TaxTMI 
TaxTMI 
TaxTMI 
2009 (10) TMI 925
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....Central Excise Tariff Act, 1985 (the Tariff Act). (2) By this petition, the petitioner originally challenged Notification No.16/2008-CE dated 27.03.2008 (Annexure-E). Subsequently vide amendment permitted on 10.07.2008 the petitioner has also challenged Notification No.33/2008 dated 10.06.2008. In other words, the petitioner has sought relief by way of a declaration that the petitioner is entitled to the exemption from duty of excise on the goods cleared by the petitioner as provided in Notification No.39/2001-CE dated 31.07.2001 (the Original Notification) and amendments thereto for a period of five years from the date of commencement of commercial production. (3) The backdrop in which the Original Notification dated 31.07.2001 was issued is the requirement to provide tax holiday in the wake of massive earthquake in the Kutch region of Gujarat, on the basis of the representations received by the Union of India from the State Government as well as representatives of the people, trade and industry. Government of India, considering the fact that a larger number of industries located in the earthquake affected areas were either totally destroyed or partially damaged and people had t....
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....pugned Notification dated 27.03.2008 No.16 of 2008 and impugned new Notification dated 10.06.2008 No.33 of 2008 stating that the exemption benefit granted to the petitioner under the Original Notification was withdrawn within the period of five years by reducing the quantum in light of the change made in the basis for calculating the amount of exemption that may be available to the petitioner. Inviting attention to the Original Notification No.39 of 2001 it was submitted that the said Notification laid down that a unit located in Kutch district of Gujarat would be entitled to refund of the amount of duty of excise or additional duty of excise, as the case may be, leviable on the goods specified in the First Schedule to the Tariff Act, other than the goods specified in the Annexure appended to the said Notification, such duty being equivalent to the amount of duty paid by the manufacturer of goods, other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2001. As against that the impugned Notifications changed the basis by substituting the same by the words "to the duty payable on value addition undertaken in the manufacture of the said goods....
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....aria Ltd. Vs. Union of India and Ors., 2000 (4) SCC 57 : 2000(119) ELT 516; (viii) Pawan Alloys & Castings Pvt. Ltd. Vs. U.P. State Electricity Board & Ors., 1997 (7) SCC 251; (ix) Pournami Oil Mills & Ors. Vs. State of Kerala & Anr., 1986 (Supp.) SCC 728; (x) Unicorn Industries Vs. Union of India, 2007 (218) ELT 175; (xi) WA Nos.219 to 222 in WP(C)Nos.1470, 1525, 1881 and 2854 of 2001 dated 03.12.2002 - Dharampal Satyapal Ltd. Vs. Union of India (UOI) and Ors.[High Court of Gauhati); AND (xii) CWP No.589 of 2008 dated 18.12.2008- M/s. Gillete India Ltd. & Anr. Vs. Union of India & Ors. [Himachal Pradesh High Court, Shimla]. (9) On behalf of respondents it was submitted that in the field of taxation a wide discretion vests in the legislature to classify items for tax purpose, and same principle be applied for granting exemption and/or withdrawal, and/or modification of the exemption. Under Section 5A of the Central Excise Act, 1944 (the Act) Central Government is vested with statutory powers to issue necessary Notification to grant exemption from duty of Central Excise on being satisfied that it is necessary in public interest so to do. As such Notification is placed bef....
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....ndia basis in relation to manufacture of similar goods. The Government therefore realized that purpose of exemption was being defeated, exemption being available only in respect of genuine manufacturing activities carried out in specified areas. That the policy manifesting the intention of the Government was to grant excise duty exemption only to actual value addition made in the specified areas. Hence the exercise of powers under Section 5A of the Act. (9.2) It was submitted that as a result of the modification the manufacturers are required to pay duty on the full value of goods manufactured and cleared in the same manner as per existing scheme, but refund would be granted only to the extent of duty paid on the actual value addition according to the percentages fixed in the Notification, or as may be fixed as a special case as provided in the Notification. In the written submissions filed by the Counsel the effect of modification is stated in the following words: "The effect of modification is as follows : (i) It is submitted that genuine manufacturers would not at all be affected inasmuch as they would be getting the refund of same amount under the present modification as als....
