2011 (5) TMI 915 - HC - Central Excise

Issues Involved:
1. Eligibility and conditions for availing duty exemption under Central Excise Notification No. 8/2004 and No. 28/2004.
2. Requirement and process for withdrawal from the ESCROW account.
3. Delay in decision-making by the Jurisdictional Commissioner.
4. Forfeiture of unutilized funds in the ESCROW account.
5. Extension of time for investment of withdrawn amounts.

Issue-Wise Detailed Analysis:

1. Eligibility and Conditions for Availing Duty Exemption:
The judgment discusses the eligibility criteria for industrial units to claim duty exemption under Central Excise Notification No. 8/2004 dated 21.1.2004, which is applicable to North East based units commencing production between 21.4.1997 to 28.2.2001. Clause (B) of the notification mandates that the tax benefits must be utilized for investment in plants, machinery, infrastructural or civil works, manufacturing units, and social projects in the North Eastern States. The investments must be made within six months from the end of each quarter. The eligibility and compliance are verified by an Industrial Appraisal Committee (IAC Committee).

2. Requirement and Process for Withdrawal from the ESCROW Account:
Notification No. 28/2004 dated 9.7.2004 amended the earlier notification, requiring eligible manufacturers to deposit payable duty into an ESCROW account within 60 days from the end of the quarter. Withdrawals from this account need prior approval from the Jurisdictional Commissioner of Central Excise and must be invested in permissible sectors within two years (extended to four years). Details of the investments must be furnished to the IAC Committee to ensure compliance with Clause (B).

3. Delay in Decision-Making by the Jurisdictional Commissioner:
The petitioner argued that many withdrawal applications were pending without decision by the Jurisdictional Commissioner, which hindered their ability to make timely investments. The court noted that the Commissioner's inaction could irreparably prejudice the manufacturers, as they are unable to proceed with investments without approval. The court emphasized that withdrawal applications must be disposed of within a reasonable time to prevent such prejudice.

4. Forfeiture of Unutilized Funds in the ESCROW Account:
The court addressed the issue of forfeiture under Sub-Section (iv) of Section 69, which mandates that unutilized funds in the ESCROW account as of 31.12.2012 shall be forfeited to the Central Government. The petitioner contended that forfeiture should not occur due to the Commissioner's delay in approving withdrawals. The court agreed, stating that manufacturers should not face penal consequences for delays caused by the authorities.

5. Extension of Time for Investment of Withdrawn Amounts:
The court considered the petitioner's request for an extension of the time limit for investments. It was held that the four-year period for making permissible investments should commence from the date of communication of the decision on the withdrawal application, not from the date of deposit in the ESCROW account. This adjustment ensures that manufacturers are not unfairly penalized due to delays in the decision-making process.

Conclusion and Directions:
The court concluded that the respondents must take timely decisions on pending withdrawal applications. If a decision has already been made, it must be communicated to the applicant immediately. If further information is required, it should be sought promptly. The time limit for making investments will start from the date of communication of the decision on the withdrawal application. The writ petition was allowed to the extent indicated, without any order of cost.

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