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Administrative delay can't deny exemptions
July, 26th 2006

A sound principle of fiscal administration has been enunciated by the Supreme Court in some recent judgements, which deserve all the appreciation from the taxpayers who are often denied the deserving benefit on feeble technical grounds, such as not having been able to produce the essentiality certificate or some other certificate in time. 
The Customs and excise tariffs are rife with exemptions with conditions that some certificates or other have to be produced before the exemption is availed of. Some of the authorities who provide the certificates are Director of Vanaspati, Vegetable Oil and Fat (Department of Food and Public Distribution), Director General Health Services (DGHS), Council for Leather Exports, Chief Engineer of the State Electricity Board of the state, etc. 
There are nearly 30 such organisations, which are not all known for granting the certificates in quick time. The result is that when the goods are imported and are waiting to be cleared at the ports, the certificate is not ready and so the exemption is not available to them. 
What is worse, when a refund is claimed after paying higher duty and clearing the goods, Revenue rejects it on the ground that the certificate was not produced at the time of import, which is the requirement in the exemption. This creates enormous hardship and the importers often have to knock at the door of all the appellate authorities and ultimately travel to the Supreme Court. Some cases have already reached the Supreme Court on this issue alone. 
In a recent case of Commissioner of Customs, Mumbai vs Tullow India Operations Ltd 2005(189(ELT 401 (SC), the exemption was subject to the condition that the importer at the time of importation produces the required certificate from the Directorate General of Hydrocarbons. Whereas the importer applied for the certificate well in time, the certificate was not issued due to administrative delay. 
The essentiality certificate was obtained and produced at a later date whereupon the importer asked for the money back. It was rejected at all levels until it came to the Supreme Court, which finally granted the exemption on the ground that an exemption which is otherwise admissible cannot be denied just because the certificate has been produced later due to administrative delay. 
This sound principle had also been enunciated earlier in a similar case of CCE vs M.P.V. Egg. Industries 2003 (153) ELT 485 (SC). The exemption in this case was subject to the condition that the factory is registered with the Directorate of Industries. Due to the delay in granting the registration, Revenue granted the exemption only from the date of granting the registration. 
This deprived the small-scale factory of the benefit of the exemption for a substantial period of time. The Supreme Court observed that in a case of this nature it is only reasonable to take the view that the benefit of exemption will accrue to a unit found to be a small-scale industrial unit from the date on which the application was made for the grant of registration certificate. 
Such a unit should not be deprived of the benefit to which it is otherwise entitled as a small-scale industrial unit merely because the authorities concerned took their own time in disposing of the application. 
It is a pity that even after such principle has been enunciated earlier, other cases are travelling to the Supreme Court on the same issue. 
An administrative solution to this problem of undue litigation travelling upto the highest level is that the Central Board of Excise and Customs should issue a binding circular that such conditional exemption about production of certificates should not be interpreted strictly, and in any case refund of duty should be granted when the required certificates are produced later.

Sukumar Mukhopadhyay

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