I.A.ANSARI, J. - (1.) By this common judgment and order, I propose to dispose of all these writ petitions inasmuch as all these writ petitions, involving identical facts and having raised same questions of law for determination, have been heard together on the request made by the learned counsel for the parties.
(2.) In order to correctly appreciate as to what the grievances of the petitioners are, what reliefs they have sought for and on what basis, the respondents resist the writ petitions, certain material facts, not being in dispute, are set out as under: (i) Taking into account the continuing backwardness of the North-Eastern region, it was felt by the Government of India that a new synergetic incentive package would stimulate development of industries, for, such incentive package would attract investors. Thus, with a view to fostering industrial growth in North-Eastern region, the then Prime Minister of India made, on 27.10.96, at Guwahati, a statement that new incentives would be announced for industrial development of the North-Eastern region. Expert groups/committees were accordingly constituted to concretize the initiatives. By a notification, dated 24.12.1997, Government of India, eventually, announced a new Industrial Policy Resolutions (hereinafter referred to as '1997 IPR') containing a package of incentives and concessions for the investors in the North-Eastern region. As a measure of fiscal incentives, Government approved conversion of the growth centers into total tax free zones for a period of ten years. All industrial activities, in these zones, were to be, under the 1997 IPR, free from payment of income tax and excise duty for a period of ten years from the date of commencement of production and the State Governments were to be requested to grant exemptions in respect of sales and municipal taxes. The 1997 IPR also announced that the Ministry of Finance, Government of India, would be moved to amend the existing rules/notifications for giving effect to the decisions embodied in the IPR. Apart from exemption from, inter alia, payment of income tax and excise duty, the 1997 IPR envisaged various other incentives and concessions like capital investment subsidy, interest subsidy, assistance in obtaining term loan as well as working capital, etc. (ii) In terms of the promises made by the Government of India under the 1997 IPR, various notifications conferring benefits, in tune with the promises made in the 1997 IPR, were issued by various departments of the Central Government. In so far as exemption from payment of central excise duty was concerned, Ministry of Finance, Department of Revenue, Government of India, brought out notifications No.32/99-CE and 33/99-CE, both dated 08.07.99, granting exemption in respect of certain specified excisable goods from a unit located in the Growth Center or Integrated Infrastructure Development Center or Export Promotion Industrial Park or Industrial Estates or Industrial area or Commercial Estate, as the case may be. The exemption from payment of excise or additional excise duty was to be 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. The exemption, contained in the said notifications, were made applicable to new industrial units, which commenced their commercial production on or after 24.12.1997. The excise duty exemption, as declared under the said notifications, were also to be applicable to those industrial units, which existed even before 24.12.1997, but which undertook substantial expansion by way of increase in the installed capacity by not less than 25% on or after 24.12.1997. The exemption, contained in the said notifications, were made applicable to the industrial units of such descriptions, as mentioned hereinbefore, for a period of 10 (ten) years from the date of publication of the notification in the official gazette or from the date of commencement of commercial production, whichever was earlier. (iii) Some of the writ petitioners, in the present set of writ petitions, claim to have set up, acting upon the promises made in the 1997 IPR and taking into account the relevant notifications issued in this regard, industries for manufacture of various commercial products, which the said notifications, granting exemption from payment of excise duty, had envisaged. Another set of writ petitioners plead that their industrial units had already existed, when the 1997 IPR came into force and, acting upon the incentives promised, they made substantial expansion by increasing the installed capacity of their respective industrial units to the extent as mentioned in the relevant notifications. (iv) In course of time, the petitioners were granted certificates of eligibility showing that they were entitled to receive various exemptions from payment of excise duty, which was, otherwise, leviable on their products. In fact, many of the petitioners, having set up their industries, started receiving refund of central excise duty in terms of the notifications issued in this regard. Those, who claim to have expanded the installed capacity of their respective industrial units, in terms of the relevant notifications, too claim that they are entitled to receive refund of excise duty in terms