TaxTMI 
TaxTMI 
2016 (5) TMI 1074
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....Act, 1956 and has its units in Guwahati and Agartala and is engaged in the production of Jarda scented tobacco/pan masala containing tobacco falling under the heading of tariff 2403 99 30 and 2403 99 10 of the First Schedule to the Central Excise Tariff Act, 1985 ("Tariff Act" for short). In order to uplift the North Eastern India from economic backwardness and to attract investors' confidence, the Central Government formulated the North Eastern Industrial Policy dated 24-12-1997 for facilitating industrial development in the North Eastern Region. One of the incentives being initiated was to provide Central Excise and Income Tax Exemption on various excisable commodities/goods including tobacco products for a period of ten years from the date of commencement of commercial production or date of issuance of the Notification, whichever was later. In furtherance of such policy decision, the Central Government issued the said Notification No. 32/99-CE and 33/99-CE exempting some specified goods manufactured in the specified areas of the North East India from, inter alia, excise duty and additional excise duty, which were otherwise leviable on these goods. The summary of the said two ....
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....volved in the manufacturing of tobacco. Three tobacco manufacturing units were also set up at Agartala pursuance to the 1997 Industrial Policy and the Notifications issued in connection therewith. According to the appellant, it has invested huge amounts in the North East by providing employment to the locals and stimulating industrialization in the region. Presently, it provides employment to about 2200 persons in its units and has planned several new units and ventures in the North East region on the assurance that exemption extended to them would continue for the next ten years. According to the appellant, the details of investment made as on 30-9-2009 are as under: Particulars Amount in Lacs Land : Rs.45.46 Buildings : Rs.432.41 Plant & Machineries : Rs.1098.39 Furnitures & Fixtures : Rs.66.66 Office Equipments : Rs.138.21 Vehicles : Rs.40.01 Stocks : Rs.5089.89 Total : Rs.6911.03 It is stated by the appellant that it satisfied all the requirements of the said Notification and availed of the benefits of exemptions from payment of excise duty made thereunder in respect of the fini....
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....ing unit which is located in the same 7 North East States and the said investments had to be made before the expiry of six months from the end of each quarter described above to a Committee consisting of the Chief Commissioner of Central Excise, Shillong, the Principal Secretary of the Department of Industries of the concerned State in which the unit was located and the Principal Secretary of the Department of Industries of the State in which the investment was made. The manufacturer was required to prove to the satisfaction of the Committee that the investment was made for plant and machinery in a manufacturing unit located in the concerned State. Once the Committee was satisfied that the investment was made in the plant and machinery of the manufacturing unit, it was to issue a certificate to that effect to the manufacturer within a period of one month as above. The certificate was then to be produced by the manufacturer within a period of two weeks from the date of issue of the said certificate to the jurisdictional Central Excise Officer. The investment made under the said Notification was required to be for a period of ten years from the date on which the investment was made. ....
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....dia, Guwahati on 21-6-2005 whereby the State Bank of India was appointed as the Escrow Agent. It was further stipulated in the agreement that operations of the account including withdrawals from and closure of the said Escrow Account were to be made with the prior approval of the jurisdictional Commissioner of Central Excise, Shillong and that if the balance amount lying with Escrow Account was not re-invested in terms of the Notification No. 28/2004-CE, the appellant should bind itself to pay on the demand of the Deputy Commissioner of the Central Excise or Assistant Commissioner of Central Excise, as the case may be, to the extent of the duty which was equal to the amount not re-invested along with interest thereon at the rate specified under Section 11 (AB) of the Excise Act with the amount lying in balance in the Escrow Account. 7. It is the case of the appellant that the Central Government, contrary to the assurances made in the earlier Notifications pursuant to which it had made huge investments in the Region, issued the Notification No. 11/2007-CE, dated 1-3-2007 amending the said Notifications No. 08/2004-CE and 28/2004-CE respectively and withdrawing the benefits which ....
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....the exemption period and that the respondents and the Central Excise officials were engaging in numerous illegal and arbitrary actions of appropriating huge amounts of money lying in their escrow accounts and its group companies without any rhyme or reason. According to the appellant, the Central Excise authorities and the Investment Appraisal Committee have been conducting their functions under the Notifications No. 8 and 28 illegally and arbitrarily in denying investment certificates to it and its group companies. Aggrieved by that, the appellant also filed WP(C) No. 591 of 2008, 1048 of 2008 and 2148 of 2008 challenging the arbitrary exercise of powers by the respondent authorities denying it the benefit granted under the excise exemption notifications. These writ petitions were allowed, but an appeal against the said order was filed before the Division Bench which stayed the said order. 9. The respondents No. 1 to 4 contested the writ petition and filed two affidavits. In the first affidavit filed on behalf of the respondent No. 2, the promulgation of the policy of 1997 and the notifications No. 32/99-CE and 33/99-CE dated 8. 7. 1999, the incentives thereunder including cent....
