TMI Blog2012 (5) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioners that they have established their units pursuant to the Industrial Policy Resolution (IPR) of the Government of India as notified vide Central Government Office Memorandum dated 24-12-1997 followed by the State Government Notification No. G.O./2/DI/2002-2003/901, dated 17-2-2003 and the statutory Notification No. 71/2003-C.E., dated 9-9-2003 issued by the Central Government under Section 5A of the Central Excise Act, 1944 (hereinafter referred to as the Act ) granting exemption for a period of 10 (ten) years from the date of notification or commencement of commercial production by new units set up in Sikkim from the payment of Income-tax and Excise duty leviable under the provision of the Act, the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 in respect to goods specified in the First Schedule and Second Schedule to the Central Excise Tariff Act, 1985 other than goods specified in Annexure-I appended thereto and some other incentives under the aforesaid notification. This benefit was available to the goods manufactured in the units located in the Industrial Growth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erro Alloys Pvt. Ltd. Anr. v. Union of India in this Court. Some of the industrial units who were also aggrieved of the notifications withdrawing Cenvat exemption also filed separate writ petitions. All the writ petitions were allowed by this Court vide Common Judgment dated 15-11-2010, quashing the impugned notifications with some directions. 7. In case of M/s. Unicorn Industries, the exemption from payment of Excise duty granted vide Notification No. 71/2003-C.E., dated 9-9-2003 was withdrawn by Notification No. 21/2007-C.E., dated 25-4-2007 by induction of Pan Masala in Annexure-I (Negative List). It filed a separate writ petition being W.P.(C) No. 22 of 2007 titled M/s. Unicorn Industries v. Union of India Ors. This writ petition has been allowed by a separate judgment of even date. 8. The petitioners were availing the exemption in terms of exemption Notification No. 71/2003-C.E., dated 9-9-2003 in respect to the basic Excise duty payable under the Act and if leviable, the additional duties of Excise under the Acts specified in the notification. At the time exemption Notification No. 71/2003-C.E., dated 9-9-2003 was issued, the Central Government had also levied anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter for the purposes specified in sub-section (1), as it may consider necessary. xxxxxx xxxxxx xxxxxx xxxxxx 93. Education Cess on excisable goods. - (1) The Education Cess levied under Section 91, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), being goods manufactured or produced, shall be a duty of Excise (in his section referred to as the Education Cess on excisable goods), at the rate of two per cent, calculated on the aggregate of all duties of Excise (including special duty of Excise or any other duty of Excise but excluding Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 (1 of 1944) or under any other law for the time being in force. (2) The Education Cess on excisable goods shall be in addition to any other duties of Excise chargeable on such goods, under the Central Excise Act, 1944 (1 of 1944) or any other law for the time being in force. (3) The provisions of the Central Excise Act, 1944 (1 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary and Higher Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 or under any other law for the time being in force. (2) The Secondary and Higher Education Cess on excisable goods shall be in addition to any other duties of Excise chargeable on such goods, under the Central Excise Act, 1944 or any other law for the time being in force and the Education Cess chargeable under Section 93 of the Finance (No. 2) Act, 1944. (3) The provisions of the Central Excise Act, 1944 and the rules made thereunder, including those relating to refunds and exemptions from duties and imposition of penalty shall, as far as may be, apply in relation to the levy and collection of the Secondary and Higher Education Cess on excisable goods as they apply in relation to the levy and collection of the duties of Excise on such goods under the Central Excise Act, 1944 or the rules made thereunder, as the case may be. Believing that the NCCD, Education Cess and Secondary and Higher Education Cess levied under the Finance Act, 2001, 2004 and 2007 respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may apply in relation to the levy and collection of the NCCD, the Education Cess and the Secondary and Higher Education Cess respectively. The submission is that the exemption provision of the Act, namely, Section 5A of the Act, has been made applicable to all these different categories of duties introduced under the Finance Acts, 2001, 2004 and 2007 respectively and the duties being recovered in the nature of Excise duties, the petitioners are entitled to exemption thereof. Learned Counsel for the petitioners further submits that the Industrial Policy Resolution (IPR) dated 24-12-1997 and the State Government Notification dated 17-2-2003 were issued to grant total exemption from Income-tax and Excise duty for a period of 10 years and thus no duty imposed as Excise duty under any law becomes recoverable from the petitioners during the exemption period. The impugned Notification No. 71/2003-C.E., dated 9-9-2003 in so far as it incorporates (under any of the said Acts) in paragraph 1 of the notification restricting the exemption in respect to the goods covered under three statutes only is violative of the basic IPR memorandum dated 24-12-1997 as also the State of Sikkim Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption for a period of 10 Years from the date of commencement of commercial production. Thrust Sector Industries as mentioned in Annexure-II are entitled to similar concessions in the entire