1 wp2087.09.sxw ssm IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2087 OF 2009 Indian Oil Corporation Limited ......Petitioner. Vs. The Union of India & Ors. .....Respondents. Mr. M.H. Patil for the Petitioner. Ms. Suchitra Kamble for the Respondents. CORAM :- DR. D.Y. CHANDRACHUD AND ANOOP V. MOHTA, JJ. DATE :- 26 JULY 2011. P.C. :- This Petition under Article 226 of the Constitution by the Indian Oil Corporation Limited seeks to question the correctness and legality of an order passed by the Joint Secretary to the Government of India in the Ministry of Finance (Department of Revenue) acting as a revisional authority under Section 35EE of the Central Excise Act, 1944. 2 The Petitioner engages in the manufacture and supply of petroleum products at and from its refineries, warehouses and 2 wp2087.09.sxw ssm installations situated in different parts of the country. For the supply of Aviation Turbine Fuel (ATF) falling under heading No. 2710.90, the Petitioner holds Central Excise Registration for receipt and storage of ATF inter alia at the air fuel station at Sahar Airport, Mumbai. ATF is supplied by the Petitioner to aircraft operating through various airports in India both on domestic and on international flights. Between February 1998 and February 2000, the Petitioner cleared 3736.,75 Kilo Liters (KL) of ATF to Aircraft operating international flights on payment of duty at `24.94 per KL under Notification 46/94- CE (NT) dated 22 September 1994 issued under Rule 12 of the Central Excise Rules, 1944. Six notices to show cause were issued to the Petitioner on 1 September, 3 December, and 19 December 1998 and on 2 February, 1 April and 20 February 1999 alleging that Notification 46/94-CE (NT) did not permit the clearance of mineral oil without payment of duty, in excess of `24.94 per KL to Aircraft bound for Nepal and that hence the Petitioner was required to pay full duty at the rate of 16% ad valorem on the entire quantity of ATF supplied to such aircraft. Accordingly the Petitioner was required to pay differential duty of `62,09,790/- together with interest. 3 By an order dated 31 January 2003, the Deputy Commissioner 3 wp2087.09.sxw ssm of Central Excise confirmed the demand for duty. On 30 June 2003, the Commissioner (Appeals) upheld the order of the adjudicating authority. On 31 May 2004, the revisional authority set aside the order of the Appellate Authority and remanded the matter back for reconsideration. On remand, the Commissioner (Appeals) by an order dated 20 December 2005 rejected the Appeal and upheld the demand on ATF supplied to aircraft bound for Nepal during the period between February 1998 and June 2001. By an order dated 30 April 2009, the Revisional Authority in the Government of India rejected the revision application. 4 On 22 September 1994, the Government of India in the Ministry of Finance issued a Notification in exercise of powers conferred by Rule 12 of the Central Excise Rules 1944 by which it directed that a rebate of duty paid on mineral oil products falling under Chapter 27 of the Schedule to the Central Excise Tariff Act, 1985 and exported as stores for consumption on board an aircraft on foreign run shall be allowed subject to several conditions. Among the conditions, was condition (i) which provided that in regard to foreign countries having land frontiers with India, the Notification shall apply to air flights to Pakistan, Bangladesh, Myanmar and Bhutan. The other 4 wp2087.09.sxw ssm conditions prescribed by the Notification are not relevant at this stage. Prior to the issuance of the aforesaid Notification, the Union Government had issued notification 203/67 on 9 September 1967 under which a rebate was allowed on excise duty paid on mineral products exported as stores for consumption on board an aircraft on a foreign run subject to the condition inter alia that in regard to foreign countries having land frontiers with India, the Notification shall apply to air flights to Pakistan, Bangladesh and Burma. 5 Though the earlier Notification of 1967 and its successor of 1994 specifically stated that the Notification shall apply to air flights stipulated and named foreign countries having land frontiers with India, the Central Government had in its Manual containing departmental instructions on excisable manufactured products extended the concession under executive instructions. Para 139 of the Manual (Corrected up to 31 August 1989) provided as follows:- “139. Rebate of duty not admissible on exports to a country or territory with common land frontier with India. As the conditions prescribed under the notification issued under 12 of the Central Excise Manual now stand, rebate of duty is statutorily not admissible on exports whether by land or by sea to a foreign 5 wp2087.09.sxw ssm territory having common land frontier with India except Pakistan and Burma. The countries to which such rebate is not so admissible are:- 1. Afghanistan 2. Nepal 3. Tibet 4. Bhutan However, under executive instructions, the concession of export under claim for rebate of excise duty has been extended in respect of export of excisable goods to the above mentioned countries. (Govt. of India C. No. 7/2/CX. 48, dated 4.4.1949, Government of India M.F.R.D. No. 32/1-CX./49, dated 5.1.1950, F. No. 14/4-CX. (i)-54, dated 5.9.51 and 14/13-CX./49. Dated 18.2.50).” 