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TMI Blog2014 (11) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 724/2014, WP(C) 723/2014, WP(C) 729/2014, WP(C) 1694/2014, WP(C) 1723/2014, WP(C) 2887/2014, WP(C) 1696/2014, WP(C) 3457/2014, WP(C) 3458/2014, WP(C) 6685/2013, WP(C) 6698/2013, WP(C) 6786/2013, WP(C) 5444/2014, WP(C) 5538/2014 THE UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF FINANCE, (DEPARTMENT OF REVENUE) NEW DELHI, THE COMMISSIONER OF CENTRAL EXCISE, SHILLONG, THE COMMISSIONER OF CENTRAL EXCISE,THE DEPUTY COMMISSIONER OF CENTRAL EXCISE,GUWAHATI Versus ICON HOUSEHOLD PRODUCTS PRIVATE LIMITED, R.C.L. CEMENTS, ICON HOUSEHOLD PRODUCTS PRIVATE LIMITED., NORTH EAST ROOFINGS LTD., ASSAM ROOFING LTD., PRAG ELECTRICALS PVT. LTD, EMAMI LTD, VINAY CIMENTS LIMITED., GUWAHATI CARBON LIMITED, BRAHMAPUTRA CARBON LIMITED , PDP STEELS LTD., M/S DHARAMPAL SATYAPAL LIMITED (GUWAHATI UNIT), M/S GODREJ SARA LEE LTD., M/S OZONE AYURVEDICS, M/S OZONE AYURVEDICS (UNIT II), M/S OZONE PHARMACEUTICALS LIMITED., M/S. S. JOHNSON PRODUCTS PRIVATE LTD., M/S N.E. THERMISION PRIVATE LIMITED AND UNION OF INDIA & ORS Versus M/S MANAKSIA LTD. AND ZOBELE INDIA PVT. LTD., GODREJ CONSUMER PRODUCTS LTD., GREENPLY INDUSTRIES LTD., BULLAND CEMENTS PRIVATE LTD., KITPLY INDUSTRIES LTD. ,HINDUSTAN UNILEVER LIMITED ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... policy reads thus: FISCAL INCENTIVES TO NEW INDUSTRAIL UNITS AND THEIR SUBSTANTIAL EXPANSION. i. Government has approved for converting the growth centers and IIDs into a total Tax Free Zone for the next 10 years. All industrial activity in these zones would be free from Income Tax, Excise for a period of 10 years from the commencement of production. State Government would be requested to grant exemptions in respect of Sales Tax and Municipal Tax. ii. Industries located in the growth centers would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subje ct to a maximum ceiling of Rs. 30.0 lakhs. 3. Pursuant to the said policy, dated 08-07-1997, a notification is issued by the Central Government, under Section 5A (1) of Central Excise Act, 1944 (in short, 'Act of 1944') and under Section 3 (3) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (in short, 'Act of 1957'), wherein the nature of industries and the areas, which are entitled to benefits are specified . The Industrial Policy of 1997 came to be expired by 23-12-1997. The Government of India, again, issued another Industrial Policy on 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e substantial and heavy investments. In fact , the first Industrial Policy of the year 1997, operated successfully. The Government felt that a further extension of the said concession will boost the industrial activity in the North-eastern region. Therefore, the second Industrial Policy of 2007, on similar line, was published for a further period of 10 years. The Government in the year 2008 abruptly modified the rates of concession by the modified notifications, which is contrary to the terms of the Industrial Policy. The State cannot issue notifications contrary to the Industrial Policy in view of the judgment of the Supreme Court in Suprabhat Steel Ltd. and others -vs- State of Bihar and others, reported in (1999) 1 SCC 31. (b) The State having held out a solemn promise to the investors to invest in the North-eastern region, declared concessions. Reposing faith in the promise, the investors have invested substantial sums of money in the North-eastern region. The abrupt withdrawal of concessions by the modified notifications, in question, is impermissible in view of the doctrine of promissory estoppel enunciated by the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd -vs- St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g detection of the case the unit withdrew their application for availment of exemption. 3. Sanghi Industries Ltd. Kutcch 40.12 Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption, a s the unit was already in existence even prior to issuance of Notification. Following detection of the case the unit voluntarily deposited Rs. 25.00 Crores. SCN is being issued. 4. Sumangal Glass Pvt. Ltd. Kutcch No refund was claimed by the party Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption. Detailed report sent to CC. Case is yet to be decided by the Committee. 5. Gran Electronics Pvt. Ltd. Kutcch No refund was claimed by the party Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption. Detailed report sent to CC. Case is yet to be decided by the Committee. 6. Hinron Steel Industries Kutcch No refund was claimed by the party. Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption, as the investment made in Plant & Machinery was less than 20 Crores. Deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K 0.05 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issue d by these companies without physical receipt of any inputs. 