2002 (5) TMI 806 - HC - Central Excise

Writ jurisdiction - Alternative remedy - Review - Quasi-judicial authority - Interpretation of Statutes - Exemption notification - Exemption - North-Eastern Region Industrial Policy - Strictures against Department - Order - Industrial policy - Industrial licence - Job work - Relationship of principal to principal basis

Issues Involved:
1. Maintainability of the writ petition in view of the availability of an alternative remedy.
2. Interpretation and application of the exemption notification dated 8-7-99.
3. Compliance with the Industrial Policy and the requirement of PMT (Provisional Manufacturing Certificate).
4. Applicability of the Industries (Development and Regulation) Act, 1951 to the petitioners.
5. Allegation of fraud and misuse of the exemption benefits.

Detailed Analysis:

1. Maintainability of the Writ Petition:
The respondents argued that the writ petition is not maintainable due to the availability of an alternative remedy under the Central Excise Act, 1944, which provides a complete machinery for challenging the impugned order. The petitioners countered that the writ petition should be entertained due to the arbitrary actions of the respondents, apparent errors on the face of the order, and violations of natural justice principles. The court held that the writ petitions are maintainable, considering the peculiar facts and circumstances of the case, including the arbitrary actions of the respondents and the prolonged pendency of the matter.

2. Interpretation and Application of the Exemption Notification:
The exemption notification dated 8-7-99 aimed to stimulate industrial development in the North-Eastern Region by exempting certain goods from excise duty. The court emphasized that the notification's language should be interpreted plainly and strictly according to its terms. The petitioners met the notification's requirements, as they were new units that commenced production after 24-12-97 and were located in specified areas. The court rejected the respondents' argument that the notification should be interpreted in light of the broader industrial policy objectives, stating that the notification's clear language must govern its application.

3. Compliance with the Industrial Policy and PMT Requirement:
The respondents initially granted refunds based on the exemption notification but later withheld them, citing non-compliance with PMT requirements. The court found that the PMT was not a condition precedent for the excise exemption and that the Central Excise Department acted beyond its authority by imposing additional conditions not specified in the notification. The court noted instances where the PMT was issued shortly after the commencement of production, undermining the respondents' arguments.

4. Applicability of the Industries (Development and Regulation) Act, 1951:
The respondents contended that the petitioners required a license under the IDR Act to manufacture cigarettes. The court held that the IDR Act did not apply to the petitioners, as they employed fewer than 50 workers with the aid of power, thus exempting them from the licensing requirement. The court cited relevant Supreme Court decisions affirming that small-scale units with fewer than 50 workers are not subject to the IDR Act's licensing provisions.

5. Allegation of Fraud and Misuse of Exemption Benefits:
The respondents alleged that the petitioners committed fraud by setting up front companies to benefit from the exemption. The court found no merit in this argument, noting that the agreements between the petitioners and larger companies were transparent and disclosed to the authorities. The court emphasized that job working is a recognized industrial process and that the benefits of the exemption notification could not be denied based on these allegations.

Conclusion:
The court concluded that the respondents acted arbitrarily and beyond their authority by withholding refunds and imposing additional conditions not specified in the exemption notification. The court directed the respondents to refund the excise duty paid by the petitioners within 30 days and quashed the impugned orders denying the benefits of the exemption. The court also provided that no penal action would be taken against the petitioners for non-payment of excise duty due to withheld refunds and disposed of the pending appeals before the Commissioner of Excise.

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