TMI Blog2019 (6) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - W.P. (C) No. 354 of 2014 with W.P. (C) Nos. 355-356 of 2014 - - - Dated:- 9-10-2018 - Ajay Rastogi, CJ. and Arindam Lodh, J. Dr. Ashok Saraf, Senior Advocate, S/Shri S. Tyagi, P. Baruah and K. Roy, Advocates, for the Petitioner. Shri Bidyut Majumder, CGC, M. Debbarma, Additional GA, Paramartha Datta and T. Debbarma, Advocates, for the Respondent. ORDER [Order per : Ajay Rastogi, CJ.]. - Since a common question of law and facts have been raised in the present batch of writ petitions, the same are being decided by the present order. 2. Petitioner is primarily aggrieved by the unilateral decision of the Investment Appraisal Committee (hereinafter referred to as Committee ) held in its meeting dated 4-4-2014 and 17-4-2014 disallowing certain investments which were m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 1-3-2001. 6. Thereafter, the Parliament enacted Section 154 of Finance Act, 2003 stipulating therein that the Central Government in exercise of powers amended the two notifications dated 8-7-1999 aforementioned with retrospective effect. Though the exemptions granted under the aforesaid two notifications dated 8-7-1999 at one stage indicated above withdrawn the above exemptions which had been earlier withdrawn once again restored in respect of certain exigible goods including Pan masala vide notification dated 25-8-2003 was a partial but conditional restoration of the exemption of Central Excise duty to the extent of 50% of the duty payable. 7. It was stipulated that the exemption would be subject to certain conditions and would be available only in respect of units that are located in the seven North Eastern States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura and for those units where commercial production commenced on or after 24-12-1997 but not later than 28-2-2001 further the unit should have continued its manufacturing activities after 28-2-2001 and should have availed of the benefit under Notification Nos. 32/99-C.E. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as specified in the corresponding entry in column (2) of the said Table - (a) from so much of the duty of excise specified thereon under the First Schedule to the said Central Excise Tariff Act, (hereinafter referred to as the basic excise duty), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table; (b) from so much of the special duty of excise specified thereon under the Second Schedule to the said Central Excise Tariff Act, (hereinafter referred to as the special excise duty), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (5) of the said Table; (c) from so much of the duty of excise specified thereon under the First Schedule to the said Additional Duties of Excise Act, (hereinafter referred to as the additional excise duty), as is in excess of the amount calculated at the rate specified in the corresponding entry in column (6) of the said Table; subject to the following conditions, namely, - (A) the exemption under this notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of two weeks from the date of issue of such certificate, to the jurisdictional Central Excise Officer; (F) the investment made under this notification shall not be allowed to be withdrawn before the expiry of ten years from the date on which the investment is made except in a case where the investment withdrawn is reinvested in the same manner as specified in this notification, in any one of the States mentioned in condition (A) : Provided that if the investment made under this notification is withdrawn before the expiry of ten years and is not reinvested as mentioned above, the duty which is equal to the amount so withdrawn and not so reinvested, shall be paid by the manufacturer on the date on which the investment is withdrawn. TABLE S. No. Sub-heading No. Description Basic excise duty Special excise duty Additional excise duty (1) (2) (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1999 and continued its manufacturing activities after 28-2-2001 from an amount equal to the sum of basic excise duty, special excise duty, additional excise duty and National Calamity Contingent duty with a condition that exemption in the notification shall be utilized by the manufacturer for investment in (i) plant and machinery in a manufacturing unit which is located in the seven North Eastern States including Tripura or (ii) infrastructure or civil works or social projects in the seven North Eastern States including Tripura. 11. The notification dated 21-1-2004 is reproduced ad infra :- 21st January, 2004. Notification No. 8/2004-Central Excise In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), and sub-section (3) of section 136 of the Finance Act, 2001 (14 of 2001), and in supersession of the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 69/2003-Central Excise, dated the 25th August, 2003, published ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth after the expiry of the period of six months referred to in condition (C), to a Committee consisting of, the Chief Commissioner of Central Excise, Shillong, the Principal Secretary of the Department of Industry of the State concerned, in which the unit is located and the Principal Secretary of the Department of Industry of the State in which the investment is made, and shall have to prove to the satisfaction of the said Committee that the investment has been made for the purpose specified in condition (B); (E) if the Committee referred to in condition (D) is satisfied that the investment as specified in condition (B), has been made, it shall issue a certificate to this effect to the manufacturer within a period of three weeks after the expiry of the one month referred to in condition (D), which shall be produced by the manufacturer, within a period of two weeks from the date of issue of such certificate, to the jurisdictional Central Excise Officer; (F) the investment made under this notification shall not be allowed to be withdrawn before the expiry of ten years from the date on which the investment is made except in a case where the investment withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndments in Condition Nos. C, D E of its notification dated 21-1-2004. Primarily, the sectors for investment by the manufacturer in terms of Condition No. (B) remain the same which is (i) plant and machinery or (ii) infrastructure or civil works or social projects in the seven North Eastern States including the State of Tripura but the procedure for investment has undergone a material change and appears to be introduced with intention to put the reasonable check and balances and to encourage the manufacturer/entrepreneur also to invest hassle free, at the same time, interest of the revenue be safeguarded. Keeping those prime considerations in mind, the amendments were made by the Central Government under its notification dated 9-7-2004 which is reproduced ad infra :- Notification New Delhi, dated the 9th July, 2004. No. 28/2004-Central Excise G.S.R. (E). - In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 136 of the Finance Act, 2001 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement, within sixty days from the end of the relevant quarter to a Committee, consisting of the Chief Commissioner of Central Excise, Shillong, the Principal Secretary in the Department of Industry of the State concerned in which 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); (E) if the Committee referred to in condition (D) is satisfied that the investment as specified in condition (B), has been made, it shall issue a certificate to this effect to the manufacturer within a period of one month from the receipt of the details as referred to in condition (D), and on the issuance of which, the lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount specified in Condition B within the stipulated period and in the manner as prescribed the duty which is equivalent to the amount not so deposited or invested shall be recoverable from the manufacturer along with interest thereon at the rate specified under Section 11AB of the Central Excise Act, 1944 without prejudice to any action which may be taken by the revenue under the provisions of the Act or any other law for the time being in force including forfeiture of the amount in the said escrow account. 15. It is pertinent to mention herein that in the meantime, the earlier Notification No. 69/2003 and Notification No. 8/2004 dealing with the time period for making withdrawal applications and investments, were amended with retrospective effect vide Section 72 of the Finance Act, 2011, which came into force on 8-4-2011 and the time period of investment to be made within six months, as provided in the Notification No. 69/2003 with an increase of time period for two years, provided in Conditions C D of the Notification No. 8/2004-C.E. was replaced by four years. The scheme was ended on 31-12-2012 and in terms of the scheme, the committee was to verify the records on o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the respondents against the order of the High Court of Gauhati in WP (C) No. 1174/2013, dated 7-8-2013 also came to be disposed of by the Apex Court vide order dated 28-3-2014. 18. Indisputably, in the instant case, the withdrawals and investments are being made with the prior approval of the Jurisdictional Commissioner of Central Excise on whom the duty has been casted being a watchdog to safeguard the interest of revenue under notification dated 9-7-2004 but when the quarterly statements are being furnished to the committee with reference to the amount withdrawn from the escrow account and the investments made in either of relevant sectors (i) plant and machinery or (ii) infrastructure or civil works or social projects in the seven North Eastern States including Tripura as specified in Condition B, to record satisfaction and issue a certificate to this effect to the manufacturer to be discharged from the liability to the extent of investments so certified and if the manufacturer fails to make deposit or does not invest the amount specified in Condition B before the stipulated period or in the manner prescribed, the duty which is equivalent to the amount not so depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in the High Court of Gauhati has been decided holding that the decision has been taken by the committee without complying the principles of natural justice and not sustainable in law. Taking note thereof, the SLP was disposed of with an observation to keep the interim order of this Court dated 27-8-2014 in abeyance with a direction to the High Court to decide the writ petition as early as possible and preferably within a period of three months. 21. The main thrust of the submission of counsel for the petitioner is that the selfsame controversy and in reference to the three notifications issued by the Central Government dated 25-8-2003 which has been superseded vide later notification dated 21-1-2004 followed with amendments made vide notification dated 9-7-2004 has been examined by the High Court of Gauhati in the case of the present petitioner and the investments were indisputably made under the identified sectors in terms of Condition B of the notification with prior approval of Jurisdictional Commissioner of Central Excise in the State of Assam and on the investments being disallowed unilaterally by the committee and demand notices in furtherance thereof was assai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made but despite petitioner s persuasion the respondents are not taking precedence of the interpretation made by the High Court of Gauhati and at least in the light of the view expressed by the High Court of Gauhati the minutes of the meetings of committee dated 4-4-2014 and 17-4-2014 and issuance of demand notices in furtherance thereof is indeed a prejudicial action against the petitioner which has been taken without affording opportunity of hearing and is indeed in violation of principles of natural justice and keeping in view the decision of the High Court of Gauhati in the case of the petitioner, at least the minutes of the committee and the consequential demand notices impugned in the instant case is not sustainable in law and deserves to be quashed. 