ASG, Kiran Bhardwaj, Rahul Kaushik, B.K.
    Prasad, Anil Katiyar, Pramod B. Agarwala and Abhishek Said
    for the Respondent.

c       The Judgment of the Court was delivered by
        DR. MUKUNDAKAM SHARMA, J. 1. The issue that falls
  for consideration in these appeals is whether the appellants are
  entitled to credit of duty paid on High Speed Diesel oil at any
  time during the period commencing on and from 16th March,
D 1995 and ending with the day of Finance Act, 2000 which
  received assent of the President on 1st April, 2000. ·
    In Civil Appeal No. 476 of 2003:

        The appellants are engaged in the business of
E manufacturing and selling Man Made PV Blended Yarn and
  have installed a diesel generating set for generation of
  electricity for captive consumption in their factory premises. It
  is the case of the appellants that they purchased High Speed
  Diesel oil for generation of electricity from Indian Oil
F Corporation Ltd. I Hindustan Petroleum Corporation Ltd. through
  their sales office/depots in Rajasthan, which was cleared under
  heading 27.10 (sub heading 2710.90) on payment of central
  excise duty.
G In Civil Appeal No. 477-478 of 2003:
       The appellants are engaged in the business of
  manufacturing and selling Portland cement and have installed
  a diesel generating set for generation of electricity for captive
H consumption in their factory premises. It is the case of the
  SANGAM SPINNERS LTD. v. UNION OF INDIA & 1039 .
     ORS. [DR. MUKUNDAKAM SHARMA, J.]

appellants that they purchased High Speed Diesel oil for              A
generation of electricity from Indian Oil Corporation Ltd. I
Hindustan Petroleum Corporation Ltd. through their sales office/
depots in Rajasthan, which was cleared under heading 27.10
(sub heading 2710,90) on payment of central excise duty.
                                                                      B
In Civil Appeal No. 479 of 2003:

      The appellants are engaged in the business of .
manufacturing and se!ling Cotton Yarn and Yarn of Synthetic/
Artificial Staple Fiber and have installed a diesel generating
set for generation of electricity for captive consumption in their C
factory premises. It is the case of the appellants that they
purchased High Speed Diesel oil for generation of electricity
from Indian Oil Corporation Ltd. I Hindustan Petroleum
Corporation Ltd. through their sa!es office/depots in Rajasthan,
which was cleared under heading 27.10 (sub heading 2710.90) D
on payment of central excise duty.

     2. In all these Appeals, identical issues are involved and
therefore, we propose to dispose of all these appeals by this
common judgment and order.                                            E

     3. The case of the appellants is that the said diesel oil is
used as input/goods in the said diesel generation set for
generation of electricity which is used in the manufacture of final
goods or for other purposes in the factory of the appellants.
They submitted a declaration in respect of the diesel as well         F
as oil and lubricants as required under Rule 57G read with Rule
578 of th~ Central Excise Rules 1944, [for short "the Rules")
intending to avail the credit of duty on the said goods/inputs on
17/18.3.1997 with the Assistant Commissioner, Central Excise,
Ajmer. But the Assistant Commissioner informed the appellants         G
that after 1.3:1'J97, MODVAT credit was not available on high
speed diesel oil ar1J therefore no action could be taken on the
declaration submitted.by the company. The appellant company
submitted declaration under Rule 57(H) of the Rules declaring
the stock position of HSD oil as on 17.3.1997 They also prayed        H
    1040     ~UPREME COURT REPORTS                 [2011) 3 S.C.R.


A for condonation of delay in submitting the declaration. The
  Superintendent, Central Excise Range Beawar vide letter dated
  25.6,199.7 informed the appellant company that the MODVAT
  credit was not admissible on high speed diesel oil under Rule
  57(A) of the Rules.
B
       4. After denial of MODVAT credit, the appellant company
  was given a show cause notice by Superintendent Central
  Excise Range, Beawar to project as to why the credit given
  should not be disallowed to the appellant.
c       5. The appellant filed a writ petition in the year 1997
    seeking direction to quash the Trade Notice No. 26/27, the entry
    regarding the explanation of the HSD Oil in the Notification ~!o.
    5/94 and also the order dated 2.9.1997.

