Central Government bound by promissory estoppel to continue excise exemption as per Industrial Policy

The court held that the Central Government is bound by the doctrine of promissory estoppel to continue excise exemption for 10 years as promised in the Industrial Policy. The Ministry of Finance was found to lack the authority to unilaterally withdraw concessions, and the withdrawal of the excise exemption was deemed unjustified by overriding public interest. The court quashed the withdrawal notification, restoring the excise exemption and directing the credited excise duty to be adjusted against future liabilities, granting the appellants entitlement to the exemption as per the initial notification.

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Issues Involved:

1. Whether the Central Government is bound by the doctrine of promissory estoppel to continue excise exemption for 10 years.
2. Whether the Ministry of Finance has the authority to unilaterally withdraw the concessions given under the Industrial Policy.
3. Whether the withdrawal of the excise exemption was justified by overriding public interest.

Detailed Analysis:

Issue 1: Doctrine of Promissory Estoppel

The appellants, manufacturers of Pan Masala containing Tobacco, challenged the withdrawal of excise exemption by the Central Government, arguing that the government is bound by the principles of promissory estoppel. The government had initially promised, through the Industrial Policy dated 24.12.1997 and subsequent Notification No. 32/1999-CE dated 8.7.1999, to exempt new industrial units in the North Eastern Region from excise duty for 10 years. The appellants had relied on this promise and made significant investments in setting up their units.

The court held that the government is indeed bound by the principles of promissory estoppel. The Industrial Policy and the notification issued were clear promises that induced the appellants to set up their industries. The appellants had altered their position based on these promises, and the government had acted on the policy by granting excise refunds until the issuance of the impugned notification.

Issue 2: Authority of the Ministry of Finance

The appellants argued that the Ministry of Finance was incompetent to unilaterally withdraw the concessions given in pursuance of the Industrial Policy, as the policy decision was taken by the Central Government and remained unchanged. The court referred to the Supreme Court's decision in State of Bihar v. Suprabhat Steel Ltd., which held that notifications issued by the government to carry out policy decisions must not be repugnant to the policy itself.

The court found that the Industrial Policy of 24.12.1997, which declared the North Eastern Region a total tax-free zone for 10 years, remained in force. The withdrawal of excise exemption by the Ministry of Finance through Notification No. 6/2001 dated 1.3.2001 was contrary to this policy and thus invalid.

Issue 3: Overriding Public Interest

The government contended that the withdrawal of the excise exemption was justified by overriding public interest, arguing that the benefits to manufacturers of tobacco products were disproportionate to the fiscal revenue foregone and that the units did not generate the anticipated employment. The court emphasized that the government must provide adequate material to prove such overriding public interest, and mere fiscal considerations are insufficient.

The court found that the government failed to provide sufficient evidence to demonstrate that the public interest in withdrawing the exemption outweighed the interests of the appellants. The reasons provided by the government were not supported by concrete data or documents, and the court was not persuaded that the withdrawal was necessary for any overriding public interest.

Conclusion:

The court quashed Notification No. 6/2001-CE dated 1.3.2001, restoring the excise exemption granted under Notification No. 32/1999-CE dated 8.7.1999. The appeals were allowed, and the impugned judgment of the learned Single Judge was set aside. The court directed that the excise duty paid by the appellants from 7.5.2001 onwards be credited to their respective accounts, to be adjusted against future excise duty liabilities. From the date of the judgment, the appellants were entitled to excise duty exemption as per the notification dated 8th July 1999.

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