Gauhati High Court
Kaziranga Tobaco Products Pvt. Ltd. vs Union Of India (Uoi) on 17 May, 2002
Equivalent citations: 2003(160)ELT98(GAU)
JUDGMENT P.G. Agarwal, J.
1. This batch of 23 writ petitions are disposed of by this common judgment and order.
2. We have heard Shri Ashok Desai, Sr. Advocate, Shri P.K. Goswami, Sr. Advocate, Shri G.N. Sahewalla, Sr. Advocate, Dr. Ashok Saraf, Sr. Advocate, for the writ petitioners and Shri A.K. Ganguly, Sr. Advocate, Shri K.N. Choudhury, Sr. Advocate for the respondent Union of India.
3. The facts are that the Government of India announced a separate Industrial Policy for the North-Eastern Region in the month of December, 1997 to stimulate development of industries so that the Region overcomes its continuing backwardness. The State of Assam also announced their industrial policy. In order to make operational the policy, number of Notifications were issued by the Government of India as well as the State of Assam and out of them Excise Notification issued by the Ministry of Finance on 8-7-99 on the eve of the Hon'ble Prime Minister's visit to Assam was the major incentive.
4. The case of the writ petitioner is that pursuant to the said notification, they (writ petitioners) before us established new units to manufacture cigarettes and for the purpose all of them obtained provisional registration certificate. After the completion of the project, commercial production commenced and the petitioners approached the concerned Central Excise Department, Guwahati for releasing the excise benefits as per the said notification. The Exemption Notification No. 32/99, dated 8-7-99 issued by the Central Excise (hereinafter referred as Exemption Notification No. 74) reads as follows :-
"Exemption from excise duty and additional excise duty to goods cleared from a unit located in the Growth Centre or Integrated Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estates or Industrial Area or Commercial Estates or Scheme Area. - In exercise of the powers conferred by Sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), read with Sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and Sub-section (3) of Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and cleared from a unit located in the Growth Centre or Integrated Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estates or Industrial Area or Commercial Estate or Scheme area, as the case may be, specified in Annexure appended to this notification, from so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts as is equivalent to the amount of duty paid by the manufacturer of goods from the account current maintained under Rule 9 read with Rule 173G of the Central Excise Rules, 1944.
2. The exemption contained in this notification shall be given effect to in the following manner, namely :-
(a) The manufacturer shall submit a statement of the duty paid from the said account current to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, by the 7th of the next month in which the duty has been paid from the account current.
(b) The Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, after such verification, as may be deemed necessary, shall refund the amount of duty paid from the account current during the month under consideration to the manufacturer by the 15th of the next month.
(c) If there is likely to be any delay in the verification, the Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, shall refund the amount on provisional basis by the 15th of the next month to the month under consideration, and thereafter may adjust the amount of refund by such amount as may be necessary in the subsequent refunds admissible to the manufacturer.
The exemption contained in this notification shall apply only to the following kind of units namely :-
(a) New industrial units which have commenced their commercial production on or after the 24th day of December, 1997.
(b) Industrial units existing before the 24th day of December, 1997 but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent on or after the 24th day of December, 1997.
4. The exemption contained in this notification shall apply to any of the said units for a period not exceeding ten years from the date of publication of this notification in the Official Gazette or from the date of commencement of commercial production whichever is later."
5. In the present case there is no dispute at the Bar that the industrial units established by the petitioner are all new units having commenced their commercial production on or after 24-12-97 and they are all situated within the specified area mentioned in Annexure to the exemption notification. After the establishment of the industry and before starting commercial production, writ petitioners got themselves registered before the Central Excise Department as required under the Rules and after completion of the formalities commercial production commenced. The writ petitioners deposited their excise duty and thereafter claimed refund as per Clause 2 of the Notification as quoted above. The respondent Assistant Commissioner of Central Excise after due verification and on being satisfied about the writ petitioners' eligibility for exemption under the exemption notification, refunded the excise duty paid by the petitioners for the months of May/June, 2000. The refund of the said amount is admitted by the respondents who in their additional affidavit dated 3-4-2002 have given a chart, the relevant portion of which reads as follows :-
Name of writ petitioner WPC No. No. of workers Date of PMT Amount of refund sanctioned Amount of refund withheld/denied (from July, 2000 onwards through adjudication by A.C./D.C. 2 3 7 9 10 11 Agasthya Industries (P) Ltd.
2548/01 388/01 46 13-10-2000 848.62 805.74 Assam Tobacco (P)Ltd.389/01 46
22-11-2000 201.46 946.81 New Tobacco (P) Ltd.446/01 39
No PMT 276.90 189.45 AMS Converters 387/01 26
-
-
587.19 Kazirang a Tobacco Products (P) Ltd.403/01
1914/01 26 16-11-2000 363.45 675.52 Alam Industries 386/01 45 15-12-2000
-
1124.66 Sunflag Enterprises (P) Ltd.
391/01 4716-12-2000 1310,35 1221.49 Golconda Industries 385/01 46 18-11-2000 1609.37 1198.43 Frontier Multi-products 406/01 41 No PMT 1146.50 1204.34 Assam Cigarettes Co. (P) Ltd.
3533/01 445/01 21 25-1-2000 1320.34 1101.25 R.C. Tobacco (P)Ltd.
2549/01 447/01 43 31-10-2000 1408.89 2283.63 Tirupati Tobacco (P) Ltd.
2547/01 384/01 44 10-11-2000 559.39 1165.79 Kreesna Industries (P) Ltd.
6850/01 39 19-6-2000 482.85 207.65 AVM Tobacco (P) Ltd.
7094/01, 380/01 20 No PMT 57.65 47.00 Newzone India (P) Ltd.
402/01 4216-11-2000 1348.14 1065.40 As the commercial production was continuing, the writ petitioners deposited their excise duty for the subsequent months of July, August, September, 2000 etc. and claimed refund. The respondent authorities, however, initially postponed their release of the refund and it relates to certain correspondences between the parties. Some of the writ petitioners approached this court by filing writ petitions for a direction to the respondents to release the refund. This court vide interim order directed the Assistant Commissioner of Central Excise to refund the amount of excise duty paid as provided under Clause 2(3) of the exemption notification. The respondent authorities filed an application for vacation of the said direction whereupon the matter was heard and this court vide order dated 8-2-2001 provided as follows :-
"For the aforesaid reasons, I am not inclined to vacate the interim order passed by this court but considering the fact that the said order has not been complied with as yet for reasons which may not be altogether be justified. I allow time to the Assistant Commissioner of Central Excise Department up to 28-2-2001 to comply with the interim order of this Court. Misc. case stands disposed of."
7. The respondent authorities neither filed any appeal against the above direction nor complied with the same. On the contrary, passed different orders against the writ petitioners stating inter alia that the refund claimed for the months of July, 2000 to September, 2000 should not be entertained and the Asstt. Commissioner ordered recovery of the amount already refunded to the assessee/writ petitioners. Hence the writ petitioner filed writ petition challenging the impugned order.
