TMI Blog2019 (11) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... tes in terms of para 3(ii) and 3(iv) dated 22.6.2004 were issued after proper deliberation and verification and after obtaining full report from the jurisdictional Commissioner office. Thus, the Appellants cleared the goods under valid certificate - Once, an admitted fact is that the Appellants were holding eligibility certificate issued by the Committee as per the notifications, proceedings initiated to deny exemption are bad in law and same is liable to be set aside. In the facts of the present case where the Committee already applied its mind before issuing the certificate and nearly took one year to grant the same after seeking full verification report from the jurisdictional excise office, the jurisdictional excise office including investigating agency has no jurisdiction whatsoever to initiate fresh inquiry and deny the benefit of notification. Impugned order is thus contrary to law and is liable to be set aside. Power of review - HELD THAT:- It is well settled that no court or authority has inherent power of review. The power of review has to be specifically conferred on the authority. There is no such power conferred on committee under the notification to review such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not otherwise. CBEC vide Circular No.842/19/2006-CX Dated 8.12.2006 had clarified Section 11B of the Central Excise Act, 1944 would not apply to refund granted under Notification No.39/2001-CE Dated 31.7.2001 - Thus, entire proceedings to recover erroneous refund by invoking Section 11A of the Central Excise Act, 1944 is incorrect. The recovery if any has to be strictly in accordance with the machinery provided under Notification. Since the cancellation of certificate is not with the authority of law on that basis demand was not sustainable - the demand of refund confirmed by the adjudicating authority is upheld on the concession made by Ld. Senior Counsel, the penalty imposed under Section 11AC and interest demanded under Section 11AB are set aside. Penalty u/r 26 of CER, 2002 - HELD THAT:- There is no malafide on the part of the appellant company in taking the benefit of Exemption Notification, the director for the same reasoning cannot be penalized - Hence the penalty imposed upon him under Rule 26 of Central Excise Rules, 2002 is set aside and appeal of Director is allowed. Appeal allowed in part. - Excise Appeal No. 615 of 2010, 616 of 2010 - A/12225-12226/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate to their grinding unit in terms of Notification No.39/2001-CE Dated 31.7.2001. The appellant along with the letter dated 03.02.2003 submitted to the department evidences as regard to possession of land by the appellant, bhoomi poojan, foundation stone laying down ceremony and also certificates from various persons. The department vide letter dated 25.02.2003 asked the appellants to submit various documents including Memorandum Article of Association, List of Directors, Project Report, Factory Plan, Resolution, NOC from GPCB, Copy of IEM, Certificate from CA as required under Notification No.39/2001-CE dated 31.7.2001, Declarations as per Notification and Trade Notices issued from time to time. The appellant vide letter dated 25.03.2003 filed declaration in terms of Notification No.39/2001-CE and intimated that commercial production of the new grinding unit will commence from 28.03.2003. The appellant vide letter dated 28.03.2003 submitted to the Chief Commissioner of Central Excise all the details and documents sought by them vide letter dated 25.02.2003. The documents furnished by the appellant vide letter dated 28.03.2003 were forwarded by the Additional Commissioner (CCO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no relevance as it is mere addition to the old unit and cannot be termed to be new unit. These facts were duly communicated to the issuing authorities much before the date and certificate was issued. Vide letter dated 13.06.2003 Additional Commissioner of Central Excise (CCO) called for all the records lying in Range and Division related to the appellants application for exemption certificate from the Commissionerate of Central Excise, Rajkot. Assistant Commissioner of Central Excise, Division Bhuj vide letter dated 20.06.2003 informed the Additional Commissioner (CCO) that the machinery bought for cement was kept idle by the Appellant in their clinker unit. Further vide letter dated 27.06.2003, it was informed that the machineries were not erected or installed at clinker unit but were shifted at grinding unit by M/s Jay Kumar Erector and Fabricator on contract basis after getting clearance for acquisition of land from State Government. The chief Commissioner of Central Excise vide letter dated 26.03.2003 exchanged his comments on application with Principal Secretary, Industries and Mines Department. It was informed that original clinker project was started in 1995 itself and part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.2001 can be considered as eligible machineries for the purpose of excise exemption for grinding unit. In reply to the said letter dated 31.03.2004, the Additional Commissioner (CCO) vide letter dated 20.05.2004 intimated that the Chief Commissioner (CCO) proposed to issue certificate for eligible machinery valued at ₹ 28,06,91,571/- and