2016 (12) TMI 476 - HC - Central Excise

Partial withholding of the refundable excise duty - The litigants are industrial units which were set up in the designated duty exemption zones in the North Eastern States, under the new industrial policy resolution of the Central Government, notified in the year 1997 and 2007. These industries were made eligible for 100% tax exemption and concession by the two notification(s) of 08.07.1999 and 25.04.2007, for 10 year period. As per the incentive mechanism, full refund of excise duty was provided to the units - Notification No.20/2007- Central Excise - Held that - it would be appropriate to take note of the fact that for certain categories of industries, the rate of refundable excise duty is stipulated at 75% and if we approve the calculation of the Deputy Commissioner under his order of 12.02.2016, a successful litigant may have to pay back to the authorities a portion of the permitted refundable sum, instead of getting back 50% of the differential amount, in terms of the interim order passed by the Apex Court. The interim order passed by the Hon ble Supreme Court on 07.12.2015 in the I.A. No.3/2015 was made applicable by the Gauhati High Court in all the pending cases and therefore the determination of the amount due in terms of the Court s interim order, cannot include what was undisputedly paid back as refundable excise duty, which the manufacturers were entitled to receive, irrespective of the outcome of the litigation. Therefore inclusion of those already refunded sum, was not justified for determining the amount due. In our understanding, only the differential amount can be taken into account for deciding what sum to be paid back now to the manufacturer. In other words, 50% of the unpaid amount is the due amount and this must be refunded to the eligible units, subject to furnishing of solvent surety to the satisfaction of the jurisdictional commissioner. It is declared so accordingly. Before we part with the records, it is necessary for us to observe that while relief through the judgment of June 24th 2009 was confined to the writ petitioners, the benefit of the relief was expanded to cover all the industries set up pursuant to policy of 1997 and 2007, under the Division Bench judgment dated 20.11.2014 in the WA No.243/2009. Therefore, our above observation on the receivable amount will universally apply to all the eligible industries and the interim relief is not to be restrictive to only the litigants, before the Court - by virtue of the interim order operating in all these cases, the respondent authorities are ordered to disburse 50% of the withheld segment of the refundable amount, to the units subject to furnishing of solvent surety by those units. Such interim refund or the entitlement to receive the balance 50% of the withheld sum, will abide by the final decision of the Hon ble Supreme Court in the pending challenge of the central Government in SLP(C) No.11878/2015 and other related cases. It is ordered accordingly. As the petitioners have been deprived of the benefit of the successful litigation and the respondents are expected to act with promptitude in granting due refund, the necessary exercise in this regard should be completed within 8(eight) weeks, from today.

Summary

Issues Involved:
1. Partial withholding of refundable excise duty.
2. Legal validity of reduced exemption benefits.
3. Interpretation of "amount due" in terms of interim orders.
4. Calculation methodology for refundable excise duty.

Issue-wise Detailed Analysis:

1. Partial Withholding of Refundable Excise Duty:
The common grievance among the writ petitions and contempt cases was the partial withholding of refundable excise duty. The petitioners, industrial units set up in designated duty exemption zones in North Eastern States under the Central Government's industrial policy resolutions of 1997 and 2007, were entitled to 100% tax exemption and concession. However, subsequent notifications reduced this exemption, leading to the current legal dispute.

2. Legal Validity of Reduced Exemption Benefits:
The manufacturers challenged the reduced exemption benefits, invoking the principle of promissory estoppel. The learned Single Judge's judgment on 24.06.2009 quashed the notifications dated 27.03.2008 and 10.06.2008, declaring them unsustainable in law. The judgment held that the petitioners were entitled to 100% exemption from excise duty as per the original notifications of 08.07.1999 and 25.04.2007.

3. Interpretation of "Amount Due" in Terms of Interim Orders:
The Supreme Court's interim order on 07.12.2015 directed that 50% of the amount due to the respondents be released, subject to furnishing solvent surety. The issue was the interpretation of "amount due," which the petitioners argued should exclude the undisputed segment of the refundable excise duty. The court concluded that the "amount due" referred to the differential amount withheld due to the curtailment notifications, not the already refunded amount.

4. Calculation Methodology for Refundable Excise Duty:
The correct calculation method was a point of contention. Initially, the Asstt. Commissioner of Central Excise calculated the refundable amount by subtracting the already refunded amount from the total duty paid and then determining 50% of this differential amount. However, a subsequent calculation by the Deputy Commissioner included the undisputed refunded amount, leading to a lesser refund. The court declared that the correct methodology should exclude the undisputed segment and focus on the differential amount withheld due to the curtailment notifications.

Conclusion:
The court ordered the respondent authorities to disburse 50% of the withheld segment of the refundable amount to the petitioners, subject to furnishing solvent surety. This interim relief applies universally to all eligible industries set up under the policies of 1997 and 2007, not just the litigants. The final decision on the remaining 50% will depend on the Supreme Court's ruling in the pending challenge by the Central Government. The necessary exercise for refund calculation and disbursement should be completed within eight weeks.