2015 (1) TMI 539 - HC - Central Excise

Area based exemption - Constitutional validity of Circular dated 25th April, 2006 - Denial of benefits in the Notification No. 39/2001, dated 31-7-2001 - first commercial production for cast iron was done prior to 31-12-2005. However, the entire plant and machineries for production/ manufacturing of Pig Iron was not commissioned and installed (Fully) prior to 31-12-2005, and therefore, naturally the petitioners could not have commenced the production/manufacturing of Pig Iron. - Held that - that so far as the exemption/benefits contained in the Notification No. 39/2001 are concerned, same shall not be available to the petitioner with respect to the production of Pig Iron, as admittedly, the plant/unit and machinery for production of Pig Iron were not commissioned/installed (Fully) prior to 31-12-2005. Under the circumstances, no error or illegality has been committed by the concerned respondents in denying the exemption/benefit of Scheme contained in the Notification No. 39/2001, with respect to the production of Pig Iron. So far as the non-granting of the exemption/benefits contained in the Notification No. 39/2001, on production/manufacturing of cast iron articles is concerned, it is not clear as to whether on production/manufacture of cast iron articles on the unit/plant and machineries fully installed and commissioned prior to 31-12-2005, the petitioners have been denied the said benefits or not - if, the unit/plant and machineries have been commissioned/installed (Fully) prior to 31-12-2005, the petitioner may be entitled to the benefits contained in the aforesaid Notification, on manufacture/production of cast iron articles for a period of five years from the date of commencement of the first commercial production of such goods on such unit. Under the circumstances, the concerned respondent are required to consider the case of the petitioner for grant of the benefit under the Notification No. 39/2001 with respect to the production/manufacture of cast iron articles. So far as challenge to the clarificatory Circular, dated 25-4-2006, issued by the Director (TRU), clarifying that, if, the commercial production of a particular kind of specified goods has not commenced prior to 31-12-2005, there again the benefit of such notification would not be available to the such goods, is concerned, so far as the claim of the petitioner with respect to the Pig Iron is concerned, as stated and observed herein above, said situation may not arise, as industrial Unit was not commissioned and the plant and machineries were not installed (Fully) prior to 31-12-2005. So far as the grant of benefits with respect to the same Scheme contained in the Notification No. 39/2001 on manufacturing/production of cast iron is concerned, as stated above, the matter is required to be considered by the appropriate authority - Following decision of M/s. Plastene India Ltd. 2015 (1) TMI 527 - GUJRAT HIGH COURT - Matter remanded back - Decided partly in favour of assessee.

Summary

Issues Involved:

1. Validity of the Circular dated 25th April 2006.
2. Denial of exemption/benefits under Notification No. 39/2001-C.E. for cast iron articles and Pig Iron.
3. Entitlement to refund of Rs. 8.20 crore with interest.

Detailed Analysis:

1. Validity of the Circular dated 25th April 2006:

The petitioners challenged the Circular dated 25th April 2006, issued by the Director (TRU), Ministry of Finance, which clarified that if the commercial production of specified goods had not commenced before 31-12-2005, the exemption/benefit of Notification No. 39/2001-C.E. would not be available. The petitioners argued that this Circular was contrary to the original scheme and ultra vires to the Notification No. 39/2001-C.E.

The Court observed that the challenge to the Circular was academic in this case as the unit/plant and machineries for Pig Iron were not commissioned and installed fully before 31-12-2005. Therefore, the Circular's clarification was not applicable to the petitioner's situation. The Court further noted that the Circular was merely a clarification and did not alter the original scheme of the Notification.

2. Denial of exemption/benefits under Notification No. 39/2001-C.E. for cast iron articles and Pig Iron:

The petitioners argued that they were entitled to the exemption/benefits under Notification No. 39/2001-C.E. as they had made an aggregate investment of Rs. 24.30 crores and had commenced commercial production of cast iron articles before 31-12-2005. However, the production of Pig Iron did not commence before the cut-off date as the plant and machinery for Pig Iron were not fully installed.

The Court referred to the Division Bench decisions in "M/s. Plastene India Ltd. v. Union of India and Ors." and "Jaiprakash Associates Ltd. v. State of Gujarat & Others." It was held that the exemption/benefits under Notification No. 39/2001-C.E. would not be available for Pig Iron as the plant and machinery for its production were not commissioned/installed fully before 31-12-2005. Therefore, the denial of exemption/benefits for Pig Iron was upheld.

For cast iron articles, the Court noted that the plant and machinery were fully installed and commercial production commenced before 31-12-2005. The Court directed the appropriate authority to consider the petitioner's claim for exemption/benefits for cast iron articles in light of the observations made and the decision in "M/s. Plastene India Ltd."

3. Entitlement to refund of Rs. 8.20 crore with interest:

The petitioners sought a refund of Rs. 8.20 crore paid over and above the CENVAT Credit utilized, along with interest. The Court did not explicitly address this issue in detail but implied that the refund claim would be contingent on the determination of the entitlement to exemption/benefits for cast iron articles.

Conclusion:

The Court dismissed the petition concerning the claim for exemption/benefit for Pig Iron. However, it directed the appropriate authority to reconsider the claim for exemption/benefit for cast iron articles, provided the plant and machinery were fully installed and commissioned before 31-12-2005. The authority was instructed to complete this exercise within four months. The petition was dismissed with no order as to costs.