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2015 DIGILAW 975 (GAU)

Upper Assam Petrocoke Pvt. Ltd. v. Union of India

2015-08-06

B.K.SHARMA

body2015
JUDGMENT : B.K. Sharma, J. 1. It is submitted by Dr. A. Saraf, learned senior counsel for the petitioner that another writ petition being WP (C) No. 2646/2014 based on the same set of facts and raising the same issues are pending disposal and can be heard analogously alongwith this writ petition. Accordingly, the case record of the said writ petition, i.e. WP (C) No. 2646/2014, is requisitioned and both the writ petitions have been heard analogously and are being disposed of by this common judgment and order. 2. The challenge in these writ petitions is the Annexure-XV letter dated 8th February, 2013, by which the Government of India in the Ministry Commerce & Industry (Department of Industrial Policy & Promotion) communicated that the Units engaged in manufacture of Calcined Petroleum Coke (CPC) & Bitumen Emulsion are not eligible for subsidy under the North East Industrial & Investment Promotion Policy, 2007 (in short "NEIIPP, 2007"). 3. While in WP (C) No. 2645/2014, the petitioner is a Private Limited Company registered under the Companies Act, 1946; the petitioner involved in the other writ petition being WP (C) No. 2646/2014 is a Partnership Firm registered under the Partnership Act, 1932. The petitioners are engaged in the business of manufacture and sale of CPC and Bitumen Emulsion, respectively. According to the petitioners, they are eligible for incentives as provided for in NEIIPP, 2007. Under the said policy, a negative list was incorporated vide Annexure-I Office Memorandum dated 1st April, 2007. The negative list is reproduced below:- "(x) Negative List: The following industries will not be eligible for benefits under NEIIPP, 2007:- (i) All goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which pertains to tobacco and manufactured tobacco substitutes. (ii) Pan Masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). (iii) Plastic carry bags of less than 20 microns as specified by Ministry of Environment and Forests Notification No. S.O. 705(E) dated 02.09.1999 and S.O. 698(E) dated 17.6.2003. (iv) Goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) produced by petroleum oil or gas refineries." 4. (iii) Plastic carry bags of less than 20 microns as specified by Ministry of Environment and Forests Notification No. S.O. 705(E) dated 02.09.1999 and S.O. 698(E) dated 17.6.2003. (iv) Goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) produced by petroleum oil or gas refineries." 4. The Government of India vide its Annexure-II circular dated 21st August, 2008 circulated the operational guidelines in respect of various subsidy schemes under NEIIPP, 2007, inter-alia providing that no industrial unit should be registered for benefits under NEIIPP, 2007, if it was covered under negative list. Being encouraged and inspired by the incentives announced in the said policy, the petitioners took steps for establishment of industrial units for manufacturing of CPC and Bitumen Emulsion, respectively. They also obtained the certificates of registration and were also granted the Central Excise Registration Certificate. They were found to be eligible for Central Excise Benefits as new industrial units. The petitioners being eligible for the benefits under the NEIIPP, 2007 and being industrial units not falling in the negative list submitted their claim petition for grant of Central Capital Investment subsidy. 5. The Under Secretary to the Government of India in the Department of Industrial Policy & Promotion vide its Annexure-VIII Office Memorandum dated 25th May, 2011 requested the Ministry of Finance, Department of Revenue, Government of India to clarify as to whether the industrial units manufacturing CPC and Bitumen Emulsion can be treated as eligible for excise exemption and other benefits under NEIIPP, 2007, specifically in view of Chapter-27 of the First Schedule of Central Excise Tariff Act, 1985. The Director (TRU), Government of India, Ministry of Finance, Department of Revenue, through Office Memorandum dated 16th November, 2011 Annexure-IX issued clarification with exemption from excise duty had been extended to excisable goods manufactured in the North Eastern Sates based on NEIIPP, 2007. It was also stated that the benefit of excise duty exemption was not to be extended to goods listed in the negative list. 6. According to the petitioners, they came to know about the proposal to put CPC and Bitumen Emulsion in the negative list with regard to NEIIPP, 2007 eventually by