8. In these writ petitions, respondents, however, filed counter affidavit and additional affidavit on two occasions. The respondents have resisted the claim of the writ petitioners and the relief sought by them mainly on the grounds that (1) the writ petition is not maintainable in view of availability of alternative remedy. (2) The exemption notification dated 8-7-2000 should not be read in isolation and it is to be read keeping in mind the objectives of the special Industrial Resolution, 1997. (3) In view of the provisions contained in Industries (Development and Regulation) Act, the petitioners, who are all manufacturers of cigarettes, are not entitled to exemption. That the said industries were established in violation of the provisions of Industries (Development and Regulation) Act, 1951. (4) That the Assistant Commissioner of Central Excise did not commit any wrong in considering the requirement of PMT and for non-establishment of non-tobacco based industries by the writ petitioners. We will revert back to the specific pleas when these issues are addressed later on in this judgment.
9. As regards the question of maintainability on the ground of alternative remedy the submission of the respondents is as follows :-
"Under the Scheme of the Central Excise Act, 1944, there is a hierarchy of authorities before which the petitioner can get adequate redress against the alleged order of the Answering Respondent No. 4. The petitioner has the right to prefer an appeal before the Commissioner (Appeals), (Which the petitioner has already availed). Against the decision of the Commissioner (Appeals) the petitioner can approach CEGAT. Further, the petitioner can also apply to the High Court seeking the High Court to direct the Tribunal to refer the question of law for the opinion of the High Court under Section 35G. Further more, an appeal also lies with the Supreme Court of India. The Central Excise Act, 1944 provides a complete machinery to challenge the impugned order. As a matter of fact the petitioner has availed the Appellate remedy under Section 35E(4) and the Appellate Commissioner is in seise of the matter. Thus the writ petition filed by the petitioner is not maintainable in its present form.
(1) Titagar Paper Mills Co. Ltd. v. The State of Orissa reported in AIR 1983 S.C. 603 (para 11);
(2) Asstt. Collector of Central Excise, Chandan Nagar v. Dunlop India Ltd. reported in AIR 1985 S.C. 330 (para 3);
(3) H.B. Gandhi, Excise & Taxation Officer cum Assessing Authority v. Gopinath & Sons and Ors. reported in 1992 Supp (2) SCC (312) (para 6)."
10. In the case of Titagar Paper Mills Co. Ltd. and Anr. v. State of Orissa and Anr., reported in AIR 1983 SC 603 the Apex Court held :-
"The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and not by a petition under Article 226 of the Constitution. It is now well recognised that where a right or liability is created by a statute which gives a special remedy for enforcing it, the remedy provided by that statute only must be availed of."
11. The learned Counsel for the writ petitioners on the other hand, submitted that in this connection misc. case filed by the respondent was rejected and an interim direction was given to the respondent to refund the amount till 28-2-2001. However, in violation of the court's direction the respondents passed the impugned order dated 27-2-2001 rejecting the claim for refund which was in violation of this court's order and finding. While disposing of the misc. case filed by the respondent, this court observed that the question whether the petitioners are entitled to refund or not, shall be considered by the court and as and when the writ petition is finally disposed of in view of Clause 2(c) of the exemption notification, the respondents are duty bound to make provision for refund and accordingly directed for the same. Shri Ganguli, Sr. Advocate for the respondent has, however, justified the order dated 27-2-2001 passed by the Assistant Commissioner by stating that the interim direction given by this court requiring the Assistant Commissioner to determine the eligibility of the industries in claiming the benefit before passing of order and as such the impugned order dated 27-2-2001. It may be mentioned here that the question of eligibility was also decided when the first refund was made in the months of May, June, 2000 and the question of eligibility is not required to be considered each time when the application for refund is made. We are not satisfied with the explanations given in the order dated 27-2-2001 but that need not detain us.
12. There is no dispute at the Bar that the Central Excise Act provides complete machinery to challenge the impugned order as submitted by the respondent and as quoted above. The writ petitioners have also admitted that some appeals were in fact filed before the Commissioner of Central Excise as provided under the Act. It is, however, submitted that the petitioners had approached this court prior to the passing of the order dated 27-2-2001 and the appeals were filed during the pendency of the writ petition and as a matter of abundant caution so that the statutory period does not defeat their cause. The learned Counsel for the writ petitioners, however, submitted that the petitioner cannot be thrown out on the ground of maintainability in view of the peculiar facts and circumstances of the case and the following factors :-
(1) That the fate of the appeal is predetermined.
(2) The act of the respondents was arbitrary.
(3) That there is apparent error on the face of the order and the principles of natural justice have been violated.
(4) The order was passed without jurisdiction.
(5) Once rule has been issued and parties have filed their affidavits, counter affidavits, rejoinders, additional affidavits, etc., when the matter is pending for nearly two years, it will amount to injustice, if they are thrown out without considering the merit.
13. The case of the writ petitioners is that after the commencement of commercial production, the Central Excise Department after verification of the records and other documents found that the writ petitioners are entitled to exemption and accordingly granted the same to them. However, the problem arose when the Director of Industries and Commerce, Assam vide their letter dated 25-5-2000 informed the Commissioner of Central Excise, Assam that before claiming the refund of excise duty, the industrial units are required to observe certain formalities as mentioned in the said letter and it was stated that unless the above formalities are observed by the cigarettes manufacturing units, their cases should not be considered for refund of the excise duty. Another letter was sent on 29-6-2000 by the Joint Director, Industries, Government of Assam. Initial response/reaction of the Commissioner of Central Excise, Shillong is reflected in the following words of his letter No. C.No.V-24 (19) 1/89, dated 12/13 July, 2000, the relevant portion of which reads as follows :-
"In this context, I am directed to inform you that there is no provision under the Central Excise Act, 1944 and rules made thereunder and also in terms of Notification Nos. 32/99-C.E. and 33/99-C.E. both dated 8-7-99 to deny refund of Central Excise duty to the Cigarette Units for non-compliance of the instruction and procedure said to have been laid down by DIG, Assam as mentioned in your letter referred above.
Therefore, Central Excise Authority shall not deny refund of Central Excise duty as far as the said manufacturers follow and fulfil the terms and conditions of Notification No. 32/99-C.E., dated 8-7-99 issued under the provisions of the Central Excise Act, 1944.
For further details, you may refer to the above notifications along with the relevant Act and Rules.
Yours sincerely Sd/-
(T. Haokip)"
14. The following portion of the letter No. 16742-50, dated 2-8-2000 of the Office of the Commissioner of Central Excise, North-Eastern Region, Shillong, also goes to show the question of keeping the refunds in abeyance and subsequently passing of the impugned order was at the behest of the higher-ups. It reads as follows :-
"C No.IV-16/42/TECH/99/Pt-I, dated 1-8-2000 2-AUG 2000 To The Assistant Commissioner /Deputy Commissioner (BY NAME) Central Excise Division, Guwahati.