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.... Ltd. Vs. Assistant Commissioner (Assessment) Sales Tax, 2006(206) E.L.T. @ 6 (S.C.); (xx) Adani Exports Pvt. Ltd. Vs. Union of India., 2004 (4) G.L.R. 2891 - (Paragraphs 3.5, 5.2, 5.4, 5.6, 8.4, 8.5,9, 26 and 32.4); (xxi) Assistant Collector, Central Excise Vs. Dunlop India, AIR 1985 SC 330 @ 333 & 334. (10) Original Notification No.39/2001-CE dated 31.07.2001 was titled " Kutch (Gujarat)- Exemption to excisable goods (except those specified in Annexure) and cleared from Units in Kutch District of Gujarat". The said Notification as originally issued in principle grants exemption by way of refund in relation to the duty of excise paid on the goods specified in the First Schedule to the Tariff Act, except the goods specified in the Annexure to the Notification. The goods have to be manufactured and cleared from a unit located in Kutch district. Payment of excise duty by utilization of CENVAT credit would not be entitled to exemption. A unit having an original value of investment exceeding ₹ 20 crores in plant and machinery installed in the factory is entitled to the refund without any limit. In relation to a unit having original value of investment below ₹ 20 crores....
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....ction work on the factory premises and any installation of plant and machinery on such premises commences only on or after the date of publication of the Notification in the Official Gazette. (10.2) Vide Notification No.42/2001-CE dated 21.09.2001 Explanation-II has been added while numbering the original Explanation as Explanation-I. The second Explanation defines the phrase "original value of investment in plant and machinery installed in the factory" to mean original value as determined in accordance with the Accounting standards issued by the Institute of Chartered Accountants of India on Accounting for Fixed Assets. (10.3) Vide Notification No.45/2002 dated 2nd September, 2002 in Paragraph No.3, in condition No.(i), the date has been changed from 31st July, 2003 to 31st July,2004. Hence new industrial units set up by this date would also become entitled to exemption under the original Notification. (10.1) Notification No.60/2002 dated 19.12.2002 has been issued considering administrative exigency by specifying that in the Committee instead of Chief Commissioner of Central Excise, Vadodara, now Chief Commissioner of Central Excise, Ahmedabad will be a Member. (10.1) Notific....
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....fter paragraph Nos. 1A, 2 and 2A have been substituted with paragraph Nos. 2, 2A, 2B, 2C, 2.1 etc., and the said Notification has been made effective from 1st April, 2008. (10.4) Vide Notification No. 33/2008 -Central Excise dated 10th June, 2008 once again major amendment has been carried out in Paragraph No.2 as well as paragraph No.2.1 etc. (10.1) Vide Notification No.51-Central Excise dated 3rd October, 2008 the table in paragraph No.2 has been modified in relation to certain entries. (11) The question that is therefore required to be considered is whether the Notifications dated 27.03.2008 and 10.06.2008 really achieve the purpose and object with which Notification No.39/2001-CE dated 31.07.2001 was issued. In the Explanatory memorandum to Notification No.39/2001-CE it is stated thus: "Notification No.39/2001-Central Excise dated 31st July, 2001, seeks to provide exemption from excise duty on goods manufactured by factories located in the district of Kutch in the State of Gujarat. The exemption is applicable to all commodities with the exception of tobacco and tobacco products, goods attracting special excise duty and a few other specified goods. The exemption is available....
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....um to Notification No. 31/2008 to 38/2008 the same basis of value addition has been referred to in relation to the exemption scheme for North East States, Sikkim, Jammu and Kashmir and Kutch district in Gujarat. (14) Thus when one reads the Explanatory Memorandum to the Original Notification it becomes clear that the exemption is available to new units that are set up in the distric t of Kutch within the stipulated time limit. The exemption would be available for a period of five years from the date of commencement of commercial production. The said Explanatory Memorandum does not talk of any exemption in relation to value addition. A plain reading of the Notification No.39/2001 also indicates that the basis of eligibility is the amount of new investment in plant and machinery installed in the factory on or after the date of publication of the Notification in the Official Gazette with further condition that the new unit shall be set up and shall commence commercial production by the stipulated date. The focus and emphasis is on setting up new industry in an area ravaged by devastating earthquake which occurred on 26.01.2001. There is no question of any value addition in relation ....
