TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 1067
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....issued dated 28-7-2014, 15-9-2014 & 12-10-2015 under the seal and signature of Assistant Commissioner of Central Excise and Service Tax, Agartala for recovery of the said investment amount which was disallowed with interest in the instant proceedings. 3. With consent of the parties facts have been noticed from WP (C) No. 354/2014 in brief, which may be relevant for the purpose are that the petitioner Dharampal Satyapal Ltd. is a company incorporated under the Companies Act, 1956 having its Registered office at 1711, S.P. Mukherjee Marg, Delhi-110006 and its manufacturing units in the State of Tripura and also in the State of Assam in addition to other places. The petitioner is engaged in the manufacture of Scented Chewing Tobacco/Pan Masala containing tobacco falling under tariff heading 2403 99 30 and 2403 99 10 of the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the Act of 1985) in addition to other products. 4. The Government of India pursuant to North Eastern Industrial Policy dated 24-12-1997 issued Notification No. 32/1999-C.E. and Notification No. 33/1999-C.E., dated 8-7-1999 under Section 5A of the Central Excise Act, 1944 gr....
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....ng unit which is located in the seven North Eastern States including Tripura and the said investment had to be made before the expiry of six months from the end of each quarter. Further, the manufacturer was under an obligation to furnish details of investments made within one month of the expiry of the six months period indicated under the notification dated 25-8-2003 to a committee consisting of Chief Commissioner of Central Excise, Shillong, Principal Secretary of the Department of Industry of the State concerned in which the unit is located and the Principal Secretary of the Department of Industry of the State (hereinafter called Committee) where the investment was made. It was also incumbent upon the manufacturer to prove to the satisfaction of the committee that the investment has been made for plant and machinery in a manufacturing unit located in the North Eastern States including Tripura and only after the committee recorded its satisfaction that the investment has been made in the identified sector in a manufacturing unit, was to issue a certificate to this effect to the manufacturer within a time bound framework of three weeks after the period of one month described abov....
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....had commenced commercial production on or after the 24th day of December, 1997, but not later than the 28th day of February, 2001; (iii) had availed of the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 32/99-Central Excise, dated the 8th July, 1997 [G.S.R. 508(E) dated the 8th July, 1997] or No. 33/99-Central Excise, dated the 8th July, 1997 [G.S.R. 509(E), dated the 8th July, 1997]; and (iv) has continued its manufacturing activities after the 28th day of February, 2001; (B) an amount equal to the difference between the sum of basic excise duty, special excise duty and additional excise duty, payable, but for the exemption in this notification, and the sum of basic excise duty, special excise duty and additional excise duty, paid, shall be utilised by the manufacturer only for investment in plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; (C) the investment in terms of condition (B), shall be made before the expiry of six months from the e....
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.... notification dated 25-8-2003 aforementioned and was eligible to receive benefit of exemption from payment of excise duty or additional duty of excise in terms of the notification in this regard. In furtherance thereof, the Central Government in supersession of the notification dated 25-8-2003 issued another Notification No. 8/2004-C.E., dated 21-1-2004 for complete exemption from payment of excise duty or additional duty of excise leviable under the said Central Excise Tariff Act, the Additional Duties of Excise (Goods of Special Importance) Act and National Calamity Contingent duty leviable thereon under sub-section (1) of Section 136 of the Finance Act, 2001 to be available to the manufacturers who have established their units in the seven North Eastern States including Tripura and apart from the fact that commercial production commenced on or after 24-12-1997, but not later than 28-2-2001 and had availed the benefit under the notifications of Government of India dated 8-7-1999 and continued its manufacturing activities after 28-2-2001 from an amount equal to the sum of basic excise duty, special excise duty, additional excise duty and National Calamity Contingent duty with a co....