D       6. The said writ petition came up for consideration be1ore
    the Rajasthan High Court and by the impugned judgment and
    order dated 3.4.2002, the writ petition was dismissed.
      7. Aggrieved by the aforesaid judgment and order, the
  present appeals were filed on which we heard the learned
E counsel appearing for the parties.

        8. Counsel appearing for the parties drew our attention to
  Chapter V of the Rules which deals with levy of excise duty on
  manufactured goods other than salt. Rule 43 to Rule 57 under
F Section A of Chapter V provides the general provisions. Rule
  57 speaks of offences and penalties. Rule 57A provides for
  availment of MODVAT credit in respect of inputs used in
  manufacture of the finished product. The rule empowers the
  Central Government to specify the final product by issuing
G notifications in the official gazette for the purpose of allowing
  MODVAT credit of any duty of excise paid on the goods i.e.
  inputs used in the manufacture of the said final products.
         9. Learned counsel appearing for the parties also drew our
    attention to various notifications issued by the Government of
H
   SANGAM SPINNERS LTD. v. UNION OF !NOIA & 1041
      ORS. [DR. MUKUNDAKAM SHARMA, J.]
India which are relevant for the purpose of deciding the present    A
case and also to various decisions to which reference shall be
made during the course of our discussion.

      10. Learned counsel appearing for the appellants
submitted that the High Court in the impugned judgment failed B.
to draw a distinction between an•ccrued and vested right
because of the operation of the Rules and the power to tax
which in certain circumstances could be used retrospectively
by issuing a validating Actto cure the defect in the statute. It
was also contended that MODVAT creditis an accrued and C
vested right and therefore it would be governed by the Rules
prevailing on that date and such vested and accrued right
cannot be taken away by an Act of Parliament giving
retrospective effect. It was also Contended that the explanation
added to Rule 578 with notification dated 2.3.1998 was
retrospective in nature and the explanation can only clarify a D
legal position already existing but it cannot restrict or enlarge
the scope of the substantive provisions of law so as to nullify
the substantive provisions itself. Another submission of the
counsel appearing for the appellants was that the Finance Act
of 2000 intends to take away the rights accrued retrospectively E
which is burdensome and oppressive as the appellants were
unable to pass on the burden on the customer and that in view
of the law enacted, the appellants would have to bear the entire
burden and that too retrospectively and therefore such provision
is in violation of Article 14 of the Constitution of India.       F
      11. Counsel appearing for the respondent, however,
refuted all the aforesaid allegations and submitted that the Act
sought to be named as a validating Act by the appellant is not
a validating Act, but in fact explanatory in nature in order to     G
clarify and put in proper perspective the legal position as
existing on the issue. It was also submitted that the courts have
held that the power of the legislature to validate the acts done
in respect of a particular provision is permissible particularly
in respect of fiscal matter. Reference was also made to the         H
    1042    SUPREME COURT REPORTS                  (2011] 3 S.C.R.


A decision of this Court in Central Excise, Meerut Vs. Rama
  Vision Ltd. reported in 2005 (181) ELT 201 (SC), wherein it
  was held by this Court that no such MODVAT credit is available
  on the duty paid on HSD Oil as fuel in the generation of
  electricity for the period 16.3.1995 to 1.4.2000.
B
        12. Reference was also made to the decision of this Court
  in Mis. Gujarat Ambuja Cement Vs. UOI reported in 2005
  (182) ELT 33 (SC), wherein this Court held that because of the
  inherent complexity of fiscal adjustments of diverse elements
C in the field of tax, the legislature has large discretion in
  classifying as to what should be taxed in which manner. It was
  also the submission of the leaHied counsel appearing for the
  respondents that the respondents never intended to allow any
  such credit which is being claimed by the appellants and a
  Finance Bill was introduced justifying the action taken to deny
D the credit of any duty paid on the HSD oil from 16.3.1995. In
  fact the explanatory note is not issued to signify any legislative
  change but the same was issued in order to explain the real
  position as existing by issuing an Act by way of Finance Bill
  2000 and thereafter the Finance Act, 2000 which was passed
E by the Parliament and received the assent of the Parliament
  on 12.5.2000. '

