High Court
Case Details
WP(C) 1174/2013 BEFORE THE HON’BLE MR. JUSTICE I. A. ANSARI THE HON’BLE DR. (MRS.) JUSTICE INDIRA SHAH Judgment and Order {oral} (Ansari, J) We have heard Dr. AK Saraf, learned Senior counsel, for the petitioner, and Mr. R Dubey, learned Standing Counsel, Central Excise Department, appearing on behalf of the respondents. 2. The subject-matter of controversy, raised in the present writ petition, made under Article 226 of the Constitution of India, is substantially covered by the decision of a Single Bench of this Court in the case of Dharampal Satyapal Ltd. & others -vs- Union of India & ors., reported in 2010 (1) GLT 744. The said decision, rendered by the Single Bench, has been upheld and affirmed by the jud gment and order, dated 19-01-2012, passed, in WA Nos. 392/2010 and 395/2010, by a Division Bench of this Court. 3. Before reverting to the decision rendered in the case of Dharampal Satya pal Ltd. (supra), it may be pointed out that the present writ petition has been filed putting to challenge as many as 4 (four) numbers of certificates/reports, dated 31-12-2012, issued by the Commissioner of Central Excise, based on the dec ision of the Investment Appraisal Committee (in short, (cid:28)IAC (cid:29)) indicating to the effect that the IAC has reached a finding that the petitioner company’s claim fo r an amount of Rs. 18,66,86,576.29 is inadmissible as investment. The petitioner alleges that while reaching the finding that its claim for the said sum of Rs. 18,66,86,576.29 is inadmissible as investment, the IAC has not assigned reasons. This apart, neither any notice to show cause was given to the petitioner compan y nor was the petitioner company given any opportunity to have their say, in the matter, by the IAC before the IAC arrived at the said finding and rejected the petitioner company’s claim for treating the said sum of Rs. 18,66,86,576.29 as i nvestment made by the petitioner company within the meaning of the relevant sche me. 4. As a demand notice, dated 26-10-2013, has been issued by the Assistant C ommissioner of the Central Excise on the basis of the above findings of the IAC, the demand notice, dated 26-10-2013, has also been put to challenge in the pres ent writ petition inasmuch as the demand notice, which rests on the findings of the IAC, directs the petitioner company to make payment of excise duty of a sum of Rs. 18,66,86,576.29 along with interest, because the investment, claimed to h ave been made by the petitioner company, stands disallowed by the IAC. The respondents have filed an affidavit resisting the writ petition, whe 5. rein they have contended to the effect, inter alia, that the investment, which h ave been disallowed by the IAC, were not treatable as investments within the Sch eme, which provides for such investments to be exempted from payment of excise d uty. The respondents further contend that no opportunity of showing cause or hea ring was necessary to be accorded to the petitioner company before its claim for investments, having been made under the relevant scheme, were disallowed by the IAC. Whether the respondents’ insistence, on the impugned demand notice, is s 6. ustainable in law, some material facts, as set out hereinbelow, need to be taken into account.
Facts
(i) The petitioner company is engaged in the business of manufacturing of Za rda Scented Tobacco/Pan Masala, containing tobacco, falling under tariff heading 2403 99 30 and 2403 99 10 of the First Schedule to the Central Excise Tariff Ac t, 1985. Pursuant to the North Eastern Industrial Policy, dated 24.12.1997, two notifications, namely, Notification No. 32/1999-CE and Notification No. 33/1999- CE were issued by the Central Government under Section 5A of the Central Excise Act, 1944, granting exemption, on certain goods and units set up in certain area s, from payment of excise duty. (ii) By virtue of Section 154 of Finance Act, 2003, which received Presidenti al Assent on 14.5.2003, exemption from payment of central excise, in respect of Cigarette and Pan Masala, containing tobacco, was withdrawn retrospectively with effect from the date of issuance of the relevant notifications, dated 8.7.1999. However, exemption of Central Excise in respect of Chewing Tobacco, was withdra wn retrospectively with effect from 1.3.2001. Section 154 of Finance Act, 2003 a lso provided for recovery of the amount of central excise not paid by the manufa cturers, because of exemption from payment of central excise duty. The said reco very, in the light of Section 154 of the Finance Act, 2003, was required to be m ade along with interest accruing thereon. (iii) By Notification No.69/2003-CE, there was a partial but conditional resto ration of the exemption, which had been withdrawn vide Notification No.6/2001-CE and Section 154 of the Finance Act, 2003, to the extent of 50% of the duty paya ble. It was stipulated therein that the exemption would be subject to certain co nditions, the conditions being that exemption from payment of central excise dut y would be available only in respect of units, which were located in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura, a nd for those units, which had commenced commercial production on or after 24.12. 