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TMI Blog2018 (7) TMI 1999X X X X Extracts X X X X X X X X Extracts X X X X ..... onal excise duty, in respect of certain goods manufactured in the specified areas in the North Eastern Region of India. The exemptions were made applicable to such manufacturing units which were established after 24-12-1997 and manufactured any of the goods mentioned in the 1st and 2nd Schedule to the Central Excise Tariff Act, 1985 and also to those goods which were specified in the Schedule to the Notifications. A further provision was that in order to avail the benefits the manufacturing units be located in any of the seven north-eastern States, which apparently also includes the States of Assam and Tripura. 4. By a subsequent Notification No. 45/99-C.E., dated 31-12-1999, the earlier two Notifications of 8-7-1999 were amended and tobacco related products, including pan masala, were excluded from the purview of the exemptions. By the later Notification dated 17-1-2000, the exemptions granted earlier were restored, but by the further Notifications dated 22-1-2000, and 1-3-2001, the exemptions were again withdrawn. 5. The exemptions granted and the withdrawal of the exemptions effected as indicated above, culminated in the Notification No. 69/2003-C.E., dated 25-8-2003 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ptions are available in respect of the Units located in the seven States in the North-Eastern Region (NER), which had commenced commercial production on or after 24-12-1997, but not later than 28-2-2001 and had availed the benefits under the Notifications dated 8-7-1999 and further that the investments equivalent to the excise duty and additional excise duty payable were made before expiry of six months from the end of each quarter and that the details of such investments were placed before the IAC for its acceptance and issuance of the certificate. 7. Thereafter, the Notification No. 28/2004-C.E., dated 9-7-2004 was issued. The said notification was also issued under Section 5A(1) of the Central Excise Act of 1944, read with Section 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Section 136(3) of the Finance Act, 2001. The Notification of 9-7-2004 accordingly amends the earlier Notification of 21-1-2004. 8. While retaining the conditions of exemption that the units be located in the seven States of NER, and had commenced commercial production on or after 24-12-1997, but not later than 28-2-2001 and had availed the benefits under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acturer, thereupon, shall prove to the satisfaction of the IAC that the investments were made for the purpose specified in condition B of the Notification dated 21-1-2004. 10. The IAC, thereupon, if satisfied that the investments were made as required under condition B of the Notification dated 21-1-2004, shall issue a certificate to that effect to the manufacturer whereupon the manufacturer shall stand discharged from payment of excise duty to the extent of investment so certified. 11. If in the event, the manufacturer fails to make the deposit in the escrow account, or does not invest the amount equal to the duties payable within the stipulated period and in the manner provided, an amount equivalent to the amount not so deposited or invested shall be recoverable from the manufacturer along with interest specified in Section 11AB of the Central Excise Act, 1944, without prejudice to any further action that may be taken under the said Act, or any other law in force for the time being, by forfeiture of the amount deposited in the escrow account. 12. From the aforesaid provision of the Notifications dated 21-1-2004 and 9-7-2004, what is discernible is that the manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the unit is located and the Principal Secretary in the Department of Industry of the State in which the investment is being made, giving details of deposits made in and withdrawal made from, the escrow account, along with details of investment, made during the quarter; (ii) provide all details relating to the investment made in terms of condition (B), not later than one month after the expiry of the period of two years referred to in condition (C), to the said Committee; (iii) prove to the satisfaction of the said Committee that the investment has been made for the purposes specified in condition (B);" 16. As provided under condition C(ii) of the notification dated 9-7-2004, the petitioner was allowed to withdraw certain amount from the escrow account for making investments as required under condition B of the notification dated 21-1-2004. Upon such investments being made, the details thereof were placed before the IAC, which was considered in its meeting held on 24-12-2012. 17. As per the minutes of the IAC of 24-12-2012, an investment amounting to Rs. 18,66,86,576/- out of the total claim of investment submitted by the petitioner stood rejected. Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the respondent authorities. 22. In the judgment and order dated 6-10-2010 in Dharampal Satyapal Ltd. (supra), in paragraphs 30 to 35 it has been held as under : 30. What is, now, of prime importance to borne in mind is that the liability of the manufacturer to satisfy the jurisdictional Commissioner that the withdrawal, sought for by the manufacturer, is for such a purpose as is envisaged by the Notification, dated 9-7-2004, imposes a corresponding duty, on the jurisdictional Commissioner, to ensure that he does not permit any withdrawal by a manufacturer from the Escrow Account unless the withdrawal, sought to be made, is for the purpose of making 'investment' on such a project, which is envisaged and permitted by the notification aforementioned, namely, that the 'investment' is in 'plant and machinery' or in 'infrastructure' or 'civil works', or 'social project'. 