       13. In the context of the aforesaid submissions of the
  counsel appearing for the parties, we proceed to deal with the
F issues raised before us more elaborately. However, in order
  to effectively deal with and understand the implications and
  ambit of the issues raised it may be necessary to set out the
  various relevant provisions of the Central Excise Act, 1944 [for
  short "the Act"], and the Rules framed thereunder and also the
G various notifications issued which are relevant for the purpose
  of deciding the present issues.
       14. In order to appreciate the contentions raised and also
  to answer the issue that falls for our consideration it would be
  necessary to extract herein relevant part of the notifications in
H question as also relevant part of Section 112 of the Finance
  SANGAM SPINNERS LTD. v. UNION OF INDIA & 1043
     ORS. [DR. MUKUNDAKAM SHARMA, J.J
Act, 2000 and such other related provisions.                      A
     15. The Finance Act, 2000 received the assentof the
President on 1st April, 2000 and the said Act was enacted for
validation of the denial of duty paid on High Speed Diesel oil.
Sub-section (1) of Section 112 of the Finance Act, 2000, which
                                                                  8
is material, reads as.follows:

    "112( 1J Notwithstanding anything contained in any rule of
    the Central Excise Rules, 1944, no credit of any duty paid
    on high speed diesel oil at any time during the period
    commencing on and from the 16th March, 1995 and C
    ending with the day, the Finance Act, 2000 received the
    assent of the President shall be deemed to be
    admissible."
     16. In order to understand and appreciate the true import    D
of the aforesaid provision it is also necessary to .read clause
108 of the Finance Act, 2000, the same reads as follows:
    "Clause 108 - seeks to deny credit of the duty paid on
    high speed diesel oil when used in the manufacture of ·
    excisable goods with retrospective effect from the 16th day E
    of March, 1995. It was never the legislative intention to
    permit credit of duty paid on high speed diesel oil. The
    clause also seeks to validate the action taken in the past
    on this basis. This amendment has become necessary to
    overcome c~rtain judicial pronouncements."                  F
In this connection, memorandum to legislative changes, which
is a part of the document is also required to be noted, which
reads as under:                                         ·
    "Modvat Credit on high speed diesel oil was not intended      G
    to be allowed at any stage. Suitable retrospective
    provision made to give effect to confirm this."
    17. We are also concerned for the purpose of deciding the
                                                                  H
    1044    SUPREME COURT REPORTS                  [2011) 3 S.C.R.


A issues with the contents and scope of with Notification No. 5/
  94-CE(NT) dated 01.03.1994, Notification No. 8/95-CE(NT)
  dated 16.03.1995 and Notification No. 11 /95-CE(NT) dated
  16.03.1995.

B       18. Notification No. 5/94-CE(NT) dated 01.03.1994 was
  issued by the Central Government specifying therein the final
  products described in column (3) of the Table in respect of which
  credit of duty under MODVAT was made available. However,
  in the said table it was provided that high speed diesel oil which
C fell under tariff entry 2710.31 of the Central Excise Tariff Act,
  1985, would not be considered as eligible input and it was
  specifically excluded from the list of eligible inputs. In the same
  notification, it was mentioned that the final product, Man Made
  PV Blended Yarn falling under Chapter 55 of the Central Excise
  Tariff Act, 1985 was also specifically excluded.
D
        19. The aforesaid notification was issued in exercise of
  the powers conferred by Rule 57A of the Central Excise Rules,
  1944. By issuing the said notification the Central Government
  idel')tified the inputs in respect of which duty paid was allowed
E as credit if they were used in relation to the manufacture of the
  final products which were also specified in the notification as
  indicated hereinbefore. The high speed diesel oil and the final
  product of the Man Made PV Blended Yarn falling under
  Chapter 55 of the Central Excise Tariff Act, 1985 were
F specifically excluded from the list of eligible inputs.

