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TMI Blog2018 (7) TMI 1999X X X X Extracts X X X X X X X X Extracts X X X X ..... ust also be a capital investment which ultimately would lead to the concept of production of profit and wealth. It would be difficult to find a purpose where if invested, the same would also lead to the benefit of the society as well as create profit and wealth. In the absence of the procedure being followed by the IAC as indicated above, the minutes of the meeting held on 25-6-2014 of the IAC, rejecting the investments claimed by the petitioner, is hereby set aside. Consequent upon the minutes of 25-6-2014 being set aside, the demand notice dated 15-9-2014 is also accordingly set aside - Petition allowed. - W.P. (C) No. 5353 of 2014 - - - Dated:- 27-7-2018 - Achintya Malla Bujor Barua, J. Dr. Ashok Saraf, Advocate, for the Petitioner. Shri R. Dubey, Advocate, for the Respondent. JUDGMENT Heard Dr. A. Saraf, Learned Senior Counsel, assisted by Mr. K. Choudhury, Learned Counsel for the petitioner as well as Mr. B. Sarma, Learned Standing Counsel, Central Excise Department, Assam. 2. The petitioner is a company having its registered office at 1711, S.P. Mukherjee Marg, Delhi and is primarily engaged in the manufacture and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 8-7-1999. (ii) The amount of the duty payable, which stood exempted, should be utilised by the manufacturer for investment in plant and machinery and such investments are to be made before expiry of six months from the end of its quarter. (iii) The manufacturer was required to furnish the details of the investment within one month from the expiry of the six months to a committee comprising of the Chief Commissioner of Central Excise, Shillong, the Principal Secretary of the Department of Industry of the State where the unit is located and the Principal Secretary of the Department of Industry of the State where the investment was made, which committee was referred as the Investment Appraisal Committee (IAC). (iv) The IAC upon examining the details would satisfy itself as to whether the investment was made in the required manner and thereupon issue a certificate to the manufacturer, which would be utilised by it for availing the 50% exemption in the excise duties. (v) A further requirement was that the investment so made was for a period of 10 years from the date of investment. 6. The commercial productions of the pan masala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a quarter, but for the exemption shall be deposited by the manufacturer within 60 days from the end of each quarter, in an escrow account to be opened by the manufacturer for the purpose in a Bank authorised for excise duty collection. (ii) The operation of the escrow account, including, withdrawal from the account shall be made with the prior approval of the jurisdictional Commissioner of Central Excise (CCE), taking into account the conditions specified in the Notification. (iii) The manufacturer, pending the investment of the withdrawn amount, shall execute a bond, as may be specified, binding himself to pay on demand the amount deposited in the escrow account, but not so invested as required, along with the interest at the rate specified under Section 11AB of the Central Excise Act of 1944. (iv) The amount deposited in the escrow account shall be invested in the manner as indicated above, within a period of 2 (two) years from the date of its deposit in such account and the amount withdrawn from the escrow account shall be invested in the manner indicated within 60 days from the date of its approval. 9. The notification of 9-7-2004 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made is provided under condition B of the Notification dated 21-1-2004 which is as under : B. An amount equal to the sum of basic excise duty, special excise duty, additional excise duty and national calamity contingent duty, payable, but for the exemption in this notification, shall be utilised by the manufacturer only for investment in : (i) Plant and machinery in a manufacturing unit which is located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura; or (ii) Infrastructure or civil works or social projects in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura. 14. Further the provision as to how the amount is to be withdrawn from the escrow account is provided under condition C(ii) of the Notification dated 9-7-2004, which is as under : (ii) Operations including withdrawals from and closure of the said escrow account shall be made with the prior approval of the jurisdictional Commissioner of Central Excise, taking into account the conditions specified in this Notification and to safeguard the revenue. 15. The manner in which the IAC is requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the investments were disallowed as the IAC was of the view that the same were not investments made as required under the scheme. A further stand was taken that under the scheme no opportunity of hearing or showing cause was required to be given. 19. By the judgment and order dated 7-8-2013 of the Division Bench in WP (C) No. 1174/2013, the stand of the respondent authorities that the scheme does not provide for any opportunity being given for substantiating the claim of investments were rejected on the ground that the principles of natural justice are imbibed in the scheme itself. 