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2016 DIGILAW 1077 (GAU)

Raj Coke Industries v. Union of India

2016-12-01

HRISHIKESH ROY, NELSON SAILO

body2016
JUDGMENT AND ORDER : HRISHIKESH ROY, J. 1. Amongst the cases listed today, few are writ petitions and others are contempt cases. But the common grievance in all the matters is partial withholding of the refundable excise duty for the petitioners, in terms of the court judgments and the specific interim orders passed by the Hon’ble Supreme Court. The litigants are industrial units which were set up in the designated duty exemption zones in the North Eastern States, under the new industrial policy resolution of the Central Government, notified in the year 1997 and 2007. These industries were made eligible for 100% tax exemption and concession by the two notifications of 08.07.1999 and 25.04.2007, for 10 year period. As per the incentive mechanism, full refund of excise duty was provided to the units. 2. Mr. G.N. Sahewalla, the learned Sr. counsel is appearing for the petitioners in the WP (C) Nos. 851/16, 857/16, 2998/16, 3006/16, 3161/16, 3179/16, 7902/15, 7897/15 as well as in the Cont. Cas (C) Nos. 831/15, 4/16; Ms. M.L. Gope, the learned advocate appears for the petitioner in the WP (C) Nos. 269/16, 111/16, 265/16, 112/16, 271/16, 261/16, 268/16, 263/16, 272/16, 262/16, 119/16, 267/16, 270/16, 273/16, 266/16, 6114/16, 264/16, 2314/16, 7899/15, 7828/15, 7843/15 as well as in the Cont. Cas (C) Nos. 596/15, 598/15, 599/15, 600/15, 601/15, 603/15, 608/15, 609/15, 610/15, 611/15, 612/15, 774/15, 775/15, 776/15, 778/15, 806/15, 808/15, 814/15, 815/15, 41/16, 42/16, 636/16, 637/16; the learned advocate Mr. R.K. Agarwal, appears for the petitioner in the WP (C) No.7692/15 and Mr. R.S. Mishra, the learned counsel appears for the petitioner in the WP (C) No. 1126/16. The respondents in these cases are represented by Mr. S.C. Keyal, the learned Asstt. SGI. 3. Common questions are raised in these Writ Petitions and Contempt Cases and arguments of both sides pertain to the same issue and therefore all the cases are disposed of with the following order. 4. In exercise of powers conferred by Sub-Section (1) of Section 5A of the Central Excise Act, 1944, the Union Government issued the Notification No. 20/2007-Central Excise, whereby exemption of excise duty in respect of Industrial Units located in the North Eastern States was allowed for a period of 10 years from the date of commencement of commercial production. 4. In exercise of powers conferred by Sub-Section (1) of Section 5A of the Central Excise Act, 1944, the Union Government issued the Notification No. 20/2007-Central Excise, whereby exemption of excise duty in respect of Industrial Units located in the North Eastern States was allowed for a period of 10 years from the date of commencement of commercial production. The petitioners being eligible, started availing duty exemption in terms of this notification and were given 100% refund of excise duty deposited through Personal Ledger Account (PLA), in respect of the finished products cleared from their factory. However the exemption notification was amended through subsequent notifications of 27.03.2008 and 10.06.2008, respectively, whereby the refund entitlement was co-related to the value edition made by each industry and suffices is to note that the percentage of excise exemption benefit was thus reduced in the range of 15% – 75% for different units as applicable, as compared to 100%, prior to the curtailment notifications. 5. The aggrieved manufacturers questioned the legal validity of the reduced exemption benefits by projecting, inter-alia, the principle of promissory estoppels. The WP (C) No. 2143/2008 and other cases filed by the manufacturers was allowed by the learned Single Judge through the common judgment of 24.06.2009, with the following observations: “……….. 157. Because of what have been discussed and pointed out above, I hold that the impugned notifications, dated 27.03.2008 and 10.06.2008, are not sustainable in law and must, therefore, be set aside and quashed. 158. In the result and for the reasons discussed above, these writ petitions succeed. The impugned notifications, dated 27.03.2008 and 10.06.2008, are hereby set aside and quashed. The petitioners are hereby held entitled to receive 100% exemption from payment of excise duty as were available to them in terms of the relevant notifications, dated 08.07.99 and 25.04.2007, as the case may be………..” 6. Being aggrieved by the above verdict of the learned Single Judge, the Union of India filed the Writ Appeal No. 243/2009 and other Appeals and in those proceedings, the petitioners were arrayed as respondents. The Division Bench passed the first interim order on 11.08.2009, whereby the refund in terms of the verdict in the writ petition was directed to be limited, to the amount offered by the excise authorities or in other words, the judgment of the learned Single Judge was rendered inoperative, during the pendency of the Appeal. 7. The Division Bench passed the first interim order on 11.08.2009, whereby the refund in terms of the verdict in the writ petition was directed to be limited, to the amount offered by the excise authorities or in other words, the judgment of the learned Single Judge was rendered inoperative, during the pendency of the Appeal. 