Subject : Pursuance of the meeting of the Commissioner of Central Excise, Shillong with the Chairman and Member, CBEC held on 25-7-2000 at the Chamber of the Chairman, CBEC in view of letter issued by DIC, Government of Assam for denying the benefits of Notification No. 32/99-C.E. dated 8-7-99 to Cigarette Manufacturing Units-Regarding.
Sir, On the above mentioned context, it has been instructed by the Commissioner of Central Excise, Shillong (Camp: New Delhi) that the following steps/actions are to be initiated immediately in respect of Cigarette Manufacturing Units under your jurisdiction who are availing the benefits of Notification No. 32/99-C.E., dated 8-7-99."
15. Even the learned Counsel representing the Central Excise made submission before the learned Single Judge while the misc. case was taken up and his submission finds mention in the order of this court dated 8-2-2001, which reads as follows :-
"Mr. Mahanta further submitted that the Assistant Commissioner or the Deputy Commissioner concerned has taken up the matter with the higher authorities including the Central Board of Excise and Customs and that the Assistant Commissioner or the Deputy Commissioner concerned has been instructed to take some more time so that the matter could be resolved by the higher authorities."
16. The learned Counsel for the writ petitioner submitted that the decision was rendered by the superior authorities and the decision in the appeal is a foregone conclusion as there is no effective remedy in the form of appeal before the Commissioner and it will be an exercise in futility. At this stage, we may recaptulate the observations of the Apex Court in the case of Ram & Syam Company v. State of Haryana reported in (1985) 3 SCC 267. The facts in the above case are some what identical to the present facts in the sense that the impugned order was passed for all practicable purposes by the Chief Minister of the State and the High Court refused to entertain the writ petition as an appeal lies/available before the Chief Minister. The Apex Court held :
"Ordinarily it is true that the court has imposed a restraint in its own wisdom on its exercise of jurisdiction under Article 226 where the party invoking the jurisdiction has an effective, adequate alternative remedy. More often, it has been expressly stated that the rule which requires the exhaustion of alternative remedies is a rule of convenience and discretion rather than rule of law. At any rate it does not oust the jurisdiction of the court. In fact in the very decision relied upon by the High Court in State of U.P. v. Mohammad Nooh it is observed "that there is no rule, with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy". It should be made specifically clear that where the order complained against is alleged to be illegal or invalid as being contrary to law, a petition at the instant of person adversely affected by it, would lie to the High Court under Article 226 and such a petition cannot be rejected on the ground that an appeal lies to the higher officer or the State Government. An appeal in all cases cannot be said to provide in all situations an alternative effective remedy keeping aside the nice distinction between jurisdiction and merits. Look at the fact situation in this case. Power was exercise formally by the authority set up under the Rules to grant contract but effectively and for all practical purposes by the Chief Minister of the State. To whom do you appeal in a State administration against the decision of the Chief Minister? The elitch of appeal from Ceaser to ceaser's wife can only be bettered by appeal from one's own order to oneself. Therefore this is a case in which the High Court was not at all justified in throwing out the petition on the untenable ground that the appellant had an effective alternative remedy. The High Court did not pose to itself the question, who would grant relief when the impugned order is passed at the instance of the Chief Minister of the State. To whom did the High Court want the appeal to be filed over the decision of the Chief Minister. There was no answer and that by itself without anything more would be sufficient to set aside the judgment of the High Court."
17. In recent case of Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors., reported in (1998) 8 SCC 1 the Apex Court observed :-
"14. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provision of the Constitution. This power can be exercised by the High Court not only for issuing writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari for the enforcement of any of the Fundamental Rights contained in Part III of the Constitution but also for "any other purpose".
15. Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction. But the alternative remedy has been consistently held by this court not to operate as a bar in at least three contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. There is a plethora of case law on this point but to cut down this circle of forensic whirlpool, we would rely on some old decisions of the evolutionary era of the constitutional law as they still hold the field.
20. Much water has since flown under the bridge, but there has been no corrosive effect on these decisions which, though old, continue to hold the filed with the result that law as to the jurisdiction of the High Court in entertaining a writ petition under Article 226 of the Constitution, inspite of the alternative statutory remedies, is not affected, specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation."
18. The writ petitioners have alleged that the action of the Central Excise authority was arbitrary. They first granted the refund and thereafter at the dictates of others kept the same in abeyance and subsequently stopped refund and even ordered recovery of the earlier refunded amount. They treated the cigarette manufacturing unit in a different manner although the exemption notification did not provide for any such discrimination. It was submitted during the course of argument that the other units established under the said Industrial Policy and doing similar job or producing goods in another company's brand name were granted excise refund without insisting on the PMT. It is also not disputed that the excise refunds were made available to the units manufacturing chewing tobacco products till the date of the exemption whereas the same has been denied to the present batch of writ petitioners. In the case of Tata Engineering v. Assistant Commissioner, reported in (1967) 2 SCR 751, the Apex Court held that the High Court should not refuse to entertain where the action has been taken arbitrarily without the sanction of law.
19. The writ petitioners have also submitted that the impugned orders were passed by the concerned authority without jurisdiction, that is, the matters were decided on the basis of irrelevant factors without considering the relevant factors. The writ petitioners contend that PMT was not relevant factor for deciding the refund whereas the concerned authority did so although on earlier occasion they held that condition of PMT cannot be incorporated in the exemption notification. Further, the Assistant Commissioner of Central Excise the proper authority under the notification, on being satisfied that all the conditions of the exemption notification have been fulfilled granted exemption for the months of April, 2000 to June, 2000 on provisional basis and subsequently respondent No. 4 sanctioned the refund finally for the said period. The Assistant Commissioner has no power to review his own order once he had decided that the unit is entitled or eligible for exemption. But, in the instant case they have done so without approaching the Commissioner for revision of the order Under Section 35E of the Act. Respondents have nowhere contended that the Assistant Commissioner had the power to review or revise his own orders under the Act. In the case of Dr. Smt. Kuntesh Gupta v. Management of Hindu Kanya Mahavidyalaya, reported in 1987 (32) E.L.T. 8 (S.C.) = AIR 1987 S.C. 2186 the Apex Court held :-
"11. It is now well established that a quasi-judicial authority cannot review its own order, unless the power of review is expressly conferred on it by the statute under which it derives its jurisdiction.
