The Gauhati High Court has held that application for fixation of special rate of value addition under Notification No. 17/2008-C.E. as amended by Notification 31/2008-C.E. ought not to have dismissed by the Department on grounds of limitation when such applications were filed immediately after the decision of the Supreme Court dated 22 April 2020 in the case of VVF Ltd.
The High Court decision was pronounced on 12 August in the case of Jyothi Labs Ltd. v. Union of India & Ors.
Brief facts
- Petitioner was availing benefit of refund of Central Excise duty paid in cash vide Notification No. 32/1999-C.E., dated 8 July 1999. The benefit was thereafter curtailed vide the Amending Notifications to the extent of duty paid on value addition
- Pursuant to the decision of Supreme Court’s decision in VVF Ltd. on 22 April 2020, the Petitioner filed seven applications for fixation of special rate of value addition.
- Before the adjudication of the said applications, recovery proceedings were initiated.
- Petitioner challenged the recovery proceedings before the Gauhati High Court in an earlier writ petition. The Gauhati High Court vide Order dated 24 March 2021 directed the Principal Commissioner to consider the applications filed by the Petitioner.
- Thereafter, the Principal Commissioner rejected the seven applications on the ground of being time barred, without going into the merits.
Issue
Whether applications filed by Petitioner for fixation of special rate of value addition could have been dismissed by the Principal Commissioner on the ground that they were time barred?
Decision of the Gauhati High Court
- Once the Amending Notifications were set aside earlier by the Gauhati High Court, the requirement to file applications for fixation of special rates only arose after the decision of the Supreme Court in VVF Ltd. on 22 April 2020.
- There was no prior occasion at the Petitioner’s end, to apply for fixation of special rates as the requirements in the Amending Notifications were ineffective and unimplementable.
- Upholding of the Amending Notifications by the Supreme Court brings in a legal right to apply for special rates.
- The ground of limitation for rejection of the applications by Principal Commissioner was not available to the Department. Specific direction was given to Principal Commissioner to consider the applications on merits.
Background
Notification No. 32/1999-C.E., dated 8 July 1999 granted exemption to goods cleared from units located in specified areas in the North Eastern States. The exemption was available by way of refund of the Central Excise Duty paid in cash.
Notification No. 17/2008-C.E., dated 27 March 2008 as amended by Notification No. 31/2008-CE dated 10 June 2008 curtailed the benefit under the Original Notification to extent of duty payable on value addition. The Amending Notifications (i) fixed a percentage of refund based on value addition; and (ii) gave the option to the asseesee to fix a special rate of refund. The application for fixation of special rate of value addition was to be filed by 30th September of the respective financial year.
The Amending Notifications were challenged before the Gauhati High Court on the ground that the State was estopped from withdrawing or curtailing a promised benefit. The Amending Notifications were set aside by the Single Judge Bench and Division Judge Bench of Gauhati High Court. However, the Supreme Court reversed the decision of the High Court and held that the amendment in the Notification did not amount to violation of a promise made by the State