Som Pan Products Pvt Ltd vs Revision Authority, Department ...
2018 Latest Caselaw 6479 Del

$~15
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Date of Decision: 29.10.2018

+                           W.P.(C)No.3903/2018


      SOM PAN PRODUCTS PVT LTD          ..... Petitioner
                   Through : Dr. Seema Jain, Mr. Ajay K.
                             Jain, Mr. Dushyant K. Mahant
                             and Ms. Shova Choudhary,
                             Advs.

                            versus

      REVISION AUTHORITY, DEPARTMENT
      OF REVENUE                        ..... Respondent

Through : Mr. Harpreet Singh, Sr. Standing Counsel with Ms. Suhani Mathur, Advs.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE PRATEEK JALAN

S. RAVINDRA BHAT, J.(ORAL)

1. Claiming to be aggrieved by the Revisional Authority's order under Section 35EE of the Central Excise Act, the present writ petitioner has approached this Court for quashing of the impugned order as well as the order in appeal by the Commissioner of Central Excise (Appeals).

2. The facts of this case are that the petitioner manufactured

Gutkha and forwarded two consignments for export purposes. It claimed the benefit of excise rebate in terms of Rule 18 of the Central Excise Rules, 2002 (hereafter "Rules"). That provision enables the Central Government to grant rebate payable on execisable goods or duty paid on materials used in the manufacturing of processing of such goods on conditions or limitations as are prescribed. It is not in dispute that this procedure is spelt out in paras 2 and 3 of the Notification no.19/2004. The benefit of this rebate was extended to Gutkha vide notification No.32/2008; the petitioner's rebate claim was based upon its contention that the rebate was permissible by virtue of Notification No.32/2008, which specifically listed pan masala falling under tariff item 21069020 on pan masala containing tobacco commonly known as "gutkha" falling under tariff item 2403 99 90- on which duty of excise has been paid under Section 3A of the Central Excise Act.

3. The rebate claim was processed by the competent authority i.e. the Assistant Commissioner who granted it by the order-in-original dated 01.05.2013. The Commissioner of Central Excise, took cognizance of this order at the behest of the Revenue and reversed the rebate granted, on the premise that by a notification of 11.09.2012 issued by the Commissioner, Food Safety, Government of NCT of Delhi, the manufacture, storage, sale, transportation, display or distribution of Gutkha within the territory of Delhi was entirely prohibited. The essential reasoning on the basis of which the appellate authority disallowed the rebate is contained in the following extract of its order:

"7.1 I have also gone through the Notification no. F.1(3)/DO-I/2012/5185-5203 dated 11.09.2012 issued by the Commissioner of Food Safety, Govt, of NCT vide which manufacture, storage, sale, transportation, display or the- distribution of Gutkha (by whatsoever .name it is available in the market) and Pan Masala containing Tobacco/ nicotine is prohibited in the NCT of Delhi-in the interest of public health w.e.f. 11.09.2012. The said notification was issued, in pursuance of regulation 2.3.4 of Food safety and standards (Prohibition and restriction on sales) Regulations. 2011 made by the Food safety and standards Authority ·of India in exercise of the powers conferred by clause (1) of Section 92 of the Food Safety and Standards Act, 2000 (Central Act 34 of 2006) read with Section 26 thereof, that prohibits articles of food containing tobacco/nicotine with health hazards.

7.2 I have also gone through the case laws cited by the appellant and find that in the case of Pankaj Jain Agencies vs. Union of India, 1994 (72) E.L.T.805 (S.C.) the Hon'ble Supreme Court have held that the Rules and Notifications take effect from the date of their publication In the official gazette. In another case Haryana Plywood Industries vs. Collector of Customs 199 (51) E.L.T. 119 (Tribunal); it was concluded by the Hon'ble Tribunal that the date of effect of a notification is the date on which it is made available public."

