TaxTMI 
TaxTMI 
2014 (11) TMI 1230
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....VES TO NEW INDUSTRAIL UNITS AND THEIR SUBSTANTIAL EXPANSION. i. Government has approved for converting the growth centers and IIDs into a tot al Tax Free Zone for the next 10 years. All industrial activity in these zones would be free from Income Tax, Excise for a period of 10 years from the commencement of production. State Government would be requested to grant exemptions in respect of Sales Tax and Municipal Tax. ii. Industries located in the growth centers would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of Rs. 30.0 lakhs. 3. Pursuant to the said policy, dated 08-07-1997, a notification is issued by the Central Government, under Section 5A (1) of Central Excise Act, 1944 (in short, 'Act of 1944') and under Section 3 (3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (in short, 'Act of 1957'), wherein the nature of industries and the areas, which are entitled to benefits are specified . The Industrial Policy of 1997 came to be expired by 23-12-1997. The Government of India, again, issued another Industrial Policy on 01-04-2007 rei....
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....ve made substantial and heavy investments. In fact, the first Industrial Policy of the year 1997, operated successfully. The Government felt that a further extension of the said concession will boost the industrial activity in the North-eastern region. Therefore, the second Industrial Policy of 2007, on similar line, was published for a further period of 10 years. The Government in the year 2008 abruptly modified the rates of concession by the modified notifications, which is contrary to the terms of the Industrial Policy. The State cannot issue notifications contrary to the Industrial Policy in view of the judgment of the Supreme Court in Suprabhat Steel Ltd. and others -vs- State of Bihar and others, reported in (1999) 1 SCC 31. (b) The State having held out a solemn promise to the investors to invest in the North-eastern region, declared concessions. Reposing faith in the promise, the investors have invested substantial sums of money in the North-eastern region. The abrupt withdrawal of concessions by the modified notifications, in question, is impermissible in view of the doctrine of promissory estoppel enunciated by the Supreme Court in Motilal Padampat Sugar Mills Co....
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....t being entitled for the exemption. Following detection of the case the unit withdrew their application for availment of exemption. 3. Sanghi Industries Ltd. Kutcch 40.12 Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption, as the unit was already in existence even prior to issuance of Notification. Following detection of the case the unit voluntarily deposited Rs. 25.00 Crores. SCN is being issued. 4. Sumangal Glass Pvt. Ltd. Kutcch No refund was claimed by the party Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption. Detailed report sent to CC. Case is yet to be decided by the Committee. 5. Gran Electronics Pvt. Ltd. Kutcch No refund was claimed by the party Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption. Detailed report sent to CC. Case is yet to be decided by the Committee. 6. Hinron Steel Industries Kutcch No refund was claimed by the party. Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for....
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....of invoices issued by these companies without physical receipt of any inputs. 17. M/S Shree Vaishnov Devi Metals Pvt. Ltd. J&K 0.05 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 18. M/S V.K. Metal Works J&K 2.64 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 19. Nav Bharat Metals J&K 0.32 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 20. Shiv Giri Metal Indst. J&K 0.43 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 21. Shree Sita Ram Castings J&K 0.16 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 22. Shree Vaishno Devi Metals Pvt. Ltd. J&K 3.12 Cenvat credit has been fraudulently availed by....
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....s sale of goods to their related unit situated in non-exempted area; thus facilitating availment of inadmissible Cevat credit. SCN is likely to be issued soon. 34. Satyam Ispat, NH 52A, Banderdewa, Arunachal Pradesh Arunachal Pradesh 0.31 Bogus sale of goods to their related unit situated in non-exempted area; thus facilitating availment of inadmissible Cevat credit. SCN is likely to be issued soon. 35. Satya Megha Ispat (P) Ltd., Tamiulkuchi, Bymihat. Meghalaya 0.08 Bogus sale of goods to their related unit situated in non-exempted area; thus facilitating availment of inadmissible Cevat credit. SCN is likely to be issued soon. 36. Foto Industries, Meghalaya & M/S Photo Film Industries, Pondicherry Meghalaya 8.66 Goods claimed to have been manufactured at the Meghalays factory of M/S Foto Industries, Meghalaya were, in fact, being produced at their sister concern, namely, M/S Photo Film Ind, Pondicherry from where the goods were cleared without payment of duty to their customers. Case settled under settlement commission. Entire duty alongwith interest has been realized. 37. M/S Matiz Metals Pvt. Ltd. Meghalaya 19.57 The un....
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....e industries from its sister concerned of other area, which has no exemption, has been alleged. But except 2/3 cases, in rest of the cases, the adjudication is pending. The report of the DGCEI, has given the following reasons in support of the impugned modified notifications: 8. To sum up, in order to minimize misuse of area based excise duty exemption applicable to J&K, North East and Kutch areas (by way of bogus production, bogus purchases of input, purchase of input against non duty paid invoices, overvaluation etc), following proposals are submitted for modification of existing scheme. i) To provide that refund of excise duty would be allowed only to the extent of duty payable on the value addition made by the units in these areas ii) The quantum of value addition may be determined by fixing an all industry ratio based on CENVAT Credit and PLA (Cash) ration for non-POL items with an option to assessee to get the ratio fixed based on actual financial data from audited profit and loss account. 9. It is submitted that the above said fraudulent and dishonest acts of cheating by the industries, if any, can very well be verified at the ....
