M/S Sun Shine Fibre Industry vs. The Union Of INDIA And 3 Ors

Held

The Court held that it would be inappropriate for the department to proceed against the petitioner based on the rates provided in Notification No. 20/2008-Central Excise dated 27.03.2008 without an appropriate decision being taken on the petitioner's claim for a special rate. The reasoning was that Clause 3(1) of the notification provides a legal right to the assessee to claim for a special rate to be fixed in the event of add-ons to the manufactured goods. The Court directed the Principal Commissioner of GST, Dibrugarh, to consider the petitioner's application dated 04.09.2012 for a special rate. After arriving at a decision on the special rate, further proceedings against the petitioner as per law may be initiated. Until such a decision is taken, no coercive measures are to be taken against the petitioner pursuant to the impugned communication dated 06.01.2021 and the subsequent communication dated 08.02.2021. The petitioner's bank account was to be allowed to be operated. The issue of imposition of interest was expressly left undecided, with liberty granted to the petitioner to approach the Court again.

Facts

The petitioner, M/s Sun Shine Fibre Industry, manufactures Kraft Paper and is registered under the Central Excise Act, 1944. They were eligible for benefits under the Northeast Industrial Policy, which involved a refund of excise duties paid. Initially, a 100% refund was provided. Notification No. 20/2008-Central Excise dated 27.03.2008 altered this, limiting refunds to rates specified in the notification. Clause 3(1) of this notification allowed manufacturers to apply for a special rate based on actual value addition if it exceeded the rates in the notification's table. The petitioner applied for a special rate on 04.09.2012. Subsequently, this notification was set aside by the High Court, restoring the 100% refund. However, the Supreme Court, in Union of India vs. V.V.P. Limited & Others (2020 SCC Online SC 378), restored Notification No. 20/2008-Central Excise. The petitioner's grievance is that their application for a special rate remains unconsidered, while the respondents intend to attach their bank accounts based on the rates in the restored notification.

Key Issues

1. Whether the respondents can proceed to recover excise duty based on the rates in Notification No. 20/2008-Central Excise dated 27.03.2008 without first considering the petitioner's application for a special rate under Clause 3(1) of the said notification? (Question of law and mixed fact and law, concerning the interpretation and application of Notification No. 20/2008-Central Excise, Clause 3(1)). Petitioner's arguments: The petitioner contended that Notification No. 20/2008-Central Excise, by virtue of Clause 3(1), provides a legal right to claim a special rate for value addition. They argued that it is inappropriate for the department to proceed with recovery based on the standard rates in the notification without a decision on their pending application for a special rate. They also highlighted that their bank accounts were being targeted for recovery. Revenue/State's arguments: The judgment records that the learned counsel for the respondent GST department agreed to the disposal of the petition on the terms directed by the Court. No specific arguments against the petitioner's claim were recorded.