of the notifications aforementioned. (v) Be it mentioned that the earliest notification No.32/99-CE, dated 08.07.99, aforementioned, whereby exemption from payment of central excise duty was granted, underwent several amendments. Notwithstanding such issuance of subsequent notifications, the petitioners claim that they have had remained entitled to, and had, in fact, been receiving, full excise duty exemption. Thus, the basic incentives, which had, according to the petitioners, lured the petitioners to set up their respective industries, in Assam, continued without any modification. (vi) As already indicated, a new industrial unit was, under the notification No.32/99-CE, dated 08.07.99, entitled to refund of excise duty equivalent to the amount of the duty paid by the manufacturer for the finished goods from the account current maintained under Rule 9 read with Rule 173G of the Central Excise Rules, 1944. However, in the year 2001, the CENVAT Credit Rules were framed simplifying the credit provisions, and procedure for availing credit of the duty paid on input and capital goods used, whether directly or indirectly, in, or in respect of, manufacture of final products. The credit of the duty, so allowed, could be used for payment of excise duty leviable on the finished goods subject to the conditions laid down in the relevant Rules. The basic object of allowing credit on CENVAT was to ensure that there is no cascading effect of levy of excise duty. The Rules framed aimed at collecting excise duty on the finished goods and thereby the manufacturer of finished goods were enabled to take credit of the duty paid on the inputs or the capital goods used in the manufacture of finished products and could utilize the said credit for payment of excise duty on the final finished products. (vii) Some of the manufacturers did not, however, utilize the CENVAT for payment of excise duty on the finished goods; they rather, continued to make full payment of excise duty on finished products through the account current and claimed refund of the same. Such manufacturers, thus, allowed the CENVAT credit to be accumulated in their books of account with the object of utilizing the same at a latter stage. In other words, instead of utilizing the CENVAT credit, some of the manufacturers continued to make full payment of excise duty on finished products through the account current and claimed refund of the same. They let the CENVAT credit to so accumulate with the object of utilizing the same after expiry of a period of 10 years of exemption. This apart, the manufacturers, who did not use the CENVAT credit, were able to utilize the accumulated amount for payment of excise duty on such products, which were not eligible for exemption under the Notification Nos. 32/99-CE and/or 33/99-CE aforementioned. Since the inputs, in respect of which CENVAT credit had been taken, were to be utilized in the manufacture of finished goods, which were eligible for exemption as per Notification Nos.32/99-CE and 33/99-CE, dated 08.07.99, the CENVAT credit, in respect of such inputs, could not have been utilized for payment of excise duty in respect of finished products, which were not eligible for exemption under the said notifications, dated 08.07.99. Similarly, the act of accumulating CENVAT credit (in respect of the inputs, used in the manufacture of finished products, eligible for exemption, under Notification Nos.32/99-CE and 33/99-CE), with the object of utilization the same for payment of excise duty after expiry of the period of ten years of promised exemption, was against the spirit of Notification Nos.32/99-CE and 33/99-CE aforementioned as well as 1997 IPR. The modus operandi, so adopted, would have, thus, defeated the aim and objectives of the 1997 IPR. The Notification No.32/99-CE, dated 08.07.99, was, therefore, amended by Notification No.35/2001-CE, dated 29.06.2001. By the Notification, dated 29.06.2001, aforementioned, it was made clear that those industries, which were, otherwise, exigible to excise duty, shall be eligible for refund of the amount of duty paid other than the duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2001. The effect of the Notification, dated 29.06.2001, aforementioned, thus, did two things, namely, (a) it required the manufacturers to, first, utilize CENVAT credit towards payment of excise duty on the inputs and, (b) it made the eligible industries entitled to receive refund of only such amount of excise duty, which were paid after utilization of the CENVAT credit. Similar amendments were introduced in the notification No.33/99-CE too. In course of time, Notification No.32/99-CE was, again, amended by Notification No.61/2002-CE, dated 23.12.2002, whereby a proviso was added to Clause (b) of the second paragraph making it clear that the refund shall not exceed the amount of duty paid less the CENVAT credit availed off in respect of the duty paid on the inputs used or in respect of the manufacture of goods cleared under Notification No.32/99-CE. The Notification No.32/99-CE underwent yet another amendment by notification No.65/2003-CE, dated 06.08.2003. (viii) In the Notification, dated 06.08.2003, aforementioned, paragraph 1A was inserted, which