7. However for similar litigations emanating from the Gujrat High Court, the Supreme Court on 13.01.2012 in the SLP (C) Nos. 28194-28201/2010 passed a different type of interim order on the following terms:- “We have heard learned counsel for the parties on the question of stay of the impugned judgment. Having done so, we direct that operation of the impugned judgment shall remain stayed till further orders, subject to the petitioners' releasing to the respondents 50% of the amount due to them in terms of the impugned judgment on the respondents' furnishing solvent surety to the satisfaction of the jurisdictional Commissioner, within four weeks of their furnishing the said surety.” 8. Taking a cue from the interim order passed in the Gujarat Cases, the Misc. Case No. 1999/2012 was filed in the pending Writ Appeal No. 243/2009 and the Gauhati High Court after referring to the Hon’ble Supreme Court’s order of 13.01.2012 (in the Gujarat Cases), declared on 14.08.2012 that the interim order is modified, in terms of the order of the Hon’ble Supreme Court. 9. Eventually the Gauhati High Court did not find any merit in the Writ Appeals filed by the Central Government and through the common judgment of 20.11.2014, the appeals were dismissed with the following observations: “………..24. For the reasons and discussions made above, we find no reason to interfere with the order of learned Single Judge. Accordingly the appeals are dismissed and the writ petitions are allowed. All the industries set up pursuant to the policy of 1997 and 2007 shall continue to enjoy the benefits of full exemption as per the policy and the notifications. 25. The writ appeals, writ petitions and the connected miscellaneous cases are accordingly disposed of.” 10. One of the litigant before the Gauhati High Court i.e. M/s Ozone Ayurvedics (Unit-II), Amingaon then claimed refund of excise duty on account of quashing of the curtailment notifications. Then the refundable amount payable to the manufacturer was calculated by the Asstt. 25. The writ appeals, writ petitions and the connected miscellaneous cases are accordingly disposed of.” 10. One of the litigant before the Gauhati High Court i.e. M/s Ozone Ayurvedics (Unit-II), Amingaon then claimed refund of excise duty on account of quashing of the curtailment notifications. Then the refundable amount payable to the manufacturer was calculated by the Asstt. Commissioner of Central Excise in the following manner in his order dated 09.07.2015:- Year Duty paid on clearance of Finished Goods from PLA Refund sanctioned as per impugned Notification dated 27.03.08 Differential refund due (PLA-Refund sanctioned) 50% of Differential refund due. Total 11-12 12,352,872 11,211,472 1141400 1753931 Total 12-13 19,394,196 17,027,735 2366461 Grand Total 31747068 28239207 3507861 11. At this stage it would be relevant to refer to the I.A. No. 3/2015, filed by the Union of India in the SLP (C) No. 11878/2015 (Union of India vs. M/s. Kamakhya Cosmetics & Pharmaceuticals). Through this application, the Central Government prayed for stay of the judgment of the Gauhati High Court and in their application they prayed for the same interim order passed by the Supreme Court on 13.01.2012, in the SLP (C) No. 28194-28201/2010, which pertain to the cases emanating from the State of Gujarat. Accordingly the Hon’ble Supreme Court, passed the following interim order on 07.12.2015, for the lead case going from the Gauhati High Court: “……….. Pending further orders, we direct that subject to the petitioners releasing 50% of the amount due to the respondent in terms of the impugned judgment on the respondents’ furnishing solvent surety to the satisfaction of the jurisdictional commissioner, the operation of the impugned judgment shall remain stayed. We further direct that contempt proceeding initiated against the petitioners shall subject to their releasing 50% of the amount as stated above remain stayed………..” 12. The departmental authorities however failed to refund the payable amount to the concerned litigants and accordingly Contempt Cases came to be filed in the Gauhati High Court. The Division Bench in the Cont. Cas (C) No. 609/2015 and other cases, issued direction on 09.12.2015 to the authorities to comply with the interim order passed by the Hon’ble Supreme Court on 07.12.2015, in the I.A. No. 3/2015. 13. The Division Bench in the Cont. Cas (C) No. 609/2015 and other cases, issued direction on 09.12.2015 to the authorities to comply with the interim order passed by the Hon’ble Supreme Court on 07.12.2015, in the I.A. No. 3/2015. 