20. The Division Bench further went into the question as regards the role of the IAC in the post escrow situation, vis- -vis the role of the jurisdictional Commissioner, who also makes an application of mind at the time of granting the approval for withdrawal from the escrow account, as regards the question as to whether the investments sought to be made meets the requirement of condition B of the notification dated 21-1-2004. The Division Bench in this respect refers to an earlier decision of this Court dated 6-10-2010 rendered in Dharampal Satyapal Ltd. and Others v. Union of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Commissioner, the manufacturer is required to satisfy the IAC that he not only has made the investment , as claimed by him but also that he has invested the money for a purpose, which meets the conditions embodied in clause (B) of the Notifications. It is easily understandable that a manufacturer, if honest, would be hesitant to make investment freely unless he is satisfied that he would receive refund of the amount, which is invested by him. For this purpose, it was not only necessary that the manufacturer be sure that he was investing money in any of the four categories of specified activities, but he be also sure that the IAC would not reject his investment on the ground that the investment , though made, was for a purpose not envisaged or allowable under the Notification aforementioned. In other words, in order to enable a manufacturer make investment without reservation and freely, the scheme, now, embodied in the Notification, dated 9-7-2004, assures that if the investor makes an investment , his investment would not be rejected on the ground that his investment is for a purpose, which is not permissible under the Notifications, particularly, in a case, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t required to undertake any further exercise to determine if the manufacturer had or had not really invested the amount as claimed by him. Thus, the manufacturer was required to make, under the earlier Notification, dated 21-1-2004, investment , at his own peril and without knowing as to whether his investment would or would not be allowed as an investment within the meaning of the scheme of the Notification. Howsoever honest may be a manufacturer, the fact remains that any such kind of scheme, which the Notification, dated 21-1-2004, had embodied, could have, many a times, led to a serious controversy and dispute inasmuch as it might have become a matter of mere opinion whether an investment , already made, was really covered by the scheme of the Notifications or not. No investment can be undertaken by a manufacturer on the basis of such an unsure and uncertain scheme. 35. The only way, therefore, to make the scheme workable was that either the Central Government, or some authority, appointed by the Central Government, examines the investment , which is sought to be made, and allows investment to be made if and only if the investment is for a purpose mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of investment, which the Notification, dated 9-7-2004, envisages. In fact, such a prior sanction of the project by the IAC would amount to usurpation of the power, which stands, vested in and exercisable by, the jurisdictional Commissioner. Had the role of the jurisdictional Commissioner, under the later Notification, dated 9-7-2004, remained confined to only ensuring or safeguarding the interest of revenue, the contention, raised on behalf of the respondents, that the IAC has a role to play in the matter of even initial scrutiny of a project, would have had some substance; but when the Notification, dated 9-7-2004, requires, under condition (C)(ii), that the jurisdictional Commissioner shall, while allowing withdrawal from the Escrow Account, take into account the conditions, specified in the Notification, and also safeguard the interest of revenue, the question of the jurisdictional Commissioner being merely an executor of the decision of the IAC does not arise at all. 141. The respondent No. 2 has sought to take the shield of protection of superior authority by saying that he has acted in the matter under the instructions of superior authority. It needs to be unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition B of the Notification dated 24-1-2004 and therefore no further jurisdiction is vested in the IAC to make a fresh application of mind to arrive at a conclusion as to whether the claim of investments conform to the requirement of condition B. In the pre-escrow situation the role and concept of the jurisdictional Commissioner was not in place and consequently the manufacturers were required to make the investments at their own peril and thereafter place the same before the IAC for its application of mind as to whether investments conformed to the requirements of condition B. But such procedure opened the scope of further dispute and secondly had placed the manufacturer at an unenviable position to the effect that the investments made may either be accepted or rejected by the IAC. (iv) In the pre-escrow situation the IAC had the dual role of examining as to whether the investments conformed to the requirements of condition B, as well as, to verify as to whether such investments were actually made or not. But in the post escrow situation the IAC is required only to verify whether the investments conforms to what the jurisdictional Commissioner had allowed and further as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd jurisdiction of the IAC in the pre-escrow situation and post escrow situation are different from each other and the role it had played in the pre-escrow situation cannot ipso facto be made applicable also in the post escrow situation. 26. If the role and jurisdiction of the IAC in the pre-escrow and post escrow situation is understood to be same, a situation may arise in the post escrow situation where an investment sought to be made having been approved by the jurisdictional Commissioner can still be rejected by the IAC by claiming that it does not meet the requirements of condition B. But such an understanding would be incongruous to the extent that the investments sought to be made having been approved by the jurisdictional Commissioner, the manufacturer makes such investment thinking it to be the approved investment and if upon making the investments it is subsequently rejected by the IAC, a situation would arrive where the manufacturer would change his position to his detriment at the instance of the jurisdictional Commissioner but would not be entitled to the benefit for which such change of position was made. Such a situation would result in a violation of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards investments in plants and machinery