Kisan Sahkari Chini Mills Ltd. vs Union of India

Tarun Agarwala, J.—The petitioner is engaged in the manufacture of sugar and molasses. The petitioner was granted permission for storage of non-duty paid sugar in godowns situated outside the factory premises on account of paucity of storage space in the factory premises. This permission was granted subject to payment of supervision charges. The respondents issued a letter dated 7-11-2002 directing the petitioner to pay supervision charges @ Rs. 21,532/- per month. The petitioner hired a godown for the period 12-2-2002 to 22-2-2003 and, on the basis of the supervision charges as indicated by letter dated 7-11-2002, the petitioner alleges that he paid the entire amount of Rs. 10,22,731/- under protest and thereafter stored the sugar in the said godown and, from time to time, the sugar was stored or cleared under the supervision of the excise authorities. According to the petitioner, the storage and clearance of sugar was done on 64 days under the supervision of the excise authorities and, therefore, the petitioner was liable to pay Rs. 49,216/- as supervision charges. Accordingly, the petitioner applied for a refund of Rs. 9,73,515/-. This claim for refund was rejected against which the petitioner filed an appeal before the Tribunal which was rejected by an order dated 17-7-2008 holding that the appeal was not maintainable and that the petitioner should approach the administrative authority. The petitioner, thereafter filed a fresh application before the Assistant Commissioner, Customs and Central Excise and Service Tax, Division Saharanpur, which was again rejected by an order dated 16-7-2012. The petitioner, being aggrieved by the said order has filed the present writ petition praying for its quashing and for a mandamus directing the respondents to refund the excess amount deposited by the petitioner along with interest.

In this backdrop, we have heard Sri A.P. Mathur, the learned counsel for the petitioner and Sri B.K.S. Raghuvansi, the learned counsel for the respondents.

The excise duty is leviable at the time of removal of the goods. Rule 47(5) of the Central Excise Rules, 1944 (hereinafter referred to as the "Rules") permitted the manufacturer to store goods in exceptional circumstances without payment of duty on account of shortage of storage space at the premises of the manufacturer subject to certain conditions imposed by the authority. Under this Rule, in case of excess stock and shortage of storage place, the authorities were permitting the manufacturers to store non-duty goods outside their factory premises on deposit of bonds, etc. Subsequently this facility was withdrawn and representations were made by the manufacturers which led to the issuance of a circular dated 1-1-2002 wherein it was decided that in view of Rule 47(5) of the Rules, the facility of non-duty paid goods outside the factory premises without payment of duty would be made available to the manufacturers subject to adequate revenue safeguard.

Subsequently, the Central Excise Rules, 2002 (hereinafter referred to as the "Rules of 2002") were promulgated w.e.f. 1-3-2002. Rule 4 provided that every person who produces and manufactures of any excisable goods and who stores such goods in a warehouses would be liable to pay duty on such goods in the manner provided in Rule 8 and that no excisable goods shall be removed without payment of duty. Rule 4(4) of the rules provided an exception, which is extracted hereunder:

"4(4) Notwithstanding anything contained in sub-rule (1), Commissioner may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer where the goods are made, permit a manufacturer to store his goods in any other place outside such premises, without payment of duty subject to such conditions as he may specify."

A perusal of the aforesaid indicates that in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of the manufacturer, the Commissioner may permit a manufacturer to store the goods at any other place outside their factory premises without payment of duty.

Based on the aforesaid Rule of 2002, a trade notice dated 29-10-2002 was issued. Under this trade notice permission to store non-duty paid goods in godowns outside the factory premises could be granted subject to the following formalities, namely:--

"(a) that the outside godown where the non-duty paid sugar is to be stored should be under the physical control of Central Excise authorities in Cost recovery basis, and all receipts in and clearances from outside godown is effected under Excise Supervision.

(b) That the clearances of sugar should be on first in first out basis.

(c) That no losses of any nature in the outside godown will be permitted.

(d) That any left over stocks of non-duty paid sugar lying in the outside godowns is first cleared.

(e) That the party gives an undertaking in writing that it should pay appropriate duty of excise in respect of all the sugar taken for reprocessing from the stocks stored in the said godowns and after reprocessing no refund of excise duty shall be claimed by the party of the resultant sugar.

(f) That the duty involved in respect of sugar in transit and thereafter so stored outside should be secured by Bond (Specimen attached as Annexure-II) with 25% cash security subject to maximum of Rs. 10 lacs whichever is less and in case there is any pilferage/damage/loss of sugar so stored, the assessee shall pay the duty involved thereon unconditionally.

(g) That for the movement of sugar from the factory premises to outside godown, procedure of ARE-3 (Annexure-25) and invoice is followed very strictly.

(h) That the proper accounts of the sugar is maintained at the outside go-down."

One of the conditions is, that the non-duty paid sugar could be stored under the physical control of the Central Excise authority on cost recovery basis. Based on the said trade notice, the respondent issued a letter dated 7-11-2002 granting permission to the petitioner to store goods outside their factory premises subject to deposit of supervision charges on cost recovery basis. The cost recovery basis was calculated @ Rs. 21,532/- per month. This calculation has been accepted and has not been questioned in this writ petition.

The only ground urged by the petitioner is, that supervision charges could only be charged for the days when storage or clearance of sugar was actually supervised by the respondents in the said godown. According to the petitioner, the storage and/or clearance of sugar was actually done on 64 days under the supervision of the excise authority and that no clearance or storage was done on other days. It was, therefore, contended that for the period where no supervision was conducted by the excise authority, the amount deposited by the petitioner should be refunded along with interest.

The submission of the learned counsel for the petitioner appears to be attractive, but on the closer scrutiny the said contention cannot be accepted.

The supervision charges as contemplated under Rule 4(4) of the Rules of 2002 read with the trade notice dated 29-10-2002 is not for the clearance of storage of sugar as and when it happens in the godowns, but, the supervision charges is for the duration of the period when the godown is in the physical control of the respondents where the sugar is stored.

The contention, that supervision charges is only required to be paid when the sugar is stored or cleared from the godown, is patently misconceived. So long as the sugar is stored in godown outside the factory premises the same remains under the physical control of the respondents and the petitioner is required to pay the supervision charges on cost recovery basis. In the instant case, the godown was hired for the period 12-2-2002 to 22-2-2003 and, for this period, the supervision charges @ Rs. 21,532/- per month was required to be paid, which the petitioner had paid. The question of refund, therefore, does not arise. In view of the aforesaid, there is no merit in the writ petition and is dismissed.