2006 (9) TMI 597 - HC - Central Excise

Summary

Issues Involved:
1. Whether the writ petitions were granted an opportunity for a hearing under Section 11A(1) of the Central Excise Act.
2. Whether the impugned orders were contrary to Notifications No. 32/99 and 33/99 and the existing Industrial Policy.
3. Whether the amendments made by Sections 150, 151, and 153 of the Finance Act, 2003, were unconstitutional and violated Articles 14, 19(1)(g), 21, and 300A of the Constitution of India.
4. Whether the impugned orders were based on a misinterpretation of the term "availment."
5. Whether the case of Shree Hari Chemicals Export Ltd. v. Union of India is applicable.

Detailed Analysis:

1. Opportunity for Hearing under Section 11A(1) of the Central Excise Act:
The petitioners argued that they were not granted an opportunity for a hearing as mandated by Section 11A(1) of the Central Excise Act, which requires a notice to be served when any duty has been erroneously refunded. The court found that the refunds made to the assessees under Notifications No. 32/99 and 33/99 were not "erroneously refunded" but were benefits granted under those notifications. Therefore, Section 11A(1) was not applicable in this case.

2. Impugned Orders Contrary to Notifications and Industrial Policy:
The petitioners contended that the impugned orders were contrary to the notifications and the existing Industrial Policy, which had accrued certain vested rights to them. The court observed that the New Industrial Policy and other concessions for the North Eastern Region extended 100% excise duty exemption but did not include the benefits of CENVAT Credit. The amendment through Section 153 of the Finance Act was to ensure that the manufacturers utilized the CENVAT Credit availed of on the inputs for the manufacture of final products and paid only the balance of duty in cash. Therefore, the impugned orders were not contrary to the notifications or the existing Industrial Policy.

3. Constitutionality of Sections 150, 151, and 153 of the Finance Act, 2003:
The petitioners challenged the constitutionality of these sections, arguing that they were unreasonable and violated their fundamental rights. The court held that the competence of Parliament to amend or repeal an exemption notification is unquestionable, provided it does not conflict with other constitutional provisions. The retrospective operation of the legislation was not deemed unreasonable as it aimed to correct the unintended benefit of excess refunds to the manufacturers. Therefore, Sections 150, 151, and 153 were not unconstitutional.

4. Misinterpretation of the Term "Availment":
The petitioners argued that the term "availment" was misinterpreted by the revenue authorities. They contended that merely recording CENVAT Credit in their registers did not constitute "availment" unless it was utilized to pay off the excise duty. The court referred to various dictionary definitions and judicial interpretations of the term "avail" and concluded that "availment" meant actual utilization of the CENVAT Credit. The court found that the petitioners had taken advantage of the lacuna in the law and received unintended benefits. Therefore, the term "availment" was correctly interpreted by the revenue authorities.

5. Applicability of Shree Hari Chemicals Export Ltd. v. Union of India:
The petitioners relied on this case to argue that they could not be considered to have "availed of" CENVAT Credit unless it was utilized. The court distinguished the facts of the present case from Shree Hari Chemicals, noting that the latter involved a different factual matrix and related to the wrong mentioning of a section. The court held that the ratio of Shree Hari Chemicals was not applicable to the present case.

Conclusion:
The court dismissed all the writ petitions, holding that the excess refund availed by the petitioners needed to be recovered. The court found no merit in the petitions and upheld the impugned orders passed by the revenue authorities. There was no order as to costs.