2013 (4) TMI 83 - HC - Central Excise

Court rules in favor of petitioners, grants excise duty exemption on aerated waters under binding circulars.

M/s. Hindustan Coca-Cola Beverages Pvt. Ltd and another Versus Union of India and others

M/s. Hindustan Coca-Cola Beverages Pvt. Ltd and another Versus Union of India and others - 2013 (296) E.L.T. 150 (All.) Issues Involved:1. Binding effect of circulars dated 8.9.1971 and 17.9.1975.2. Retrospective application of the withdrawal of circulars dated 9.7.2010.3. Requirement of remission procedure under Rule 21 of the Central Excise Rules, 2002 for claiming benefit of the circulars.Issue-wise Detailed Analysis:1. Binding Effect of Circulars Dated 8.9.1971 and 17.9.1975:The petitioners argued that the circulars dated 8.9.1971 and 17.9.1975, issued by the Central Board of Excise and Customs (CBEC), were binding on the authorities and entitled them to an exemption of excise duty on 0.5% of the aerated waters produced due to breakage of bottles during handling and movement. The court noted that these circulars were issued under the authority of Section 37B of the Central Excise Act, 1944, and provided a tolerance limit for breakages. The circulars were meant to address practical issues of breakage during handling and were binding on the department. The Supreme Court's decisions in UCO Bank Calcutta Vs. Commissioner of Income Tax W.B. and Paper Products Limited Vs. Commissioner of Central Excise supported the view that circulars issued by the Board are binding on the department.2. Retrospective Application of the Withdrawal of Circulars Dated 9.7.2010:The petitioners contended that the withdrawal of the circulars by the circular dated 9.7.2010 should only have a prospective effect and not apply to excise goods produced prior to its issuance. The court agreed, stating that the circular dated 9.7.2010 aimed to avoid future disputes and did not explicitly state that it would apply retrospectively. The court cited the Supreme Court decisions in CCE Vs. Mysore Electrical Industries Limited and Suchitra Components Limited Vs. Commissioner of Central Excise Guntur, which held that beneficial circulars apply retrospectively, while oppressive ones are prospective. Thus, the withdrawal of the circulars was deemed prospective and not applicable to the period from June 2002 to September 2007.3. Requirement of Remission Procedure Under Rule 21 of the Central Excise Rules, 2002:The respondents argued that the petitioners were not entitled to the benefit of the circulars without following the remission procedure under Rule 21 of the Central Excise Rules, 2002. The court noted that Rule 21 provides for remission of excise duty for goods lost or destroyed by natural causes or unavoidable accidents. However, the court found that the circulars specifically addressed the issue of breakages of aerated waters due to handling and did not require the remission procedure under Rule 21. The circulars allowed for a 0.5% exemption on breakages certified by the Range Staff, making the remission procedure unnecessary in this specific context. The court emphasized that the circulars were not in conflict with Rule 21 but rather supplemented it, ensuring fair enforcement and avoiding undue hardship to the assessee.Conclusion:The court quashed the impugned orders dated 22.10.2009, 31.3.2010, and 16.4.2012, and directed that the petitioners were entitled to the exemption of 0.5% of the excise goods produced/manufactured by them as per the circulars dated 8.9.1971 and 17.9.1975. The writ petitions were allowed.