TMI Blog2009 (10) TMI 925X X X X Extracts X X X X X X X X Extracts X X X X ..... ving its unit at survey No.254 paiki, Kidana Bharapar Road, Village Bharapar, Taluka Gandhidham, District Kutch, is engaged in the business of manufacturing steel bars and other related products. The goods manufactured by the petitioner company fall in Chapter 72 of the First Schedule to the 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 receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the aforesaid order the petitioner made a representation dated 26.05.2008 through the Kutch Chamber of Commerce and Industry. The respondents thereupon issued fresh Notification dated 10.06.2008 bearing No.33/2008 CE. (8) Learned Senior Counsel appearing on behalf of the petitioner assailed the impugned 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No.33 of 2008 stating that the exemption benefit granted to the petitioner under the Original Notification was withdrawn within the period of five years by reducing the quantum in light of the change made in the basis for calculating the amount of exemption that may be available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 manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inspector ETIO and Anr., 2007 (5) SCC 447; (iv) MRF Ltd. Vs. Assistant Commissioner (Assessment) Sales Tax, 2006(206) ELT 6; (v) Mahabir Vegetable Oil (P) Ltd. and Anr. Vs. State of Haryana Ors., 2006(3) SCC 620; (vi) State of Punjab Vs. Nestle Indua Ltd Anr., 2004(6) SCC 465; (vii) Dai Ichi Karkaria 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f excise duty paid in cash as well as percentage of excise duty paid by utilizing CENVAT credit by similar units located elsewhere when compared with units situated in the notified area availing exemption. That the units in the specified area were paying high percentage of duty in cash when compared to payment of duty on an all India 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 Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999(110) E.L.T.@ 3 (S.C.); (xv) Union of India Vs. Jalyan Udyog, 1993 (68) E.L.T.@ 9 (S.C.); (xvi) Union of India Vs. Bharat Commerce Industries Ltd.,1999 (107) E.L.T. @ 582; (xvii) R.C. Tobacco Pvt. Ltd. Vs. Union of India, 2005(188) E.L.T. 129 (S.C.); (xviii)State of Punjab Vs. Nestle India Ltd. And Another, AIR 2004(6) SCC @ 465; (xix) MRF 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays down the outer time limit by stating that the exemption shall apply for a period not exceeding five years from the date of commencement of commercial production. In the Explanation appearing after paragraph No.4 the expression set up on or after the date of publication of this Notification in the Official Gazette has been defined to mean that any civil construction 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dated 27.03.2008 has been issued by substituting in paragraph No.1 for the words and figures, to the amount of duty paid by the manufacturer of the goods other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2001 , the words to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit . Thereafter 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: Notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39/2001 Central Excise dated 31.7.2001 16/2008 Central Excise 56/2002 Central Excise dated 14.11.2002. 19/2008 Central Excise 57/2002 Central Excise dated 14.11.2002. 22/2008 Central Excise 56/2003 Central Excise dated 25.6.2003. 21/2008 Central Excise 71/2003 Central Excise dated 09.09.2003. 23/2008 Central Excise 20/2007 Central Excise dated 25.04.2007. 20/2008 Central Excise 2 . Revenue implication of the abov e changes is not quantifiable . (13) Again in Explanatory Memorandum 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 wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use Notification No.39/2001 was not issued in light of backwardness of Kutch District being notified for the purpose of development. Therefore, the subsequent Notifications dated 27.03.2008 and 10.06.2008 cannot be upheld as they treat unequals as equals. Merely because the power to issue notifications is available in both cases under Section 5A of the Act authority exercising powers of delegated legislation under the said provisions cannot be permitted to equate what is inherently not equal. (16) Section 5A of the Act reads as under: [5A. Power to grant exemption from duty of excise.--(1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other measure with reference to which the duty is leviable. (4) Every notification issued under sub-rule (1), and every order made under sub-rule (2) of rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the Customs and Central Excise Laws (Amendment) Act, 1987 shall be deemed to have been issued or made under the provisions of this section and shall continue to have the same force and effect after such commencement until it is amended, varied, rescinded or superseded under the provisions of this section.] [(5) Every notification issued under sub-section (1) [or sub-section (2A)] shall, -- (a) unless otherwise provided, come into force on the date of its issue by the Central Government for publication in the Official Gazette; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision and the contention that a loss occurs to the Central Government by virtue of operation of an exemption notification and hence, the same is required to be modified, or varied or rescinded cannot be countenanced. An authority exercising delegated legislation cannot read in the provision granting powers of delegated legislation something more than what such provision in fact provides. In other words, a delegatee of powers of delegated legislation cannot exercise such powers, even by attempting to read intent, in excess of the powers granted by the provisions. (21) In the present case the respondent authority has sought to curtail the exemption in purported exercise of powers under Section 5A of the Act by trying to read an object which did not exist, and which was not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evival thereof cannot be treated at par with industries set up in other areas of India and, therefore, the assimilation of percentile figures