TaxTMI 
TaxTMI 
2013 (5) TMI 733
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....ng. The petitioner manufactures Indian Mouth Freshner with the brand name of "123". 3. The Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, Government of India formulated its industrial policy for the North-Eastern Region to give impetus to industrial growth and development in all the hilly regions of the country, particularly the North-Eastern Region. The policy for North-Eastern Region was notified by the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, Government of India vide its Office Memorandum dated 24-12-1997, inter alia, providing for various incentives for establishment of Industries in North-Eastern Region. Since the State of Sikkim was not specifically included in this policy, Government of India vide subsequent Notification/Memorandum dated 23-12-2002 extended the policy to the State of Sikkim, namely, "Special package of incentives for development of Industries in the State of Sikkim, 2002". Consequent upon the Government of India's industrial policy, the State of Sikkim issued Notification No. G.O./2/DI/2002-2003/901 dated 17-2-2003, whereunder various Fiscal Incentives to new Industrial Units and ....
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....ed for registration as a manufacturer under the Central Excise Law on 15-5-2006 in respect to its proposed unit in the State of Sikkim and a Certificate dated 16-5-2006 (Annexure-P4) was issued in its favour. The petitioner also applied for registration as a dealer under Sales Tax Act and a Sales Tax Registration Certificate dated 15-5-2006 (Annexure-P5) was also issued to it. It is stated that the petitioner set up a full-fledged manufacturing unit for its product Indian Mouth Freshner "123" brand by investing Rs. 2,93,56,461/-. This investment was made on capital and preliminary expenditures, raw-materials, direct and indirect costs and various other expenses. A statement detailing the investment made in the unit up to April, 2007 is placed with the petition as Annexure-P6. The petitioner also claims to have employed about 18 workers as per the details given in Annexure-P7. The petitioner's unit commenced its commercial production from June, 2006. In accordance with the exemption Notification, the petitioner was required to deposit the excise duty as leviable under the Central Excise Act, 1944 and was entitled to refund of the same on clearances of the goods in accordance with th....
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....cise duty to the industrialists and entrepreneurs for establishment of industries in hilly areas. The petitioner being persuaded and allured by such promises, assurances and incentives extended by the Union of India and the State of Sikkim established an industrial unit for manufacturing of Indian Mouth Freshner (Pan Masala) with a brand name "123" in the State of Sikkim by investing Rs. 2.93 crores and thus altered its position to its detriment. It is stated that the respondents after having extended such promises and assurances to continue to grant exemption from excise duty for a period of 10 (ten) years from the date of publication of the Notification in Govt. Gazette or from the date of commercial production whichever is later, were not entitled to withdraw the exemption on the principle of promissory estoppel. The petitioner has also pleaded that the action of the respondents besides being in breach of its promises is arbitrary and ultra vires to Article 14 and Article 265 of the Constitution of India. 7. The Government of India has filed its counter affidavit on behalf of the respondents nos. 1, 2 and 3 through the Superintendent, Central Excise, Rangpo Range opposing the....
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....d on record an additional affidavit dated 17-4-2008 in response to additional affidavit filed by the respondents containing allegations of mis-declaration, wrong classification etc. Along with additional affidavit dated 1-9-2011, some reports of the Laboratory have also been placed to indicate that the product manufactured by petitioner does contain component of lime. These test reports are not germane to the controversy as during the hearing of the petition no arguments were raised on behalf of the respondents in respect to the allegations contained in the additional affidavit filed by the respondents. Otherwise also if the petitioner has committed any mischief or fraud, the respondents were/are at liberty to initiate any action in accordance with the Prevention of Food Adulteration Act or any other law against it. However, it has no relevance in so far the question of grant or withdrawal of exemption from payment of excise duty is concerned. 8. Before the issues involved in the petition are examined and delved upon, it is relevant to notice that the question in the Writ Petition relates to the validity of the policy decision of the Government of India, but unfortunately the co....
