WP(C) 3122/2009 BEFORE THE HON’BLE MR. JUSTICE HRISHIKESH ROY The petitioner Industry claims the benefit of exemption under the Central Excise Notification No. 8/2004 dated 21.1.2004 and the Notification No. 28/2004 dated 9.7.2004 and seek direction on the respondents 2 & 3 to take decision on their p ending withdrawal applications from the ESCROW Account, for making permissible i nvestment under Clause (B) of the exemption notification No. 8/2004. 2. I have heard Mr. A.K. Bhattacharyya, learned Senior Counsel on b ehalf of the petitioners and Mr. B. Sharma, learned Senior Standing Counsel for the Central Excise department, appearing for the respondents. 3.1 In exercise of powers conferred by Section 5 A(i) of the Central Excise Act, 1944 (hereinafter referred to as the Excise Act ) read with Sectio n 3(3) of the Additional Duties of Excise (Goods of Special Importance) Act, 19 57 and Section 136(3) of the Finance Act, 2001, the Central Government in public interest, exempted certain goods from the whole of duties of excise. The pre-co nditions for exemption were specified in the Notification No. 8/2004 of 21.1.200 4 which envisaged, duty exemption for North East based industrial units commenci ng commercial production, between 21.4.1997 to 28.2.2001. 3.2 Under Clause (B) of the exemption notification, the eligible uni ts were required to utilize the tax benefits secured through exemption, for inve stment in plants and machinery, infrastructural or civil works, in manufacturing units and social projects in the North Eastern States. The permissible investme nts are to be made before expiry of 6 months, from the end of each quarter. 3.3 The manufacturers claiming exemptions are required to provide details of the investments made in terms of Clause (D) within the stipulated period, to an Industrial Appraisal Committee (hereinafter referred to as the IAC Committee), constituted by the Chief Commissioner of Central Excise, Shillong, the Principa l Secretary of the Department of Industry of the State concerned where the unit is located and the Principal Secretary of the Department of Industry of the Stat e in which the investment is made and the IAC Committee was required to be satis fied that, the investment have been made only for the permissible projects and s chemes specified in Clause (B). 3.4 Upon certification by the IAC Committee that the investment were made in permissible sectors, the benefit of exemption under the exemption notif ication dated 21.1.2004, becomes operational 10 years from the date(s) of invest ment. 4.1 Amendment to the earlier exemption Notification dated 21.1.2004 was brought through the notification No. 28/2004 dated 9.7.2004, which substitu ted Clause (C), (D) and (E) in the earlier notification. According to the substi tuted Clause (C) for making investment under pre-existing Clause (B), the eligib le manufacturer is required to deposit the payable duty within 60 days from the end of the quarter, in an ESCROW Account of an authorized bank, opened specifica lly by the manufacturer for depositing duty under the exemption scheme. However withdrawal from the ESCROW account is permitted to be made with prior approval o f the jurisdictional Commissioner of Central Excise and the amount deposited in the ESCROW Account is required to be invested in the permissible spheres specifi ed in Clause (B), within 2 years (now extended to 4 years) from the date of depo sit of duty in the ESCROW account. When any amount is withdrawn from the ESCROW Account, the same is required to be invested for the permitted purpose, within 6 0 days from the date of withdrawal. 4.2 After investment is made of the withdrawn amount, the details of investment are required to be furnished within 2 years (now extended to 4 years ) to satisfy the IAC Committee that, the investment has been made for the permit ted purpose specified in Clause (B). Through amendment made in the Central Excis e and Service Tax Act w.e.f. 1.3.2011, it is provided in Sub-Section (iv) of Se ction 69 that, any amount remaining unutilized in the ESCROW Account on or afte r 31.12.2012, shall stand forfeited and be appropriated to the account of the Ce ntral Government. 5.1 Mr. Bhattacharyya, the learned Senior Counsel points out that m any applications were made by the petitioners for making withdrawal from the ESC ROW Account for permitted investment under Clause (B) of the exemption Notificat ion dated 21.1.2004 but, most of the withdrawal applications of the manufacturer have been kept pending by the Jurisdictional Commissioner, without considering approval for withdrawal of the applied amount. Specifying the pending applicatio n(s) marked collectively as Annexure K, Mr. Bhattacharyya submits that for most of these applications, the Jurisdictional Commissioner has either not taken a d ecision for approving withdrawal or have failed to communicate his decision if t aken, to the applicant. 5.2 The learned Counsel accordingly submits that since investment in to permitted sectors are to be made within a time bound period of 4 years from t he date of the deposit in the ESCROW account, an obligation is cast on the Juris dictional Commissioner to deal expeditiously with the applications for investmen t. He submits that non-consideration of the withdrawal applications in due time, disables the manufacturer to make the investment within the permissible time fr ame. The further submission is that delay in considering withdrawal applications also result in cost escalation and the viability of the intended project(s) is impacted, to the prejudice of the manufacturer. 