were unacceptable and in paragraph 4.2, 4.3, and 4.4, the TDS, Service Tax and payment to ESI, respectively, paid by the petitioner which were also included as investments in the plants and machinery, infrastructure and social projects were unacceptable. In paragraph 4.5 to 4.8, it was observed that the plants and machinery which were purchased and kept in the original packed condition, but not installed, were also not acceptable. The IAC refers to an earlier minutes of a meeting held on 18-8-2004 providing that investments are to be accepted on the basis of installation of plants and machinery and not merely upon placing supply/purchase orders and concludes that the uninstalled plants and machinery in the original packed form is unacceptable. Further, the reliance of the petitioners in the C.B.E. C. Circular F. No. 81/3/2006-CX., dated 25-7-2006 which provides that machinery received at site in the North-Eastern Region and in possession of the beneficiary shall have to be construed to be an investment made, was also rejected by the IAC by taking a view that the said circular of the C.B.E. C. is not binding upon the IAC as be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceptable. (iv) The social project has been interpreted to mean capital investment for the benefit of the society, and, therefore, the investment made in any other form for the benefit of the society are unacceptable. 33. Further the IAC was also of the view that it is a statutory authority comprising of the senior officials and, therefore, they are not bound by the provisions of any notification or circular, nor they are bound by any procedure established otherwise and that they have the inherent authority to set up any procedure that it may deem appropriate and thereupon arrive at a conclusion as to whether the investments claimed are acceptable investments or not. It was also the view of the IAC that the jurisdictional Commissioner can only approve the withdrawal and that there was no provision for him to approve the scheme of investments that may be presented or to verify the investments before allowing the withdrawals. 34. The question, as to what the jurisdictional Commissioner was required to do and as to what he can do had already been decided by this Court in its Judgment and Order dated 6-10-2010 in Dharampal Satyapal Ltd. (supra) wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re approved by the jurisdictional Commissioner while granting the approval for withdrawal from the escrow account. The conclusion of the IAC that the jurisdictional Commissioner was required only to allow the withdrawal from the escrow account and there is no inbuilt provision allowing him to check or verify the investments before allowing the withdrawals is also contrary to the provisions of condition C(ii) of the notification dated 9-7-2004, inasmuch as, under the said provision, the jurisdictional Commissioner is required to allow the withdrawals by taking into consideration the conditions specified in the notification, which would also include condition B of the notification dated 21-1-2004, meaning thereby that the jurisdictional Commissioner shall satisfy itself as to whether the investments sought to be made do meet the requirements of condition B. Further, the conclusion of the IAC that it is for it to undertake the verification of the investments for issuing the certificate upon being satisfied that they were made in accordance with law, would have to be understood that the verifications to be undertaken by the IAC would be as to whether the investments claimed were made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits of such change of position. In other words, there would be a violation of the principle of promissory estoppels, where the manufacturer makes the investments strictly pursuant to the approval of the jurisdictional Commissioner, but after such investments are made, it stands rejected merely because the IAC is of a different view that such investments do not conform to the requirement of condition B. 41. As regards the conclusion of the IAC in its minutes of 25-6-2014 that the investments made in Tripura out of the amounts pertaining to the Guwahati unit and the investments made in Assam out of the amount pertaining to the Tripura unit are unacceptable, in the view of this Court could be contrary to the provisions of condition B of the notification dated 21-1-2004. Condition B provides that the amount equal to the duties payable, but for the exemption, be utilized by the manufacturer only for investment in plant and machinery of a manufacturing unit which is located in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura or for investment in infrastructure or civil works or social projects in the same States. The provisions of conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent for Consultancy Service incurred while setting up the plants and machineries as well as the TDS, Service Tax and ESI Payment are unacceptable towards being included in the investments made, a more rational approach on the part of the IAC would have been to consider as to whether the investments so claimed upon plants and machineries could have been made without incurring the required expenditure for Consultancy Service, TDS, Service Tax and ESI Payment. 44. In paragraph-14 of the judgment of the Supreme Court rendered in Commissioner of Income Tax, Lucknow v. M/s. U.P Cooperative Federation Ltd, reported in (1989) 1 SCC 747, the word investment has been dealt as under :- The term invest is used in a sense broad enough to cover the loaning of the money but is not restricted to that mode of investment or loans made on commercial paper. The word invest has been judicially defined as follows : To place property in business; to place so that it will be safe and yield a profit. It is also commonly understood as giving money for other property (as) investing funds on lands and houses. Investment means in common parlance, putting out money on interest, eit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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