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....G.S.R. 509(E), dated the 8th July, 1999]; and (iv) has continued its manufacturing activities after the 28th day of February, 2001; (B) an amount equal to the sum of basic excise duty, special excise duty, additional excise duty and National Calamity Contingent duty, payable, but for the exemption in this notification, shall be utilised by the manufacturer only for investment in, - (i) plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura ; or (ii) infrastructure or civil works or social projects in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; (C) the investment in terms of condition (B) shall be made before the expiry of six months from the end of each quarter; (D) the manufacturer shall provide all details relating to the investment made in terms of condition (B), within one month after the expiry of the period of six months referred to in condition (C), to a Committee consisting of, the Chief Commissioner o....
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....n Condition B and on issuance of a certificate to this effect to the manufacturer within a time framework by the Jurisdictional Central Excise Officer with a proviso that investments made under notification dated 21-1-2004 shall not be allowed to be withdrawn before the expiry of 10 years and if any investment is withdrawn prior thereto or is not reinvested as referred to under the notification, the duty which is equal to the amount so withdrawn and not so reinvested shall be paid by the manufacturer on the date on which the investment is withdrawn. 13. In furtherance of the notification dated 21-1-2004 in ease of doing business and to make the system more effective and transparent, the Central Government made certain amendments vide notification dated 9-7-2004 issued in exercise of powers conferred under sub-section (1) of Section 5A of the Central Excise Act, 1944 read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and sub-section (3) of Section 136 of the Finance Act, 2001 making necessary amendments in Condition Nos. C, D & E of its notification dated 21-1-2004. Primarily, the sectors for investment by the manu....
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....ard the revenue; (iii) the manufacturer shall, pending investment in the manner specified in condition (B), execute a bond, as may be specified by the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, binding himself to pay on demand an amount equal to the amount referred to in clause (i) along with interest thereon at the rate specified under section 11AB of the Central Excise Act, 1944, and not so invested, in terms of condition (B), with the amount lying in balance in said escrow account as security or collateral; (iv) the amount deposited in the said escrow account, in terms of clause (i), shall be invested, in the manner specified in condition (B), within two years from the date of its deposit in such account; (v) the amounts withdrawn from the escrow account shall be invested for the purposes specified in condition (B) within sixty days of its withdrawal from such account; (D) the manufacturer shall, - (i) submit a quarterly statement, within sixty days from the end of the relevant quarter to a Committee, consistin....
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....ute a Bond to the effect that if the amount not so invested as required has to repay along with interest as specified under Section 11AB of the Central Excise Act, 1944 and thereafter submit a quarterly statement within 60 days from the end of relevant quarter to the committee, giving details of deposits and withdrawals made from the escrow account along with the details of investments made during the quarter, not later than one month after the expiry of the period of two months referred to in Condition C to prove to the satisfaction of the committee that the investment has been made for the purpose as specified in Condition B and the committee after recording its satisfaction that the investment has been made as specified in Condition B issue a certificate to this effect to the manufacturer within a period of one month from the receipt of the details as referred to in Condition D and on the issuance of which, the liability of the manufacturer shall stand discharged to the extent of investments so certified and in the event of the manufacturer fails to make the deposit or does not invest the amount specified in Condition B within the stipulated period and in the manner as prescribe....
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...., this Court directed that the committee be constituted in terms of the notification shall meet and decide the matter in respect of the investments made by the petitioner earlier latest by 31-10-2013 to examine whether the investment has been made by the assessee in terms of the earlier notifications. 17. The order passed by this Court in WP (C) No. 111/2013, dated 9-7-2013 came to be challenged by the respondents in SLP (C) No. 31756/2013 before the Apex Court and that came to be decided vide order dated 24-1-2014 with a direction to the committee to conclude its work within three months and if the findings of the committee are against the concerned units which have been given the incentives. The amount of incentives so given shall be recovered within six months thereafter in accordance with law and since the same was the grievance of the petitioner in the State of Assam as well similar order was passed by the High Court of Gauhati in terms of the order of this Court dated 9-7-2013 which was challenged by the respondents before the Apex Court, that SLP (C) No. 191/2014 preferred by the respondents against the order of the High Court of Gauhati in WP (C) No. 1174/2013, dated ....
