Court Invalidates Excise Duty, Upholds Lawful Withdrawal of Exemption, Addresses Liability Dispute

The court held that the demand for excise duty for the period before the withdrawal of exemption was invalid and must be refunded to BPCL. The withdrawal of the exemption notification was deemed lawful, citing government discretion and public interest. Interpretation of the contract terms regarding changes in law was left to the parties. Liability determination between the contractor and TNRSP was addressed, allowing the petitioner to make representations and instructing TNRSP to act accordingly. The writ petitions were disposed of with no costs, and connected miscellaneous petitions were closed.

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Issues Involved:
1. Validity of the demand for excise duty for the period before the withdrawal of exemption.
2. Legality of the withdrawal of the exemption notification.
3. Interpretation of the contract terms regarding the change in law.
4. Liability determination between the contractor and TNRSP.

Issue-wise Detailed Analysis:

1. Validity of the demand for excise duty for the period before the withdrawal of exemption:

The petitioner challenged the demand for excise duty for the period from March 2016 to June 2017. The court held that the impugned notification dated 30.06.2017, which withdrew the exemption, comes into effect only from 01.07.2017. Therefore, any recovery of duty for the period prior to 01.07.2017 is deemed bad in law and must be refunded to BPCL. BPCL is instructed to appear before the Central Excise Officer for reconciliation, and the amount should be refunded within two weeks from the reconciliation date.

2. Legality of the withdrawal of the exemption notification:

The petitioner argued that the withdrawal of the exemption during the currency of the agreement was unlawful and that the government must establish specific public interest circumstances justifying such withdrawal. The petitioner cited the Supreme Court judgment in the case of State of Uttar Pradesh vs. Birla Corporation Ltd. However, the court accepted the revenue's stand, distinguishing the Birla Corporation case. The court noted that the withdrawal of the exemption in 2017 was within the government's discretion and justified by public interest. The court cited several Supreme Court cases, including Union of India vs. Unicon Industries, to support the view that the government has the discretion to grant, continue, or withdraw exemptions. The challenge to the notification dated 30.06.2017 was thus rejected.

3. Interpretation of the contract terms regarding the change in law:

The contract between the petitioner and TNRSP included a clause (Article 19.17) addressing changes in law. This clause stipulated that any additional costs or benefits resulting from a change in law should be notified and reconciled between the parties. The court noted that the parties were aware of the possibility of changes in law, supported by the issuance of a public trade notice regarding the reversal of the exemption. The court refrained from interpreting the contract terms, leaving it to the parties to resolve the impact of the change in law through representation and discussion.

4. Liability determination between the contractor and TNRSP:

The petitioner was permitted to make a representation to TNRSP regarding the interpretation of the exemption notification and the consequent liability. The court instructed TNRSP to act upon this representation, calling upon the petitioner to appear and pass orders accordingly. The Central Excise Department was directed to determine the refund or additional demand based on the amounts collected from BPCL and paid by the petitioner to BPCL. The court also addressed the issue of BPCL's demand for the period from 2015 to 2018, reiterating that there should be no demand for the period before 01.07.2017. The court noted that the petitioner had paid BPCL suo motu and the amount should remain with BPCL until a final demand is raised by the Customs Authorities.

Conclusion:

The writ petitions were disposed of in light of the above orders, with no costs, and connected miscellaneous petitions were closed.

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