        20. The aforesaid notification came to be amended
  specifically by issuing Notification No. 8/95-CE(NT) dated
  16.03.1995, where also high speed diesel oil classifiable under
  heading 27.10 was specifically excluded from the list of eligible
G inputs. 1Noven fabrics classifiable under Chapter 52 or Chapter
  54 or Chapter 55 were also specifically excluded from the list
  of final products. Thus, the input and the final product of the
  appellants were specifically excluded in the Notification No. 8/
  95-CE(NT) dated 16.03.1995.
H
   SANGAM SPINNERS LTD. v. UNION OF INDIA & 1045
      ORS. [DR. MUKUNDAKAM SHARMA, J.]

    21. Reliance was also placed on the 2nd .proviso in Rule . A
57D by Notification No. 11 /95-CE (NT) dated 16th March, 1995.
The aforesaid amendment wa~ to the following effect: . · ·. .

     "4. In the said Rules, in Rule 57D, for the proviso, the
     followi~g provisos shall be substituted, namely:-        .8

     Provided that such intermediate products are -
      (a)

      (b)   Specified as inputs or as final products under a          c
            notification issued under rule 57A:

              Provided that the credit of specified duty shall be
              allowed in respect of inputs which are used for
         . _.generation of electricity, used within the factory of
          · · production for manufacture of final products or for D
            . any other purpose."
     22. It is to be remembered at this stage that although the
aforesaid 2nd proviso in Rule 570 was brought in, but inputs
like high speed diesel oil used for the purpose of generation         E
of electricity was specifically excluded by another Notification
issued on the same date i.e. on 16.03.1995 to which we have
already made a reference.
      23. The contention of the appellants in this regard was that
by the insertion of the 2nd proviso in Rule 570 by Notification       F
No. 11/95-CE (NT) dated 16th March, .1995 they became
entitled for the credit of duty paid on high speed diesel oil which
was used for generation of electricity.
      24. But in our observation, high speed diesel oil for the G
purpose of generation of electricity was specifically excluded
from the list of eligible inputs in the Notification No. 5/94-CE(NT)
dated 1st March, 1994 issued under Rule 57A also under
Notification No. 8/95-CE(NT) dated 16.3.1995 from the list of
eligible inputs. Therefore on a conjoint reading of the aforesaid H
    1046          SUPREME COURT REPORTS             [2011] 3 $.C.R.

A Notifications dated 1st March, 1994 and 16.3.1995 as also the
  amendment to Rule 570, it is sufficiently indicated that the
  appellants are not entitled to credit of duty paid in respect of
  high speed diesel oil which was used for the purpose of
  generation of electricity.
8
       25. Our attention was also drawn to the Notification dated
  1.3.1997 whereby the Central Government amended Central
  Excise Rules and the provisos of Rule 570 were deleted, but
  the appellants, however, claim that they became entitled to such
C benefit as per Rule 578. Relevant part of which reads as
  follows:

        "578. Eligibility of credit of duty on certain goods:-
        (1) Notwithstanding anything contained in Rule 57A, the
0       manufacturer of final products shall be allowed to take
        credit of the specified duty paid on the following goods,
        used in or in relation to the manufacture of the final
        products, whether directly or indirectly and whether
        contained in the final products or not, namely,:-
E          (i)      goods which are manufactured and used within the
                    factory of production;
           (ii)     paints;

           (iii)    goods used as fuel;
F
           (iv) . goods used for generation of electricity or steam,
                  used for manufacture of final products or for any
                  other purpose, within the factory of production.

G
          26. On 10.03.1997, a Notification No. 84211/97 was issued
    in the nature of corrigendum whereby in Rule 578 in sub-rule
    (1) for "goods" wherever it occurs it was provided that it should
H
   SANGAM SPINNERS LTD. v. UNION OF INDIA & 1047
      ORS. [DR. MUKUNDAKAM SHARMA, J.]
be read as "Inputs". The relevant part of the same read as            A
under:

     "Explanation: For the purposes of this sub-rule, it is hereby
     clarified that the term "inputs" refers only to such inputs as
     may be specified in a notification issued under rule 57A.•
                                                                      B
    27. We may also refer to another Notification No. 5/98-
CE{NT) dated 2.3.1998 wherein an explanation was added in
Rule 579 in sub-rule (1). which reads as follows:

    "(I) in rule 578, in sub-rule (1 ), for "goods" wherever it       c
    occurs read "inputs"."

