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2019 (6) TMI 1067 - HC - Central ExciseArea based exemption - Disallowing certain Investments made in North Eastern states - establishment of manufacturing unit - Demand of duty with interest - HELD THAT:- Indisputably, economically and industrially, the North East India represents one of the least developed regions of the country and that appears to be one of the reason for which the Central Government has come out with a scheme to encourage entrepreneurs/manufacturers to establish their manufacturing units in the seven North Eastern States in availing exemption from central excise by investing in plant and machinery in the manufacturing units or infrastructure or civil works or social projects in the seven North Eastern States including Tripura in availing such benefits - The Central Government has come out with various Central Development Projects in the North East sharing 90 per cent of the cost which was later on converted into 100 per cent funding by the Central Government for projects in the region and also introduced “Act East Policy” to 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. 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 confined to one sector of plant and machinery and the other sectors also have a potential to cater developments in the States and also the sector of infrastructure or civil works or social projects in the seven North Eastern States to make the manufacturer flexible to claim 100% exemption from Central Excise subject to fulfilment of other conditions and in supersession of the earlier notification dated 25th August, 2003 introduced Notification No. 8/2004, dated 21st January, 2004 but actions of the manufacturer for claiming exemption on investments remains directly under the aegis to the satisfaction of the committee under Condition D of the notification. 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. 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 prior approval of the Jurisdictional Commissioner of Central Excise and that has been later disallowed by the committee and recovery proceedings are initiated. In the given circumstances, the money which the manufacturer withdrew had already been invested under the sectors which are identified under Condition B and is not open at his disposal, at the same time after the decision being taken by the committee disallowing such investments, manufacturer has been called upon to deposit such investments which has been disallowed with interest which could never be the intention of Central Government in extending the exemptions to such of the manufacturers who are investing money in the seven North Eastern States to seek exemption from the excise duty with the prior approval of the Jurisdictional Commissioner of Central Excise. The procedure adopted by the committee deserves to be reviewed in the light of what has been observed by us and as a word of caution we would like to observe that the Jurisdictional Commissioner of Central Excise or the Committee is supposed to interpret conditions of the notifications liberally to its optimum vitality but implement strictly in true spirit. Petition allowed - decided in favor of petitioner.
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