1997, but not later than 28.02.2001 and that the unit ought to have continued it s manufacturing activities after 28.02.2001 and ought to have availed of the ben efit under Notification Nos.32/99-CE and 33/99-CE. It was further stipulated und er the Notification No.69/2003-CE that the sum of duty payable, but for the exem ption, was to be utilized by the manufacturer only for investment in plant and m achinery in a manufacturing unit, which is located in the States of Arunachal Pr adesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura and the investmen t had to be made before the expiry of six months from the end of each quarter. T he manufacturer was made obliged to furnish details of the investments within on e month of the expiry of the six months period, as described above, to a Committ ee, popularly known as the Investment Appraisal Committee (in short, ’the IAC’), which shall consist of the Chief Commissioner of Central Excise, Shillong, the Principal Secretary of the Department of Industry of the State concerned in whic h the unit was located and the Principal Secretary of the Department of Industry of the State in which the investment was made. The manufacturer was required to prove to the satisfaction of the IAC that the investment was made for plant and machinery in a manufacturing unit located in the concerned State. Finally, once the IAC was satisfied that the investment was made in plant and machinery in a manufacturing unit as stipulated in the relevant Notification, it was to issue a certificate to this effect to the manufacturer within a period of three weeks a fter the period of one month described above. This certificate was to be produce d by a manufacturer, within a period of two weeks from the date of issuance of t he said certificate, to the jurisdictional Central Excise Officer. This apart, t he investment, made under the said Notification, could not have been withdrawn f or a period of ten years from the date on which the investment was made. (iv) However, on 21.01.2004, another Notification No.8/2004-CE, in suppressio n of the earlier Notification No. 69/2003, was issued by the Central Government. The later Notification provided that exemption to the extent of 100% would be a vailable to the manufacturer for investment made not only in plant and machinery in a manufacturing unit, located in the State of Arunachal Pradesh, Assam, Mani pur, Meghalaya, Mizoram, Nagaland or Tripura, but also in infrastructure or civi l works or social projects in any of these states. The other procedural stipulat ions, in the said Notification, remained similar to those already delineated in the Notification No.69/2003-CE. Thereafter, the Notification No.28/2004-CE, dated 09.07.2004, made a ser (v) ies of procedural amendments to the Notification No.8/2004-CE, dated 21.01.2004, inasmuch as it was provided that the sum, equal to the excise duty, which was p ayable, but for the exemption, would be deposited by the manufacturer within 60 days from the end of the quarter in an Escrow Account opened by the manufacturer for this purpose. Under Notification No. 28/2004-CE, dated 09.07.2004, the ope ration, including withdrawals from, and closure of, the said Escrow Account, had to be made with the prior approval of the jurisdictional Commissioner of Centra l Excise by taking into account the conditions specified in the said Notificatio n. The manufacturer was also to invest the amount, deposited in the said Escrow Account, within two years from the date of the deposit and the amount, withdrawn from the Escrow Account, was to be utilized for the purpose specified within 60 days of its withdrawal. (vi) The respondents/authorities concerned, however, in illegal and arbitrary manner, took steps for appropriation of various amounts from various Escrow acc ounts of the petitioner company and issued instructions not to allow any withdra wal in respect of the Escrow Accounts of the petitioner company. The said action was challenged before this Court by filing a writ petition being W.P.(C) No.591 /2008. The petitioner company, by filing W.P. (C) No. 2814/2008, also challenged the functioning of the Investment Appraisal Committee, constituted under the pr ovisions of the Notification, dated 09.07.2004, aforementioned, by yet another w rit petition, namely, W.P.(C) No. 1048/2008. The petitioner company challenged a s arbitrary and unreasonable the action of the Deputy Commissioner of Central Ex cise, Guwahati, in issuing letters of demand on the ground that the investment, made by the petitioner company had not been approved by the Investment Appraisal Committee. (vii) All the writ applications were allowed by this Court by judgment and ord er, dated 6.01.2010. This Court, by order, dated 26.9.2010, in Misc Case No. 479 /2010 arising out of W.P.(C) No. 591/2010, ordered the exclusion of the period d uring which the Escrow Account had remained frozen and the period, during which the various amounts remained appropriated for the calculation of two years perio d as provided in the Notification. (viii) The petitioner company, thereafter, made application for withdrawal of t he amount from the Escrow Account. However, no order was passed by the Commissio ner of Central Excise, although the petitioner company made repeated requests se eking permission to withdraw various amounts for the purpose of making investmen ts in terms of the notification. On the other hand, the respondents filed two ap peals before a Division Bench of this Court against the judgment and order, date d 06.01.2010, and 29.06.2010, aforementioned, which came to be numbered as W.A. No. 394 & 395 of 2010. The said appeals were dismissed by this Court by judgment and order, dated 19.1.2012.