4. The petitioner approached the Revisional Authority i.e. the Central Government who endorsed the view of the Commissioner holding as follows:

"3. On examination of the revision application in the light of Commissioner (Appeals)'s order, it is noticed by the Government that there is no dispute that the gutkha was cleared by the applicant from their factory on 11.9.12 only under two ARE-1s to the merchant exporter

when the prohibition order with regard to sale, manufacture, storage, transportation, display or distribution of gutkha was already in force. Applicant has claimed that they had cleared gutkha from the factory prior to publication of the above Notification by the Delhi Government, but they have not adduced any evidence to substantiate their claim. Moreover, the actual export of the gutkha was effected much later as is evident from the dates of the shipping bill and the airway bill as mentioned above. Thus even if consignments of gutkha were cleared on 11.9.12 by the applicant before having knowledge about the Delhi Government's ban order, these consignments involving sale, transportation and storage were in India until these were exported under the export documents dated 25.9.12 and 26.9.12. Thus right from the day of clearance of gutkha from the applicant's factory on 11.9.12 till export of gutkha, all activities of the applicant as well as the merchant exporter with regard to manufacture, sale, transportation and storage etc. of gutkha covered under two ARE-1s were clearly hit by the Delhi Government's prohibition order dated 11.9.12 and the scope of this order is wide enough to cover even export of goods from the territory of NCT of Delhi as if invariably involved all activities prohibited under the above Notification.

4. One of the conditions for allowing rebate of duty on excisable goods under Notification No.19/2004-CE(NT) dated 6.9.2004 read with Notification No.32/2008CE(NT) dated 28.8.2008, is that export of goods should not be prohibited under any law for the time being in force. Since the export of gutkha from 11.9.12 involving sale, transportation and storage etc. in NCT of Delhi was prohibited by the Government of NCT of Delhi, the above condition in Notification No.19/2004 that goods should not be prohibited under any law is undoubtedly attracted in this case. Therefore, the Government observes that the rebate of duty has been rightly disallowed by the Commissioner (Appeals) to the applicant. The applicant's

averment that gutkha is not prohibited for export under the Delhi Government's order or under the Central Excise and Customs Acts is completely misplaced in the light of above discussion that the Delhi Government's order covers all activities relating to the movement, storage and sale of goods involved in the export of goods also and once it is banned by the Government of Delhi by taking into account the public health, it was applicable for all purposes in the territory of Delhi and a separate provision under the Central Excise Act and the Customs Act was not necessary."

5. The revision was also dismissed on the ground of limitation which was occasioned on account of delay in depositing the requisite registration/Court fee.

6. Dr. Seema Jain, learned counsel for the petitioner urges that the conditions of the notification of 11.09.2012 are entirely extraneous to the issue of grant or refusal of rebate which are wholly governed by Rule 18 of the 2002 Rules as well as the relevant procedure spelt out in Rules 2 and 3 of the Notification No.19/2004 - by virtue of its extension to pan masala (by a notification No.32/2008 dated 28.08.2008). It is submitted that the expression "export" is nowhere defined in the Central Excise Act and has to be understood either in the common parlance or in terms of the definition in the cognate enactment i.e. the Customs Act, 1962 which defines it as an Act of "taking to a place outside India". It was submitted that the ban with respect to storage, transportation, sale, etc. of gutkha within the territory of Delhi or for the purpose of use, sale and consumption in Delhi and did not per se apply to export transactions that aimed at export.

7. Mr. Harpreet Singh, learned counsel for the Revenue contended that the order of the Revisional Authority is valid. He relied upon under Section 2(33) of the Customs Act, which inter alia describes prohibited goods as those which are subjected to "any prohibition under the Act or any other law for the time being in force". It was, therefore, urged that the notification of 11.09.2012 had universal and wide application; its effect and objective could not be curtailed in the manner sought by the petitioner. Rule 18 of the 2002 rules is extracted below:

"Rebate of duty- Where any goods are exported , the Central Government may, by notification, grant rebate of duty paid on such excisable goods, or duty paid on materials used in the manufacture or processing of such goods and the rebate shall be subject to such conditions or limitations, if any, and fulfillment of such procedure as may be specified in the notification."

8. The notification No.19/04-CE by Rule 2 prescribes the conditions and limitations for availing excise rebate; Para 3 of that notification elaborates the procedure prescribed.