Annexure-XV. It was also stated that the benefit of excise duty exemption was not to be extended to goods listed in the negative list. 6. According to the petitioners, they came to know about the proposal to put CPC and Bitumen Emulsion in the negative list with regard to NEIIPP, 2007 eventually by Annexure-XV. The Government of India in the Ministry of Commerce & Industry (Department of Industrial Policy & Promotion), by its Annexure-XV impugned letter dated 8th February, 2013 addressed to the Principal Secretary (Industries) of the North Eastern States including Sikkim, intimated that the matter regarding eligibility of subsidy under NEIIPP, 2007 to industrial units producing CPC and Bitumen Emulsion was examined by the Department and by way of a clarification further intimated that the units engaged in manufacture of CPC and Bitumen Emulsion would fall under the negative list since raw materials used for manufacture of both the items are bi-products of petroleum refineries and thus, were not eligible for subsidy to NEIIPP, 2007. For a ready reference, the impugned letter dated 8th February, 2013 (Annexure-XV) is reproduced below: "To, The Principal Secretary (Industries) Government of Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura. Subject: Eligibility of Subsidy under NEIIPP, 2007 to industrial units producing Calcined Petroleum Coke (CPC) and Bitumen Emulsion. Sir, The undersigned is directed to say that subsequent to announcement of a package of fiscal incentives and other concessions for the North East Region namely North East Industrial and Investment Promotion Policy (NEIIPP), 2007, a reference has been received from the State Government of Assam seeking clarification whether units engaged in manufacture of Calcined Petroleum Coke (CPC) and Bitumen Emulsion are eligible for subsidy under NEIIPP 2007 or not. 2. The matter has since been examined in this department and it is clarified that the units engaged in manufacture of CPC and Bitumen Emulsion fall under the negative list of NEIIPP 2007 since raw materials used for manufacture of both CPC and Bitumen Emulsion are by-products of petroleum refineries and hence are not eligible for subsidy under NEIIPP, 2007." 7. Referring to the impugned communication, Dr. A.K. Saraf, learned senior counsel assisted by Mr. A. Goyal, learned counsel for the petitioner submits that on the face of it, the decision in the said letter is not sustainable in law. Referring to the impugned communication, Dr. A.K. Saraf, learned senior counsel assisted by Mr. A. Goyal, learned counsel for the petitioner submits that on the face of it, the decision in the said letter is not sustainable in law. In this connection, he has referred to the Annexure-IX Office Memorandum dated 16th November, 2011 of the Government of India providing as follows:- "Office Memorandum Subject: Eligibility of Calcined Petroleum Coke to excise duty exemption benefit under North East Industrial and Investment Promotion Policy (NEIIPP, 2007) - regarding The undersigned is directed to refer to DIPP's reference No. 9(4)/2011/DBA.II/NER dated 21st October, 2011 seeking clarification on whether Calcined Petroleum Coke (CPC) can be treated as eligible for excise duty exemption and other benefits under North East Industrial and Investment Promotion Policy (NEIIPP 2007) especially in view of sub-Para (iv) under Para (x) of OM dated 1st April, 2007 on NEIIPP, 2007. 2. Exemption from excise duty has been extended to excisable goods manufactured in the North Eastern Sates based on NEIIPP, 2007 under Notification No. 20/2007-CE dated 25.4.2007. However, the benefit of excise duty exemption has also not been extended to goods listed in the Negative List mentioned in Para (X) of OM dated 1st April, 2007 on NEIIPP, 2007. Calcned Petroleum coke is classifiable under Tariff item 2713-1200 of the First Schedule to the Central Excise Tariff Act. Hence if this product is manufactured by a Petroleum oil or gas refinery, it is clear that the benefit of excise duty exemption would not be available. However, if they are manufactured by a stand-alone manufacturer starting with a raw material other than crude petroleum or natural gas, i.e. by a manufacturer, other than Petroleum oil or gas refinery, the benefit of excise duty exemption would be available." 