12. The next question that falls for our consideration is whether the High Court was justified in dismissing the writ petition of the appellant on the ground of availability of an alternative remedy. It is true that there was an alternative remedy for challenging the impugned order by referring the question to the Chancellor under Section 68 of the U.P. State Universities Act. It is well established that an alternative remedy is not an absolute bar to the maintainability of a writ petition. When an authority has acted wholly without jurisdiction, the High Court should not refuse to exercise its jurisdiction under Article 226 of the Constitution on the ground of existence of an alternative remedy. In the instant case, the Vice-Chancellor had no power of review and the exercise of such a power by her was absolutely without jurisdiction. Indeed, the order passed by the Vice-Chancellor on review was a nullity; such an order could surely be challenged before the High Court by a petition under Article 226 of the Constitution and, in our opinion, the High Court was not justified in dismissing the writ petition on the ground that an alternative remedy was available to the appellant under Section 68 of the U.P. State Universities Act."
20. This court vide order dated 8-2-2001 directed the respondents to make the refund in terms of Para 2(c) of the exemption notification within 28-2-2001. Two or three days before the end of such deadline, the respondents in a very hush hush manner and by pasting notices at night, fixed 27-2-2001 for hearing without affording any reasonable opportunity to the writ petitioners to make their submissions and thereafter the prayer for time/adjournment was rejected and the impugned order dated 27-2-2001 was passed. In the case of Babu Ram v. Zila Parishad, reported in AIR 1969 S.C. 556 the Apex Court held that the doctrine with regard to exhaustion of statutory remedy have no application in a case where the impugned order has been made in violation of the principles of natural justice.
21. In the present case, we find that Rule was issued and the matter is pending for the last one and half years during which both the parties have filed numerous applications, affidavits, counter affidavits, rejoinder and volume of documents. In view of foregoing discussions, this court is of the view that this is not a case where the writ petitioners are to be thrown out on the ground of existence of alternative remedy. Accordingly, it is held that the writ petitions are maintainable and it is proposed to dispose of on merit.
22. Before interpreting the exemption notification, it will be fruitful to examine the principles of interpretation of exemption notification. In the case of Hansraj Gordhandas v. H.H. Dave, reported in 1978 (2) E.L.T. (J 350) (S.C.) = AIR 1970 S.C. 755, the Apex Court held : -
"It is well established that in a taxing statute there is no room for any intendment but regard must be had to the clear meaning of the words. The entire matter is governed wholly by the language of the notification. If the tax-payer is within the plain terms of the exemption it cannot be denied its benefit by calling in aid any supposed intention of the exempting authority. If such intention can be gathered form the construction of the words of the notification or by necessary implication therefrom, the matter is different but that is not the case here. In this connection we may refer to the observations of Lord Watson in Salomon v. Salomon and Co., 1897 AC 22 at p. 38:
"Intention of the legislature is a common but very slippery phrase, which popularly understood may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably would have meant, although there has been an omission to enact "it. In a court of Law or Equity, what the Legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication."
It is an application of this principle that a statutory notification may not be extended so as to meet a casus omissus. As appears in the judgment of the Privy Council in Crawford v. Spooner, (1846) 6 Moo PC 1(9) :
".....we cannot aid the legislature's defective phrasing of the Act, we cannot add, and mend, and by construction, make up deficiencies which are left there."
Learned Counsel for the respondents is possibly right in his submission that the object behind the two notifications is to encourage the actual manufacturers of handloom cloth to switch over to powerlooms by constituting themselves into Co-operative Societies. But the operation of the notifications has to be judged not by the object which the rule making authority had in mind but by the words which it has employed to effectuate the legislative intent."
In a later decision in the case of Collector of Central Excise, Bombay v. Parle Exports (P) Ltd., reported in 1988 (38) E.L.T. 741 (S.C) = (1989) 1 SCC 345, the Apex Court held :-
"The expression in the Schedule and in the notification for exemption should be understood by the language employed therein bearing in mind the context in which the expressions occur. According to the tradition of our law, primacy is to be given to the text in which the intention of the law giver has been expressed. The words used in the provision, imposing taxes or granting exemption should be understood in the same way in which these are understood in ordinary parlance in the area in which the law is in force or by the people who ordinarily deal with them. When a notification is issued in accordance with power conferred by the statute, it has statutory force and validity and, therefore, the exemption under the notification is, as if it were contained in the statute itself. The notification has to be read as a whole in the context of other relevant provisions in the statute. When two views of a notification are possible, it should be construed in favour of the subject as notification is part of a fiscal enactment. Though in a taxing Act provision enacting an exception to the general rule of taxation has to be construed strictly against those who invoke its benefit, but While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It is only, however, in the event of there being a real difficulty in ascertaining the meaning of a particular enactment that the question of strictness or of liberality of construction arises. However, absurd results of construction should be avoided."
23. Learned Counsel for the respondent Central Excise has placed reliance in the observations of the Apex Court in the case of Tata Oil Mills Co. Ltd. v. Collector of Central Excise, reported in 1989 (43) E.L.T. 183 (S.C.) = (1989) 4 SCC 541 wherein the Apex Court held :-
"We are of opinion that the view taken by the excise authorities as well as by the Tribunal proceeds upon too narrow an interpretation of the notification. It is true, as Mr. Ganguli contended, that an assessee claiming relief under an exemption provision in a taxing statute has to show that he comes within the language of the exemption. But, in trying to understand the language used by an exemption notification, one should keep in mind two important aspects : (a) the object and purpose of the exemption, and (b) the nature of the actual process involved in the manufacturer of the commodity in relation to which exemption is granted."
Mr. Ganguli has also referred to the observations of the Apex Court in the case of Novopan India Ltd. v. Collector of C. Ex. and Customs, Hyderabad, reported in 1994 (73) E.L.T. 769 (S.C.) wherein the Apex Court held :-
"18. We are, however, of the opinion that, on principle, the decision of this court in Mangalore Chemicals - and in Union of India v. Wood Papers referred to therein - represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound - does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reason explained in Mangalore Chemicals and other decisions, viz., each such exception/exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is found applicable to him full effect must be given to it. As observed by a Constitution Bench of this court in Hansraj Gordhandas v. H.H. Dave [1978 (2) E.L.T. (J 350) (S.C.) - 1969 (2) S.C.R. 253] that such a Notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification, i.e., by the plain terms of the exemption."