24. Counter affidavit has been filed by the respondents and the defence of the respondents in substance is that the committee has concluded its business in apprising of the investments made by the petitioner for recording its satisfaction in terms of the notifications dated 25-8-2003, 21-1-2004 and 9-7-2004 and keeping in view the directions of the Apex Court in SLP (C) No. 31756/2013, dated 24-1-2014 to the committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner remains a useless formality and not going to serve any purpose and that has not been looked into by the High Court of Gauhati while passing the judgment relied upon by the petitioner. 27. We have considered submissions made by the counsel for the parties and with their assistance perused the materials on records. 28. The indisputed facts which have come on record are that the withdrawals/closure from the escrow account and investments were made within sixty days of its withdrawal in the sectors which are specified under Condition B of the notifications; (i) plant and machinery, or (ii) infrastructure or civil works or social projects in the seven North Eastern States including the State of Tripura in reference to which exemptions are being extended by the Central Government under its notification issued in exercise of powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 dated 25-8-2003 and in its supersession vide further notification dated 21-1-2004 with certain amendments made under Conditions C, D E vide notification dated 9-7-2004 with the prior approval of the Jurisdictional Commissioner of Central Excise. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Notification, dated 9-7-2004, promises exemption from payment of excise duty if a manufacturer, who is, otherwise, eligible to make investment under the Notification, dated 21-1-2004, invests such sum of money, as he may be liable to pay as excise duty, or additional duty of excise, or special excise duty, etc., in plant and machinery , in a manufacturing unit or in infrastructure , or civil works , social projects , which are mentioned in the Notification, dated 9-7-2004. Having so invested the money with the permission of the jurisdictional Commissioner, the manufacturer is required to satisfy the IAC that he not only has made the investment , as claimed by him, but also that he has invested the money for a purpose, which meets the conditions embodied in Clause (B) of the Notifications. It is easily understandable that a manufacturer, if honest, would be hesitant to make investment freely unless he is satisfied that he would receive refund of the amount, which is invested by him. For this purpose, it was not only necessary that the manufacturer be sure that he was investing money in any of the four categories of specified activities, but he be also sure that the IAC w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the scheme of exemption, which can sit on the wisdom of the decision of the jurisdictional Commissioner. 34. It needs to be clearly understood that before the scheme, dated 9-7-2004, came into force, the IAC was required to do both, namely, enquire if the investment had, at all, been made, and, if so, whether the investment was for a purpose mentioned in the Notification. If, on such enquiry, it was found that the investment had been made for a purpose other than what the Notifications, dated 21-1-2004, had envisaged, the IAC was not required to undertake any further exercise to determine if the manufacturer had or had not really invested the amount as claimed by him. Thus, the manufacturer was required to make, under the earlier Notification, dated 21-1-2004, investment , at his own peril and without knowing as to whether his investment would or would not be allowed as an investment within the meaning of the scheme of the Notification. Howsoever honest may be a manufacturer, the fact remains that any such kind of scheme, which the Notification, dated 21-1-2004, had embodied, could have, many a times, led to a serious controversy and dispute inasmuch as it m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whether the investments , so made, fall under any of the permissible categories of investments or not, would be a valid exercise of power under the notification, dated 21-1-2004. This exercise of power is subject to a caveat and the caveat is that if the IAC finds that an investment or some of the investments are not covered by any of the categories, mentioned in the Notification, dated 21-1-2004, it cannot straightway reject the investments as not certifiable. The principles of natural justice bind the IAC to give a notice to the manufacturer to show cause, clearly specifying, in the notice, as to why the investment is, in the considered view of the IAC, not an investment made in any of the allowable projects. 169. Coupled with the above, even though the IAC finds, in a given case, that the investments , claimed to have been made, are of doubtful quality, it cannot straightway reject such investment as an investment , which is not certifiable. When the IAC finds that the claim of investment is of doubtful quality , the opinion, which it so forms, or the view, which it so takes, must be treated as a tentative finding or opinion of the IAC and the IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure . India s North East is a part of a great tropical rainforest that stretches from the foot-hills of the Himalayas to the tip of the Malaysian Peninsulas and the mouth of the Mekong River as it flows into the Gulf of Tonkin. It is popularly known as seven sisters . The region shares international borders with Bangladesh, Burma, Tibet, China and Bhutan. The region is home to multitudinous ethnic groups, numbering more than fifty, with one-fourth of all the languages and dialects spoken in the country. Its peculiar topography-hills, rivers, swamps, dales, and jungles and salubrious climate also demarcate it from the rest of mainland India. In a country with enormous diversity, the North Eastern region comprising eight States including Sikkim is an important geographical entity. This region s development is impeded by certain inherent difficulties such as inadequate infrastructure, adverse climate conditions and mountainous landscape. The region s peace and social life is often disturbed by border clashes and ethnic tensions. However, the region is endowed with rich bio-diversity and natural resources. 