read as under: "In cases where all the goods produced by a manufacturer are eligible for exemption under this notification, the exemption contained in this notification shall be available subject to the condition that the manufacturer first utilize whole of the CENVAT credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and pays only the balance amount in cash." The proviso to Clause (b) of paragraph 2 was also substituted by the following: "Provided that in cases, where the exemption contained in this notification is not applicable to some of the goods produced by a manufacturer, such refund shall not exceed the amount of duty paid less the amount of the CENVAT credit availed of, in respect of the duty paid on the inputs used in or in relation the manufacture of goods cleared under this Notification." (ix) The amendments, so introduced, made it mandatory for a manufacturer of those goods, which were made eligible for exemption under Notification No.32/99-CE, to, first, utilize the CENVAT credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and to pay balance amount only in cash. The substituted proviso further took care to see that refund is not claimed in respect of the duty paid on goods, which were not eligible for exemption. (x) Before expiry of the 1997 IPR, the Government of India announced a new industrial policy resolution by a Memorandum, dated 01.04.2007, namely, North-East Industrial and Investment Promotion Policy, 2007 (NEIIPP), (hereinafter referred to as the '2007 IPR'), whereunder a package of fiscal concessions and other concessions for the North-Eastern region were promised. (xi) Under the 2007 IPR too, the incentives were promised in respect of those industrial units, which were to be set up, on coming into force of the 2007 IPR, as well as those industrial units, which had existed before coming into force of the 2007 IPR, but which would undertake substantial expansion of their respective industrial units, in terms of the requirement of the 2007 IPR. In terms of the promises made by the 2007 IPR, requisite notification, making the promised excise duty exemption available for the industrial units, was issued on 25.04.2007, the Notification being 20 of 2007, dated 25.04.2007. On the question of excise duty exemption, Clause (v) of 2007 IPR mentions thus: "hundred percent excise duty exemption will be continued on finished products made in the North-Eastern Region as was available in NEIP, 1997." (xii) The IPR 2007 made it clear that the 1997 IPR and other concessions, made thereunder, in the North-Eastern Region, announced by the Office Memorandum, dated 24.12.97, would cease to operate with effect from 01.04.2007, but the Industrial Units, which had commenced commercial production, on or before 31.03.2007, would continue to receive benefits/incentives under the NEIP, 1997 (i.e., 1997 IPR) until expiry of the promised period of ten years from the respective date of commencement of their commercial production. (xiii) In the present set of writ petitions, thus, there are four distinct categories of investors, namely, (i) those, who had set up their industrial units under the 1997 IPR and claim 100% exemption from payment of excise duty; (ii) those, who had in existence such industrial units, as specified under the 1997 IPR, when the 1997 IPR came into force, but undertook substantial expansion as were required under the 1997 IPR and, having made such substantial expansion, they claim to be entitled to the benefits as were promised and assured to them by the 1997 IPR; (iii) those, who have set up their respective industrial units under the 2007 IPR and claim to be entitled to receive such benefit as were promised and assured to them under the 2007 IPR; and (iv) those, who have expanded the installed capacity of their respective industrial units to the extent as were necessary under the 2007 IPR, and claim, therefore, to have become entitled to receive the benefits as were promised and assured to them by the 2007 IPR. All these petitioners claim to have commenced their commercial production in terms of the relevant IPRs, namely, 1997 IPR and 2007 IPR, as the case may be. The petitioners claim that having established their industrial units, or having expanded their industrial units, and having started production from such industrial units within the prescribed period, they had been receiving, without any interruption, 100% refund of the amount of excise duty paid in terms of the notification Nos.32/99-CE, 33/99-CE and 25.04.2007. (xiv) The grievance of the petitioners is that with the help of the Notification No.17/2008, dated 27.03.2008, the Ministry of Finance, Department of Revenue, Govt. of India has amended the notification, dated 32/99-CE, aforementioned and by the notification, dated 27.03.2008, the excise duty refund has been restricted to the maximum limits as specified in the rate column of the table appended to the said notification, whereunder different rates of maximum limits of exemption have been specified in respect of different goods. For instance, the goods produced by the petitioners, as stated in WP(C) No.2143/2008, fall under Chapter 85 of the Schedule to the Central Excise Tariff Act, 1985. The maximum limits of excise duty refund in respect of such goods would, now, be 31%, whereas, according to the petitioners, in WP(C) No. 2143/2008, they were entitled to receive 100% refund as had been promised under the 1997 IPR and also the subsequent notifications issued in this regard. The petitioners have, therefore, impugned the notification, dated 27.03.2008, aforementioned by contending, inter alia, that the amendments, which the notification No.32/99-CE, dated 08.07. 