M/S Charu Innovation Department And Industries And Anr vs. The Union Of INDIA And 3 Ors

Held

The Court held that it would be inappropriate for the department to proceed with the recovery of excise duty based on the rates provided 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. The reasoning was that the notification itself provides a legal right to the assessee to claim a special rate in cases of value addition. Therefore, the application for a special rate must be decided. The Court directed the Principal Commissioner of GST, Guwahati, to consider the petitioner's application dated 01.04.2021 for fixing a special rate. After arriving at a decision on the special rate, further proceedings against the petitioner may be initiated as per law. Until such a decision is taken, no coercive measures are to be taken against the petitioner for recovery of refund, and the communication dated 22.03.2021 from the Assistant Commissioner of GST, Guwahati, is not to be pursued. The Principal Commissioner is to complete this within six weeks.

Facts

The petitioners, engaged in manufacturing UPVC pipes and fittings, were eligible for excise duty exemptions under the Northeast Industrial Policy. Initially, they received a 100% refund of excise duty paid. Notification No. 20/2008-Central Excise dated 27.03.2008 altered this, providing refunds based on specified rates. Clause 3(1) of this notification allowed manufacturers to apply for a special rate if their value addition exceeded the rates in the notification. The petitioners applied for a special rate. While this application was pending, the notification was initially set aside by the High Court, restoring the 100% refund. However, the Supreme Court, in Union of India & Ors. vs. V.V.P. Limited & Ors. (2020 SCC Online SC 378), restored Notification No. 20/2008-Central Excise. Subsequently, the respondents intended to recover excise duty based on the rates in the restored notification without considering the petitioners' pending application for a special rate.

Key Issues

1. Whether the respondents can proceed with the recovery of excise duty based on the rates provided 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? Petitioner's contention: The petitioner argued that Clause 3(1) of Notification No. 20/2008-Central Excise grants a legal right to apply for and obtain a special rate based on value addition. They contended that without a decision on their pending application dated 01.04.2021, the respondents cannot proceed with recovery based on the standard rates in the notification. They relied on the principle that a pending statutory right must be adjudicated before coercive action is taken. Revenue's contention: The judgment records no specific argument from the GST department regarding this issue, other than their intention to proceed with recovery based on the restored notification.