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....enerally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the notification, excisable goods of any specified description from the whole or any part of the duty of excise leviable thereon: Provided that, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured -- (i) in a [free trade zone [or a special economic zone]] and brought to any other place in India; or (ii) by a hundred per cent. exportoriented undertaking and [brought to any other place in India] Explanation: -- In this proviso, ["free trade zone" [,"special economic zone"]] and "hundred per cent. export oriented undertaking" shall have the same meanings as in Explanation 2 to subsection (1) of section 3. [(1A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods.] [(2) If the Central Government is satisfied that it is necessary in ....
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....azette; (b) also be published and offered for sale on the date of its issue by the Directorate of Publicity and Public Relations, Customs and Central Excise, New Delhi, under the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (54 of 1963). (6) Notwithstanding anything contained in sub-section (5), where a notification comes into force on a date later than the date of its issue, the same shall be published and offered for sale by the said Directorate of Publicity and Public Relations on a date on or before the date on which the said notification comes into force.]" (17) Under sub-section (1) of Section 5A of the Act powers are vested in the Central Government to issue notification to exempt generally, either with or without conditions, excisable goods as may be specified, from the whole or any part of the duty of excise, provided Central Government is satisfied that it is necessary in the public interest to grant such exemption. The Proviso thereunder lays down an embargo in relation to goods produced or manufactured in free trade zone, etc. unless specifically exempted by notification. (18) Sub-section (1A) of Section 5A of the Act....
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....the object, when Original Notification No.39 of 2001 was issued by issuing subsequent notifications impugned herein. Thus, the authority has exceeded its powers and such an exercise cannot be upheld. At the cost repetition, it is required to be stated that the discussion in relation to the Explanatory Memorandum at both the stages, in 2001 and in 2008, makes this more than abundantly clear. (22) The contention that the power to modify/vary/ revoke a notification already issued is inherent in the power under Section 5A of the Act to issue a notification may in general be correct, but when such an exercise is challenged, like in the present case, it becomes necessary to examine as to whether such an exercise is within the scope and extent of power available under Section 5A of the Act. The authority has to be alive to the fact that the power under Section 5A of the Act is essentially a power to grant exemption in relation to duty of excise which is otherwise leviable under other provisions of the Act. Therefore, in exercise of such power under Section 5A of the Act the authority cannot be permitted to take recourse to the principles applicable for determining whether duty is correct....
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....s amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not-- (a) revive anything not 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, accorded 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 on in violation of any rule, notification or order so amended, repealed, superseded or rescinded; or (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 ....
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....c. An assessee, who is required to act in a particular manner as specified by the Rule, Notification, etc. as existing before the amendment, is obliged in law to act accordingly, and correspondingly the authority is equally obliged in law to act as if the amendment had not taken place, such act on part of the authority being not only in relation to collection of revenue and other attendant provisions like penalty, etc., but also in relation to the entitlements of an assessee. This provision, namely, Section 38A of the Act incorporates in the statute the principle of a completed contract between the parties, whereunder the parties are obliged to fulfill their respective part of the concluded contract, and in case of failure, the Court may step in and direct the defaulting party to specifically perform his part of the promise. To put it differently, one may say that the principle of promissory estoppel, as normally understood, has been incorporated in the statute. (26) Hence, neither by virtue of powers under Section 5A of the Act, nor by virtue of operation of Section 38A of the Act can the respondent authority be permitted to resile from the promise statutorily made by way of noti....