6 The Excise Manual issued by the Central Board of Excise and Customs has on 1 September 2001, similarly contained the following provisions. “1. Introduction 1.1 A separate rebate procedure has been notified in respect of supplies of mineral oil products falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) exported as stores for consumption on board an aircraft on foreign run. 2. Conditions of rebate 2.1 In respect of 7 products falling under the aforementioned Chapter, rebate has to be granted at a reduced rate. The rate for reducing rebate is specified in Notification No. 40/2001-Central Excise 6 wp2087.09.sxw ssm (N.T.), dated 26-6-2001. 2.2 Earlier, the rebate was limited, by notification, to all countries, which did not have land frontiers with India, except Pakistan, Bangladesh, Myanmar and Bhutan (though these countries have land frontier with India). But this facility was available by executive instructions to all countries, including the countries, which were not appearing in the notification for grant of this facility. The Government has decided to extend this facility to all countries, without any restrictions about the countries having land frontier. The supplies of ATF and other listed items (supplies to aircraft going to Nepal, Afghanistan and Bhutan) will be allowed in the same manner as it is allowed to supplies of ATF and other listed items to aircraft going to other foreign countries, including the payments of remittances.” 7 These instructions issued by the Central Government in an administrative capacity thus provided that ATF supplied to aircraft going to Nepal, Afghanistan and Bhutan would be allowed in the same manner as it is allowed to supply of ATF to aircraft going to other foreign countries. According to the Petitioner, the Government of India acting in its revisional capacity had passed an order in its own case on 30 June 1999 in relation to the rebate of duty on ATF provided to flights to Afghanistan, relying upon the executive instructions. The same view was reiterated in an order of the CESTAT in IOCL Limited Vs. Commissioner of Central Excise. 1 1 2007 (220) E.L.T. 324 (Tri.-Kolkata) 7 wp2087.09.sxw ssm 8 The attention of the Court has also been drawn to the fact that on 26 June 2001, a Notification was issued by the Central Government (Notification 40/2001) under Rule 18 of the Central Excise (2) Rules 2001. Clause (c) of the Notification granted a rebate of the whole of the duty paid on mineral oil products falling under Chapter 27, exported as stores for consumption on board an aircraft on a foreign run subject to the condition that in respect of the excisable goods mentioned in column (2) of its table, the rebate would be reduced by the amount indicated in the corresponding entry in column (3). In respect of ATF the rebate was to be reduced by an amount of `24.94 per KL. Thereafter, the earlier Notification was amended by Notification 26/02 dated 22 July 2002 by the insertion of the proviso in clause (c) of paragraph 1 to the effect that the reduction of the amount of rebate shall not be applicable on such excisable goods when exported as stores for consumption on board an aircraft on a foreign run to Nepal. Subsequently, by a further Notification bearing No. 9/03 dated 1 March 2003 a rebate was provided for on the whole of the duty paid on a mineral product falling under Chapter 27 exported as stores for consumption on board an aircraft on a foreign run. This was followed by a further notification (19/04) dated 8 wp2087.09.sxw ssm 6 September 2004. 9 It is true that the period to which the present proceedings relate is February 1998 to June 2001. The statutory Notifications which have been issued by the Central Government have however been adverted to above since they indicate that the administrative instructions that were issued by the Central Government even earlier were subsequently incorporated in the form of statutory notifications, in some form or the other. 10 The revisional authority in the present case declined to grant to the Petitioner the benefit of the administrative instructions contained in the Manual issued by the Central Board of Excise and Customs. The Joint Secretary to the Government of India, by his impugned order held that in view of the provisions of notification 46/94 dated 22 September 1994, a rebate was not available in respect of flights to Nepal. The revisional authority has also held that the Government differs with the findings which were arrived at in the order dated 30 June 1999 of the Government of India. We find merit in the contention which has been urged on behalf of the Petitioner that the Government of India, in its revisional capacity was duty bound to maintain consistency in its own determination. Evidently, though the 9 wp2087.09.sxw ssm Notification restricted the grant of rebate to flights to certain specific countries, administrative instructions were issued by the Union Government in the Manual extending the benefit even further. The validity of the administrative instruction has not been, as it could not be, called into question on behalf of the Government. In this view of the matter, we are of the view that it would be necessary to set aside the impugned order of the revisional authority and to remit the proceedings back for a fresh determination. 11 To facilitate this exercise the impugned order dated 30 April 2009 is set aside and the proceedings are remitted back to the revisional authority for fresh consideration. The Petition is disposed of. No costs. (ANOOP V. MOHTA, J.) (DR. D.Y. CHANDRACHUD, J.)