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....otification dated 24-12-1997 followed by the Office Memorandum dated 17-2-2003 and the Notification No. 71/2003-Central Excise, dated 9-9-2003 is indubitably established. The respondents have also not disputed such offer, promise and assurance to the prospective industrialists/entrepreneurs for establishment of industrial units in the State of Sikkim or for that matter in North-Eastern Region. Grant of Fiscal Incentives, benefits for establishment of industries in the State of Sikkim is not a determinable question having been specifically admitted in the counter affidavit. Thus to consider the relief claimed by the petitioner what is required to be established by it is that it has altered its position to its detriment acting on or in response to the representation, promise and assurance of the respondents. The Government of India issued the first IPR vide its Notification No. 14(2)/2002-SPS dated 23-12-2002 offering special package of incentives for development of industries in the State of Sikkim followed by the Notification dated 17-2-2003 issued by the Department of Commerce and Industries, Government of Sikkim, though prior to the aforesaid Notification, the Government of India....
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....d be to promote industry in a particular area/State in respect to specified goods, to generate employment in an area or host of other public purposes. Once such a benefit is conferred upon any individual or juristical person for a specified period, its premature withdrawal has to be for justifiable and valid reasons and purposes. The State has to justify withdrawal once a promise/assurance is extended and the action of the State is justiciable and judicial review of such action is permissible in law. Conferment of benefit to the petitioner from payment of Central Excise Duty for a period of 10 (ten) years on the goods manufactured by it in the State of Sikkim pursuant to the promise extended by the respondents is all admitted. The State has to, therefore, justify its actions in accordance with law. In the counter affidavit filed by the State, the only ground for withdrawal of benefit is mentioned in paragraph 4(i), which reads as under :- "(i) It is submitted that such action was in public interest since Pan Masala fell within the category of "demerit goods" as it was found hazardous to health. This was felt necessary so as not to encourage production and consumption....
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....substance or component in the product of the petitioner. This certificate has not been rebutted by the respondents even in their additional affidavit filed though the respondents alleged some mis-classification on the part of the petitioner. Pan Masala is admittedly one of the specified goods under Chapter 21 of the First Schedule of the Central Excise Tariff Act, 1985. Even though it is stated in the counter affidavit that the withdrawal of the excise duty is in larger public interest, however, so called public interest has not been disclosed in the counter affidavit. 13. To justify the action of the respondents, Mr. B.K. Gupta, learned counsel appearing for the respondents, only pleaded that Pan Masala is a hazardous substance. His further contention is that premature withdrawal of benefit is in public interest but without referring to any material on record to demonstrate the nature and extent of such public interest. To support his contention he has referred to case of Kasinka Trading & Anr. v. Union of India & Anr. reported in (1995) 1 SCC 274 = 1994 (74) E.L.T. 782 (S.C.). In this case, exemption granted on import duty under the Customs Act on the import of PVC resins for ....
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....as subsequently altered to 17% vide subsequent tariff notifications issued in the years 1998 and 1999 and vide the impugned Notification dated 7-8-2000, the rebate was totally recalled. The exemption granted somewhere in the year 1986 was by a notification issued under Section 49 of the Electricity (Supply) Act, 1948. The Notification withdrawing the rebate was, however, issued after the enactments of the U.P. Electricity Regulatory Commission Act and the U.P. Electricity Reforms Act, 1999. While considering the question of validity of the withdrawal Notification, Hon'ble Supreme Court noticed that in the subsequent enactments, i.e. the U.P. Electricity Regulatory Commission Act and the U.P. Electricity Reforms Act, 1999, there is no provision for grant of rebate/exemption and the respondent-State was justified in withdrawing the rebate granted under the Electricity (Supply) Act, 1948 in the public interest. Hon'ble Court also noticed that under the agreement executed between the Electricity Board and the industrial units as a consumer, the supplier could revise the tariff rate from time to time and the revised tariff shall be applicable to the consumer. The supplier was also entit....