31. Once the jurisdictional Commissioner has granted the withdrawal, the manufacturer cannot be penalized except when the withdrawal is proved to be fraudulent or is proved to have been allowed by the jurisdictional Commissioner on extraneous considerations or in collusion with the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the purposes, which are specified under the Notifications. At the same time, it was also necessary that the interest of revenue be safeguarded so that a manufacturer, who invests on a project, which is not covered by the Notifications, does not, having already made such impermissible 'investment', claim exemptions and drags thereby the Central Government into litigation by trying to justify that his 'investment' falls within the scheme of the Notifications. 33. Thus, in order to make the earlier scheme workable, the scheme, introduced later by the Notification, dated 9-7-2004, has brought into picture the jurisdictional Commissioner, who has been vested with the power to allow, or not allow, withdrawal from the Escrow Account. This apart, safeguarding the interest of revenue, all such amounts, which would be claimed as exemption, are required, now, to be deposited in the Escrow Account. No withdrawal from such an account can be allowed by a jurisdictional Commissioner unless the 'investment' sought to be made, is for the purposes as envisaged by the Notifications. Once the jurisdictional Commissioner has allowed an amount to be withdrawn from the Escrow Account for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification. The Central Government is bound by the permission, which the jurisdictional Commissioner grants, even if he exceeds jurisdiction in granting such permission. When he grants permission to make an 'investment', it would be regarded as a valid 'investment'. Even if he exceeds jurisdiction and allows an 'investment' to be made, which is, otherwise, found to be not covered by scheme, it has to be treated as an 'investment' made with the permission given purportedly in exercise of the powers given to a jurisdictional Commissioner by the Notification, dated 9-7-2004. In such cases, the Central Government would be bound by the decision, which the jurisdictional Commissioner has taken. Such a decision would also be binding on the IAC. The IAC cannot, therefore, if an 'investment' has been made by a manufacturer after withdrawing money from Escrow Account with due permission from the jurisdictional Commissioner, re-examine and determine as to whether 'investment', already made, falls within the scheme of exemption notification or not. 23. Further in paragraphs 44 and 141 it has been provided as under : 44. "...... The manufacturer is, now, required to submit the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner for making an 'investment', on a project, in accordance with the notifications. No higher authority, in the scheme of the notifications, exists so far as jurisdictional Commissioner's exercise of power, on the question of withdrawal application, is concerned." 24. What flows from the judgment and order of this Court dated 6-10-2010 in Dharampal Satyapal Ltd. (supra) is that a conjoint reading of the Notifications, dated 24-1-2004 and 9-7-2004 indicates that the scheme provides : (i) In the post Escrow situation the jurisdictional Commissioner has been vested with the power either to allow or not to allow withdrawal from the escrow account and in doing so the jurisdictional Commissioner shall take into account as to whether the proposed investment sought to be made by the manufacturer conforms to the requirements of condition B of the Notification dated 24-1-2004, that is whether such investments are in plant and machinery in a manufacturing unit, or in infrastructure or civil works or social projects, in any of the seven States of NER. (ii) Such interpretation of the role of the jurisdictional Commissioner in allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;The aforesaid role and the respective jurisdictions of the jurisdictional Commissioner and that of the IAC can also be understood from the scheme of the provisions of the Notifications dated 24-1-2004 and 7-9-2004. The Notification of 24-1-2004 envisages only one authority, i.e., the IAC, whereas the Notification 9-7-2004 envisages two authorities, i.e., the jurisdictional Commissioner and the IAC. As the Notification 24-1-2004 envisages only one authority, therefore it was for the IAC to examine and conclude as to whether the investments claimed conformed to the requirements of condition B and also whether such investments were actually made. But the notification of 9-7-2004 having provided a distinctive role to the jurisdictional Commissioner to either allow or not to allow the withdrawal from the escrow account by taking into account the conditions specified in condition B of the Notification [dated] 24-1-2004, it is clearly to be understood that the jurisdictional Commissioner before allowing or disallowing the withdrawal would make a due application of mind and ascertain as to whether the investments sought to be made conforms to the requirements of the condition B. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he jurisdiction to determine as to whether investments claimed conforms to the requirements of condition B. 28. When an authority is required to give his approval, it is also to be understood that such authority makes an application of mind as to whether the matter that is required to be approved satisfies all the requirements of the law or procedure to which it may be subjected. In other words, grant of approval and an application of mind as to whether such approval is to be granted are co-existent and therefore, when an authority grants an approval, it is also to be construed that there was due application of mind that the subject matter approved satisfies all the legal and procedural requirements. 29. In the aforesaid background when an examination of the minutes of the meeting of the IAC held on 25-6-2016 is made in order to arrive at a conclusion as to whether the requirements and procedure indicated above was satisfied in arriving at the decision to reject the claim of investment made by the petitioner, the following are discernible. 