that the issue of inclusion for machinery purchased prior to 31.07.2001 may be referred to Government of India. Pursuant to the above letter dated 20.05.2004, the Principal Secretary agreed to sign the certificate. On 22.06.2004 the appellant received certificates dated 21.06.2004 issued in terms of para 3(ii) and 3(iv) of Notification No.39/2001-CE Dated 31.7.2004 for both clinker unit and grinding unit. On the strength of aforesaid certificate, the appellant were allowed refund in terms of Notification No.39/2001-CE Dated 31.7.2001 for the period 2003-2004 to 2007-2008. Subsequently on 24.01.2006, the factory premises of the grinding unit was searched by officers of DGCEI. Simultaneous search was also carried at the premises of clinker unit. During the course of investigations the statements of various persons were recorded by the officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ker and grinding unit as one. d) Civil construction work at grinding unit commenced in 1996 itself. e) During the litigation period itself the construction work started. f) Various status reports conclusively proves that the construction work at grinding unit was on goring prior to 31.07.2001 and that civil construction work re-started in November 2000. g) Manipulated certificates were presented before the authorities for obtaining the certificate for exemption under Notification No. 39/2001-CE. 1.5 The appellant filed detailed reply to SCN dated 14.11.2007. Additional Submissions were made by the appellant vide letter dated 25.09.2009. The Additional Commissioner of Central Excise vide impugned order dated 12.01.2010 confirmed the demand raised in the show cause notice and also imposed penalty for an equivalent amount under Section 11AC of the Central Excise Act 1944. Being aggrieved by the impugned order, the appellant filed the present appeal. 2. Shri V. Sridharan, Learned Senior Advocate along with Shri Anand Nainawati, Shri Jigar Shah, Miss Priyanka Kalwani (Advocates) appeared on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of investment and such a certificate shall be produced within a period of one month from the date of commencement of commercial production, or such extended period as the said Assistant Commissioner or Deputy Commissioner may allow. (v) In case on the basis of such certification, or otherwise, the original value of investment in plant and machinery, (a) is found to be less than rupees twenty crore but was declared to be rupees twenty crore or more, the manufacturer shall be liable to pay back the entire amount of duty exemption availed under the notification along with interest at the rate of twenty four per cent. per annum as if no exemption were available; or (b) is found to be less than the declared value and was declared to be below rupees twenty crore, the manufacturer shall be liable to pay duty on the goods cleared, if any, in excess of twice the actual value of original investment in each of the years during which exemption has been claimed under this notification along with interest at the rate of twenty four per cent. per annum, as if no exemption were available to those clearances under this notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is liable to be set aside. In the land mark judgment of the Hon ble Supreme Court in the case of East India Commercial Company Ltd. vs. Collector of Customs, Calcutta, reported in 1983 ELT 1342 (SC), [copy of decision from Page no.8 to 23 in Volume-II of compilation] Supreme Court had occasion to deal with a situation where the person had obtained a licence on misrepresentation of the facts before the licensing authority. In this case, licence was issued for import of certain electrical instruments based on the representation made by the importer. On the basis of licence so obtained, importer made the imports. Subsequently, after the goods were imported, it was noted that the importer had imported the goods on the basis of licence which was obtained from the licensing authority on the basis of misrepresentation of facts. Hon ble Supreme Court held in the matter that there is no legal basis for the contention that the licence obtained by misrepresentation makes the licence non est. It was further clarified that assuming the principles of law of contract apply to the issue of licence under the Act, licence obtained by fraud is only voidable and it remains good till it is v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under the 1993 G.O. In these circumstances the DCCT certainly could not assume that the exemption was wrongly granted nor did he have the jurisdiction under Section 20 of the State Act to go behind the eligibility certificate and embark upon a fresh enquiry with regard to the appellant's eligibility for the grant of the benefits. The counter affidavit filed by the respondents-sales tax authorities is telling. It is said that the Sales Tax Department had decided to cancel the eligibility certificates for sales tax incentives. As we have said the eligibility certificates were issued by the Department of Industries and Commerce and could not be cancelled by the Sales Tax Authorities. [See in this connection: Apollo Tyres vs. CIT Kochi, (2002) 9 SCC 1.) 