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....ld not to be an overwhelming public interest. 16. The respondents have placed on record an Office Memorandum dated 1-4-2007 said to be the New Industrial Policy for the North-Eastern Region including the State of Sikkim, namely, the "North East Industrial and Investment Promotion Policy (NEIIPP), 2007". Clause (x) of this policy contains a Negative List, which, inter alia, includes Pan Masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985. It is pertinent to note that this policy was issued under File No. 10(3)/2007-DBA-II/NER of the Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, Government of India. Simultaneously, another Office Memorandum of even date (1-4-2007) on the basis of the same File has been issued by the same Ministry. A copy of this Memorandum has been placed on record by the petitioner as Annexure-P13 along with their rejoinder. This Office Memorandum reads as under :- "File No. 10(3)/2007-DBA-II/NER Government of India Ministry of Commerce and Industry Department of Industrial Policy and Promotion New Delhi dated the 1st April, 2007. OFFICE MEMORANDUM Subject : Disco....
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....97 have been modified allowing the industries established in the State of Sikkim, who commenced commercial production on or before 31-3-2007 to get benefits thereunder, the impugned Notification dated 25-4-2007 issued under Section 5A of the Central Excise Act, 1944 does not even refer to the Office Memorandum dated 1-4-2007 (Annexure-P13) with the rejoinder. From the conjoined reading of the Office Memorandum dated 1-4-2007 (Annexue-R1), Notification No. 21/2007-Central Excise, dated 25-4-2007 and Office Memorandum dated 1-4-2007 (Annexure-P13), it appears that even while the Central Government decided to revoke incentives, particularly, the Central Excise Duty in respect to the Pan Masala, the product manufactured by the petitioner, as also units availing exemption which went to commence commercial production on or before 31-3-2007, have been allowed to avail benefits of earlier Government policy. Learned counsel appearing for the respondents has failed to either explain this factual position or rebutt the same on the basis of any document or plea. It thus emerges that the petitioner's entitlement for the excise duty exemption on Pan Masala being produced by its units established....
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....te had got exhausted. This takes us to the consideration of the second aspect of the matter." 18.3 In State of Bihar & Ors. v. Suprabhat Steel Ltd. & Ors. - (1999) 1 SCC 31, while considering a similar question of application of doctrine of promissory estoppel, Hon'ble Supreme Court held as under :- "7. Coming to the second question, namely, the issuance of notification by the State Government in exercise of power under Section 7 of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power, it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. The industrial incentive policy is issued by the State Government after such policy is approved by the Cabinet itself. The issuance of the notification under Section 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out the objectives and the policy decisions taken in the industri....
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....f public policy. It has further been held that burden to establish public policy is upon the Government. 18.6 In State of Punjab v. Nestle India Ltd. & Anr. - (2004) 6 SCC 465, relying upon various previous judgments of the Apex Court, particularly, in cases of Union of India v. Anglo Afghan Agencies - AIR 1968 SC 718 and Motilal Padampat Sugar Mills Co. Ltd. (supra), Hon'ble Supreme Court while laying down principles governing the doctrine of promissory estoppel, held as hereunder :- "30. So much for the strengths. Then come the limitations. These are : (1) Since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. But it is only if the Court is satisfied, on proper and adequate material placed by the Government, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. (SCC p. 443, para 24) (2) No representation can be enforced which is prohibited by law in the sense that the person or authority making the representation or promise must have the power to car....
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....ive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that 'legitimate expectation' gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightway from the administrative authorities as no crystallized right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, ....
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....and representation of the Government of India through its IPR and exemption Notification dated 9-9-2003 and the State of Sikkim by virtue of its Notification dated 17-2-2003 and invested huge amount of about Rs. 3.00 crores by altering its position. The respondents are bound to honour their promises, commitments and assurances and are not entitled to breach the same on mere conjectures, whims and absolute discretions. The respondents are, however, entitled to recall benefits of such promise on the basis of valid, justifiable policy and supervening public interest or in exercise of its sovereign authority or if any statute authorises them. Contentions raised by the respondents in support of their action to withdraw the exemption are - (i) statutory exercise of authority and (ii) public interest. In so far the statutory action of the respondents is concerned, suffice it to say that exemption Notification dated 9-9-2003 issued by the respondents in exercise of power under sub-section (1) of Section 5A of the Central Excise Act, 1944 was its statutory action and is deemed to be in public interest acknowledged in the notification itself. Even though the withdrawal notification is also a....