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2007 DIGILAW 331 (GAU)

Issa Industries v. Union of India

2007-05-08

I.A.ANSARI

body2007
JUDGMENT Iqbal Ahmed Ansari, J. 1. Should a person be denied grant of certificate enabling him to claim exemption from payment of duty of excise or additional duty of excise in respect of the supply of goods made by him to an international organization merely on the ground that he had not sought for grant of exemption certificate before making the supply, particularly, when it is not disputed that the supply, so made, is in terms of the notification, dated 28.08.2005, issued, in this regards, in respect of goods falling under the Central Excise Tariff Act, 1985. This is the moot question, which the present writ petition has raised. 2. I have heard Dr. A.K. Saraf, learned Senior counsel, for the petitioner, and Mr. N. Bora, learned Central Government Counsel, appearing on behalf of the respondents. Before I deal with the issue raised for determination in this writ petition, let met take note of the admitted facts giving rise to this writ petition. These facts are, in brief, thus: Respondent No. 3, namely, Rail India Technical and Economic Services Ltd. is a Government of India undertaking with respondent No. 4 as its General Manager. By a Notice Inviting Tender (in short, NIT), published, on 20.7.2000, the Ministry of Health and Family Welfare, Government of India, invited, through respondent No. 3, sealed bids from eligible bidders for supply of 60,000 mosquito bed nets for Malaria Control Project, which was sponsored by the International Development Organisation. The writ petitioner, namely, Issa Industries, which is a proprietary firm, participated in the said selection process by offering its bid. By a communication, dated 02.11.2000, respondent No. 4 informed the petitioner that the petitioner's bid had been accepted. On such acceptance of the bid, the petitioner made necessary supplies of the said mosquito bed nets. The petitioner, thereafter, applied to the respondent No. 4 for Project Authority Certificate in order to enable the petitioner to claim exemption from payment of excise duty in respect of the mosquito bed nets, which had been so supplied. On such acceptance of the bid, the petitioner made necessary supplies of the said mosquito bed nets. The petitioner, thereafter, applied to the respondent No. 4 for Project Authority Certificate in order to enable the petitioner to claim exemption from payment of excise duty in respect of the mosquito bed nets, which had been so supplied. While the respondent No. 3 did not react to the request for the Project Authority Certificate made by the petitioner, respondent No. 5, namely, Additional Director, Directorate General of Central Excise, East Zonal Unit, Kolkata, served a notice, dated 29.01.2003, on the petitioner directing it to show cause as to why the petitioner shall not be made to pay Central Excise Duty on the said supply of the mosquito bed nets inasmuch as the requisite certificate entitling the petitioner to claim exemption from payment of central excise duty had not been granted by the respondent No. 3. As repeated representations made by the petitioner to the respondent No. 3 for issuance of the Project Authority Certificate has not yielded any favourable result, the writ petitioner has, now, approached this Court seeking, with the help of this application made under Article 226 of the Constitution of India, issuance of appropriate Writ (s) commanding respondent No. 3 to issue Project Authority Certificate in favour of the petitioner, the petitioner's case being, in brief, thus: By a notification, dated 28.08.1995, issued in exercise of powers conferred by Sub-Section (1) of Sub-Section 5 A of the Central Excise and Sale Act, 1944, read with Sub-Section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, all goods, falling under Central Excise Tariff Act, 1985, stand exempted from payment of excise duty if the supply of the goods is made to, amongst others, a project financed by the World Bank, Asian Development Bank or any international organization other than those listed in the Annexure to the said notification. As the petitioner has made supply of the said mosquito bed nets to an international organization, which is covered by the said notification and when such supply is exempted from payment of excise duty, the petitioner ought to have been granted, on the request made by it, requisite certificate by the respondent No. 3. As the petitioner has made supply of the said mosquito bed nets to an international organization, which is covered by the said notification and when such supply is exempted from payment of excise duty, the petitioner ought to have been granted, on the request made by it, requisite certificate by the respondent No. 3. Denial of such certificate by the respondent No. 3 is, contends the petitioner, arbitrary, unreasonable and also discriminatory inasmuch as suppliers, who had made similar supplies in the past, had been issued requisite certificate by respondent No. 3. 3. While respondent No. 5, namely, Additional Director, Directorate General of Central Excise, East Zonal Unit, Kolkata, who issued the notice to show-cause to the petitioner as to why the petitioner shall not be made to pay excise duty on the supply of the said mosquito net beds and also the respondent No. 1, namely, Union of India, represented by the Secretary, Ministry of Finance, Department of Revenue and/or the respondent No. 2, namely, Secretary, Ministry of Health and Family Welfare, Govt. of India, Malaria Control Project, have not filed their affidavit and contested the writ petition, respondent Nos. 3 and 4 have resisted this writ petition by filing their affidavit-in-opposition, their case being, in brief, that according to the established procedure, bidders shall, while making the bid, obtain requisite certificate for exemption of excise duty before making the supply. It is also the case of these respondents that in the present case, the writ petitioner had not asked for Project Authority Certificate before making the bid nor did the petitioner make it clear, at the time of offering its bid, that the supply of mosquito bed net would be subject to exemption from excise duty. In such circumstances, contend respondent Nos. 3 and 4, that these respondents are wholly justified in declining to issue the certificate, which the writ-petitioner had asked for. 4. In view of the fact that it is the scope and ambit of the notification, dated 28.08.95, aforementioned, which forms the basis of entire controversy in the present writ petition, it is appropriate to, first, take note of what the said notification states. 