     28. A careful reading of the above said provision would
make it explicitly clear that by adding the aforesaid explanation
by Notification No'. 5/98-CE(NT) dated 2.3.1998 the inputs
mentioned in.Rule 578 refers only to such inputs as specified D
in the notification issued under Rule-57 A. Accordingly, the
appellants are not entitled to get the benefit of, credit of duty .
paid on High Speed Diesel oil as high speed diesel oil is
excluded from the list of eligible inputs as per notification issued
under Rule 57A of the Central Excise Rules; 1944.                    E
    29. It is the contention of the respondents that despite the
aforesaid clear position the Central Excise Gold (Control)
Appellate Tribunal (in short "the Tribunal") delivered three
judgments, namely,                                                    F
     (a) India Cements Ltd. vs: Commissioner of Customs ~
     C.Ex., Hyderabad reported in 1997 (95) .E.L.T. 520.

     (b) Jindal Polymers vs. Commissioner of C. Ex., Indore
     reported in 1999 (114) E.L.T. 322; and                           G
    (c) Commissioner of Central Excise, Shillong vs. Vinay
    Cement Ltd. reported in 1999 (114) E.L.T. 753.

    wherein it was held that high speed diesel oil would be
                                                                      H
    1048     SUPREME COURT REPORTS                   [2011] 3 S.C.R.

A       considered as eligible input to get the benefit.
        30. The intention regarding availment of the credit under
  MODVAT would be guided and governed by the aforesaid
  notifications which specifically excluded the benefit of availment
  of such credit as high speed diesel oil is specifically excluded
8
  from the list of eligible inputs as per notification under Rule 57A
  of the Central Excise Rules, 1944. Since it was specifically
  excluded from the list of eligible inputs such credit though may
  otherwise be available would not have created a vested right.
C      31. In the light of the aforesaid factual as also legal position,
  this Court in the case of Commissioner of Central Excise,
  Hyderabad Vs. Associated Cement Companies Ltd. reported
  in 2005 180 ELT 3 (S.C.) and Commissioner of Central
  Excise, Meerut Vs. Rama Vision reported in 2005 181 ELT
D 201 clearly laid down the proposition that no credit is
  admissible on any duty paid on high speed diesel oil for the
  period commencing from 16.3.1995 and ending with the day
  of Finance Act, 2000 which ll!ceived the assent of the President
  on 1st April, 2000.
                                   •
E
         32. Despite the aforesaid factual position, since the
    Tribunal held otherwise, therefore, there was a necessity for the
    Finance Act to be brought in whereby a clarificatory explanation
    to the legal position was laid down.
F         33. Despite the aforesaid two decisions of this court laying
    down the proposition, it must be clarified that in those decisions
    validity of Section 112 of the Finance Act was not challenged
    and therefore this Court did not have the opportunity to examine
    all the aspects of Section 112.
G
       34. In the case of Tata Motors Ltd. Vs. State of
  Maharashtra reported in (2004) 5 SCC 783, this Court
  observed that retrospective withdrawal of the benefit of set-off
  only for a particular period should be justified on some tangible
H and rational ground when challenged on the ground of
   SANGAM SPINNERS LTD. v. UNION OF INDIA & 1049
      ORS. [DR. MUKUNDAKAM SHARMA, J.]
 unconstitutionality. However, in the present case the ratio of the   A·
 Tata Motors. case [supra] would not be applicable .as the
 appellants in this case never had a right with regard to availment
 of MODVAT credit. Hence, the contentions of the appellants that
 their vested and accrued right cannot be taken away with
 retrospective effect cannot be held as just and proper.              B