23. There is another reason why the action of the DCCT cannot be upheld. The primary facts relating to the processes undertaken by the appellant at its unit were known to the Department of Industries and Commerce and the DCCT. The only question was what was the proper conclusion to be drawn from these. The Department of Industries and Commerce which was responsible for the issuance of the 1993 G.O. accepted the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot retrospective. Therefore, on this ground alone the eligibility of the Appellants to avail exemption cannot be questioned. 2.12 In any case, Notification No.39/2001-CE does not provide for cancellation of certificate once issued. In other words there is no power of review conferred on the Committee to revoke certificate subsequently. 2.13 It is well settled proposition of law that power to review has to be specifically conferred on the authority. Authority cannot presume such power. In other words, merely because Committee has power to issue certificate does not confer automatic power to them for cancelling such certificate. Such power has to be conferred by law upon them. The reliance is placed on the following decision in support of the aforesaid submissions: a) Madras Rubber Factory Ltd. Vs. ACCE 1981 (8) ELT 565 (Mad) b) Hanil Era Textiles Ltd. Vs. UOI-Hon ble Bombay High Court Order Dated 23.2.2011 in W.P NO. 1718 of 2013 c) Arvind Cotspin Vs. UOI-Hon ble Bombay High Court Order Dated 10.3.2011 in W.P. No.9378 of 2010 2.14 Section 21 of General Clauses Act which provides that power to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit having installed plant machinery after 31.7.2001. Therefore, even if some minor construction work is already being done it will not debar the assessee from claiming exemption. 2.19 In any case, the Appellants have produced on record the certificate of chartered engineer to the effect that all old piling work done has been abandoned and has not been used in new construction. Further, there does not seem to be any gap in chronology of event as pointed out by Ld. Counsel for the revenue. Reliance placed on civil construction details as extracted in OIO clearly demonstrates that the said work was done for clinker unit only. 2.20 The Appellants crave leave to refer and rely upon detailed grounds set out in appeal to rebut the findings of the Ld. Commissioner on this aspect of the submission. There is no suppression of facts by the Appellants. Certificate was issued by Committee after due deliberation and verification. Further, all the facts were within the knowledge of the department. Extended period cannot be invoked. 2.21 Show cause notice dated 14.11.2007 issued to the Appellants seek to recover the refund alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted by the Appellants as well as the comments sought vide letter dated 9.6.2003. Shri. Rishi, inter alia submitted that the Appellants have declared the value of machinery to be ₹ 103,51,37,948/-. It was also stated that the machinery worth ₹ 68,89,55,496/- was imported prior to issue of notification. It was also stated that on verification it was found that certain machine declared installed was not installed and same has to be deducted from total value declared. It was also clarified that since the construction work started in 1995 and the plant and machineries were purchased in 1995 itself therefore the grinding unit is not a new industrial unit. According to Sh. Rishi the fact that grinding unit was set up after 31.7.2001 is of no relevance as it is mere addition to the old unit and cannot be termed to be new unit. Ld. Counsel for the revenue has argued that the said letter by the Ld. Commissioner no where reflects that he was aware of the civil construction at grinding unit before 31.7.2001. The Appellants submit that Ld. Commissioner of Central Excise in his letter very categorically admitted that unit is set up only after 31.7.2001 as per the notification. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore allegation of fraud and mis-statement are incorrect. 2.28 Also, the Appellants paid back the amount of refund not because they accepted the contention of the department but they surrendered it voluntarily to avail sales tax exemption without any dispute. Though in law, the Appellants are eligible for benefit under both the scheme i.e. excise exemption under Kutch Notification and Sales Tax incentive under policy framed by the Government of Gujarat. The Appellants therefore submit that their voluntary act should not be treated as an acceptance of the contention of the department in the show cause notice. The Appellants submit that in law they are entitled for refund of amount already paid back as they are eligible for exemption by way of refund under Notification No.39/2001-CE Dated 31.7.2001. 2.29 In view of the above extended period cannot be invoked in the facts of the present case. 2.30 The Appellants submit that present proceedings initiated against the appellants as recovery of erroneous refund under Section 11A are bad in law. 2.31 The Appellants submit that Notification No.39/2001-CE Dated 31.7.2001 crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11B of the Central Excise Act. It was also held that refund can never be the case of short levy. 2.36 In view of the above, the Appellants submit that proceedings are bad in law and are liable to be set aside. 