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.... after prior approval of the Jurisdictional Commissioner of Central Excise being disallowed by the committee has to be deposited with interest which is impugned in the instant proceedings. 20. At this the petitioner filed the instant writ petition and it may be noticed that when the matter initially came at the motion stage, after hearing the parties interim order was passed by this Court dated 27-8-2014 with a direction to stay further proceedings provided the petitioner deposits with the Excise Authority 50% of the amount demanded on or before 1st November, 2014 and furnish security for the remaining 50% to the Assessing Officer by 1st November, 2014. The interim order passed by this Court dated 27-8-2014 came to be challenged by the petitioner in Special Leave to Appeal before the Apex Court and the interim order of this Court dated 27-8-2014 came to be stayed and Special Leave to Appeal was finally disposed of on 25-4-2017 taking note of the fact that the petitioner had units in Guwahati as well as in Agartala and the writ petition filed for the selfsame cause of action in the High Court of Gauhati has been decided holding that the decision has been taken by the committee....
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....ed by the petitioner under judgment dated 7-8-2013. 22. Counsel for the petitioner submits that once the selfsame controversy has been concluded holding that the unilateral decision of the committee in disallowing the investments made in the identified sectors with the prior approval of the Jurisdictional Commissioner of Central Excise and raising Demand Notices in furtherance thereof without affording an opportunity of hearing to the petitioner is in violation of the principles of natural justice has been quashed and set aside, there is no reason for the respondent to further defend its action which indeed is in violation of the principles of natural justice. 23. Counsel for the petitioner further submits that once the interpretation of the three notifications referred to has been made by the High Court of Gauhati in the case of the petitioner itself, it is expected from the respondents to carry out the procedure as being referred to by the High Court of Gauhati for proper and effective implementation of the three notifications of which reference has been made but despite petitioner's persuasion the respondents are not taking precedence of the interpretation made by th....
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....liance of the notifications relied upon by the petitioner needs no further fact finding enquiry and the decision of the committee is in conformity to the notifications referred to supra needs no further judicial review by this Court u/Article 226 of the Constitution of India. 26. Counsel for the respondents further submits that there is no requirement of principles of natural justice as the committee has proceeded in compliance of order of the Apex Court and since reasons have been assigned for disallowing the investments made by the petitioner, even if this Court comes to a conclusion that there is a denial of principles of natural justice but in the instant case service of notice and affording opportunity of hearing remains an empty formality and is not going to serve any purpose as held in the case of the petitioner by the Apex Court in its judgment in Dharampal Satyapal Limited v. Deputy Commissioner of Central Excise, Gauhati & Others, reported in (2015) 8 SCC 519 = 2015 (320) E.L.T. 3 (S.C.) decided on 14-5-2015 that affording opportunity to the petitioner remains a useless formality and not going to serve any purpose and that has not been looked into by the High Court ....
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....f the manufacturer to satisfy the jurisdictional Commissioner that the withdrawal, sought for by the manufacturer, is for such a purpose as is envisaged by the Notification, dated 9-7-2004, imposes a corresponding duty, on the jurisdictional Commissioner, to ensure that he does not permit any withdrawal by a manufacturer from the Escrow Account unless the withdrawal, sought to be made, is for the purpose of making 'investment' on such a project, which is envisaged and permitted by the notification aforementioned, namely, that the 'investment' is in 'plant and machinery', or in 'infrastructure', or 'civil works', or 'social project'. 31. Once the jurisdictional Commissioner has granted the withdrawal, the manufacturer cannot be penalized except when the withdrawal is proved to be fraudulent or is proved to have been allowed by the jurisdictional Commissioner on extraneous considerations or in collusion with the manufacturer for a purpose, which is not envisaged and permitted by the Notifications aforementioned. The reason is very simple. The Notification, dated 9-7-2004, promises exemption from payment of excise duty if a manufacturer, who is, otherwise, eligible to make 'in....