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....ice without actual production of goods and supply/clearance of excisable goods. This would result in availment of CENVAT credit by buyers of such excisable goods in other parts of the country without actual production being carried out and in absence of actual receipt of goods. (ii) Reporting of bogus production by such units in these areas where actual pro duction takes place elsewhere in the country. (iii) Overvaluation of goods resulting in availment of excess of credit by buyer. Goods are supplied by manufacturers, importers to these units without issuance of sales invoice and these are backed by bogus sales invoice issued by traders who do not undertake actual supply of goods. The actual supplier of these goods is sued bogus duty paid invoices to other manufacturers who take credit based on such invoices without receipt of goods. To elaborate the above modus operandi, I beg to give the following illustration: 1. It was submitted on the basis of illustrations set out in the Affidavit in Re ply that the same are general illustrations of misuse of exemption, which exempt ion was meant to be available to genuine manufacturers. That units in the ....
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.... 3. The methodology of calculating value addition has also been explained in part 3 of written submissions. In support of the submissions made as regards the exercise of legislative power and Courts not being entitled to question policy decision as well as on inapplicability of principle of promissory estoppel. 25. Thus, the scheme which emerges on a plain reading of Section 38A of the Ac t is that even in a case where a Rule, Notification, etc. is amended, etc., unless the amending Rule, Notification, etc. specifically denotes a contrary intention, everything that has taken place under the Rule, Notification, etc. prior to amendment shall continue to its logical end. This provision is not only a saving provision, but is a provision which correspondingly obligates both the person who was a beneficiary under the existing Rule, Notification, etc. and the authority under the existing Rule, Notification, etc. to continue to comply with the requirements of the Rule, Notification, etc. as it existed even after amendment once the parties have duly done anything or suffered under the existing Rule, Notification, etc. An Assessee, who is required to act in a particular manner as ....
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....es 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. 115. It appears that the doctrine of promissory estoppel and its scope and ambit is by now well settled and the same can be summarised as under: (1) The doctrine of promissory estoppel is to be treated as a preserved right, but such right is subject to the limitation that - (2) Such promise or the representation made must be given under the authority of law and in consonance with the statute and not un authorisedly or in contravention to any statutory provision on the principle that there cannot be any estoppel against the statute. (3) Such cannot be permitted to be invoked against the overwhelming public inter est. (4) The Legislature or the Parliament has power for diluting its effect retrospectively by enacting any law. 117. If the record produced on behalf of the Central Government is considered, it appears th....
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....on 5A of the Act, the authority cannot be permitted to take recourse to the principles applicable for determining whether duty is correctly levied or not. 22. From any angle, once power under Section 5A of the Act has been exercised an d exemption granted, a larger/superior public interest has to be shown for curtailing/modifying/ withdrawing an exemption already granted and in such eventuality, the onus shall be on the Revenue and the same cannot be discharged by merely referring to the contention that the petitioners/assessees are claiming the exemption on bogus ground, in surmise. 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 t heft 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 entrepreneur s and the ent....
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....reas, which have adversely affected units in other parts of the country. Analysis of cases booked by DGCEL and as per representations of the Associations following types of misuse have been noticed: i) Reporting of bogus production, issue of bogus sales invoices by the manufactures in these areas and availment of CENVAT Credit by buyers in another part of the country without receipt of goods; ii) Overvaluation of goods and availing excess credit by the buyer; iii) Reporting of bogus production by units in these areas, whereas actual production takes place at other unit of same manufacturer in another part of the country; iv) Purchase of inputs on non-duty paid invoice (invoices issued by traders) , even though goods are duty paid. The duty paid invoices are sold in the market to other manufacturers for availing CENVAT Credit on such invoices without receipt of goods. The DGCEL has booked involving duty evasion of Rs. 178 Crores for above types of cases. 3.2 Problem of Zinc Oxide manufacturers: The All India Zinc Oxide manufacturers Association has represented an interesting problem. They manufacture zinc oxide and zinc ....
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.....1. It can be argued that above discussed misuses are on account of administrative failure to tackle evasion. However, when the trend of evasion is seen across the industry, such misuse cannot be handled with any amount of enforcement and the only available option is to think of modifying the scheme itself. Moreover, investigation of such cases is very time consuming as each purchase and sale transaction along with transport records, which involve a large number of parties at different part of the country, is required to be investigated. 15. It is argued that specific instances of misuse were detected and cases have been booked. The Personal Ledger Account (PLA) referred to in the report is as follows: Description of Goods Total duty paid in 2006-07 by units in specified areas PLA (cash) % to total duty All India % of PLA to total duty PLA CENVAT Credit Total 1. Iron and Steel 488 230 718 68 27 2. Copper 224 8 232 96 14 3. Aluminium Rods/Wires 50 18 68 74 33 4. Tyres 118 73 191 62 39 5. Cosmetics 170 33 203 84 53 6. Misc. Chemicals 266 28 294 ....
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....e justification for issuing the modified notifications, in question. It is to be seen whether any superior public interest is evident, which prompted the Government to issue the modified notifications. The counsel for the State mainly relies upon the report of the Directorate General of Central Excise Intelligence (DGCEI) and the Annexure-A, as extracted (supra), which gives the details of malfeasance and misfeasance committed by some of the industries, in question, in J&K, Northeast and Sikkim. The instances of misuse noticed in the inquiry are hardly consists of about 41 cases and most of the cases, as per Annexure-A, are still under adjudication, it is not finally decided whether the industries concerned in the Northeastern region are guilty of any misuse. The argument that because of the misuse, the concession had to be withdrawn does not ap pear to be tenable, on deeper scrutiny of the materials placed before the Court. It is not as if that the State and the Department does not have any mechanism or machinery for detecting malpractice of bogus production by diligent periodical inspection. 20. Where the goods do not carry MRP, with reference to the marginal cost and th....