2.37 In view of the various submissions made above no penalty can be imposed on the Appellants under Section 11AC of the Central Excise Act. There is no suppression of facts by the Appellants, further refund sough to be recovered is not erroneous refund as per Section 11AC of the Central Excise Act. The Appellants further submit that they of their own voluntarily paid back the amount of refund which is available to them in law. Since, issue involved is pure question of interpretation of law penalty under Section 11AC is not imposable. 2.38 Without prejudice to above, the Appellants voluntarily surrendered the refund amount before issuance of Show Cause Notice despite being eligible for the scheme. On this ground alone the penalty should not be imposed on the Appellants. 2.39 The Appellants submit that in law they have rightly claimed the refund and same is not required to be paid back to the government and therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity and the benefit was given for the entire unit i.e. Clinker and Cement Plant. As per the Industries Department of GOG, SIL cannot be considered as a separate new unit under the Kutch package and it would not be eligible for the benefit of Kutch package as a new unit. In fact details received from the said department showed that the High Power Committee of GOG had, in its meeting held on 12.04.2007, unequivocally informed SIL that grinding unit cannot be considered as a separate unit under the Scheme of 1995-2000 and they cannot avail of the benefit of the said scheme as well as the benefit of exemption under Notification 39/2001. By its letter dated 12.06.2007, SIL had informed the CC that they would not like to avail of the benefit of the notification no. 39/2001 as they were informed by the Industries of GOG that they do not qualify for the benefit of excise exemption under the Kutch package. It is clear from the above, that the Industries Department of GOG had taken a decision that SIL cannot be considered as a separate new unit under the Kutch package and it would not be eligible for the benefit of excise exemption as a new unit. This decision was conveyed also to the CC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar allegation in the SCN that the refund was taken by way of fraud, suppression of facts, willful mis-statement and contravention of the provisions of CEA, 1944 and the Rules made thereunder with intent to avail refund erroneously by claiming exemption. [Vide para 21.2 and 21.3 of OIO]. Further, as per the findings recorded by the adjudicating authority in Para 63.5 of the OIO, that the refunds taken by them u/n 39/ 2001 was obtained by way of fraud, suppression of facts, willfull mis-statement and contravention of the provisions of CEA, 1944 and the Rules made thereunder inasmuch as the certificate was obtained by them by making false declarations and suppression of facts with intent to evade duty. Since SIL had been availing of refunds as laid down in the subject notification by way of fraud, suppression of facts, willful mis-statement there was deliberate default on the part of SIL by way of fraud, suppression of facts, willfull mis-statement. The facts leading to and the circumstances of recovery initiated in the present case are, thus, totally different from the one incident in the case of R.C. Tobbacco. Even if the expression, erroneous refund is not applicable to the refun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the LB has relied on two landmark decisions of the Hon ble SC. Hence, mention of erroneous refund in the SCN does not make the SCN invalid. 3.5 No defence was offered with reference to the allegations and findings on fraud . As observed by the Hon ble SC in the case of Commissioner of Customs vs. Essar Oil Ltd. [2004 ELT 172 433 (SC) viz. paras 29 to 44], Fraud and collusion vitiate even the most solemn proceedings in any civilized system of jurisprudence. In the instant case, SIL s act of obtaining the Certificate as prescribed u/n 39/2001 by way of fraud, suppression of facts, and wilful mis-statement has clearly vitiated their availing of the refund by self-credit. Accordingly, its recovery, invoking the proviso to section 11A (1) is not only justified but also legal and proper. 3.6 Payment of duty initially and claiming of the same as refund, as prescribed under the notification is nothing but availment of full duty exemption under the relevant notification. If taking of refund is found to be illegal on account of non-fulfilment of basic condition specified in the notification and is tainted by fraud, suppression of facts, and willful mis-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al No. E/464/2009, E/844/2010 and E/1196/2012 and they prayed for setting aside the penalty and interest on the company and penalty imposed on the Managing Director. The appeal was again relisted for a clarification as the affidavit mentioning in their letter dated 24.10.2019 was not available on record. The matter was heard again only on the limited point of affidavit. Learned counsel Shri Anand Nainawati submitted a copy of the affidavit as a disclaimer of refund of the amount already deposited by the appellant which was taken on record. 