        35. We have already discussed the applicability of the
  provisions of the Central Excise Act and the Rules made there
  under, which are also read in context of the various notifications
  issued by the Government of India. When read collectively in C
  the aforesaid context the only conclusion that can be drawn is
  that the appellants are not entitled ta the credit of duty as high
  speed diesel oil is specifically excluded from the list of eligible
  inputs as per the notification issued under Rule 57A of the
  Central Excise Rules 1944. Therefore, the contention of the
  counsel appearing for the appellants that explanation to Section D ·
  57-B not being clarificatory, and to whittle down the width of non-
  obstante clause of Section 57-8, cannot be accepted. The
  contention that the provisions of Rule 578 prevails over Rule
  57A and consequently the inputs enumerated under Rule 578
  would be inputs for the availment of MODVAT credit in spite E
  of any provision to the contrary which may be contained in Rule
  57A, is misreac1ng of the provisions, for in our considered
  opinion, the aforesaid explanation added to the Notification No.
  5/98 dated 2.3.1998, clearly intends that the inputs merltioned
 .in Rule 578 refers only to such inputs as specified in a F
· notification issued under Rule 57A.
      36. So far the contention with regard to concept of
 MODVAT is concerned, the intention regarding availment of the
 credit under MODVAT would be guided and governed by the G
 aforesaid notifications which specifically excluded the benefit
 of availment of such credit, as high speed diesel is specifically
 excluded from the list of eligible inputs as per the notification
 under Rule 57A of the Central Excise Rules. Since, it was
 specifically excluded, such credit though may be otherwise H .
    1050    SUPREME COURT REPORTS                   [2011) 3 S.C.R.

A available, could not have created any vested right. In our
  considered opinion the intention of the legislature is clear from
  the beginning to exclude the benefit of such credit by excluding
  high speed diesel oil from the list of eligible inputs by making
  substantial exclusion thereof in the notifications referred to
B hereinbefore. The aforesaid position is also verified by the
  decision of this Court in the case of Commissioner of Central
  Excise, Hyderabad Vs. Associated Cement Companies Ltd.
  reported in 2005 180 ELT 3 (S.C.) and Commissioner of
  Central Excise, Meerut Vs. Rama Vision reported in 2005 181
c ELT 201 (supra).
       37. The aforesaid decisions of this Court have clearly laid
  down the proposition that no credit is admissible on any duty
  paid on high speed diesel oil for the period commencing from
  16.3.1995 and ending with the day of Finance Act, 2000 which
D received the assent of the President on 1st April, 2000.
        38. Despite the aforesaid fact, since the Tribunal held
  otherwise, therefore, there was a necessity for the Finance Act
  to be brought in giving a clarificatory explanation to the legal
E position which had been prevailing all along and established
  by the long list of the notifications which were issued from time
  to time and referred to hereinbefore.
       39. We may also appropriately refer to at this stage to the
  decision of this Court in Shri Prithvi Cotton Mills Ltd. and
F Another Vs. Broach Borough Municipality and Ors. reported
  in (1969) 2 SCC 283 wherein the Supreme Court in paragraph
  4 has stated thus:-
                "4. Before we examine Section 3 to find out whether
G       it is effective in its purpose or not we may say a few words
        about validating statutes in general. When a Legislature
        sets out to validate a tax declared by a court to be illegally
        collected under an ineffective or an invalid law, the cause
        for ineffectiveness or invalidity must be removed before
H       validation can be said to take place effectively. The most
SANGAM SPINNERS LTD. v. UNION OF INDIA & · 1051
   ORS. [DR. MUKUNDAKAM SHARMA, J.]
  important condition, of course, is that the Legislature must A
  possess the power to impose the tax, for, if it does not,
  the action must ever remain ineffective and illegal. Granted
  legislative competence, it is not sufficient to declare merely
  that the decision of the Court shall not bind for that is
· tantamount to reversing the decision in exercise of judicial B
  power which the Legislature does not possess or
  exercise. A court's decision must always bind unless the
  conditions on which it is based are so fundamentally
  altered that the decision could not have been given in the
  altered circumstances. Ordinarily, a court holds a tax to be c
  invalidly imposed because the power to tax is wanting or
  the statute or the rules or both are invalid or do not
  sufficiently create the jurisdiction. Validation of a tax so
. declared illegal may be done only if the grounds of illegality
  or invalidity are capable of being removed and are in fact 0
  removed and the tax thus made legal. Sometimes this is
  done by providing for jurisdiction where jurisdiction had not
  been properly invested before. Sometimes this is done by
  re-enacting retrospectively a valid and legal taxing
  provision and then by fiction making the tax already
  collected to· stand under the ie-enacted law. Sometimes E
  the Legislature gives its own meaning and interpretation
  of the law under which tax was collected and by legislative
  fiat makes the new meaning binding upon courts. The
  Legislature may follow any one method or all of them and
  while it does so it may neutralise the effect of the earlier F
  decision of the court which becomes ineffective after the
  change of the law. Whichever method is adopted it must
  be within the competence of the legislature and legal and
  adequate to attain the object of validation. If the Legislature
  has the power over the subject-matter and competence to G
  make a valid law, it can at any time make such a valid law
  and make it retrospectively so as to bind even past
  transactions. The validity of a Validating Law, therefore,
  depends upon whether the Legislature possesses the
  competence which it claims over the subject-matter and H ·
    1052    SUPREME COURT REPORTS                   [2011] 3 S.C.R.