13. Following the interim order passed by the Hon’ble Supreme Court, the High Court and the order passed in the contempt cases, the Deputy Commissioner of Central Excise ordered for refund of duty to M/s Ozone Ayurvedics (Unit-II), through his order dated 12.02.2016. But this time, departure was made from the earlier method, followed on 09.07.2015, by taking into account the undisputed segment of the already refunded excise duty, to calculate the 50% entitlement of refund, for the manufacturer. The following chart will indicated how a lesser amount was proposed to be paid by the Revenue:- Quarter Total duty payable DUTY paid in clearance of finished goods Refund sanctioned as per impugned Notification dated 27.03.08 or 10.06.2008 Total Refund due as per Supreme Court’s interim order dated 07.12.2015 (i.e. 50% of column 3) From PLA From CENVAT Credit Account 3 103743 91137 12606 37348 45569 6 11568633 8052389 3516244 6478433 4026195 3 5285731 4327421 958310 2960009 2163711 4 1032069 749593 282476 392186 374797 Total 17990176 13220540 4769636 9867976 6610272 14. The petitioners before us contend that under the interim order passed by the Hon’ble Supreme Court, they are entitled to receive back 50% of the amount, disputed by the departmental authorities and the calculation for the refundable sum can’t take into account the undisputed segment of the refundable excise duty. Therefore direction is sought on the respondents to grant relief and refund to the petitioners’ strictly in accordance with the direction issued by the Hon’ble Supreme Court and the High Court. Since the precise amount to be released by the excise authorities to the industrial units, is being calculated in different manner the resolution of this issue by the Court is pressed forward not only by the petitioners but also by the learned Asstt. Solicitor General of India, for guidance of the departmental authorities. 15. The issue to be considered in these cases is the meaning of the expression amount due in terms of the impugned judgment, referred to by the Hon’ble Supreme Court in their order dated 07.12.2015 in the I.A. No. 3/2015. Solicitor General of India, for guidance of the departmental authorities. 15. The issue to be considered in these cases is the meaning of the expression amount due in terms of the impugned judgment, referred to by the Hon’ble Supreme Court in their order dated 07.12.2015 in the I.A. No. 3/2015. The challenge in the Gauhati High Court was to the curtailment notifications dated 27.03.2008 and 10.06.2008, whereby the excise duty refund was restricted to a maximum limit as specified in the rate column of the table appended to the impugned notification, whereby the different rates of refund ranging from 15% – 75%, was permitted to be paid back to the manufacturer. The focus of the litigation related to whether the concerned manufacturer will be entitled to 100% excise duty exemption, as was envisaged by the notification of 25.04.2007 or will receive exemption at lesser rates, as specified in the curtailment notifications dated 27.03.2008 and 10.06.2008. At no stage it was the stand of the department that the manufacturer will receive benefit of exemption at a lesser rate than what was specified, in the two curtailment notifications of 27.03.2008 and 10.06.2008 respectively. Both impugned notifications as earlier noted, were quashed in the writ proceeding by the High Court. Thus the entitlement, to the extent of the applicable rate for the concerned industry, was never a matter of dispute in the litigation. To put it differently, the litigation relates to whether the manufacturers are entitled to exemption in full, beyond the rate that was stipulated in the two impugned notifications of 27.03.2008 and 10.06.2008. 16. The entitlement to curtailed refund of the excise duty under the incentive scheme of the Central Govt. for the North East based units, was never a matter of controversy amongst the rival litigants. Therefore, the litigation centered around the issue on whether full duty refund is payable for the units. In fact, the excise authorities were disbursing lesser refund, as applicable to each industry under the curtailment notifications, but without raising any dispute on the proportionate refund so granted since 1997. Therefore when the curtailment notifications were quashed by the Court and declaration was given that the industries are deserved hundred percent exemption benefits, the units then became entitled to the withheld segment of the refundable duty. Therefore when the curtailment notifications were quashed by the Court and declaration was given that the industries are deserved hundred percent exemption benefits, the units then became entitled to the withheld segment of the refundable duty. Hence the expression amount due in terms of the court’s verdict, which finds place in the interim order passed by the Supreme Court, cannot logically relate to the withheld segment, to which the litigants became entitled, by the success in their legal battle. When 50% of this amount due is to be calculated, the determination must be with relation to the disputed or withheld portion of the refundable excise duty and cannot rationally take into account, the segment already disbursed to the units, which are unaffected by the curtailment notifications. 17. In our understanding of the judgment rendered by the learned Single Judge on 24.06.2009 and by the Division Bench on 20.11.2014, the manufacturers became entitled to the differential amount of excise duty, which was withheld from them, on account of the curtailment notifications. Thus the disputed amount mentioned in the interim order, cannot take into account the undisputed sum, which was never the subject matter of litigation in the Court. 