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....ing already made such impermissible 'investment', claim exemptions and drags thereby the Central Government into litigation by trying to justify that his 'investment' falls within the scheme of the Notifications. 33. Thus, in order to make the earlier scheme workable, the scheme, introduced later by the Notification, dated 9-7-2004, has brought into picture the jurisdictional Commissioner, who has been vested with the power to allow, or not to allow, withdrawal from the Escrow Account. This apart, safeguarding the interest of revenue, all such amounts, which would be claimed as exemption, are required, now, to be deposited in the Escrow Account. No withdrawal from such an account can be allowed by a jurisdictional Commissioner unless the 'investment', sought to be made, is for the purposes as envisaged by the Notifications. Once the jurisdictional Commissioner has allowed an amount to be withdrawn from the Escrow Account for the purpose of making 'investment', there is no separate appellate or revisional authority including the IAC under the scheme of exemption, which can sit on the wisdom of the decision of the jurisdictional Commissioner. 34. It needs to be clearly....
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....alid 'investment'. Even if he exceeds jurisdiction and allows an 'investment' to be made, which is, otherwise, found to be not covered by scheme, it has to be treated as an 'investment' made with the permission given purportedly in exercise of the powers given to a jurisdictional Commissioner by the Notification, dated 9-7-2004. In such cases, the Central Government would be bound by the decision, which the jurisdictional Commissioner has taken. Such a decision would also be binding on the IAC. The IAC cannot, therefore, if an 'investment' has been made by a manufacturer after withdrawing money from Escrow Account with due permission from the jurisdictional Commissioner, re-examine and determine as to whether 'investment', already made, falls within the scheme of exemption notification or not.    xxx    xxx    xxx    xxx 168. I may say, at the cost of repetition, that if the IAC finds that the "investments" relate to pre-Escrow Account period, as is the case at hand, then, the examination, by the IAC, of the question, as to whether the 'investments', so made, fall under any of the permissible categor....
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....xcise Officer, as the case may be, is required to issue notice to the manufacturer directing him to show cause as to why the amount, which has not been certified by the IAC, be not recovered from him in terms of the provisions of section 11a read with the provisions of section 11b, or be not 'forfeited' from the Escrow Account of the manufacturer in terms of the provisions contained in the notification, dated 9-7-2004, if the amount, sought to be recovered, relates to post Escrow Account period." 31. After going through the judgment of the Learned Single Judge of the High Court of Gauhati which has been confirmed by the Division Bench and after we have heard the parties, we are in agreement with the view expressed and in our considered view, it may not be advisable to have a detailed discussion on the selfsame issue which has been once examined in detail in the case of the very petitioner by the High Court of Gauhati. 32. In addition we would further like to observe that the 'Seven Rainbow States' that makes up the North Eastern part of India can best be described as 'Asia in miniature'. India's North East is a part of a great tropical rainforest that stretches from the....
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.... enhance the importance of the region in engaging with South East Asian neighbours and to promote North East Special Infrastructure Development Scheme and with this object behind it Central Government has come with a scheme to grant exemption from the excise duty under its notifications dated 25-8-2003, 21-1-2004 followed with dated 9-7-2004 respectively. 36. It appears that the primary object was to make the North Eastern States economically viable and industrial growth in the manufacturing sectors and development in the Real Estate which indeed may create job opportunities. Keeping such paramount considerations, it appears that the Central Government in exercise of its powers conferred under sub-section (1) of Section 5A of the Central Excise Act, 1944 read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 came with the notification dated 25th August, 2003 opening investments in plant and machinery in a manufacturing unit which is located in the seven North Eastern States for exemption of Central Excise to a limited extent, but it reveals that the Central Government later realize that it is not advisable to remain c....
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....d or invested to be recoverable from the manufacturer along with interest at the rate specified under Section 11AB of the Central Excise Act, 1944 without prejudice to any other action which would be contemplated by law. 39. Indisputably, in the instant case, the petitioner opened the escrow account and all operations including withdrawals and investments have been made with a prior approval of the Jurisdictional Commissioner of Central Excise who has been introduced as an officer to monitor the functioning of the manufacturers with restrictions and adequate check and balances over withdrawals from the escrow account and to keep a vigil over the investments which are made by the manufacturer in the two identified sectors identified in Condition B of the notification being a watchdog to safeguard the interest of the revenue and it was indisputably complied with by the petitioner and it is not the case of the respondents that there was any objection ever raised by the Jurisdictional Commissioner of Central Excise either while withdrawals from the escrow account or in reference to the investments made by the petitioner in the sectors indicated in Condition B of the notification.....