4. In view of the fact that it is the scope and ambit of the notification, dated 28.08.95, aforementioned, which forms the basis of entire controversy in the present writ petition, it is appropriate to, first, take note of what the said notification states. With this purpose in view, the notification, in question, is reproduced herein-below: Goods supplied to UN International Organisation Notification No. 108/95-C.E. Dated – 28.8.1995 In exercise of the powers conferred by Sub-section (1) of Section 5A of the Central Excise and Salt 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), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts all goods falling under the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) (hereinafter referred to as the said goods) when supplied to the United Nations or an international organization for their official use or supplied to the projects financed by the said United Nations or an international organization and approved by the Government of India, from the whole of. (i) The duty of excise leviable thereon under Section 3 of the Central Excise Act, 1944 (1 of 1944) (ii) The Additional duty of excise leviable thereon under Sub-section (1) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) Provided that before clearance of the said goods, the manufacturer produces before the Assistant Commissioner of Central Excise having jurisdiction over his factory. (a) In case the said goods are intended for the official use by the United Nations or an international organization, a certificate from the United Nations or that international organization that the said goods are intended for such use; (b) In case the said goods are- (i) Supplied to an international organisation listed in the Annexure appended to this notification for use in a project that has been approved by the Government of India and financed (whether by a loan or a grant) by such an organisation, a certificate from such an organisation that the said goods are required for the execution of the said project and that the said project has duly been approved by the Government of India. (ii) Supplied to a project that has been approved by the Government of India and financed (whether by a loan or a grant) by an international organization listed in the said Annexure, a certificate from an officer not below the rank of Deputy Secretary to the Government of India, in the Ministry of Finance (Department of Economic Affairs) that the said goods are required for the execution of the said project and that the said project has duly been approved by the Government of India. (c) In case the said goods are intended to be supplied to a project financed (whether by a loan or a grant) by the World Bank, the Asian Development Bank or any international organization other than those listed in the Annexure. (i) If the said project has been approved by the Government of India, a certificate from the executive head of the project Implementing Authority and countersigned by an officer not below the rank of a Joint Secretary to the Government of India, in the concerned Line Ministry in the Government of India, that the said goods are required for the execution of the said project and that the said project has duly been approved by the Government of India. (ii) If the said project has been approved by the Government of India for implementation by the Government of a State or a Union Territory, a certificate from-the executive head of the Project Implementing Authority and countersigned by the Principal Secretary or the Secretary (Finance), as the case may be, in the concerned State Government or the Union Territory, that the said goods are required for the execution of the said project, and that the said project has duly been approved by the Government of India for implementation by the concerned State Government. 5. A careful reading of the notification shows that the Govt. of India has exempted all goods, falling in the Schedule to the Central Excise Tariff Act, 1985, if the goods are supplied, amongst others, to a project financed by World Bank, Asian Bank and any International Organisation other than those listed in the Annexure to the notification. In the present case, it is not in dispute that the supply of mosquito bed net made by the petitioner is covered by the notification aforementioned. In the present case, it is not in dispute that the supply of mosquito bed net made by the petitioner is covered by the notification aforementioned. It is in the backdrop of this admitted fact that the case of the writ petitioner needs to be considered. It is, no doubt, true, as transpires from a close reading of the said notification, that before clearance of the goods from the factory in respect whereof exemption from payment of duty of excise or additional duty of excise is intended to be sought, the manufacturer shall produce before the Assistant Commissioner of Central Excise, having jurisdiction over the factory, requisite certificate, as contemplated under the said notification, from the project implementing authority. Procedurally speaking, therefore, it is correctly contended by respondent Nos. 3 and 4 that before any supply is made to an authority, which is exempted under the said notification, the person making the supply shall obtain requisite certificate. Can failure to adhere to this procedure be made as the sole ground to wholly deny to a person the right to claim exemption from payment of excise duty on the materials supplied by him to an organization, which is, otherwise, covered by the said notification? 