In this connection the following observations of the Apex Court in the case of Harbhajan Singh v. Press Council of India and Ors., reported in JT 2002 (3) SC 21 may be pertinent :
"7. Cross, in Statutory interpretation (third edition, 1995) states : "The governing idea here is that if a statutory provision is intelligible in the context of ordinary language, it ought, without more, to be interpreted in accordance with the meaning an ordinary speaker of the language would ascribe to it as its obvious meaning, unless there is sufficient reason for a different interpretation. Thus, an 'ordinary meaning' or 'grammatical meaning' does not imply that the judge at attributes a meaning to the words of a statute independently of their context or of the purpose of the statute, but rather that he adopts a meaning which is appropriate in relation to the immediately obvious and unresearched context and purpose in and for which they are used. By enabling citizens (and their advisers) to reply on ordinary meanings unless notice is given to the contrary, the Legislature contributes to legal certainty and predictability for citizens and to greater transparency in its own decisions, both of which are important values in a democratic society" (p. 32 ibid.). The learned author cites three quotations from speeches of Lord Reid in House of Lord's cases, the gist whereof is :
in determining the meaning of any word or phrase in a statute ask for the natural or ordinary meaning of that word or phrase in its context in the statute and follow the same unless that meaning leads to some result which cannot reasonably be supposed to have been the legislative intent; (ii) rules of construction are our servants and not masters; and (iii) a statutory provision cannot be assigned a meaning which it cannot reasonably bear, if more than one meaning are capable, you can choose one but beyond that you must not go (p. 40, ibid.)."
24. In the light of the aforesaid settled legal proposition, we find that the courts are required to confine themselves to the express language employed by the exemption notification and in case of ambiguity only, the court may look to other aspects. In other words, whether the writ petitioners before us were entitled to exemption/claim refund of excise duty is to be gathered from the express language of the Notification. Mr. Ganguli, learned senior Advocate appearing for the respondents has, however, referred to a recent decision of the Apex Court in the case of Collector of Custom, Bombay v. M.J. Exports Ltd., reported in 2001 (132) E.L.T. 514 (S.C.) = (2001) 6 SCC 756. On perusal of the said decision it is seen that the Apex Court had in fact reiterated the proposition in Hansraj (supra). However, in view of the observations of the Apex Court in the earlier case of M.J. Exports Ltd. reported in 1992 (60) E.L.T. 161 (S.C.) = 1993 Supp (1) SCC 169, the court held that re-export of goods specified in List II and imported into India is prohibited by necessary implication by the language of, and the scheme underlined grant OGL to them. The court also found that there is suppression of material facts also. The matter was decided in view of the peculiar facts and circumstances of that case. The Industrial Policy as reflected in the Government of India Notification dated 24-12-1997 provides that "In view of the continuing backwardness of North-East Region, the need for a new and synergetic incentive package was widely felt to stimulate development of industries". Under the Heading of Fiscal Incentives to New Industrial Units and their Substantial Expansion as provided is as follows :-
"i. Government has approved for converting the growth centres and HDs 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 exemption in respect of Sales Tax and Municipal Tax."
25. Pursuant to the above, the State Government announced as under :-
"Today, the State Government is pleased to announce that due to the efforts of the State Industries Department, major portions of the policy have been made operational for the States of Assam and Tripura. A number of notifications have been issued by the concerned Ministries in the Government of India, the important ones being the Excise notifications issued by the Ministry of Finance on 8th July, 1999 on the eve of the Honourable Prime Minister's visit to Assam. These notifications are a major incentive and a significant windfall to industrialists and entrepreneurs wishing to invest in the region and indeed, these notifications could well be a watershed in the path to industrialisation."
26. On a plain reading of the exemption notification as quoted above, it is seen that a new industrial unit was required to fulfil two conditions namely, (1) It is situated in the specified area as mentioned in the Annexures to the Notification (2) That it has started commercial production after 24-12-1997.
27. The notification also provides methodology to be adopted to avail the exemption provided therein. There is absolutely no ifs and buts and it was not limited to any particular industry or any particular industry was excluded. As a matter of fact, the entire idea was to give a boost to industrial activities in the region. So far the present writ petitioners are concerned, they had all established new units after 24-12-1997 and they are situated or established in the location/area specified in the exemption notification. This part has not been disputed by the respondents at any point of time. On the contrary, the competent authority of the Central Excise on verification of the claims of the writ petitioners found that they are eligible for exemption and accordingly granted exemption till June, 2000.
28. It has been submitted by the respondents that for the purpose meaningful interpretation must be given to the notification to subserve the object of the notification and an interpretation which would defeat the object should not be given. The object sought to be achieved is to be gathered from the notification that the condition as well would be implemented in the interpretation of the notification which would subserve that object. The plain and simple object of the exemption notification was to give a filip to industrial activities in the area and to achieve the said object industrialists were invited or tempted with excise duty benefit without any strings attached. An attempt was made to show that the exemption benefits were not meant for cigarette manufactures or large scale cigarette manufacturers. We find absolutely no such condition in the exemption Notification or even in the policy decision of the Central/State Governments. On the other hand, we find that the Exemption Notification No. 74 further provided that the goods specified in the First Schedule and Second Schedule to the Central Excise Tariff Act, 1985 are exempted and the manufacturing of cigarettes comes under the said Tariff. It may be further mentioned here that during the subsistence of the scheme, exemption on cigarettes manufacturing was withdrawn by the Government of India vide their notification dated 31-12-1999 but within a short period the said notification was withdrawn vide Notification No. 1/2000 thereby bringing the cigarette manufacturing under the purview of exemption notification. Moreover, vide order dated 22-1-2001 the benefits of excise exemption in respect of cigarette manufacturing was withdrawn by the Government of India. In this writ petition the claim of the writ petitioners is in respect of the excise duty till the exemption notification was in force and the legality or validity of the withdrawal notification dated 22-1-2001 is not under challenge before us.
29. The above mentioned two withdrawal notifications issued by the Central Government fully decries the respondents' plea that the benefits of the exemption notification was not available in respect of cigarette manufacturing. If it was not meant for cigarette manufacturing where was the need for withdrawing the same and again enforcing it and finally abandoning its. The words are pertinent which state that the benefits of exemption notification will not be available with effect from 22-1-2001 which in turn goes to show that these were available till that date.
30. As stated above, the Central Excise Department for short, the Department, has refused to grant exemption on the ground of PMT although initially they were of the firm view that PMT is not relevant consideration even in the impugned order dated 27-2-2001, the concerned authority has stated that 'although the condition of PMT is not expressly provided in the said notification, the fact remains that it is a part of the industrial policy.' In the industrial policy, besides the Central Excise Notification, several other benefits, incentives and subsidies were granted by the Central Government, such as, transport subsidy, capital investment subsidy, income-tax free, interest subsidies, incentive benefit etc. etc. For all incentives and benefits, some nodel agencies were constituted and methodology was provided for providing/enjoying exemption. However, in case of Central Excise, no other body including the State agencies was involved and the matter was left entirely to the Department. Likewise the State of Assam also announced a number of schemes and incentives and it was provided that benefits under the incentive scheme shall be available if the conditions mentioned therein are complied with. Further it was provided that if the unit does not comply 80% of people in Assam under the managerial cadre and 90% in the non-managerial cadre for a period of five years, the State Government subsidy will not be available or would be fully refunded. Does it mean that if the condition is not complied with by a unit, this unit will also be denied, the Central Excise benefits. Likewise, the income of this unit established under the above, scheme/policy was made income-tax free for a period of 10 years. Can it be said that an unit which has not availed excise benefits or granted excise benefits will be denied the above benefits under the Income-tax Act for the reason that it will defeat the object of the policy. We are afraid that the concerned industrial policy did not envisage such narrow and pedantic approach or view. Further, the benefits and incentives granted under the said policy were not made dependent upon the availability or working of each other scheme. It was held, that the requirement of PMT as a condition precedent for grant of excise benefits cannot be gathered from the scheme or objective thereof and the same was irrelevant for the purpose of deciding the question of excise refund. Learned Counsel for the writ petitioner submitted that PMT was a mere ploy to harass the industrialists and deprive them of their dues and even in cases, where proper PMTs were available, the refund was withheld.
