TMI Blog2014 (11) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. The State does not dispute the Industrial Policies of 1997 and 2007 and also the grant of concession pursuant to the said notifications. However, the dispute revolves round the 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 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 scheme of the policy and the notifications insist that there s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014, WP(C) 1694/2014, WP(C) 1723/2014, WP(C) 2887/2014, WP(C) 1696/2014, WP(C) 3457/2014, WP(C) 3458/2014, WP(C) 6685/2013, WP(C) 6698/2013, WP(C) 6786/2013, WP(C) 5444/2014, WP(C) 5538/2014 THE UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF FINANCE, (DEPARTMENT OF REVENUE) NEW DELHI, THE COMMISSIONER OF CENTRAL EXCISE, SHILLONG, THE COMMISSIONER OF CENTRAL EXCISE,THE DEPUTY COMMISSIONER OF CENTRAL EXCISE,GUWAHATI Versus ICON HOUSEHOLD PRODUCTS PRIVATE LIMITED, R.C.L. CEMENTS, ICON HOUSEHOLD PRODUCTS PRIVATE LIMITED., NORTH EAST ROOFINGS LTD., ASSAM ROOFING LTD., PRAG ELECTRICALS PVT. LTD, EMAMI LTD, VINAY CIMENTS LIMITED., GUWAHATI CARBON LIMITED, BRAHMAPUTRA CARBON LIMITED , PDP STEELS LTD., M/S DHARAMPAL SATYAPAL LIMITED (GUWAHATI UNIT), M/S GODREJ SARA LEE LTD., M/S OZONE AYURVEDICS, M/S OZONE AYURVEDICS (UNIT II), M/S OZONE PHARMACEUTICALS LIMITED., M/S. S. JOHNSON PRODUCTS PRIVATE LTD., M/S N.E. THERMISION PRIVATE LIMITED AND UNION OF INDIA ORS Versus M/S MANAKSIA LTD. AND ZOBELE INDIA PVT. LTD., GODREJ CONSUMER PRODUCTS LTD., GREENPLY INDUSTRIES LTD., BULLAND CEMENTS PRIVATE LTD., KITPLY INDUSTRIES LTD. ,HINDUSTAN UNILEVER LIMITED, M/S KAMRUP PERSONAL CARE, VARUN BEV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO NEW INDUSTRAIL UNITS AND THEIR SUBSTANTIAL EXPANSION. i. Government has approved for converting the growth centers and IIDs into a total 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, subje ct to a maximum ceiling of ₹ 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 reiterating the same te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Ltd -vs- State of Uttar Pradesh a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Kutcch No refund was claimed by the par ty Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without 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, a s the unit was already in existence even prior to issuance of Notification. Following detection of the case the unit voluntarily deposited ₹ 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 Fraudul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 13. HSS (Dinesh International Limited) J K 0.07 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 14. J K Metals J K 0.13 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 15. Jain Metal Works J K 1.27 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 16. Kashmir Wire J K 0.35 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these companies without physical receipt of any inputs. 26. Him Valves Regulators (P) Ltd. physical receipt of any inputs. H.P. 0.37 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without 27. Swastik Wires H.P. 0.37 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 28. Koolminit Manufacturing Company, Industrial, Gouripur, Dlaubri, Assam.. Assam 0.95 The unit showed bogus production and issued bogus invoices. Over valuation of products. SCN issued. Case pending adjudication 29. Ishan Technologies Pvt. Ltd., Bymihat, Meghalaya SCN issued. Case pending adjudication. Meghalaya 9.98 The unit showed bogus production and issued bogus invoices. Overvaluation of products. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Entire duty alongwith interest has been realized. 37. M/S Matiz Metals Pvt. Ltd. Meghalaya 19.57 The unin has shown bogus purchase of raw materials availing Cenvat credit, bogus production and fraudulently issued invoices showing clearance of excisable goods in order to facilitate the buyers to avail Cenvat credit. One SCN to the party and 58 SCN s to various manufacturers who have availed cenvat credit on the strength of invoices issued by the party have been served. Commissioner, Central Excise, Adjudication, Mumbai has been appointed as common adjudicator. Case pending adjudication. 38. M/S Jindal Drugs Limited Jammu 44.26 Clearance of raw material (Crude Mentha Oil) without manufacturing excisable goods and by misdeclaring it as finished goods (Deterpinated/ fractionated Mentha Oil) and wrongly claiming benefit of area based exemption and irregularly passing on a Cenvat credit to the purchaser. Goods are further exported by M/S Jindal Drugs Limited as merchant exporter claiming rebate of duty paid. SCN has been issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 time of refund and also by periodical inspections, the Department can detect the acts of cheating, if any, indulged by the industries. There are investigatory and regulatory mechanism envisaged under the Central Excise Act, which can effectively take car e of the above instances of malfeasance and misfeasance. Merely because there are strong instances of misuse, it would not be a valid ground to call it in public interest to partially withdraw the concessions. 