8. He has also referred to the affidavit-in-reply filed by the petitioner in WP (C) No. 2645/2014. Alongwith the said reply affidavit, a copy of the additional affidavit-in- opposition that was filed by the Central Pollution Control Board in PIL No. 39/2007, Abdul Hai vs. Union of India and Others, has also been enclosed and so also the notification No. 32/2003-Central Excise dated 4th April, 2003. Dr. Alongwith the said reply affidavit, a copy of the additional affidavit-in- opposition that was filed by the Central Pollution Control Board in PIL No. 39/2007, Abdul Hai vs. Union of India and Others, has also been enclosed and so also the notification No. 32/2003-Central Excise dated 4th April, 2003. Dr. Saraf has also referred to the Division Bench judgment of this Court dated 21st June, 1996 passed in Writ Appeal No. 305/1995, Union of India vs. M/s India Carbon Limited and Others and so also the unreported judgment dated 20th March, 2014 passed in WP (C) No. 2010/2011, Digboi Carbon Limited vs. The Union of India and Others. 9. Mr. S.C. Keyal, learned Assistant Solicitor General of India, referring to the counter affidavits filed by the respondents has contended that the impugned decision is unassailable and the same being within the parameters and yardsticks laid down in the Office Memorandum dated 1st April, 2007 (Annexure-I), is required to be sustained. Referring to the stand of the respondents in their counter affidavits, he submits that the petitioners cannot claim, as a matter of right, the incentives as envisaged in the NEIIPP, 2007. 10. I have carefully considered the submissions advanced by the learned counsel appearing for the parties and have also considered the entire materials on record. My conclusions and findings are as follows. 11. The industries, which are not eligible for benefits under the NEIIPP, 2007 and for that matter, the negative list has been noted above. As per the said list, the industries involved in manufacturing of goods mentioned therein are not eligible for benefits under the policy. In the present proceedings, we are concerned with Item No. (iv) of the negative list, which includes Goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) produced by petroleum oil gas refineries. According to the petitioners, they are not industries producing goods as petroleum oil or gas refineries. It is in this connection, the learned counsel for the petitioners has referred to the Division Bench judgment, referred to above, in which it was held that the respondent Company, namely, M/s India Carbon Limited, was not refinery and consequently, the prohibition regarding applicability of the particular scheme did not come. It is in this connection, the learned counsel for the petitioners has referred to the Division Bench judgment, referred to above, in which it was held that the respondent Company, namely, M/s India Carbon Limited, was not refinery and consequently, the prohibition regarding applicability of the particular scheme did not come. In the said proceeding, the issue related to Transport Subsidy Scheme, which was available to all industrial units in the specified areas except plantations refinery and power generated units. In paragraph 15 of the counter affidavit filed in the said proceeding, it was stated thus:- "The issue is whether CPC produced by M/s. India Carbon Limited is a refinery product. Obviously it is not a refinery product in that India Carbon is not engaged in refining of petroleum crude like other private calcimining units." 12. The aforesaid judgment was carried on appeal before the Apex Court registered and numbered as Special Leave to Appeal (Civil) No. 22152/1996, which was dismissed by order dated 6th January, 1997 with the following order:- "In fairness, learned Attorney General has pointed out the contents of an affidavit filed on behalf of the Union of India in another matter which are quoted in para 24 of the impugned order of he High Court. In view of this, we do not consider it necessary to examine the point raised in this special leave petition. It is, therefore, left open for consideration in an appropriate case. The special leave petition is dismissed." 13. In the counter affidavit filed by the respondents, it has been contended thus:- "5. That, with regards to the contents of Paragraphs 8 to 45 of the writ petition, the humble deponent begs to state that the eligibility of Bitumen Emulsion and Calcinated Petroleum Coke (CPC) manufacturing units for benefits under NEIIPP 2007, for which major raw material is a refinery product, i.e. Raw Petroleum Coke (RPC), was examined in this Department on receipt of a reference from Government of Assam seeking clarification in this regard. Matter was initially referred to Department of Revenue who opined as under: Exemption from excuse duty has been extended to excisable goods manufactured in the North Eastern States based on NEIIPP, 2007 under Notification No. 