Legal Reasoning
7. It is pertinent to mention herein that in the meantime, the provisions o f the Notification No. 69 of 2003 and Notification No. 8 of 2004, dealing with t he time period for making withdrawal applications and investments, were amended with retrospective effect vide Section 72 of the Finance Act, 2011, which came i nto force on 08.04.2011 and the time period of investment to be made within six months, as provided in the Notification No. 69 of 2003, was increased to two yea rs and the time period of 2 (two) years, provided in Condition C & D of the Noti fication No. 8 of 2004-CE, was replaced by 4 (four) years. 8. The Division Bench of this Court in its order, dated 19.01.2012, held th at there was no conflict in the applicability of retrospective amendment, made b y Section 72 of the Finance Act, 2011, and the judgment of this Court rendered o n 06.01.2010 and 29.06.2010. The Division Bench also held that the judgment of t his Court, dated 06.01.2010 and 29.06.2010, were fully executable and the partie s were to act in accordance with the terms and conditions of the Finance Act, 20 11, and the respondents were to deal with the matter and finalize the same withi n 3 months from the date of receipt of the order. 9. After the judgment and order of the Division Bench of this Court and in compliance with Section 72 of Finance Act 2011, the petitioner company, admitted ly, received Investment Appraisal Certificates/Reports, wherein certain amounts were said to be not admissible without giving any reason for the inadmissibility /ineligibility of the investment. This apart, no hearing whatsoever was given to the petitioner company before holding the investment to be not allowable. 10. It is pertinent to mention here that the provisions, embodied in the rel evant Notification, specifically stated that the manufacturer has to prove to th e satisfaction of the Investment Appraisal Committee that the investment was mad e for the purposes specified in the notification. The same principle was followe d by Section 72 of the Finance Act, 2011. However, the petitioner company was ne ver intimated about any date of hearing by the Investment Appraisal Committee no r was any explanation/clarification sought for from the petitioner company. The investment, made by the petitioner company, has been held to be inadmissible wit hout assigning any reason, which is in express violation of the relevant Notific ation read with Section 72 of the Finance Act, 2011. 11. With regard to the above, this Court, in its judgment and order dated 6. 01.2010, passed, in W.P. (C) Nos. 591, 1048 and 2814 of 2008, reported Dharampal Satyapal Ltd. vs. Union of India & Ors. [2010 (1) GLT 744 has clearly laid down the duties of the Investment Appraisal Committee, while examining the claim of investment made by a manufacturer. Paragraphs 168 and 169 of the said judgment, which are relevant in the present context, are reproduced below: 168. I may say, at the cost of repetition that if the IAC find that the (cid:28)investm ent (cid:29) relate to pre-Escrow Account period, as is the case at hand, then, the exam ination, by the IAC, of the question, as to whether the (cid:28)investments (cid:29) so made, f all under any of the permissible categories of (cid:28)investments (cid:29) or not, would be a valid exercise of powers under the notification, dated 21.01.2004. 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 categor ies, mentioned in the Notification, dated 21.01.2004, it cannot straightway reje ct 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, sought to be recov ered, relates to post Escrow Account period. given case, that the ’investments’ claimed to have been made, are of ’doubtful’ quality, it cannot straightway rej ect 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 is to form, or the view, which it takes, must be treated as a tentative finding or opinion of the IAC and the IAC must allow manufacturer to show cause against su ch a tentative finding of the IAC. What the IAC has to do, in such a case too, i s that it has to issue notice, to the manufacturer concerned, stating therein th e reason, which did not satisfy the IAC that the details of the investments are correct. Only upon giving notice to show cause, in every case, as indicated here inbefore, that necessary decision can be given either allowing the investments a s certifiable or disallowing the investments as not certifiable. Whatever decisi on is, eventually, reached by the IAC, must be communicated, along with the reas ons therefore, to the manufacturer so that the manufacturer knows as to why his claim for investment has been rejected and he can, if required, take recourse to appropriate provisions of law. Extended logically, it would mean as I have alre ady discussed above, that when a IAC takes a decision refusing to approve an inv estment, the jurisdictional excise officer, in terms of the Notification dated 2 1.01.2004 cannot straightway direct ’forfeiture’ of the amount, which is not cer tified by the IAC. In such circumstances too, jurisdictional Commissioner, or th e Jurisdictional Excise Officer, as the case may be, is required to issue notice to the manufacturer directing him to show cause as to why the amount, which has been certified by the IAC, be not recovered from him in terms of the provision of Section 11A read with provision of Section 11B, or be not, ’forfeited’ from t he Escrow Account of the manufacturer in terms of the provisions contained in th e notification dated 9.07.2004, if the amount, sought to be recovered, relates t o post Escrow Account period. 