1999, had undergone, continued to provide the promised exemption of excise duty without any curtailment except that the Government, with the help of the amendments, which were made, took care to ensure that the benefit of exemption was not used for purposes other than what the 1997 IPR and the exemption notifications had envisaged, but the impugned notification, dated 27.03.2008, has changed the entire scenario by reducing promised limit of exemption inasmuch the exemptions were, until before the issuance of the impugned notification, available to the extent of 100%, whereas the impugned notification reduces the same to a limited percentage.
(3.) Before proceeding further, it may be appropriate to point out that justifying the issuance of the impugned notifications, the respondents alleged that some unscrupulous manufacturers were showing bogus production and thereby gaining undue benefit in the form of excise duty exemption and, it was for this reason, that the impugned notifications have been issued without affecting the interest of the genuine manufacturers. The respondents further clarified by reiterating that the genuine manufacturers would continue to receive exemption from payment of excise duty to the same extent as they were entitled to receive and had, in fact, been receiving under the earlier notifications. The respondents claim that the 1997 IPR and the notifications, earlier issued thereunder, all aimed at giving exemption from payment of excise duty to the extent of value addition and not anything beyond and this exemption remains still available with the genuine manufacturers. In this regard, in their affidavit, the respondents justify the issuance of the impugned notification in the following words: "7. An analysis of cases booked by the Excise department and the representations received from the Industry Associations has revealed that the following modus operandi is broadly being followed. i. Reporting of bogus production by mere issuance of sale invoices without actual production of goods and supply/ clearance of excisable goods. This would result in availment of cenvat credit by buyers of such excisable goods in other parts of the country without actual production being carried out and in absence of actual receipt of goods. ii. Reporting of bogus production by such units in these areas where actual production takes place elsewhere in the country. iii. Over valuation of goods resulting in availment of excess of credit by buyer. iv. Goods are supplied by manufacturers, importers to these units without issuance of sales invoice and these are backed by bogus sale invoices issued by traders who do not undertake actual supply of goods. The actual supplier of these goods issue 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. Illustration 1: - A Unit in North east reports fictitious production of Rs 100, which has actually not taken place and pays full duty of Rs.16/- in cash. It is submitted that obviously there is no Cenvat credit available in as much no input or raw material has been purchased by him. Such a purchaser claims full refund from the Government under the scheme. No-doubt one can argue that there is no loss to the Government as the Government has collected Rs.16/- and refunded only the same amount. However, the fact remains that the said manufacturer issues sales invoices showing excise duty payment to another buyer/manufacturer in other parts of the country entitling and making the buyer eligible to take Cenvat credit of Rs.16/-. The subsequent buyer/ manufacturer utilizes this credit of Rs.16/ - for payment of excise duty on goods manufactured by him and as a result, he pays excise duty less in cash to the extent of Rs.16/ - for which Cenvat credit though ineligible (on account of actual non production of goods) is availed by him. In this way, there is a clear loss to the Government of Rs.16/- and the manufacturer in North East illegally gains that amount as he is recovering this amount from his customers. Illustration 2: - If an input valued at Rs.100/- is manufactured in Ahmedabad and cleared on payment of duty of Rs.14/ - to a unit in the North East, who in turn makes a value addition of Rs.50/-, in such a case the Government wants to give excise duty refund of Rs.7/- to the unit in North East on the value addition of Rs.50/- and to this extent the product manufactured in North East should become cheaper by Rs.7/-. However, if the same manufacturer in North East shows the purchase of these inputs from a trader on a non duty paid invoice which is in fact a non duty paid invoice, in that case, he pays a total duty of Rs 21 in cash i.e. excise duty at 14% on Rs.150/- (the sum total of Rs.100/- because of input and Rs.50/- value addition as mentioned hereinabove) and gets the refund of Rs.21/- after paying duty in cash from the personal ledger account. At the same time, such manufacturer recovers a duty ofRs.21/from his customers and gives him the net benefit ofRs.21/- entitled to be claimed as Cenvat credit against the intended benefit of Rs.7/- which should be the only entitlement. In other words, the Government has to give refund for the goods manufactured in other parts of the country as a result of manipulation indulged into by such a manufacturer. 