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....buses the concession it is always open to the other party to revoke such concession. But for this there has to be cogent material in the form of direct evidence pointing out misuse of the concession. When public interest is pleaded the same cannot be general and vague for the purpose of either modifying or revoking an exemption already granted. Supervening public interest is always a good ground for modifying or withdrawing an exemption. But once again such supervening public interest has to be established by direct cogent evidence in this regard, and not on basis of general and vague apprehensions. (28) In a case where the State invited new industries by offering concessional power tariff and thereafter withdrew the same on the ground that there was power theft on a large scale the Apex Court in case of U.P. Power Corporation Limited (supra), after detailed analysis of the law on the subject, struck down the action of the State by invoking principle of promissory estoppel and in the process stated: " 20.In this 21st century, when there is global economy, the question of faith is very important. Government offers certain benefits to attract the entrepreneurs and the entrepreneur....
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.... the scheme of exemption. The Jurisdictional Commissioner who is entrusted with the duty to undertake verification cannot be permitted to grant refund and not take any steps to recover duty, if erroneously refunded. The bogey of misuse and the scheme of exemption therefore cannot be permitted to be raised and under the guise of so called misuse. Central Government cannot be permitted to modify the exemption scheme before the stipulated period is over merely because the same may possibly have exceeded the estimated forego of revenue. (30) Original Notification in Paragraph No.3 also provides various checks and counter checks to ensure that only a genuine case where a new industrial unit is set up within the stipulated period and which actually commences commercial production after making investment as per the stipulated limit becomes entitled to benefit under the scheme. Not only the limits of investment but also the period during which the unit has to be set up and commence commercial production are specified, but the manufacturer is required to furnish a declaration regarding the original value of investment in plant and machinery installed in the factory as on the date of the co....
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....exhausting the whole of CENVAT credit available to the manufacturer on the last day of the month under consideration and paying only balance amount of duty in cash. This would ensure that the actual cash outgo would be limited. (32) Thus when one considers the entire scheme as a whole it is more than abundantly clear that there is hardly any scope for misuse of the scheme. Furthermore, the period of the scheme is a self limiting one and only those manufacturers who have complied with the requirements of the Original Notification are entitled to the benefit. The said manufacturers therefore cannot be called upon to make payment of duty and seek a smaller amount of refund under the scheme considering the purpose of granting exemption. One of the purposes that is apparently discernible is to ensure that during gestation period a new industrial unit is able to recoup the capital outlay involved in setting up a new industrial unit so as to ensure that the new unit does not face cash crunch during the initial period and circulating capital is available to such new unit. (33) Applying the aforesaid principles to the facts of the case it becomes clear that the petitioner has acted on th....
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....direction of the amount of revenue generated or the amount of excise duty refunded. Respondent authorities have thus failed to co-relate the modification of the basis for granting exemption midstream with the purpose and object with which Original Notification had been issued by considering extraneous factors not germane to the object, intent and purpose behind the issuance of Original Notification. (34) Various figures given in the form of charts and comparing the same with figures stated to have been obtained from similar industries situated elsewhere in India would have no bearing on the issue at hand because operation of Section 5A of the Act itself envisages foregoing of revenue when exemption is granted by issuing a notification. The entire approach is misconceived in law and is contrary to the legislative scheme which emanates from a plain reading of Section 5A of the Act. Therefore, the hypothetical illustrations given in the affidavit-in-reply and the written submissions of the respondent authority need not be considered in light of what is stated hereinbefore, as the entire exercise is misdirected considering the object, intent and purpose of the Original Notification. S....
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....nciples applicable for determining whether duty is correctly levied or not. (ix) Once an exemption notification has been issued on the footing that it is in public interest, the authority cannot thereafter refer to loss of revenue as larger public interest for withdrawing such an exemption. (x) The onus shall be on the respondent authority to establish superior public interest for curtailing or withdrawing an exemption already granted, and the same cannot be discharged by merely referring to a perceived loss of revenue on comparison with similar units in other areas which are not entitled to exemption. (xi) The entire exercise of issuing impugned notifications dated 27.03.2008 and 10.06.2008 is without any basis, as the basis adopted has no nexus with the object, intent and purpose which formed the basis for issuing Original Notification in 2001. (xii) The provision of Section 38A of the Act is not only a saving provision, but is a provision which correspondingly obligates both the person who was a beneficiary under the existing Rule, etc. and the authority under the existing Rule, etc. to continue to comply with the requirements of such Rule, etc. as it existed, even after....