10. The learned counsel relied upon the decisions of Gujarat High Court in the case of SAL Steel Ltd. -vs- Union of India, reported in 2010 (260) E.L.T. 185 (Guj.). A particular, reference is made to the observations in paragraph 9 of the judgment of Hon ble DA Mehata, J. The vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Kutch region were wanting to pay maximum amount of duty in cash so that refund of the entire amount can be claimed. A study was undertaken to verify this aspect and find out percentage of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 attendant provisions like penalty, etc., but also in relation to the entitlements of an Assessee. This provision, namely, Section 38A of the Act incorporates in the statute the principle of a completed contract between the parties, whereunder the parties are obliged to fulfil their respective part of the concluded contract, and in case of failure, the Court may step in and direct the defaulting party to specifically perform his part of the promise. To put it differently, one may s ay that the principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pel 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 that none is concerning to the object which was at the time of formulation of the policy or achievement of the said object. On the aspects of public interest, the ground as sought to be canvassed is that the duty paid in such area where incentive provided was higher in comparison to the other places and it was orally contended by the learned Additional Solicitor General that such would s how that the exemption policy was being misused or there were manipulations for getting the refund. The contention considered in either way may at the most attract for initiation of the action in accordance with law against the industry concerned, if there is manipulation or abuse of the policy. Even if it is considered that some units had misused or had abused the policy, the same can hardly be said to be a valid ground for withdrawing the benefit conferred upon the bona fid e industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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 i s very important. Government offers certain benefits to attract the entrepreneur s and the entrepreneurs act on those beneficial offers. Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the short sightedness of the governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellant-Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith. 12. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dross is their main input. As per a Supreme Court judgment, the zinc dross is not an excisable product. Therefore, the zinc oxide manufacturers in other part of the country are require d to pay almost full duty in cash as no CENVAT Credit is available to them on the zinc dross. But units manufacturing zinc oxide in J K even though they pay same amount of duty, get refund of full duty and also recover the duty amount from customers and this results in making the produce of other units totally uncompetitive. This is explained with the following data: Cost of Zinc dross - Rs.160 per kg Value addition to make Zinc Oxide - Rs.13 per kg Excise duty - ₹ 27 per kg Hence, a manufacturer in J K is able to get excise duty exemption of ₹ 27 per kg, as against value addition of ₹ 13 per kg and their product becomes c heaper by ₹ 27/- per kg a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 90 31 7. Soap Detergent 117 73 190 64 47 8. Article of plastic 48 12 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Bar, it becomes very essential for this Court to determine whether there is prompting of public interest involved in the modified notifications. 19. The State does not dispute the Industrial Policies of 1997 and 2007 and also the grant of concession pursuant to the said notifications. However, the dispute revolves round the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion requires a thorough compliance of formalities and c heck up by every Department. The industries, in question, have complied with all the requirements of law and have set up industries and all of them have started production. The allegation of misuse, if really a genuine ground, it would have come to the notice of the Department much earlier before the declaration of the second Industrial Policy in the year 2007, the modified notifications are brought into force within a short span of time. If really there is any infringement or misuse or malpractice, the State would have given serious attention and would not have issued the second Industrial Policy of 2007 in haste. Within a span of a year after the issuance of notification of Industrial Policy of 2007, the change in the stand to withdraw the concessions does not appear to be sound and proper and the grounds made out are so feeble and fragile which do not offer a concrete objective material for this Court to believe that really superior public interest prompted the issuance of modified notifications. 24. For the reasons and discussions made above, we find no reason to interfere with the order of learned Single Judge. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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