5.3 Referring to the forfeiture Clause under Sub-Section 4 of Secti on 69, the learned Senior Counsel submits that when the manufacturer had made ti mely application for withdrawal from ESCROW account and the deposited duty rema ins unutilized for default of the jurisdictional Commissioner to consider approv al within reasonable time, the money in the ESCROW account should not be permitt ed to be forfeited, under the amendments made w.e.f. 1.3.2011, as the manufactur er’s right to claim exemption benefit can’t be defeated by default of the Excise authorities. 5.4 Referring to the absence of reasonable promptitude on the part of the jurisdictional Commissioner, the Senior Counsel submits that not only the withdrawal applications have been kept pending but withdrawal has been refused even for projects covered under Clause (B) of the exemption notification. He spe cifically refers to the application for a hotel project at Guwahati, which altho ugh was rejected by considering it to be an impermissible project, on challenge being made by the manufacturer, a Single Judge of this Court has interfered with the refusal decision. But he also points out that resultant Writ Appeal filed b y the Excise Department, is now pending consideration before the Division Bench. 6.1 Representing the Central Excise Department, Mr. B. Sharma, conte nds that when withdrawal applications from the ESCROW account is made for invest ment in impermissible projects not covered by the exemption notification, money can’t be permitted to be withdrawn by the manufacturer from the ESCROW account. He submits that duty exemption is to be considered upon satisfaction of certain pre-condition and only when the manufacturer is able to show that the proposed i nvestment is within the permissible contour of Clause (B) of the exemption notif ication, withdrawal can be permitted and money can’t be taken out from the ESCRO W account merely on the application of the manufacturer. 6.2 Referring to the Chart annexed as Annexure-A to the departmental additional affidavit filed on 6.5.2011, Mr. Sharma submits that few of the appl ication(s) filed by the manufacturers, pertaining to Cement Project in Meghalaya , Ceramic Tiles Project and Warehousing Project couldn’t be considered, for inad equate information and unless the deficiencies are made good, decision on these withdrawal application can’t be taken. 7. Although multiple prayers are incorporated in the writ petition, in course of his submission Mr. Bhattacharyya for the present, confines his sub mission to prayers (i) & (ii) in the present proceeding. 8.1 For considering the first prayer for a direction on the responde nts 2 & 3 to consider the pending application(s) (Annexure-K) of the petitioner, it would be appropriate to examine how the exemption benefits are to be granted . Under the notification No.8/2004 (Annexure H), the eligible industries can ava il the benefits only when it satisfies the competent IAC Committee that investm ents were made in the permitted spheres specified in Clause (B). They are also t o satisfy that the amount invested is not prematurely withdrawn before 10 years of investment. Only when these twin conditions under Clause (E) and (F) are sati sfied, the benefits of duty exemption become available. In case of premature wit hdrawal, except for reinvestment in similarly permitted arenas specified in Clau se (B), the proviso to Clause (F) requires the manufacturer to pay duty, equival ent to the amount withdrawn from the ESCROW account. 8.2 Further pre-conditions are placed through notification No.28/200 4 (Annexure I) on the manufacturers who seek to avail duty exemption through inv estment in permitted spheres, by stipulating an outer time limit for investment. If the time schedule for withdrawal from ESCROW account and investment can’t be adhered, the manufacturer’s unutilized money in the account is forfeited to the Central Government under Sub-Section (iv) of Section 69 of the amended provisi on. 8.3 Therefore under the exemption mechanism, unless the manufacturer is able to adhere to the prescribed time schedule for withdrawing, and investme nt, they can’t get the benefits under the 2 exemption notification(s) 8 and 28 o f 2004. But since prior approval of the Jurisdictional Commissioner is required before any amount can be withdrawn from the ESCROW account, the manufacturer app lying for withdrawal can’t take any further step towards investment, unless gree n signal is given for withdrawal by the Jurisdictional Commissioner, under Sub-C lause (iii) of Clause (C) of the notification No.28/2004. Therefore while the ma nufacturer is required to complete a race within a specified time, they can’t st art the race until the starter’s gun is fired by the Jurisdictional Commissioner . Therefore a manufacturer after he applies for withdrawal from ESCROW account, has to crouch in the set mode, and can’t start the race of investment, until the go ahead is given by the Jurisdictional Commissioner. 