of two incomparable regions would give a misleading picture. The entire exercise of issuing subsequent notifications on 27.03.2008 and 10.06.2008 is thus without any basis, i.e. the basis adopted has no nexus with the object, intent and purpose which formed the basis for issuing Original Notification in 2001. (23) Section 38A of the Act is in relation to effect of amendments, etc., of Rules, Notifications or Orders. The said provision reads as under: [ 38A. Effect of amendments, etc., of rules, notifications or orders. -- Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (25) Thus, the scheme which emerges on a plain reading of Section 38A of the Act 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 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 att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied against an Act. However, in case of delegated legislation it is not so. The general principle will come into play and if a subject is able to establish having acted on the promise made, put himself in a detrimental position, the other party is obliged in law to make good the promise, even if the promise is by way of a delegated legislation. The State cannot be heard to complain that the promise has resulted in financial loss. If the nature of promise is such where in exercise of delegated legislation the State has consciously agreed to forego certain revenue the State cannot resile from the said position only on the ground of loss to the exchequer. Of course, it is equally well settled that no person can be permitted to misuse the concession or benefit and invoke promissory estoppel. If one party abuses 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 alwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Jurisdictional Commissioner is required to undertake verification, which he deems necessary, and thereafter refund the amount of duty paid in cash by the fifteenth day of the next month. It is further provided that in case of likelihood of delay in verification the Jurisdictional Commissioner shall refund the amount on provisional basis and thereafter adjust the amount of refund by such amount as may be necessary, at the time of payment of subsequent refunds. Thus it is not as if the statement made by a manufacturer is accepted at face value. If any claim for refund is made and approved by the Jurisdictional Commissioner, revenue will have to show by co-relating with the specific transaction and specific order of refund as to where and how a concession/benefit has been availed by a manufacturer by misusing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the written submissions and the Affidavitin- Reply where certain instances are referred to alleging violation/misuse of the scheme it is apparent that the said instances are of action initiated in 2009, namely, after the impugned Notifications dated 27.03.2008 and 10.06.2008 have already been issued. Thus on facts also it is not possible to state that the respondent authorities have even prima facie been able to establish any such wide scale misuse of the scheme. (31) One more aspect of the scheme which came by way of amendment dated 06.08.2003 vide Notification No.65 of 2003-CE further makes it more rigorous to ensure that no undue advantage is derived by a manufacturer, when the said Notification provides that a manufacturer is obliged to discharge his liability to pay duty of excise in the first instance by 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of exempting such new industrial units from payment of duty of excise was inherent and the subsequent lame explanation that exemption was to be limited only to value addition is nothing else but an afterthought to reduce loss of revenue. The policy was not in relation to inflow or otherwise of revenue, but was to invite establishment of new industrial units. That was the public interest. Hence, respondents cannot be permitted to plead supervening public interest on the basis of perceived revenue loss or misuse of the scheme of exemption. The primary inquiry that is required to be undertaken is as to whether a new industrial unit has been set up in the District of Kutch and whether such a new industrial unit fulfills all other requisite conditions prescribed by the Original Notification. The inquiry cannot be in the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e what is inherently not equal. (v) The concept of the Central Government foregoing certain amount of revenue is inherent in Section 5A of the Act. (vi) The contention that a loss occurs to the Central Government by virtue of operation of an exemption notification and hence, the same is required to be modified cannot be countenanced. (vii) In exercise of delegated legislation the authority cannot read in the provision something more than what such provision in fact provides. (viii) 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 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 es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointing out misuse of the concession. (xix) Supervening public interest is always a good ground for modifying or withdrawing an exemption. But the same has to be established by direct cogent evidence and not based on general and vague apprehensions. (36) Hence, on application of the law in the form of provisions of Sections 5A and 38A of the Act as well as the general principles relating to promissory estoppel it becomes clear that even if one were to uphold the powers of the Central Government to issue a notification in exercise of powers under Section 5A of the Act, it would not be possible to uphold the said exercise in so far as impugned Notification No.16/2008-CE dated 27.03.2008 and Notification No.33/2008- CE dated 10.06.2008 are concerned to the extent they are sought to be applied to new industrial units set up in Kutch District of Gujarat in compliance with Original Notification No.39/2001-CE dated 31.07.2001 within the stipulated period. Accordingly, the two impugned notifications to the extent they curtail/modify/substitute the basis laid down in Original Notification No.39/2001-CE dated 31.07.2001 are declared to be bad in law. New industrial units, which have b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