20/2007-ce Dated 25.04.2007. Matter was initially referred to Department of Revenue who opined as under: Exemption from excuse duty has been extended to excisable goods manufactured in the North Eastern States based on NEIIPP, 2007 under Notification No. 20/2007-ce Dated 25.04.2007. However, the benefit of excise duty exemption has also not been extended to goods listed in the Negative List mentioned in Para (X) of OM dated 1st April, 2007 on NEIIPP, 2007. Calcined Petroleum Coke is classified under Tarrif item 2713-1200 of the First Schedule to the Central Excise Tariff Act. hence, if this product is manufactured by a Petroleum oil or gas refinery, it is clear that the benefit of excise duty exemption would not be available. However, if they are manufactured by a stand-alone manufacturing starting with a raw material other than crude petroleum or natural gas i.e. by a manufacturer, other than Petroleum oil or gas refinery, the benefits of excise duty exemption would be available. 6. That the deponent begs to state that the matter was also discussed in the meeting of the Sub-Committee under NEIIPP, 2007 held on 30th January, 2012 wherein members of the sub-Committee were apprised of the aforementioned views/comments of Department of Revenue. Though North Eastern Development Finance Corporation (NEDFI) endorsed views of Department of Revenue, representative of planning Commission started that there is a hue and cry on the production of coke as its production has adverse effect on the environment. As such it was decided that comments of Ministry of Petroleum and M/o Environment may also be obtained before taking a final view in the matter. M/o Petroleum and Natural Gas informed that they do not have any jurisdiction over calcinated Petroleum Coke manufacturing units. Petroleum Refineries mainly manufacture Raw Petroleum Coke was produced only the Numaligarh Refinery in the North East. Numaligarh Refinery has not demanded any benefit of Transport Subsidy. 7. That his issue was also discussed in the meeting of the Empowered Committee held on 09.02.2012 and it was decided that the Department would need to examine the views of the concerned Departments to finalise its stand. Accordingly views of Ministry of Coal and Ministry of Environment and Forests were sought. 7. That his issue was also discussed in the meeting of the Empowered Committee held on 09.02.2012 and it was decided that the Department would need to examine the views of the concerned Departments to finalise its stand. Accordingly views of Ministry of Coal and Ministry of Environment and Forests were sought. While Ministry of Coal informed that they have no comments to offer, M/o Environment & Forest clarified as under: The raw material for Calcinated Petroleum Coke (CPC) is raw petroleum coke (RPC) which is a byproduct of a Petroleum Oil Refinery. CPC is produced by driving out moisture and associate volatile combustible matter from CVC at high temperature (upto 1400 degree C) in a rotary kiln. The process of manufacturing of CPC has pollution potential and the CPC manufacturing units will need to install the necessary pollution control devices to meet the prescribed emission and discharge standards, as approved by concerned State Pollution Control Board, i.e. gas cleaning system including bag filters, ID fan & stack etc. 8. That though, the department of (in short D/o) Revenue was requested to also clarify eligibility of units manufacturing Bitumen Emulsion for benefits under NEIIPP, D/o Revenue have remained silent on its eligibility under NEIIPP. As per circular dated 01.04.2007 on NEIIPP, 2007, goods falling under chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 have been placed in the negative list for benefits under the said Policy and the CPC has been listed as one of the goods under chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985. 9. That in view of the above mentioned facts and after detailed deliberations and examination it was concluded that units engaged in manufacture of CPC and Bitumen Emulsion qualify in the negative list of NEIIPP, 2007. Accordingly vide letter dated 08.02.2013, it was clarified to the State Governments concerned that CPC and Bitumen Emulsion manufacturing units are ineligible for benefits of the schemes under NEIIPP, 2007. It is also worth mentioning that the Cabinet Committee on Economic Affairs, while considering the note on revision of Transport Subsidy Scheme has inter-alia accorded approval to placing all coke units (including CPC) in the negative list, in its meeting held on 22.11.2012. It is also worth mentioning that the Cabinet Committee on Economic Affairs, while considering the note on revision of Transport Subsidy Scheme has inter-alia accorded approval to placing all coke units (including CPC) in the negative list, in its meeting held on 22.11.2012. The rationale behind placing such units in the negative list is due to the fact that such units are not friendly to environment and hazardous to health. 