2010 (6) TMI 680 - HC - Central Excise

Impugned actions of getting transferred diverse sums of money from the Escrow Accounts of the writ petitioners towards recovery of alleged dues of excise duty and additional duty of excise Held that - For the purpose of making the withdrawal applications, the periods, during which the Escrow Accounts had remained frozen as well as the periods, during which diverse sums of money had stood appropriated by forfeiture of the amounts, shall be kept excluded Coming to the question of the hotel project, it needs to be noted that by way of an interim order, dated 30-9-2008, the Court had allowed the petitioners-applicants to proceed with the construction of the hotel subject to the outcome of the writ petition and since this Court has already held that the petitioners-applicants hotel project stood approved, on principle, by the IAC, and when the petitioners hotel project satisfies the conditions of investment on infrastructure, it becomes clear that the respondents are, now, required to pass appropriate order(s), in this regard, so as to enable the petitioners-applicants receive the benefit of the findings of this Court and the directions given in this regard. The directions, contained above, it may be noted, having not been consciously denied, though the petitioners-applicants were entitled to, ought to have been given and it is this error, which was apparent on the face of the record and which has, now, been corrected. Such directions, one must reiterate, shall be made available to the petitioners-applicants so that they can enjoy the fruits of the directions already passed, in their favour, in their writ petitions

Issues Involved:
1. Interpretation of exemption notifications.
2. Withdrawal and restoration of exemptions.
3. Procedural requirements for claiming exemptions.
4. Actions taken by authorities regarding escrow accounts.
5. Clarification and implementation of court orders.

Issue-wise Detailed Analysis:

1. Interpretation of Exemption Notifications:
The case revolves around the interpretation of various notifications issued by the Government of India, Ministry of Finance, Department of Revenue, which granted and later withdrew exemptions from payment of excise duty and additional duty of excise for certain goods manufactured in the North-Eastern States. The industrial units of the writ petitioners were set up under Notifications No. 32/99-C.E. and 33/99-C.E., both dated 8-7-1999.

2. Withdrawal and Restoration of Exemptions:
By Notification No. 45/99-C.E., dated 31-12-1999, the Central Government excluded tobacco-related products from the exemption. This exemption was briefly restored by Notification dated 17-1-2000, but later withdrawn again by Notifications dated 22-1-2000 and 1-3-2001. The exemptions were partially restored by Notification No. 69/2003-C.E., dated 25-8-2003, to the extent of 50% of the duty payable. Notification No. 8/2000/4-C.E., dated 21-1-2004, expanded the scope of exemption to 100% for investments in plant and machinery, infrastructure, civil works, or social projects.

3. Procedural Requirements for Claiming Exemptions:
The scheme outlined in the notifications required manufacturers to make investments in specified areas and submit details to an Investment Appraisal Committee (IAC). Procedural amendments were introduced by Notification dated 9-7-2004, including depositing sums in an Escrow Account and obtaining approval from the jurisdictional Commissioner of Central Excise for withdrawals. Failure to comply with these conditions would result in the recovery of duty along with interest.

4. Actions Taken by Authorities Regarding Escrow Accounts:
The petitioners were issued show-cause notices for failing to produce requisite investment certificates. The authorities transferred sums from the petitioners' Escrow Accounts and froze these accounts, leading to the filing of WP(C) No. 591/2008. The court set aside these actions and directed the respondents to consider the petitioners' applications for withdrawal of funds for investments, including a five-star hotel project.

5. Clarification and Implementation of Court Orders:
The petitioners sought clarification on the implementation of the court's judgment, specifically on excluding the period during which the Escrow Accounts were frozen and the appropriated amounts were unavailable. The respondents argued that the writ proceeding could not be reopened by a miscellaneous application. However, the court clarified that it had the power to review and correct errors apparent on the face of the record. The court directed that the periods during which the Escrow Accounts were frozen or sums were appropriated should be excluded while considering the withdrawal applications. The petitioners were also allowed to file fresh withdrawal applications for making investments.

Conclusion:
The court addressed the procedural and substantive issues related to the exemption notifications, the actions taken by the authorities, and the implementation of its orders. It emphasized the need to exclude periods when the Escrow Accounts were frozen or sums were appropriated to ensure the petitioners could benefit from the exemptions. The court's directions aimed to rectify errors and ensure justice for the petitioners.

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