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....the committee or the committee is not the appellate authority to review/revisit the decisions of the Jurisdictional Commissioner of Central Excise. At least under the notifications, there is no clarity in respect to the jurisdiction of the committee and what is its ambit and scope and to what extent the committee can interfere in the decisions of the Jurisdictional Commissioner of Central Excise with whose prior approval the manufacturer withdrew the money from the escrow account and made investments in the sectors which are identified under Condition B of the notification, at the same time, at least the committee is not working as an ombudsman over the decisions of the Jurisdictional Commissioner of Central Excise to reopen/review all his actions which indisputably is not permissible under the notification of which reference has been made. 44. Taking note of the submissions made and examining the relevant notifications of which a detailed reference has been made, it appears to be a case of double penalty to a manufacturer being a law-abiding person who withdrew the money from the escrow account and made investments in the identified sectors referred to in Condition B with pr....
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....ion and this is otherwise the settled principle of law that no one should be condemned unheard needs no elaborate discussion since the law of natural justice and its scope has been considered by the Apex Court in the judgment reported in (2015) 8 SCC 519 = 2015 (320) E.L.T. 3 (S.C.). 47. We find further substance in the submission made by the petitioner's counsel that reference has been made of the report of the Monitoring Committee and its report has been relied upon by the committee in taking its decision but we find that neither the report of the Monitoring Committee has been placed on record and under whose authority the Monitoring Committee was constituted, what are its observations and under whose directives the Monitoring Committee has functioned is not on record and indisputably, the committee neither called upon the petitioner nor supplied the material relied upon and straightaway arrived to a conclusion that certain investments are disallowable which is indeed prejudicial to the interest of the petitioner and in violation of the principles of natural justice and since it has been elaborately dealt with by the High Court of Gauhati, we need not consider appropriate t....
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....th the consultancy firm payment of TDS/service tax in preparation of drawing and design from the engineers, all the consultancy charges under a single stroke are disallowed and the investments which are made in the category of civil works, TDS payments made to the contractors are straightway being disallowed, at the same time, we further find that the investments made in the plant and machinery has been disallowed for the reason that the Monitoring Committee has reported that the investments made in plant and machinery has not been installed and are found to be in packed condition at the moment. 50. We have our prima facie reservation for the reason that if the manufacturer has to invest under the relevant sectors under notification in plant and machinery or in infrastructure or civil works or social projects in the North Eastern States including Tripura, there are certain ancillary charges which are inevitable and there is no restriction under the notification if such ancillary charges are incurred for the purposes of investment in the identified sectors under the notification, is still available for satisfaction of the committee but could not to be outrightly rejected by a ....
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....reaucratic approach and red-tapism take responsibility on its shoulders and wants to shift the buck from one shoulder to the other and leaving the entrepreneur/manufacturer in lurch as in the instant case after so many rounds of litigation and a recent judgment of the Single Bench of the High Court of Gauhati in the case of the present petitioner which appears to be the third round of litigation in WP (C) No. 5353/2014, decided on 27-7-2018 which again has remitted the petitioner back to square one with no positive results coming forward. 54. It is expected from the respondents that it is high time that the Central Government may revisit the relevant notifications dated 25-8-2003, 21-1-2004 and 9-7-2004 and come out with a guideline and separation of powers and jurisdiction of the Jurisdictional Commissioner of Central Excise and that of the committee which the authorities have to discharge keeping in view the observations made by the High Court of Gauhati and further by this Court in making the task of the authorities easier in taking action in furtherance of deciding the matters in reference to the instant notifications with a possibility and hope to avoid further litigatio....