A       whether in making the validation it removes the defect
        which the courts had found in the existing law and makes
        adequate provisions in the Validating Law for a valid
        imposition of the tax."
         40. There are similar decisions to that effect of this Court
8
    in D.G. Gose & Co. (Agents) Pvt. Ltd. Vs. State of Kera/a &
    Anr. reported·ig. (1980) 2 SCC 410. In paragraph 14 of the said
    judgment, this Court stated thus:-
        "14. Craies on Statute Law, seventh Edn., has stated the
c       meaning of "retrospective" at p. 367 as follows:
        "A statute is to be deemed to be retrospective, which takes
        away or impairs any vested right acquired under existing
        laws, or creates a new obligation, or imposes a new duty,
D       or attaches a new disability in respect of transactions or
        considerations already past. But a statute 'is not properly
        called a retrospective statute because a part of the
        requisites for its action is drawn from a time antecedent
        to its passing'."
E       It has however, not been shown how it could be said that
        the Act has taken away or impaired any vested right of the
        assessees before us which they had acquired under any
        existing law, or what that vested right was. It may be that
        there was no liability to building tax until the promulgation
F       of the Act (earlier the Ordinances) but mere absence of
        an earlier taxing statute cannot be said to create a "vested
        right", under any existing law, that it shall not be levied in
        future with effect from a date anterior to the passing of the
        Act. Nor can it be said that by imposing the building tax
G       from an earlier date any new obligation or disability has
        been attached in respect of any earlier transaction or
        consideration. The Act is not therefore retrospective in the
        strictly technical sense."
        41. In the light of the aforesaid decisions and legal position
H
   SANGAM SPINNERS LTD. v. UNION OF INDIA & 1053
      ORS. [DR. MUKUNDAKAM SHARMA, J.]
which emanates from reading of the provisions of the Act and A
the Rules framed there under and notifications which are issued
from time to time, the contentions of the counsel appearing for
the appellants are found to be without any merit. Since the
product High Speed Diesel oil was excluded specifically from
the Ii.st of eligible inputs in the notifications, there was no B
question of creation of any right in favour of the appellant to avail
such benefit. Therefore, contention that a vested or accrued
right is sought to be taken away by giving retrospective effect
is without any merit. Consequently, in the facts of this case we
are not required to answer whether a vested or accrued right c
could be taken away with retrospective effect. Further on a
conjoint reading of all the notifications it is clearly established
that the intention of the Government all along was to exclude
the appellants from getting the benefit of the MODVAT credit,
therefore, the contentions that the Finance Act violates the 0
vested right is without any basis. The various decisions referred
to and relied upon by the counsel appearing for the appellants
 in support of his contention that the vested right created in their
favour could not have been divested by the respondent
 retrospectively is found to be based on misreading of the
 language of the aforesaid notifications which do not support, E
but in fact destroy the very basis of the case of the appellants.

     42. In that view of the matter, we find no merit in these
appeals which are dismissed but leaving the parties to bear
their own costs.                                                   F
N.J.                                       Appeals dismissed.