30. The IAC in paragraph 2.4 of the minutes records the various observations that it had made as regards the claim of investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of the people and, therefore, unless some capital investment for the benefit of the society is shown, it cannot be construed to be a social project. In paragraph 4.18, the IAC took a view that the jurisdictional Commissioner under clause C(ii) of the Notification was required to approve the withdrawal under a tripartite arrangement and there was no provision for a prior approval of the scheme either by the jurisdictional Commissioner or of the IAC. A view was further taken that under the Notification, the jurisdictional Commissioner was required only to allow the withdrawal from the escrow account and there is no inbuilt provision allowing the jurisdictional Commissioner to check or to verify the investments before allowing the withdrawals and that it is for the IAC to undertake the verification of the investments for issuing the certificate upon being satisfied that they were made in accordance with law. Accordingly, the IAC rejected the investments amounting to Rs. 18,04,77,678/- out of the claimed investment of Rs. 18,66,86,576/-. In other words, except for an amount of Rs. 80,246/- the balance of the amount claimed was rejected. 32. From the said minutes of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm to the requirements of Clause B of the Notification dated 21-1-2004. 35. The said conclusion of this Court having attained its finality and also having been followed in a subsequent Judgment by the Division Bench, which had also attained its finality, the IAC would be disallowed to take the same view once again and reject the investments claimed by proceeding on the premises that the jurisdictional Commissioner has no authority to approve the proposed investments. 36. Further, Clause C(ii) of the Notification dated 9-7-2004 provides that the withdrawal from the escrow account can only be made with prior approval of the jurisdictional Commissioner by taking into account the condition specified in the Notification. 37. As already alluded hereinabove, any act of granting an approval also includes an inbuilt mechanism that such approval can be granted only upon a due application of mind as to whether the approval is to be granted or refused. When the said requirement of application of mind is read along with the provisions of Clause C(ii) of the Notification on 9-7-2004, it is seen that the jurisdictional Commissioner has to take into account the conditions specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also be contrary to the principle of interpretation that a provision of a statute cannot be rendered redundant, while interpreting another provision and both the provisions are to be read in a harmony. A harmonious interpretation of condition C(ii) and D(iii) of the notification dated 9-7-2004, providing for the role of the jurisdictional Commissioner and the role of the IAC, respectively would lead to an irresistible conclusion that upon the introduction of the role of the jurisdictional Commissioner by the notification dated 9-7-2004, the role of the IAC would now stand truncated to some extent, in comparison to the extent of its earlier role prior to the notification dated 9-7-2004, when it was the only authority for examining whether the investments claimed meet the requirement of condition B of the notification dated 21-1-2004. 40. Any other interpretation of the role of the jurisdictional Commissioner vis-à-vis the role of the IAC, allowing the IAC to make an independent assessment and verification as to whether the investments claimed conforms to the requirement of condition B and disallow the same as per its own conclusion, without giving due credence to the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escrow account was allowed. Of course, such interpretation would have to be subjected to the condition that investments sought to be made were approved by the jurisdictional Commissioner. But in the instant case, there is no indication in the minutes of 25-6-2014 of the IAC that where the approval of the jurisdictional Commissioner was in respect of the investment to be made in a particular State, the manufacturer in violation thereof had made investment in another State. 42. As regards the rejection of the investment on the ground that the plants and machineries were not installed and were found in the original packed condition, the provision of the C.B.E. & C. circular dated 25-7-2006, cannot be wholly ruled out by merely providing that the IAC is a statutory authority comprising of senior officials and therefore, it is not bound by the provisions of the circular of the C.B.E. & C. Further, the requirement of the various notifications is that such investments should be made for a period of ten years, meaning thereby that the plants and machineries, where the investments were made, should remain in place for at least ten years. In the absence of any appropriate material bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot merely conclude without any decision that the amount spent on Consultancy Service, TDS, Service Tax and ESI Payment, would not be a part of the investment. In other words, the IAC would have to examine the matter as to whether the investments in the plants and machineries can still be achieved without paying for the related amount in respect of Consultancy Service, TDS, Service Tax and ESI Payment. 47. The IAC had rejected the investment claimed by the petitioner in respect of social project by giving an interpretation that the investment in social project would have to be capital investment for the benefit of the society. Capital investment would have to be understood to be an investment to meet the acquisition price of a capital asset, where the word capital means accumulated goods, possessions and assets used for the production of profits and wealth. When the aforesaid meaning of the expression capital investment is taken into consideration, the reasoning of the IAC that the social project has to be interpreted to mean a capital investment appears to be self-contradictory. On one hand we have the concept of social project, which would mean some activity which would l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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