12. From the observations and directions issued by this Court in the judgmen t and order, dated 6.1.2010, which have been upheld in writ appeals by judgment and order, dated 19.1.2012, it becomes clear that if the IAC is not satisfied wi th any of the claims of the manufacturer, it may reject the investment; but the same can be done only by assigning reasons for rejection. This apart, the satisf action of the IAC carries with it a duty of giving to any person, against whom t he decision is to be taken, a fair opportunity to make any relevant statement, w hich he may desire to bring forward and a fair opportunity to correct or controv ert any relevant statement brought forward to his prejudice. 13. In the present case, some of the investments, made by the petitioner com pany, have been held to be inadmissible without giving any reason and without af fording any opportunity of hearing to the petitioner company to explain and/or c larify the objection, if any of the Investment Appraisal Committee before the IA C’s decision holding the investment to be inadmissible was rendered. This is who lly contrary to, and in violation of, the judgment and order, dated 6.01.2010. T he conduct of the IAC exposes it to contempt of Court for defying the directions , which had been given in the judgment and order, dated 06.10.2010, between the parties concerned. 14. Because of what have been discussed and pointed out above, it becomes ab undantly clear that the impugned four investment certificates, whereby a sum of Rs. 18,66,86,576.29/- has been held to be inadmissible by the IAC as well as the impugned demand notice, issued pursuant thereto, are liable to be set aside and quashed and the respondents/authorities concerned are bound to act in accordanc e with the judgment and order passed by this Court in W.P. (c) Nos. 591, 1048 an d 2814 of 2008, reported in Dharampal Satyapal Ltd. vs. Union of India & Ors. [ 2010 (1) GLT 744. 15. Notwithstanding the contention of the respondents that no notice to show cause and no opportunity to have their say were required to be given by the IAC to the petitioner company before the claim for investments, having been made un der the scheme, in question, were disallowed, it may be noted that it has been, as rightly pointed out, on behalf of the petitioner company, clearly held, in Dh arampal Satyapal Ltd. (supra), that the principle of natural justice binds the I AC to give notice to show cause clearly specifying in the notice as to why, in t he considered view of the IAC, not an investment made in any of the project. Thi s Court has further held that even when the IAC finds, in a given case, that the investments, claimed to have been made, are of doubtful quality, the IAC cannot reject the investment; rather, the opinion, which the IAC, so forms, must be tr eated as its tentative opinion and the IAC must allow the manufacturer to show c ause against its such tentative finding. 16. In the present case, it is the admitted position that before disallowing the claim for investments, which the petitioner company has made, neither any s how cause notice was given to the petitioner company in terms of the requirement of law as indicated above nor was any opportunity of hearing given to the petit ioner to have their say in the matter. In the circumstances mentioned above, while the finding of the IAC to th 17. e extent that it has allowed the petitioner company’s some claims for investment s, the same needs no interference, but its action, so far as the same relates to rejection of the claims of investment, the decision, being contrary to the posi tion of law as has been laid down by this Court, has to be interfered with and t he matter needs to be remanded to the IAC for doing the needful in accordance wi th law. 18. While dealing with the above aspect of the case, it is also pertinent to point out that one of the reasons of the IAC having not been able to certify th e claim of investments, which the petitioner company has made, was continuous ab sence of the representative of the Government of Tripura in attending the meetin g of the IAC. In similar situation, which became the subject-matter of decision in WP(C) No. 111/2013, a Division Bench of Tripura High Court has issued certain directions on 09-07-2013. The observations made and the directions, which have been given by the order, dated 09-07-2013, aforementioned, read as under: (cid:28)On 7th May 2013, we had passed a detailed order which reads as follows: (cid:28)The Government of India issued a policy known as the New Industrial Policy and other concessions in the North-eastern region. Various Notifications, vide Nos. 32/99-CE, 33/99-CE, 8/2004 and 28/2004 r/w Section 72 of the Finance Act, 2011, were issued by the Central Government granting certain benefits of refund of exc ise duty to the assesses in case they made investments in the North-eastern Stat es and used the amount refunded for purchase of plant, machinery etc. The scheme was to end on 31st December, 2012. As per the terms of the scheme the Investment Appraisal Committee compri sing of one official of the Revenue Authority along with one representative of t he State Government concerned was to verify on or before 31st December, 2012 whe ther in fact the assesse had