8. These are general illustrations of misuse exemption given by the Government, which was meant to be available only for genuine manufacturers. 9. Your humble applicant submits that by adopting such modus operandi, the unit in these areas were wanting to pay maximum amount of duty in cash so that they become entitled to a claim of refund of entire amount of duty paid in cash. In order to verify this aspect, a study has been made by the Excise department on receipt of information from the Director General, Central Excise Intelligence and other such agencies to find out the percentage of excise duty paid in cash and from the Cenvat Credit account by the units availing this area based exemption. On receipt of these details they were compared with the duty payment details of the same industry groups for all the units across the country to find out whether the percentage of duty paid by the units in cash in the specified areas is comparable with the units in the rest of the country. An analysis of these details, clearly shows that the industry sectors in the specified areas were paying a very high percentage of duty in cash i.e. through Personal Ledger Account in comparison to the all India, payment of duty through PLA on similar goods. It is submitted that had these units in the specified areas paid excise duty without indulging in deliberate manipulations, as referred to hereinabove, there was no reason why the cash portion of the excise duty in the specified region would be so alarmingly high vis a vis the payment of excise duty by cash by in respect of similar product in the rest of the country. The above analysis coupled with the details of the cases booked by the Excise department as well as the details received on representations of Industry associations, which were adversely affected due to unfair competition, further prove the fact of general tendency of manufacturer in specified areas who indulge in such manipulative tactics by issuing either bogus production or bogus purchase of raw materials from traders. Such analysis clearly brings out the fact that there was a misuse of the excise duty exemption which was considered expedient in public interest and given by the Central Government with a laudable object of having genuine industrialization in either backward areas or areas like North East. Misuse of excise duty exemption being rampant and the effect of such manipulative acts which were brought to the notice of the Government was to defeat the purpose, policy and intention of the Government to provide excise duty exemption only in respect of genuine manufacturing activities carried out in these areas. The entire genesis of the policy manifesting the intention of the Government to grant excise duty exemption was to provide such exemption only to actual value addition made in these areas. It is in background of these facts and with a view to give effect to such a policy, the Government in exercise of the powers conferred under section SA has modified the refund mechanism so as to provide that excise duty refund would be allowed only to the extent of duty payable on actual value addition made by manufacturers undertaking manufacturing activities in these areas. As a result of the above said modification, manufacturers are required to pay duty on the full value of goods manufactured and cleared by them in the same manner as per existing scheme but refund would be granted only to the extent of duty paid on the actual value addition made by them in these specified areas. 10. That as a result of such modification which has been considered by the Central Government to be expedient in public interest and in the interest of the Revenue, such a modification has been brought out. The effect of such modification is as follows: i. It is submitted that genuine manufacturers are not likely to be affected inasmuch as they would be getting the refund of same amount under the scheme before and after the modification, because if the inputs are duty paid then the refund under the earlier scheme and modified scheme should be of the same amount. ii. Unscrupulous manufacturers reporting bogus production and who are resorting to fictitious purchase of inputs on the strength of invoices which are non duty paid invoices would be getting excise duty refund of duty paid on actual value addition made by such manufacturers who have industries in these specified areas. iii. The excise duty exemption would be available only to the extent of actual value addition made in these areas and not for the value of raw material manufactured in other part of the country, which are received by the units in these areas without cover of duty paying invoices.";