4.1 The appellant made various submission on merit as well as on time bar in support of their claim that since the demand is not sustainable the penalty imposed under Section 11AC and demand of interest under Section 11AB will also not sustain. Therefore, first we are taking up the matter on the ground of limitation. We find that the Show Cause Notice for recovery of the refund for the period November 2003 to March 2007 was issued on 14.11.2007 therefore, extended period was invoked. It is the appellant s submission that, the demand itself is not sustainable on the ground of the time bar as there was no suppression of fact, misdec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner vide his letter dated June 2003 submitted to the Chief Commissioner about his factual comments on the documents submitted by the appellants as well as comments sought vide letter dated 09.06.2003. 4.2 It was also stated that construction work started in 1995 and plant and machineries were purchased in 1995 itself, therefore, the Grinding Unit is not a new industrial unit. According to the Commissioner, Grinding Unit was set up after 31.07.2001 is of no relevance as it is mere addition to the old unit and cannot be termed as new unit. The facts were communicated to the issuing authorities much before the date and certificate was issued. After so much deliberation and recording the facts even the contention of the department that in Grinding Unit some work was started before 31.07.2001, considering all these facts the Committee consisting of Chief Commissioner of Central Excise and Principal Secretary of State Government issued the Certificate. Subsequently, the Principal Secretary crossed the certificate and communicated to the Commissioner of Central Excise vide letter dated 16.03.2004 the reasons for not signing the certificate. The Principal Secreta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01, however in the entire verification as discussed above there was recorded fact before the Chief Commissioner as well as principle Secretary of State that some construction was started before 31.07.2001 and some of the plant and machineries were also received prior to that date, therefore, there is no substantial new facts was brought on record in the investigation of the DGCEI Officer. In this position, there is absolutely no suppression of facts or mis-declaration on the part of the appellant hence the extended period was illegally invoked for issuance of the SCN. Since, the demand is not sustainable on the ground of the time bar itself, there is no question of imposition of penalty under Section 11AC and the demand of interest under Section 11AB of the Central Excise Act, 1944. 4.3 Without prejudice to our above finding, we also intend to deal with the issue raised by the appellant that whether the cancellation of certificate by the Chief Commissioner is legal and correct. In this regard the appellant vehemently argued and made a written submission citing various judgments that a cancellation of certificate is arbitrary without following the law hence on that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of mis-representation of the facts. The Hon ble Supreme Court considering the fact held that in the matter that there is no legal basis for the contention that the license obtained by misrepresentation makes the license non est. In the present case also when the eligibility certificate was issued by the competent committee, the certificate was valid and the same cannot be non est. Somewhat the identical issue was dealt by the Hon ble Supreme Court in the case of Vadilal Chemicals Ltd. (Supra) as per the fact of the said case, the assessee was eligible for tax scheme. For this purpose state level committee was constituted who supposed to decide the eligible investment and sanctioning of incentives. The assessee was issued such certificate and benefit was being claimed by the assessee. Subsequently, the exemption was sought to be denied by the sales tax department. The Hon ble Apex Court precisely held as under:- The Department of Industries Commerce having exercised its mind, and having granted the final eligibility certificate (which was valid at all material times), the Commercial Taxes Department could not go beyond the same. More so when the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority without such authority, authority cannot presume that they have power to review therefore, the cancellation of certificate is not legal and proper in the facts of the present case. 4.4 Without prejudice to the above, we are of the view that even if revocation of certificate is required the same can be effective prospectively as the issuance of eligibility certificate is valid, therefore, the revocation cannot be effective retrospectively as held by the Hon ble Supreme Court in the case of Kazi Lhendup Dorji (supra). 4.5 With our above observation, we are of the view that since the cancellation of certificate is not with the authority of law on that basis demand was not sustainable. 4.6 As per our above discussion, we are of the view that since the recovery of refund is not sustainable on both the above findings, the consequence of imposition of penalty and demand of interest will also not follow. Accordingly, though we hold that the demand of refund confirmed by the adjudicating authority is upheld on the concession made by Ld. Senior Counsel, the penalty imposed under Section 11AC and interest demanded under Section 11AB are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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