31. In the case of the writ petitioner in WP(C) No. 310/2001, we find, on the respondents' own admission as per Annexure-V of their additional affidavit filed on 3-4-2002 that the said writ petitioner started their commercial production on 14-6-2000 and the PMT was issued to them on 19-6-2000, that is, within 5 days of the same. The following portion of the letter dated 10-7-2000 issued by the Assistant Commissioner, Central Excise, Jorhat clearly shows the hollowness in the respondents' plea :
"M/s. Kreesna Industries (I) Private Limited Industrial Estate, Cinnamara, Jorhat is situated in Dag No. 11, which has already been notified for such exemption in the Notification No. 37/99-C.E., dated 8-7-99. The assessee has submitted their eligibility, such as, suitability certificate, power load sanction letter, DIC Certificate (PMT) etc. and on scrutiny it is found that the factory is a new one and is eligible of duty exemption under the said Notification. As such, M/s. Kreesna Industrial (I) Private Limited, Industrial Estate, Cinnamara, Jorhat is eligible for grant of the duty refund; so debited in their PLA. i.e. BED of Rs. 59,25,198.00 and AED of Rs. 27,75,093.00. Total of Rs. 87,00,291.00 (Rupees eighty-seven lakhs two hundred and ninety-one only)".
32. Further, there is no dispute at the Bar that most of the writ petitioners were granted PMT and there is no dispute at the Bar that the PMTs become applicable from the date of commercial production and not from the date of issue.
33. The Department also raised that there is no joint capacity assessment but from Annexures-VII and VIII filed by the writ petitioner in WP(C) No. 310/2001 it is seen that certificate regarding capacity assessment was issued to the firm on 30-6-2000 itself.
34. On perusal of the materials on record, this court finds sufficient force in the statement of the writ petitioner that the Department was acting in a belligerant manner and beyond the scope and ambit of the exemption notification or the provisions of law. On receipt of the intimation from the Director of Industries, the Department asked the writ petitioner to settle up the matter with the State Government and get clearance. However, when the State Government gave clearance, the Excise Department came up with different pleas that the cigarette manufacturer have failed to establish non-tobacco based industries as per the condition of the PMT. Mr. G.N. Sahewalla, senior Advocate has submitted that in case of the writ petitioner in WP(C) No. 310/2001 the Department was informed 'to consider the incentives under the Central Excise Refund Scheme as the unit has also fulfilled all the criteria as required'. As regards the non-tobacco based industries is concerned, the requirement under the PMT was that a cigarette manufacturer was required to establish/take effective steps for establishing tobacco based industries. The admitted case is that the units were given time till December, 2000 to establish such industries. The Central Excise Department was not authorised to sit over the decision of the State Government and deny the benefits of exemption of July, 2000 itself before the expiry period of the condition. Moreover, the petitioners have submitted that at no point of time the Excise Department enquired with them regarding the fulfilment or non-fulfilment of the said condition. Mr. P.K. Goswami, learned Counsel for the writ petitioner Newzone has submitted that the said petitioner had already started non-tobacco based industries and the commercial production started long back; similarly is the claim on behalf of the writ petitioner in WP(C) No. 310/2001.
35. In view of what has been stated above, it is held that the above action of the respondent Department shows their lack of bona fide. Further, PMT was not a condition precedent for availability of exemption notification as stated above.
36. During the course of argument, the learned Counsel for the respondent Department have raised a plea that manufacturing of cigarettes is governed under the Industries (Development and Regulation) Act, 1951, for short, the IDR Act under which it compulsorily needs a licence to start cigarette manufacturing. It is, therefore, submitted that the petitioners started manufacturing of cigarette without obtaining a licence under the IDR Act and they are not entitled to exemption. As per Section 13 of the IDR Act, an owner of an industrial undertaking is required to obtain licence in respect of manufacturing of cigarette as the cigarette manufacturing is not included in the exemption list under Sub-clauses (c) and (d) of Section 3 which read as follows :-
"(c) "factory" means any premises, including the precincts thereof, in any part of which a manufacturing process is being carried on or is ordinarily so carried on -
(i) with the aid of power, provided that fifty or more workers are working or were working thereon on any day of the proceeding twelve months; or
(ii) without the aid of power, provided that one hundred or more workers are working or were working thereon on any day of the preceding twelve months and provided further that in no part of such premises any manufacturing process is being carried on with the aid of power.
(d) "industrial undertaking" means any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including Government."
37. There is no dispute at the Bar that all the writ petitioners before us were engaged in the manufacturing of cigarettes with the aid of power and the number of workers engaged by them was less than 50. The relevant documents are available in support of the above statement and it is admitted by the Department also.
38. In the case of State of M.P. v. Nandlal Jaiswal and Ors., reported in AIR 1987 SC 251 the Apex Court held :-
"30. The learned Counsel appearing on behalf of M/s. Doongaji & Co. also raised another contention based on the provisions of the Industries (Development and Regulation) Act, 1951. The argument of the learned Counsel as that respondents Nos. 5-11 were not entitled to set up new distilleries at the new sites without obtaining a licence from the Central Government under Section 11 of this Act and since there was nothing to show that they had obtained such licence before setting up the new distilleries their action in setting up the new distilleries was illegal and could not give rise to any rights in their favour. But, this contention is also unsustainable. In the first place, no such contention was raised in the writ petitions and neither the State Government nor respondents Nos. 5-11 had any opportunity of answering such contention. This contention is based on facts and we cannot permit the petitioners to raise it for the first time in the present appeals. The foundation for this contention should have been laid in the writ petitions and the necessary facts should have been pleaded in support of it. No such plea having been raised and no such facts having been pleaded in the writ petitions, we cannot allow this contention to be raised before us. Moreover, it is obvious from Section 11 read with the definitions of 'factory' and 'industrial undertaking' contained in Sub-sections (c) and (d) of Section 3 of this Act that licence from the Central Government for setting up new distilleries would be necessary only if 50 or more workers would be working in such distilleries and here in the present writ petitions, there is nothing to show that 50 or more workers were going to be employed in the new distilleries. We were told at the Bar that in fact old distilleries were also working without any licence from the Central Government presumably because less than 50 workers were employed in such distilleries. This contention of the learned Counsel on behalf of M/s. Doongaji & Co. must also, therefore, be rejected."