18. Following the above analysis, in granting refund of 50% of the amount due to the units as per the court’s interim order, the determination of the refundable amount cannot must exclude the sum which were already received by the petitioners. Therefore the calculation of the 50% of the refundable duty should co-relate to the differential sum only. 19. When the refundable amount was calculated for one of the successful litigants i.e. M/s Ozone Ayurvedics (Unit-II), the Asstt. Commissioner of Central Excise, on the first occasion (09.07.2015) looked at the duty amount paid on clearance of finished goods from the PLA and then took into account the refundable amount at the lesser specified rate (under the impugned notification dated 27.03.2008). For this unit, the differential amount was determined by, subtracting from the amount deposited through PLA, the sum already refunded by the impugned notification. Thereafter, in terms of the interim order passed by the Hon’ble Supreme Court, 50% of the differential due was calculated by the Commissioner. This methodology in our opinion, reflects the correct amount due, mentioned by the Hon’ble Supreme Court, in its order dated 07.12.2015 in the I.A. No. 3/2015. Thereafter, in terms of the interim order passed by the Hon’ble Supreme Court, 50% of the differential due was calculated by the Commissioner. This methodology in our opinion, reflects the correct amount due, mentioned by the Hon’ble Supreme Court, in its order dated 07.12.2015 in the I.A. No. 3/2015. Hence, any lesser amount quantified as the payable sum to the petitioners, in our comprehension, do not conform to the interim order passed by the Hon’ble Supreme Court and also by the High Court. Having concluded thus, we do not hesitate to declare that the methodology of calculation made by the Deputy Commissioner on 12.02.2016 to determine the refundable amount is not the correct mode as the authority has unjustly taken into account, the undisputed segment of the refundable excise duty, to reach a lesser figure, for making refund to the successful litigant, as an interim measure. 20. In the above context, it would be appropriate to take note of the fact that for certain categories of industries, the rate of refundable excise duty is stipulated at 75% and if we approve the calculation of the Deputy Commissioner under his order of 12.02.2016, a successful litigant may have to pay back to the authorities a portion of the permitted refundable sum, instead of getting back 50% of the differential amount, in terms of the interim order passed by the Apex Court. 21. The interim order passed by the Hon’ble Supreme Court on 07.12.2015 in the I.A. No. 3/2015 was made applicable by the Gauhati High Court in all the pending cases and therefore the determination of the amount due in terms of the Court’s interim order, cannot include what was undisputedly paid back as refundable excise duty, which the manufacturers were entitled to receive, irrespective of the outcome of the litigation. Therefore inclusion of those already refunded sum, was not justified for determining the amount due. In our understanding, only the differential amount can be taken into account for deciding what sum to be paid back now to the manufacturer. In other words, 50% of the unpaid amount is the due amount and this must be refunded to the eligible units, subject to furnishing of solvent surety to the satisfaction of the jurisdictional commissioner. It is declared so accordingly. 22. In other words, 50% of the unpaid amount is the due amount and this must be refunded to the eligible units, subject to furnishing of solvent surety to the satisfaction of the jurisdictional commissioner. It is declared so accordingly. 22. Before we part with the records, it is necessary for us to observe that while relief through the judgment of June 24th 2009 was confined to the writ petitioners, the benefit of the relief was expanded to cover all the industries set up pursuant to policy of 1997 and 2007, under the Division Bench judgment dated 20.11.2014 in the WA No. 243/2009. Therefore, our above observation on the receivable amount will universally apply to all the eligible industries and the interim relief is not to be restrictive to only the litigants, before the Court. 23. Following the above, by virtue of the interim order operating in all these cases, the respondent authorities are ordered to disburse 50% of the withheld segment of the refundable amount, to the units subject to furnishing of solvent surety by those units. Such interim refund or the entitlement to receive the balance 50% of the withheld sum, will abide by the final decision of the Hon’ble Supreme Court in the pending challenge of the central Government in SLP (C) No. 11878/2015 and other related cases. It is ordered accordingly. 24. As the petitioners have been deprived of the benefit of the successful litigation and the respondents are expected to act with promptitude in granting due refund, the necessary exercise in this regard should be completed within 8(eight) weeks, from today. It is ordered accordingly. 25. With this direction, all the cases are disposed of. No cost.