8.4 From the above analysis of the exemption process, it is quite cl ear that withdrawal applications of the manufacturer mustn’t be kept pending and they are required to be disposed of within reasonable time, from the date(s) of the application. Otherwise the manufacturer may be irreparably prejudiced in ke eping their part of the commitment. 8.5 Consequently I feel that the petitioner has made out a good case for granting the prayer (i) of this petition. Accordingly it is held that the respondents authorities are obliged to take decision(s) either way, when applica tions for withdrawal is made by a manufacturer. If the particulars furnished wit h the withdrawal applications are found to be inadequate, the authorities can re quire the applicant, to furnish the deficient details for taking the required de cision under Sub-Clause(ii) of Clause (C) of the exemption notification dated 9. 7.2004. 8.6 But from the additional affidavit of the respondent, it can be c learly gathered that some of the withdrawal applications filed by the petitioner s have been kept pending without any decision, for alleged inadequate informatio n furnished by the applicant. For such applications, the authority could have ei ther straightway rejected the application or could have asked for further partic ulars but they can’t push the manufacturer to a stage of forfeiture of their mon ey in the ESCROW account, by keeping the application(s) pending indefinitely, wi thout taking any decision on the same. 9. In so far as the prayer (ii) for extension of time for investing the withdrawal amount, it is seen that 4 years outer limit is stipulated by the amendments incorporated w.e.f. 1.3.2011. Sub-Clause (iv) of Clause (C) specifie s that the clock starts ticking from the date when duty is deposited in the ESCR OW account. If this time schedule from the date of deposit is to be adhered to, unless prompt decisions are taken on the manufacturer’s withdrawal applications, they will not be able to make investment within the specified time limit, for a ny of the permissible projects specified in Clause (B) of the exemption notifica tion. 10. The question is whether a manufacturer’s withdrawal application( s) can be kept pending indefinitely and their claim for duty exemption benefit c an then be defeated, because of non-consideration of the manufacturer’s withdraw al application within reasonable time, by the Jurisdictional Commissioner. The a nswer in my view has to be no since the inaction or lethargy of the Jurisdiction al Commissioner, Central Excise, shouldn’t have an unfair adverse impact on an e ligible manufacturer, as they are required to make time bound investments. Furth ermore, delay in considering application for withdrawal will not only jeopardize the intended project through cost escalation and other factors but more signifi cantly, will result in forfeiture of the duty deposited in the ESCROW account, f or no fault of the manufacturer. This in my view would be unfair and the manufac turer can’t be permitted to be visited with penal consequences like forfeitures, when it is the respondents who have caused delay in investment of the tax depos ited in ESCROW account, by not taking timely decision on the withdrawal applicat ion and keeping those applications pending without any decision. 11. A bare perusal of the Annexure-J Chart of the writ petition show s that several application(s) for withdrawal have been kept pending since July, 2007 and the manufacturer’s withdrawal application for investment in a hotel pro ject, has been subject matter of litigation in this Court. 12. Considering the default of the respondent authorities in dealing with the withdrawal application with reasonable promptitude, I am of the consid ered opinion that the time limit specified in Sub-Clause (iv) of Clause (C) of t he exemption notification dated 9.7.2004 should be read down to mean, four years from the date of communication to the manufacturer, of the decision on their wi thdrawal application(s) and not from the date of deposit of the tax amount in th e ESCROW account. Timely decision will enable the manufacture to offer alternate proposals. This in my view will be a just manner of applying the exemption bene fits, as the manufacturer faces the consequences of forfeiture of their money in the ESCROW account. If the respondents are at fault for the delay in investment , the Government can’t be permitted to appropriate such amount to the prejudice of the petitioner, as that will clearly amount to unjust usurpation. 13. For the foregoing conclusion, the respondents are directed to ta ke a decision on the pending withdrawal application(s) of the petitioners. If de cision on any of the application is already taken by the Jurisdictional Commissi oner, the same must immediately be communicated to the applicant. If further cla rification is necessary for any of the applications, the same be sought and a de cision may then be taken, depending upon the response or lack of it, of the appl icant. However as is already indicated, the outer time limit specified in Sub-Cl ause (iv) of Clause (C) of the exemption notification, for making the permissibl e investment will commence in respect of the concerned application, from the dat e of communication of the decision on the said application and not from the date of deposit in the ESCROW account. 14. The writ petition stands allowed to the extent indicated above w ithout any order of cost.