State of Sikkim without area restrictions. xxxxxx xxxxxx xxxxxx xxxxxx 14. IPR dated 24-12-1997, Government of India s Notification/Memorandum No. 14(2)/2002-SPS, dated 23-12-2002 providing special package of incentives for development of industries in the State of Sikkim and consequential notification of Department of Commerce and Industries, Government of Sikkim dated 17-2-2003 do indicate total and 100% Income-tax and Excise duty exemption for a period of 10 years. IPR, 1997 was issued by Government of India before the Finance Act, 2001 came to be enacted by the Parliament, whereunder National Calamity Contingent Duty was levied. When the special package of incentives were formulated for the State of Sikkim vide Government of India s Memorandum dated 23-12-2002 and exemption Notification No. 71/2003-C.E., dated 9-9-2003 was issued granting exemption from payment of Excise duty, the Finance Act, 2001 had been enacted but neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, the intention of the Central Government was unequivocal and unambiguous not to levy any Excise duty upon the goods manufactured by the petitioners in any form for this period from the date of commercial production. It is not in dispute that IPR, 1997 and Notification dated 17-2-2003 issued by the Government of Sikkim pursuant to the Central Government s Memorandum dated 23-12-2002 promised total and 100% exemption from payment of Excise duty for a period of 10 (ten) years. Both these Memorandum/Notification contain following stipulations :- Ministry of Finance, etc., are requested to amend rules/notifications, etc., and issue necessary instructions for giving effect to these decisions. (IPR, 1997) 5. The Ministry of Finance, Department of Revenue, Department of Development of North Eastern Region, etc., are requested to amend Act/rules/notifications, etc., and issue necessary instructions for giving effect to these decisions. (Notification dated 17-2-2003) 17. The above stipulations indicate that the concerned Departments/Ministries were required to issue formal statutory notifications for grant of exemption as proposed in IPR, 1997, Memorandum dated 23-12-2002 (sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986); (b) a special duty of Excise, in addition to the duty of Excise specified in clause (a) above, on excisable goods (excluding goods produced or manufactured in special economic zones) specified in the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which are produced or manufactured in India, as, and at the rates, set forth in the said Second Schedule : Provided that the duties of Excise which shall be levied and collected on any excisable goods which are produced or manufactured, - (ii) by a hundred per cent export oriented undertaking and brought to any other place in India, shall be an amount equal to the aggregate of the duties of Customs which would be leviable under the Customs Act, 1962 (52 of 1962) or any other law for the time being in force on like goods produced or manufactured outside India if imported into India, and where the said duties of Customs are chargeable by reference to their value, the value of such excisable goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d within the country. 20. The duties imposed under the Finance Acts, 2001, 2004 and 2007 respectively are in the nature of surcharge. The object and purport of the National Calamity Contingent Duty is to create a fund for the calamity disaster. Similarly, Education Cess and Secondary and Higher Education Cess have been levied to meet the commitment of the Central Government to finance the education including secondary and higher education in the country as is evident from the following statements contained in Section 91(1) of the Finance Act, 2004 and Section 126(1) of the Finance Act, 2007 respectively - Finance Act, 2004 there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes of the Union, a cess to be called the Education Cess, to fulfil the commitment of the Government to provide and finance universalised quality basic education. Finance Act, 2007 there shall be levied and collected, in accordance with the provisions of this Chapter as surcharge for purposes of the Union, a cess to be called the Secondary and Higher Education Cess, to fulfil the commitment of the Government to provide and financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure for the natural disaster by way of surcharge. It is not an Excise duty in its true nature. 22. The Education Cess and the Secondary and Higher Education Cess are a part of the Central Government s proposal to discharge its constitutional obligation under Articles 39(f), 45 and 21A of the Constitution of India. 23. Article 39(f) was introduced in the Constitution vide the Constitution (Forty-Second) Amendment Act, 1976 to incorporate provisions for the welfare and protection of the children and youth in this country by providing opportunities and facilities to develop in conditions of freedom and dignity and protection against exploitation, etc. Article 45 was substituted to make provision for childhood care and education to the children below the age of 6 years. Similarly, Article 21A was enacted creating right to free and compulsory education to all children of the age of 6 to 14 years. Both these provisions were introduced by Eighty-Sixth Amendment Act, 2002, even though Article 51A(k) introduced by the same Amendment cast a duty upon the parent or guardian to provide opportunities for education to his child between the age of 6 and 14 years. However by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not to impose a tax or a duty on the manufacture and production of the goods. Thus both the levies being not the Excise duties in the real sense of definition, the petitioners are not entitled to exemption in terms of the IPR, 1997, Memorandum dated 23-12-2002 and the exemption Notification dated 9-9-2003. 