2003 (4) TMI 493 - HC - Central Excise

Court Strikes Down Inconsistent Notification, Upholds Promissory Estoppel

The court found Clause 4 of Notification No. 32/99 dated 8-7-1999 inconsistent with the industrial policy and struck down the conflicting clause. It held ... Writ jurisdiction - Exemption - Alternative remedy Issues Involved:1. Validity of Clause 4 of Notification No. 32/99 dated 8-7-1999.2. Application of Promissory Estoppel against the government.3. Compliance of the notification with the Industrial Policy announced in the Office Memorandum dated 24-12-1997.4. Entitlement of petitioners to benefits under the new industrial policy.Issue-Wise Detailed Analysis:1. Validity of Clause 4 of Notification No. 32/99 dated 8-7-1999:The primary issue in these writ petitions was the validity of Clause 4 of Notification No. 32/99 dated 8-7-1999, which stipulated that the exemption from excise duty would apply from the date of publication of the notification or the date of commencement of commercial production, whichever is later. The petitioners contended that this clause was contrary to the industrial policy outlined in the Office Memorandum dated 24-12-1997, which promised a tax-free zone for ten years from the commencement of production. The court found that the notification's clause was inconsistent with the industrial policy and struck down the words 'whichever is later' in paragraph 4 of the notification.2. Application of Promissory Estoppel against the Government:The court examined whether the government could be held to its promise under the doctrine of Promissory Estoppel. The Office Memorandum dated 24-12-1997 constituted a promise by the Government of India to provide tax exemptions for ten years from the commencement of production. The court held that the government could not resile from this promise and was bound by Promissory Estoppel. This principle was supported by previous judgments, including the case of Dharampal Satyapal Limited v. Union of India, where the court held that the government is bound by its promises made in policy documents.3. Compliance of the Notification with the Industrial Policy:The court scrutinized the compliance of the notification with the industrial policy announced in the Office Memorandum dated 24-12-1997. The memorandum clearly stated that the tax exemptions would be effective from the commencement of production. The court found that the notification issued by the Ministry of Finance was not in consonance with the industrial policy as it introduced a condition that was not present in the original policy. The court emphasized that any executive notification must align with the policy approved by the Union Cabinet and cannot undermine it.4. Entitlement of Petitioners to Benefits under the New Industrial Policy:The petitioners had established their industrial units in the North Eastern region based on the incentives promised in the Office Memorandum. The court held that the petitioners were entitled to the benefits of the new industrial policy from the date of commencement of production. The court directed the authorities to issue a fresh notification granting exemption from the date of commencement of production or the date of the notification, whichever is earlier. This decision ensured that the petitioners received the full benefits as promised under the industrial policy.Conclusion:The court concluded that the impugned Notification No. 32/99 dated 8-7-1999 was contrary to the new industrial policy of the Union Government and struck down the words 'whichever is later' in paragraph 4 of the notification. The authorities were directed to issue a fresh notification in line with the Office Memorandum dated 24-12-1997, granting exemption from the date of commencement of production. The writ petitions were allowed, and the rule was made absolute.