18. M/S V.K. Metal Works J&K 2.64 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 19. Nav Bharat Metals J&K 0.32 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 20. Shiv Giri Metal Indst. J&K 0.43 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 21. Shree Sita Ram Castings J&K 0.16 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 22. Shree Vaishno Devi Metals Pvt. Ltd. J&K 3.12 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs. 23. V.M.I. Industries J&K 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erdewa, Arunachal Pradesh Arunachal Pradesh 0.31 Bogus sale of goods to their related unit situated in non-exempt ed area; thus facilitating availment of inadmissible Cevat credit.. SCN is likely to be issued soon 35. Satya Megha Ispat (P) Ltd., Tamiulkuchi, Bymihat. Meghalaya 0.08 Bogus sale of goods to their related unit situated in non-exempted area; thus facilitating availment of inadmissible Cevat credit. SCN is likely to be issued soon. 36. Foto Industries, Meghalaya & M/S Photo Film Industries, Pondicherry Meghalaya 8.66 Goods claimed to have been manufactured at the Meghalays factory of M/S Foto Industries, Meghalaya were, in fact, being produced at thei r sister concern, namely, M/S Photo Film Ind, Pondicherry from where the goods were cleared without payment of duty to their customers. Case settled under settlement commission. Entire duty alongwith interest has been realized. 37. M/S Matiz Metals Pvt. Ltd. Meghalaya 19.57 The unin has shown bogus purchase of raw materials availing Cenvat credit, bogus production and fraudulently issued invoices showing clearance of excisable goods in order to facilitate the buyers to avail Cenvat credit. One SCN to the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tifications: 8. To sum up, in order to minimize misuse of area based excise duty exemption applicable to J&K, North East and Kutch areas (by way of bogus production, bogus purchases of input, purchase of input against non duty paid invoices, overvaluation etc), following proposals are submitted for modification of existing scheme. i) To provide that refund of excise duty would be allowed only to the extent of duty payable on the value addition made by the units in these areas ii) The quantum of value addition may be determined by fixing an all industry ratio based on CENVAT Credit and PLA (Cash) ration for non-POL items with an option to assessee to get the ratio fixed based on actual financial data from audited profit and loss account. 9. It is submitted that the above said fraudulent and dishonest acts of cheating by the industries, if any, can very well be verified at the time of refund and also by periodical inspections, the Department can detect the acts of cheating, if any, indulged by the industries. There are investigatory and regulatory mechanism envisaged under the Central Excise Act, which can effectively take car e of the above instances of malfeasance and misfeas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in these areas where actual production takes place elsewhere in the country. (iii) Overvaluation of goods resulting in availment of excess of credit by buyer . Goods are supplied by manufacturers, importers to these units without issuance of sales invoice and these are backed by bogus sales invoice issued by traders who do not undertake actual supply of goods. The actual supplier of these goods is sued bogus duty paid invoices to other manufacturers who take credit based on such invoices without receipt of goods. To elaborate the above modus operandi, I beg to give the following illustration: 1. It was submitted on the basis of illustrations set out in the Affidavit in Re ply that the same are general illustrations of misuse of exemption, which exempt ion was meant to be available to genuine manufacturers. That units in the Kutch region were wanting to pay maximum amount of duty in cash so that refund of the entire amount can be claimed. A study was undertaken to verify this aspect and find out percentage of excise duty paid in cash as well as percentage of excise duty paid by utilizing CENVAT credit by similar units located elsewhere when compared with units situated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ac t is that even in a case where a Rule, Notification, etc. is amended, etc., unless the amending Rule, Notification, etc. specifically denotes a contrary intention, everything that has taken place under the Rule, Notification, etc. prior to amendment shall continue to its logical end. This provision is not only a saving provision, but is a provision which correspondingly obligates both the person who was a beneficiary under the existing Rule, Notification, etc. and the authority under the existing Rule, Notification, etc. to continue to comply with the requirements of the Rule, Notification, etc. as it existed even after amendment once the parties have duly done anything or suffered under the existing Rule, Notification, etc. An Assessee, who is required to act in a particular manner as specified by the Rule, Notification, etc. as existing before the amendment, is obliged in law to act accordingly, and correspondingly the authority is equally obliged in law to act as if the amendment had not taken place, such act on part of the authority being not only in relation to collection of revenue and other attendant provisions like penalty, etc., but also in relation to the entitlements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled and the same can be summarised as under: (1) The doctrine of promissory estoppel is to be treated as a preserved right, but such right is subject to the limitation that - (2) Such promise or the representation made must be given under the authority of law and in consonance with the statute and not unauthorisedly or in