27. It may also be noticed that by virtue of sub-section 3 of Section 136 (Finance Act, 2001), sub-section 3 of Section 93 (Finance Act, 2004) and sub-section 3 of Section 128 (Finance Act, 2007), the provision of the Central Excise Act, 1944 and the rules made thereunder have been made applicable as regards the refunds, exemption and imposition of penalty in respect to these duties. This clearly signifies that these cesses and duties can also be exempted by the Central Government in the same manner as the exemption is granted in respect of the basic Excise duty and additional Excise duties imposed under various enactments including those specified in exemption Notification dated 9-9-2003. Indisputably, neither the exemption notification nor the IPRs specifically grant exemption in respect to the levies as discussed hereinabove. At the first place the Finance Acts, 2004 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries set up in the State of Sikkim. It is alleged that petitioners were claiming re- credit of NCCD by referring to Notification No. 27/2001-C.E., dated 11-5-2001, even though the notification was not applicable in the State of Sikkim. It is further case of the respondents that even though general industrial policy was issued, however the policy could only be implemented through statutory notification to grant exemption. The Central Government had no intention to grant exemption from payment of NCCD, Education Cess and Secondary and Higher Education Cess. It is further stated that Education Cess and Secondary and Higher Education Cess were not in existence when the industrial policy was formulated and exemption notification was issued. The petitioners are not entitled to exemption from payment of these dues in absence of any exemption notification under law. 28. The petitioners have also relied upon a Circular issued vide Order No. 60/1/2006-CX (Annexure-P25) under Section 37B of the Central Excise Act, 1944, rendering explanation in respect to the exemption from payment of duties on goods exported under bond under Rule 13 of the Central Excise Rules, 1944, Rule 19 of the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of duty further signifies that the duty envisaged is the basic duty levied under charging Section 3 of the Act. Any other special duty imposed by any special act does not fall within the purview of the duty for purposes of the Act. 32. Apart from the fact that the Central Government never expressed its intention nor such intention is apparent from any of the notifications, cesses imposed under Finance Acts, 2001, 2004 and 2007 are not in essence the duties of Excise. The later two duties were imposed after the grant of exemption and incentives by the Central Government, it could not have visualised by the Central Government at the time of framing the IPR, 1997 and IPR, 2002 in regard to the State of Sikkim or even the exemption Notification No. 71/2003-C.E. to grant exemption from any duty which may be imposed in future. Exemption could only be granted in respect of the duties which were levied or had been imposed at the time of grant of incentives. 33. A similar question came up for consideration before the Hon ble Supreme Court in the case of Union of India v. Modi Rubber Ltd. - (1986) 4 SCC 66. In this case, the manufacture of tyres was subject to duty of Excise levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, difficult to understand how the expression duty of excise in the notification dated August 1, 1974 could possibly be read as comprehending special duty of Excise which did not exist at the date of this notification and came to be levied almost four years later. When special duty of Excise was not in existence at the date of this notification, how could the Central Government, in issuing this notification, have intended to grant exemption from payment of special Excise duty? The presumption is that when a notification granting exemption from payment of Excise duty is issued by the Central Government under Rule 8(1), the Central Government would have applied its mind to the question whether exemption should be granted and if so, to what extent. And obviously that can only be with reference to the duty of Excise which is then leviable. The Central Government could not be presumed to have projected its mind into the future and granted exemption in respect of Excise duty which may be levied in the future, without considering the nature and extent of such duty and the object and purpose for which such levy may be made and without taking into account the situation which may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f duty of Excise. The notifications in the present case were issued under sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 simpliciter without reference to any other statute and hence the exemption granted under these two notifications must be construed as limited only to the duty of Excise payable under the Central Excises and Salt Act, 1944. 36. The position in the present case is no different. The respondents have placed on record various notifications regarding grant of exemption from the NCCD or Education Cess levied under the Finance Acts, in question. This further clarifies that the Excise duty envisaged under the exemption Notification No. 71/2003-C.E., dated 9-9-2003 as also under IPR, 1997 and Notification dated 17-2-2003 could not be expanded to include the duties that may be levied, subsequently under any finance act or special duty levied by the Parliament for a different purpose. The petitioners are availing the benefit in respect to the exemption under the impugned notification itself since 2003. They illegally availed the benefit of exemption in respect to NCCD, Education Cess and Secondary and Higher Education Cess levied under the Finance Acts, 2001, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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