6. While considering the question posed above, it needs to be noted that there is nothing, in the notification, to show that if the requisite certificate is not obtained before making the supply, which is, otherwise, exempted under the said notification, the benefit of the notification would not be available or cannot be made available to the supplier. Thus, the notification, in question, does not contemplate any serious negative fall-out if the procedure, as indicated hereinbefore, is not strictly followed. 7. A microscopic reading of the notification, in question, shows, I may point out, that the purpose of obtaining exemption certificate is to ensure that while clearing the goods from a factory, such goods do not escape payment from excise duty if the goods are, otherwise, subject to excise duty. In fact, there is no dispute before me that the object of obtaining of the requisite certificate from the project implementing authority is to ensure that no goods, if subject to excise duty, leave any factory without payment of central excise duty or additional excise duty, as the case may be, unless such payment stands exempted. In fact, there is no dispute before me that the object of obtaining of the requisite certificate from the project implementing authority is to ensure that no goods, if subject to excise duty, leave any factory without payment of central excise duty or additional excise duty, as the case may be, unless such payment stands exempted. Ideally, therefore, it is necessary that a person, who seeks to receive benefit under the notification aforementioned, obtains requisite certificate before the goods are lifted from the factories or supplied to the organization concerned. The procedure for the purpose of obtaining exemption from payment of any duty cannot, however, be attributed such an importance that it defeats the very object of granting exemption. Viewed thus, it is clear that though a person should, ordinarily, obtain requisite certificate from the project implementing authority before the goods are lifted from the factory, the mere fact that the certificate has not been obtained before the goods were lifted from the factory cannot be made the sole basis for denying issuance of such certificate to the supplier, particularly, when the fact that the supply made is covered by the notification is not disputed and when no ulterior motive or mala fide is alleged against the supplier and, above all, when the notification, in question, does not indicate that if the requisite certificate is not obtained before the goods were removed from the factory, the person, who is, otherwise, entitled to claim exemption, would not be granted the certificate, 8. In the case at hand, though respondent Nos. 3 and 4 have contended that as the writ petitioner had not sought for a certificate before the supply had been made, the writ petitioner is not entitled to exemption from payment of excise duty, what needs to be noted, in this regard, is that whether or not the writ petitioner can claim exemption from payment of excise duty is a question, which can be determined only by the respondent Nos. 1, 2 and 5 and not by respondent Nos. 3 and 4, for, what merely respondent Nos. 3 and 4 have to determine is as to whether the goods, in respect whereof, certificate had been sought for were supplied to an international organization, which is covered by the said notification. 1, 2 and 5 and not by respondent Nos. 3 and 4, for, what merely respondent Nos. 3 and 4 have to determine is as to whether the goods, in respect whereof, certificate had been sought for were supplied to an international organization, which is covered by the said notification. In view of the fact that it is not in dispute that the supply made, in the present case, was covered by the said notification, respondent Nos. 3 and 4 could not have denied issuance of certificate by contending that the writ petitioner is not entitled to exemption. In the case at hand, when it is not in dispute that the said mosquito bed nets had been supplied pursuant to the NIT aforementioned and when respondent Nos. 3 and 4 are competent to issue certificate, it would be unjust and improper to deny to the petitioner grant of the requisite certificate merely on the ground that the petitioner had not obtained the certificate before making the supplies. Such an approach, to a case of present nature, by an authority, such as respondent No. 3, would be too pedantic and hyper-technical in nature. When the petitioner has, admittedly, made supplies as mentioned hereinbefore and when the supplies have been made to an organization, which enables the petitioner to claim exemption from payment of duty of excise or additional duty of excise, it would not be fair and just, on the part of the respondent No. 3, which is, admittedly a State or an instrumentality of the State within the meaning of Article 12, to deny to issue the requisite certificate in favour of the writ petitioner. 9. Considering, therefore, the matter in its entirety and in the interest of justice, respondent Nos. 3 and 4 are hereby directed to issue Project Authority Certificate in favour of the petitioner within a period of one month from the date of receipt of a certified copy of this order by respondent No. 4. Until the time the Project Authority Certificate, as directed hereinbefore, is issued, the impugned show-cause notice, dated 29.01.2003, aforementioned shall remain suspended. 10. With the above observations and directions, the writ petition shall stand disposed of. No order as to costs.