utilized the amount of excise refunded to it for th e purposes which were provided for in the scheme. With regard to the plant in qu estion no such certification could be done because the representative of the Sta te of Tripura did not attend the meeting of IAC. In our view, without entering into any other disputes, at this stage, it would be better if the State ensures that an appraisal in accordance with the t erms of the scheme is done at the earliest possible. The State is therefore directed to take up the matter with the Excise De partment at the Central Government level so that another meeting of the IAC with regard to the investment made in Tripura can be held. Holding of such a meeting at an early stage would also be for the benefit of the State because it is only this Committee which can find out whether the assesse has actually used the amo unt of excise refund to it for the purpose provided for under the scheme. In cas e the Committee finds that such refund excise has been used for other purposes t he State can be a beneficiary along with the Central Government. Mr. Datta, learned counsel, may obtain instruction within 6(six) weeks a s to how soon the said Committee can hold its meeting. List on 2nd July, 2013. The interim direction to continue till the next date. (cid:29) Pursuant to the said order we have been informed by the learned Advocate General that the State has approached the Central Board of Excise and Customs on 6th Ju ne, 2013 to constitute a Committee to finally assess whether the assesse has mad e the investments in accordance with the notifications referred to in our earlie r order. Counter has been filed by the Union of India and the stand of the Union of India is that since the scheme came to an end on 31st December 2012, there is no stat utory provision now for constitution of any Committee to make the assessment. Mr. Biswas is right that technically the time is over, However, as already indic ated in our earlier order, somebody must assess whether the investments made by the assesse were done in accordance with law and whether it is actually entitled to the benefit of the earlier notification? This question is definitely a quest ion of fact which cannot be decided by this Court. There is no statutory body or authority which can decide this question. No doubt, the notification expired on 31st December, 2012 but as stated in our earlier order, the Committee could not meet for certain reasons. Therefore, it would be in the interest of all concern ed, i.e., the assesse, the State Government as well as the Central Government th at an appraisal is done by the Investment Appraisal Committee. It would not be p roper to change the constitution of the Committee also at this stage. In case, t he assesse has actually made the investments in terms of the earlier notificatio n he is entitled to full benefits. In case it is found that the assesse has not made the investments in accordance with the earlier notification, or that part o f the investments are not in accordance with the earlier notification, the State as well as the Central Government would be beneficiaries as per the notificatio n. Therefore, we do not understand why such a stand has been taken by the Union of India. We consequently reject this objectin and direct that an Investment App raisal Committee constituted as per the earlier notification shall meet and deci de latest by 31st October, 2013 whether the investment made by the assesse are i n terms of the notifications referred to in our earlier order as above. A copy of this order be supplied to the learned counsel of the parties. In view of the detailed order passed by us the demand notice is kept in abeyance till the next date. (cid:29) 19. We find ourselves in complete agreement with the directions, which have been given by the Division Bench of Tripura High Court, in WP(C) No. 111/2013, b y its order, dated 09-07-2013 and we, too, direct that when the petitioner compa ny has claimed to have made the investment in terms of the Notification, which f orm the subject-matter of the writ petition, the petitioner company is entitled to the benefit, which the relevant scheme has promised. 20. Considering, therefore, the matter in its entirety and in the interest o f justice, the impugned demand notice, dated 26-10-2013, is hereby set aside and the matter is remanded to the IAC for its disposal bearing in mind the position of law as has been indicated by this Court in Dharampal Satyapal Ltd. (supra) a nd also by the Division Bench of this Court in WA Nos. 394/10 and 395/10. We fur ther direct that the steps, in tune with the directions given by the Tripura Hig h Court, in its order, dated 09-07-2013, shall be taken by the respondents/autho rities concerned so that the claim of the petitioner company, as regards making of investments, is, adequately and fully, decided by the IAC. 21. The whole exercise, as directed above, shall be completed expeditiously and, preferably, within a period of three months from the date of receipt of a c opies of this order by the respondent Nos. 2 and 3, namely, Chief Commissioner C entral Excise, Customs and Service Tax, Shillong and The Assistant Commissioner, Central Excise, Guwahati, Assam. With the above observations and directions, this writ petitions shall st
Decision
No order as to costs. Furnish a copy of this order to the learned Standing Counsel, Excise Dep 22. and disposed of. 23. 24. artment.