9. Pan masala and gutkha were apparently not covered in the first instance by notification 19/04-CE. The Revenue therefore, included in the list of items that could claim rebate, pan masala and gutkha, through Notification No.32/08-CE. The conditions for availing such rebate were spelt out as well in Clauses (i) to (viii). Clause (ix) stated that the procedure prescribed in Notification No.18/2004 would be applicable mutatis mutandis. It is not in dispute that these conditions were complied with.

10. The Revenue's objection to the grant of rebate was the prohibition brought in by the 11.09.2012 notification. That Notification issued by the Government of NCT of Delhi reads as follows:

"(TO BE PUBLISHED IN THE DELHI GAZETTE PART IV EXTRAORDINARY) GOVERNMENT OF NCT OF DELHI DEPARTMENT OF FOOD SAFETY A-20, LAWRENCE ROAD INDUSTRIAL AREA, RING ROAD, DELHI-110 035

No.F.1(3)/DO-I/2012/5185-5203 Dated: the 11 September, 2012 NOTIFICATION WHEREAS, regulation 2.3.4. of the Food Safety and Standards (Prohibition and restriction of Sales) Regulations, 2011 made by the Food Safety and Standards Authority of India in exercise of the powers conferred by clause (I) of sub-section (2) of section 92 of the Food Safety and Standards Act, 2006 (Central Act 34 of 2006) read with Section 26 thereof, prohibits articles of food in which tobacco and/or nicotine are used as ingredients, as they are injurious to health.

AND WHEREAS, Guthka (by whatever name) and Paan masala containing tobacco and/or nicotine is an article of food in which tobacco and/or nicotine are widely used as ingredients now-a-days.

AND WHEREAS, it is expedient to prohibit the manufacture, the storage, the sale, the transportation, the display or the distribution of Gutkha and Paan masala containing tobacco and/or nicotine in the NCT of Delhi, being food products in which tobacco and/or nicotine are widely used as ingredients.

NOW, THEREFORE, in pursuance of regulation 2.3.4. of the Food Safety and Standards (Prohibition and Restriction on Sales) Regulations, 2011, the manufacture,

the storage, the sale, the transportation, the display or the distribution of Guthka by whatever name and Paan masala containing tobacco and/or nicotine as ingredients by whatsoever name it is available in the market, is hereby prohibited in the NCT of Delhi in the interest of Public Health.

                                 (K.J.R. BURMAN)
                       COMMISSIONER           FOOD        SAFETY,
      DELHI.

No.F1(3)/DO-I/2012/5185-5203 Dated: the 11September, 2012"

11. A careful reading of the NCT's notification would in the opinion of this Court disclose that what was prohibited was the manufacture, storage, sale, transportation, display or the distribution of gutkha and pan masala or other substances containing tobacco and nicotine products within the National Capital Territory of Delhi "being food products in which tobacco and/or nicotine are widely used as ingredients". Clearly the objective of this notification was to prohibit transaction of sale or other activities which facilitated the sale of the prohibited items deemed deleterious to public health - within the NCT of Delhi. Thus for instance, the storage for the purpose of sale, storage for the purpose of transportation and storage for purpose of display or distribution of gutkha was the subject matter of ban. Although, the notification did advert to prohibition on manufacture at the same time it is silent as to whether the manufacture for the purposes of sale was per se or even by implication, prohibited.

12. In the opinion of this Court, the Government of NCT could not have banned the export of sale - as is understood in the Customs

enactment parlance. This is for the simple reason that the legislative competence and concurrently, the co-extensive executive power, to deal with the subject matter of customs or international transactions are not with the State or the Union Territory but that of the Central Government or Parliament, as the case may be. In this, consequently, upholding the revisional order would lead to anomaly in that so far as the Central Government or Parliament is concerned, gutkha per se is not prohibited at least for export, whereas, for the purposes of interpretation of the notification, even export of gutkha is prohibited. Clearly, such an anomalous consequence cannot be contemplated much less countenanced in law.

13. For the above reasons, this Court is of the opinion that the impugned order of the Revisional Authority as well as the order of the appellate authority which it confirms, cannot be sustained. They are hereby quashed. The order-in-original is hereby restored.

This writ petition is allowed in the above terms.

S. RAVINDRA BHAT, J

PRATEEK JALAN, J OCTOBER 29, 2018 aj