contravention to any statutory provision on the principle that there cannot be any estoppel against the statute. (3) Such cannot be permitted to be invoked against the overwhelming public inter est. (4) The Legislature or the Parliament has power for diluting its effect retrospectively by enacting any law. 117. If the record produced on behalf of the Central Government is considered, it appears that none is concerning to the object which was at the time of formulation of the policy or achievement of the said object. On the aspects of public interest, the ground as sought to be canvassed is that the duty paid in such area where incentive provided was higher in comparison to the other places and it was orally contended by the learned Additional Solicitor General that such would s how that the exemption policy was being misused or there were manipulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention that the petitioners/assessees are claiming the exemption on bogus ground, in surmise. 28. In a case where the State invited new industries by offering concessional power tariff and thereafter withdrew the same on the ground that there was power t heft on a large scale the Apex Court in case of U.P. Power Corporation Limited ( supra), after detailed analysis of the law on the subject, struck down the action of the State by invoking principle of promissory estoppel and in the process stated: 20. In this 21st century, when there is global economy, the question of faith i s very important. Government offers certain benefits to attract the entrepreneur s and the entrepreneurs act on those beneficial offers. Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the short sightedness of the governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellant-Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at other unit of same manufacturer in another part of the country; iv) Purchase of inputs on non-duty paid invoice (invoices issued by traders) , even though goods are duty paid. The duty paid invoices are sold in the market to other manufacturers for availing CENVAT Credit on such invoices without receipt of goods. The DGCEL has booked involving duty evasion of Rs. 178 Crores for above types of cases. 3.2 Problem of Zinc Oxide manufacturers: The All India Zinc Oxide manufacturers Association has represented an interesting problem. They manufacture zinc oxide and zinc dross is their main input. As per a Supreme Court judgment, the zinc dross is not an excisable product. Therefore, the zinc oxide manufacturers in other part of the country are require d to pay almost full duty in cash as no CENVAT Credit is available to them on the zinc dross. But units manufacturing zinc oxide in J&K even though they pay same amount of duty, get refund of full duty and also recover the duty amount from customers and this results in making the produce of other units totally uncompetitive. This is explained with the following data: Cost of Zinc dross - Rs.160 per kg Value addition to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) referred to in the report is as follows: Description of Goods Total duty paid in 2006-07 by units in specified areas PLA (cash) % to total duty All India % of PLA to total duty PLA CENVAT Credit Total 1. Iron and Steel 488 230 718 68 27 2. Copper 224 8 232 96 14 3. Aluminium Rods/Wires 50 18 68 74 33 4. Tyres 118 73 191 62 39 5. Cosmetics 170 33 203 84 53 6. Misc. Chemicals 266 28 294 90 31 7. Soap Detergent 117 73 190 64 47 8. Article of plastic 48 12 60 80 22 9. DG sets 15 24 39 39 29 10. Medicines 132 27 159 83 26 Total of 10 products groups 1628 526 2154 76 32 Total of 440 Units paying more than 50% duty in PLA 2108 673 2781 76 32 (All India Non-POL items) Total of 587 Units in these areas 2427 16. The percentage of excise duty paid in the exempted areas is highest when compared to similar industries in the area where there is no exemption as per the PLA (supra). The difference in percentage is shown so high that sometimes it is three times higher the duty is pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the misuse, the concession had to be withdrawn does not ap pear to be tenable, on deeper scrutiny of the materials placed before the Court. It is not as if that the State and the Department does not have any mechanism or machinery for detecting malpractice of bogus production by diligent periodical inspection. 20. Where the goods do not carry MRP, with reference to the marginal cost an d the prevalent market price of similar goods in comparison to the market price of similar goods, the malpractice of over valuation can be detected at the time of refund. 21. With regard to the allegation of importing of goods from the sister unit s from some other area to the exempted area, the same could also be easily detected because, under the VAT Act, the transit permits have to be taken if false transit permit has been taken for transfer of consignment from one unit to the sister unit in the exempted area, in such cases, it could be easily detected as a case of malpractice. That apart, the transit of goods is well regulated under the VAT Act, and the transit passes, documents of title of goods consigned have to be taken and that at every check post, there would be a check. It is not th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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