39. In the case of Ramnarayan Satyanarayan Agarwal Distilleries Pvt. Ltd. v. Associated Alcohols and Breweries Limited and Ors., reported in AIR 1995 SC 1686, the Apex Court made the position clear by stating as follows :-
"The provision of the Industries (Development and Regulation) Act, does not apply to an industrial unit in which less than fifty persons are employed. In the instant case the manufacturing process of appellant's business establishment is being carried out by only 22 workers. Consequently, the appellant's business undertaking manufacturing potable alcohol cannot be treated as a factory nor an 'industrial undertaking' as defined under Section 3(d). If the manufacturing establishment of the appellant is not a factory and consequently not an industrial undertaking as defined in the Act, the appellant cannot be compelled to obtain a licence under Section 11.
Decision of Madh. Pra. High Court, Reversed AIR 1987 SC 251, Foll."
40. At this stage we may reproduce the contention of the following correspondence between the Revenue Secretary and Secretary, Deptt. of Industrial Policy, Promotion & Industrial Development, Govt. of India. The letter dated 30-8-2000 from the Revenue Secretary addressed to the other Secretary reads as follows :-
D.O.F. No. 332/36/2000-TRU, dated : August 30, 2000 Dear Ajit As you are aware, cigarette is included as one of the eligible items for excise exemption if produced in factories located in North Eastern States.
However, it has been reported that certain companies have set up cigarette factories in the North-East only on the basis of provisional SSI registration certificates granted by the State Government. These factories do not have the licence issued by the Ministry of Industry.
I shall be grateful if we are advised as to what is the exact position in respect of licensing requirement of SSI units for the purpose of manufacturing cigarettes, and whether a provisional SSI registration certificate issued by the State Government constitutes a valid approval for undertaking an activity which is otherwise under purview of licensing?
I shall be grateful for an early reply in the matter. With warm regards, Yours sincerely (P.G. Mankad) Shri Ajit Kumar Secretary, Deptt. of Industrial Policy, Promotion & Industrial Development, Udyog Bhawan, New Delhi."
Reply given by the Secretary, Deptt. of Industrial Policy and Promotion, Govt. of India on 18-9-2000 reads as follows :
"D.O. No. 7(9)/2000-IP Dear Shri Mankad, Please refer to your D.O. letter No. F.332/36/2000-TRU, dated 30th August, 2000 regarding licensing policy for manufacture of cigarettes by SSI units.
Manufacture of cigarettes is a licensable activity under the Industries (Development and Regulation) Act, 1951. An industrial unit, whether SSI or non-SSI (registered with State Government or otherwise), intending to manufacture cigarettes, requires an industrial licence under the Act. However, provisions of the existing Act, including licensing, do not apply to units which employ less than 50/100 workers with/without the aid of power. We are attempting to rectify this anomaly in the new Industries Legislation.
With best regards, Yours sincerely (Ajit Kumar) Shri P.G. Mankad Finance and Revenue Secretary, Ministry of Finance, North Block New Delhi."
41. In view of the above, it is held that the provisions of the IDR Act were not applicable to the writ petitioners and they are entitled to engage themselves in cigarette manufacturing activities provided the number of workers engaged by them was below 50 as provided under the Act, and as such the units are entitled to exemption.
42. Mr. A.K. Ganguli, learned Senior Advocate further submitted that bid manufacturers, namely, G.P. India Ltd. and V.S.T. etc. required a licence under the IDR Act to establish a cigarette manufacturing unit. Hence, they set up front companies or dummy companies as their manufacturers to do something indirectly which they could not do directly. It is stated that the agreement between the big players and the front companies discloses that the former sought to take advantage of the Notification for correction of their brand of cigarettes, which if produced elsewhere, would entail higher accessibility to excise duty. It was further submitted that the petitioners have committed fraud and as such they are not entitled to exemption benefits. The petitioners have submitted that the respondent-Department have raised this plea for the first time and in the impugned order passed by the Assistant Commissioner, there is no whisper that the benefits of exemption have been denied because of the alleged fraud committed by cigarette manufacturers. On the above count, reference has been made to the observations of the Apex Court in the case of Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi and Ors., reported in (1978) 2 SCC 272 which reads as follows :
"The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose J. in Gordhandas Bhanji.
"Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to effect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself."
Orders are not like old wine becoming better as they grow older."
43. In view of the above-mentioned finding, the provisions of the IDR Act was not applicable in case an unit is engaged in the manufacturing of cigarettes provided the total number of workers working are less than 50 in case of manufacturing with the aid of power. This goes to show that such an unit could have been established any where in India. Job working is a recognised process of industrial activity all over the world. In the case of Ujagar Prints v. Union of India, reported in AIR 1989 S.C. 516, it was held that the purpose of the Excise Act is that the unit engaged in the process of manufacturing on job work basis shall be deemed to be manufacturer and liable to pay excise duty : The matter is no more res integra and in a recent case of Pawan Biscuits Co. (P) Ltd. v. Collector of Central Excise, reported in 2000 (120) E.L.T. 24 (S.C.) = AIR 2000 SC 2565, the Apex Court held that manufacturing of biscuits by the assessee is for a biscuit company out of raw materials supplied by the biscuit company is a permissible form of manufacturing process. In Pawan Biscuit (supra) the Apex Court held :
"An agreement was entered into between the appellant and Britannia which required the appellant to manufacture biscuits for Britannia. The terms of the agreement, broadly speaking, envisaged that the ingredients for the manufacture of biscuits as well as the recipe or method by which the biscuits were to be manufactured were to be supplied by Britannia. The ingredients so supplied were also to be regarded as belonging to Britannia for the manufacture of the biscuits. The appellant was required to make package as directed by Britannia and then supply the same under Britannia's instructions. For the work done, the appellant was entitled to receive certain amount which was to be fixed from time to time. The agreement also contemplated that if the biscuits were not manufactured up to the required standard, then the same were to be destroyed and in respect of those biscuits no payment was to be made to the appellant and, on the contrary, the appellant would become liable to pay for the cost of the ingredients which had got spoiled.
What is material in this agreement is that there was a clause which specifically provided that "relationship between the parties shall always be that of the principal and principal and not principal and agent". The agreement also gave liberty to the appellant to continue to manufacture biscuits under other brands and to sell the same."