10. That the deponent begs to state that subsequently on receipt of representations from stakeholders the issue regarding eligibility of a CPC manufacturing unit was reviewed and it was brought to the notice of this Department that certain units engaged in manufacture of CPC and Bitumen Emulsion have availed benefits under NEIIPP, 2007 in the past in absence of explicit guidelines placing such units in the negative list of NEIIPP, 2007. Accordingly legal opinion was sought from Ministry of Law, Department of Legal Affairs who opined that letter dated 08.02.2013 of the Respondent is nothing but a clarification to the NEIIPP, 2007 and that the Policy is to be read as per clarification. In view of the comments/observations of Department of Legal Affairs, Department's clarification dated 08.02.2013 became effective from the inception of the schemes of NEIIPP. Accordingly State Governments of NER have been directed to initiate recovery proceedings against those units that have already availed benefits under NEIIPP, 2007. Department of Revenue who have also been giving income tax and excise duty benefit to such units have also been advised to recover these benefits from such units under NEIIPP, 2007." 14. The respondents have also filed a rejoinder affidavit with the following statement:- "As per circular dated 01.04.2007 on NEIIPP, 2007, goods falling under chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 have been placed in the negative list for benefits under the said Policy and the CPC has been listed as one of the goods under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985." 15. Above quoted stand of the respondents in their rejoinder affidavit is somewhat misleading inasmuch as while stating that the CPC has been listed as one of the goods under Chapter-27 of the First Schedule to the Central Excise Tariff Act, 1985, the respondents have conveniently ignored that it is only the industries engaged in goods produced as petroleum oil or gas refineries. Further if we go by the stand of the respondents in their counter affidavit, no conscious decision in the matter is discernable. In one place, they have contended that if the particular product is manufactured by petroleum oil or gas refineries, the benefit of excise duty exemption would not available, but in another place they have contended that the production of coke has the adverse effect on environment. Finally without placing on record any reason, the respondents have conveyed the purported conclusion referred to in paragraph 9 of the counter affidavit that the units engaged in manufacture of CPC and Bitumen Emulsion qualify in the negative list of NEIIPP, 2007. 16. As referred to in the affidavit-in-reply filed by the petitioners, in the additional affidavit-in-opposition filed by the Central Pollution Control Board in PIL No. 39/2007, it was specifically contended that there will be no effect of pollution caused by CPC producing units as long as emission standards are met, which are developed based on techno-economic feasibilities including effect of pollutants on health and environment. It was also placed on record that the Central Pollution Control Board is regularly monitoring its emission from CPC producing units. Further, in the impugned Annexure-XV letter dated 8th February, 2013 as against the specification of industries producing 'goods' as petroleum oil or gas refineries, altogether a different stipulation has been made in reference to raw materials as by-products of petroleum refineries. 17. From whatever angle the matter is looked into including the stand of the respondents in their counter affidavits, no tangible and/or cogent reason is discernable towards denial of the benefits that accrued to the petitioners under the NEIIPP, 2007. In such a situation, the respondents will have to reconsider the decision contained in the impugned letter dated 8th February, 2013 (Annexure-XV) consistently with the observations made above and then to pass appropriate order. Let the required exercise be carried out and completed by passing a separate order as expeditiously as possible, preferably within 4(four) months. 18. With the above observation, writ petitions are disposed of without, however, any order as to cost.