33. The data reveals that the economic condition of the North East par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. But it appears that further necessity arose that to streamline and to make the scheme effective and more viable, hassle free and convenient with full of transparency protecting the rights of law abiding manufacturers who were willing to make investments under the notified sectors for the purposes of availing exemption from excise duty in the seven North Eastern States including Tripura made amendments under Conditions C, D E vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the investments made by the petitioner in the sectors indicated in Condition B of the notification. 40. As there was an obligation in Condition D of the notification dated 9-7-2004 to submit quarterly statements to the committee in which details of withdrawal from the escrow account and investments made during the quarter, petitioner complied with the Condition D and submitted all the documents of the quarterly statements as required to the committee, earlier the committee has not proceeded and for which the petitioner was to approach this Court by filing of WP (C) No. 111/2013 and after the interim order of this Court which came to be further challenged before the Apex Court and only thereafter the committee proceeded to examine the records and since the final benefit of exemption could have been availed by the petitioner only after the certificate being issued by the committee the only option available with the petitioner to adopt the legal recourse in calling upon the committee to examine and record its satisfaction over the records furnished by the petitioner. 41. The committee disallowed certain investments made in its meetings held on 4-4-2014 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 45. To further clarify that the Central Government intended to call upon the entrepreneurs/manufacturers to invest money in the seven North Eastern States in the sectors identified under the notification for industrial growth and to gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples of natural justice and since it has been elaborately dealt with by the High Court of Gauhati, we need not consider appropriate to further elaborate and reiterate the same. 48. We are also of the view that once the withdrawal has been made from the escrow account and investments are made under the identified sectors specified under Condition B of the notification with the prior approval of the Jurisdictional Commissioner of Central Excise, the committee which has been constituted although is the high power committee of Senior Executives of the Government but that appears to be constituted to keep the overall vigil and to see that the investments must be made by the manufacturers in terms of the approval granted by the Jurisdictional Commissioner of Central Excise in its true spirit and in the relevant identified sectors which are being specified in Condition B of the notification and if there appears any default or there is any misuse of funds or the investments have not been made in terms of the approval granted by the Jurisdictional Commissioner of Central Excise, or some fraud has been committed or with connivance of the authority funds have been diverted for other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e identified sectors under the notification, is still available for satisfaction of the committee but could not to be outrightly rejected by a single stroke of pen, at the same time, if a plant and machinery has been purchased by a manufacturing unit located in the seven North Eastern States, merely if could not be installed or put into operation in the given quarter would not disallow the claim of the manufacturer straightaway. 51. At the same time, the investments made either in infrastructure or civil works or social projects are macro projects with no micro details are provided and there are no guidelines available on records which the manufacturer while taking a decision for investments in plant and machinery or infrastructure or civil works or social projects has to be kept in mind still open for the Jurisdictional Commissioner of Central Excise to record its satisfaction prior grant of approval to the manufacturer but not open to the committee which has been constituted for recording its satisfaction to hold appellate jurisdiction in reference to the investments made by the manufacturer in the seven North Eastern States to overreach/overturn the decision of the Juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in taking action in furtherance of deciding the matters in reference to the instant notifications with a possibility and hope to avoid further litigation. 55. There could be a situation where we could have directed the petitioner to be afforded a post-decisional hearing but in the instant case, that may not be possible for the reason that the committee has expressed its view without affording an opportunity of hearing and in violation of the principles of natural justice and after the view has been expressed by this Court it has to be revisited by the committee in the first instance and affording a post-decisional hearing to the petitioner may not be advisable and in our considered view, the petitioner has made out a case not only for setting aside the demand notices but the minutes of the meetings of the committee dated 8-4-2014 and 1-5-2014 which was made to be the basis for raising demand against the petitioner impugned in the instant proceedings. 56. The writ petitions accordingly succeed and are allowed. The minutes of the meetings of the committee dated 8-4-2014 and 1-5-2014 held pursuant to meetings of the committee dated 4-4-2014 17-4-2014 respectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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