44. In the present case also we find that the agreement between the respondent and the cigarette manufacturing company also provided that the relationship will be that of principal to principal. Hence, pursuant to such an arrangement if an unit would have been established in any part of the country, the respondent-Department could have no objection Whatsoever and even Mr. Ganguli has also submitted that such manufacturing process would have been in accordance with law as they were required to pay excise duty leviable on the manufacturing thing. As stated above, the payment of excise duty was exempted by the exemption notification for the North-East Region and if some manufacturers were taking advantage of the said notification by establishing an industry in that area, how the same can be called a sham transaction ? The respondent wanted to deprive the petitioners of the refund of the excise duty by referring to the following clause of the agreement between G.P. India Ltd. and the writ petitioner in W.P.(C) No. 2549/2001. The relevant clause reads as follows :-
"GPI shall provide necessary declaration on packing materials and specification RCTL who in turn will get the Central Excise approval, wherever applicable, expressly understood and agreed that the onus of Central Excise tax payment with RCTL but GPI will provide all kind of assistance for arranging the fund discharging the said liability. However, in case of dispute in regard to determination of such liability, financial or otherwise, the entire responsibility solely by that of RCTL."
45. Admittedly, the writ petitioners were small businessmen compared to the G.P. India Ltd. or Vazir Sultan and in view of the amount of excise duty involved, if some assistance was sought or given by the other in the matter of arranging fund, can it be called a sham agreement ? We find nothing in the said agreement which supports such allegation of the Department.
46. Further, it is seen that in fact the writ petitioners are manufacturing cigarettes with the brand of GPI or VST or ITC, as the case may be, was never kept as secret. It was disclosed to the respondent at the very outset and even copies of the agreement were furnished. Moreover, as per the requirement of the Central Excise Rules, the surface design of cigarette, packing materials, etc., were provided to the respondent-Department and these were approved by them before the goods are allowed to be cleared from the factory. Even the above fact was disclosed in their application to the District Industries Centre for issuance of provisional registration certificate. There is absolutely no hide and seek and the manufacturing of cigarettes in other brand name is a permissible activity and the benefits of exemption notification cannot be denied on that counter and the fact that this is untenable.
47. Fresh plea was raised by the Excise Department that the sole purpose of delay or stall the refund can be gathered from Annexure-4 of their additional affidavit filed on 4-4-2002. It shows that one of the writ petitioners, namely AVM Tobacco (P) Ltd., the writ petitioner in WP(C) No. 380/2001 and WP(C) No. 7094/2001 were the independent manufacturer of cigarettes under their own brand name and this writ petitioner was also treated at par with the other writ petitioners.
48. To sum-up, it is seen that as per the policy decision taken by the Government of India, exemption of excise duty was granted to the new units which has commenced commercial production after 24-12-1997 and provided that these were established in the specified area. The writ petitioner before us admittedly met this requirement and they were given the benefit. Subsequently the benefit was kept in abeyance on the promoting of the State Government, regarding non-compliance of the PMT, which was not a condition precedent for granting excise refund. The respondent Department shifted its stand from time to time and the plea of requirement of licence under the IDR Act had no basis in view of the settled proposition of law. Even the plea of fraud had no legs to stand. It has also been held that language of the exemption notification was very clear and straight and there was no ambiguity in it. There was no scope to read in the language of the notification any intendment as submitted by the respondents. The question that arises for consideration is whether the Central Excise Department can be allowed to sit over the judgment of a policy maker and thereby deny the benefits of exemption notification which was in force. This court has not been called upon to decide about the legality of the Notification dated 22-1-2001 which reads as follows :-
"FROM : JOINT SECRETARY (TRU), CBEC, NEW DELHI TO : CCE, SHILLONG F. No. 354/13/2001-TRU(.) NOTIFICATION NO. 1/2001-CENTRAL EXCISE HAS BEEN ISSUED TODAY ON 22ND JANUARY, 2001(.) THE EFFECT OF THE NOTIFICATION IS TO PRECLUDE CIGARETTES FROM THE SCOPE OF THE SCHEME OF EXCISE EXEMPTIONS GRANTED TO THE NORTH-EAST(.) THUS, WITH EFFECT FROM 22 JANUARY, 2001, THE BENEFIT OF NOTIFICATION NOS. 32/99-C.E. AND 33/99-C.E. WILL NOT BE AVAILABLE TO CIGARETTE UNITS IN THE NORTH-EAST (.) A COPY OF THE NOTIFICATION NO. 1/2001-C.E. IS ENCLOSED (.)"
49. Admittedly, the exemption notification included cigarettes till 21-1-2001 and the benefit ceased to be available to the cigarettes units in the North-East from 22-1-2001. Under the circumstances, we are constrained to hold that the Excise Department failed to act in accordance with the exemption notification and instead tried to deny benefits by the rules of thumb.
50. The respondent-Department's insistence with the working of the exemption notification was not satisfactory so far the cigarette manufacturing is concerned and the exemption resulted in enlistment of cigarette manufacturer by reducing their duty liability in respect of cigarette manufacturing and packed in the units located in Assam. What is the remedy in such a situation? Is the Excise Department entitled under the law to withdraw the benefits on the above counts? If the policy decision is not yielding the desired results, it may be modified or withdrawn as was done in the present case vide Notification dated 22-1-2001. Moreover, the question whether the policy is successful or not, is for the policy maker to decide and not for the executing Department. Dr. A.K. Saraf, learned Senior Advocate for the writ petitioner has referred to the reply of the Ministry of Finance as regards the report No. 11 of 2001, the relevant portion of which reads as follows :
"In reply, the Ministry of Finance stated (13 February 2001) that it was only a co-incidence that majority of the new units were set up for manufacture of cigarettes. While confirming that, the units so set up were job working, the Ministry opined that they were engaged in manufacture under Central Excise Law. The Ministry also confirmed that the benefit of the Excise duty refund was not passed on to the consumer but argued that this was equally applicable to all such exemptions. Defending the exemption, the Ministry also stated that in Government's assessment, the beneficial impact of the scheme would far out weigh the revenue implication."
51. In view of the aforesaid discussions and decision the present batch of writ petitions are disposed of with the following directions :-
(1) The writ petitioners are entitled to refund of the excise duty on the cigarette manufacturing from the date of their commercial production till the date on which the benefits were withdrawn by the Central Government by the notification as quoted above.
(2) The impugned orders dated 27-12-2001 passed by the Central Excise denying the benefits of exemption and ordering recovery of the amount already refunded, are quashed and set aside.
(3) The respondent Central Excise Department is directed to refund the excise duty paid by the petitioners and the dues for refund within a period of 30 days from the date of this order.
(4) In cases where the writ petitioners have not deposited their excise duty for the subsequent months, due to non-receipt of refunds for earlier months, it is provided that they will not be liable to any penal action. In such case, the writ petitioners shall deposit their excise duty due, if any, within 10 days of the receipt of the refund as directed above and thereafter necessary refund shall be made by the respondents as per the Scheme.
(5) The appeals filed by the writ petitioners and pending before the Commissioner of Excise, if any, shall stand disposed of.
52. Parties shall bear their own costs.