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....lso witnessed various problems according to the answering respondents, as the Investment Appraisal Committee detected mis-utilisation of the investment as well as utilisation of the escrow fund. The Government decided to not to operate the operation of the escrow account and eventually issued the Notification No. 11/07 dated 1.3.2007 under Section 5A(1) of the Central Excise Act, 1944 read with Section 3 of the Additional Duties of Excise (Goods of Specific of Importance) Act, 1957 and further amended, in public interest, the Notification No. 8/04-CE dated 21-1-2004 clarifying that the exemption contained therein would not be available to the goods cleared on or after the first day of March, 2007. 11. While reiterating that the promise of incentives under Policy 1997 had ceased with the amendment vide the Finance Act, 2003 read with the Ninth Schedule thereto excluding tobacco and other products specified therein from the purview of the exemption, the partial respite from this levy granted by the notification No. 69/03 dated 25. 8. 2003 and 11/07-CE dated 9.7. 2004 has been asserted to be independent of the aforementioned policy and not by way of extension thereof. It has been s....
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....r additional affidavit, the respondents No. 1 to 4 besides contending that the counter filed by the respondent No. 2 questioned the maintainability of the writ petition on the ground of delay as the impugned notification was dated 25.4.2007. Apart from asserting that the appellant even otherwise had failed to lay any factual foundation to invoke the doctrine of promissory estoppel, they accused it of suppression of the material fact that it had, the impugned notification notwithstanding, been paying central excise duty for the tobacco products on the clearance of their products in terms of normal duty as applicable till 30-6-008. As the withholding of the said fact had a vital and decisive bearing on the grant of interim order in its favour, the respondents pleaded that the petitioner has thereby disentitled itself for any equitable relief from this Court. 14. Dr. A.K. Saraf, the learned senior counsel for the appellant, contends that the learned Single Judge has patently fallen into error in holding that under IPR 2007, the saving clause, which entitled the units established under IPR 1997 to avail of the benefits for the remainder of the term was applicable only to units which....
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....ies and other materials on record, and have also heard both the learned counsel appearing for the rival parties. In order to arrive at the right answer to any question, the right question shall have to be formulated. H.M. Seervai, the famous jurist, used to say, "Ask the right question, you will never get the wrong answer, but ask the wrong question, you will never get the right answer!" In this writ appeal, we are of the view that the right question to be asked for effective adjudication is: Whether the State-respondents are barred by the doctrine of promissory estoppel from issuing the impugned Notification No. 11/2007-CE dated 1-3-2007 withdrawing full and partial exemption of excise and excise tariff duty extended to the appellant made available to it by the Notification No. 8/2004-CE dated 21-1-2004 and the Notification No. 28/2004-CE dated 9-7-2004? To appreciate the controversy, the text of the impugned Notification dated 1-3-2007 is reproduced hereunder: NOTIFICATION NO. 11/2007-Central Excise New Delhi, the 1st March, 2007 10 Phalguna, 1978 (Saka) G.S.R.(E) - In exercise of the powers conferred by sub-section (1) section 5A of the Central Excise Act, 1944 (I....
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....es so leviable earlier would no longer be available to goods cleared on or after 1-3-2007. However, in so far as goods cleared on or before 28-2-2007 and in respect of which the exemption had already been availed of are concerned, the condition specified in the Notification No. 8/2004, dated 21-1-2004 would continue to apply. 17. It needs to be recapitulated that in order to implement the New Industrial Policy in the North Eastern Region, which was launched to promote and stimulate industrial production therein, the Government of India (GOI) issued the Notification No. 32/1999-CE dated 8-7-1999 exempting all goods in Schedule I and II of the Central Excise Tariff Act, 1985 ("CET Act") which were manufactured in the areas mentioned in the notification; the notification laid down the criteria for becoming eligible to avail of the exemption. Simultaneously, another cognate Notification dated 33/1999-CE dated 8-7-1999 was issued by the GOI exempting goods mentioned therein from payment of excise duty leviable from the manufacturers. Soon thereafter, the GOI vide the Notification No. 45/99-CE dated 31-12-1999 amended the said two notifications excluding goods falling under Chapter 24....
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....g for the first time the mechanism of escrow account for ensuring that money earned from exemption is re-invested in the State itself. Some three year thereafter, the Department of Industrial Police and Promotion, Ministry of Industry and Commerce launched the North East Industrial and Investment Promotion Policy, 2007 containing a saving clause declaring that "industrial units which have commercial production on or before 31-3-2007 would continue to get benefits/incentives under NEIP, 1997". The new Policy included a negative list which excluded units manufacturing certain class of goods from eligibility under new Policy related exemption. This negative list included (i) all goods falling under Chapter 24 of 1st Schedule, CET Act which pertains to tobacco and manufactured tobacco substitutes; (ii) Pan Masala as covered under Chapter 21 of the 1st Schedule to the CET Act, etc. On 1-3-2007, the GOI issued another Notification No. 11-2007-CE amending the Notification No. 8/2004-CE whereby the exemption granted therein was not made available to goods cleared on or after 1st day of March, 2007. This was followed by another Notification No. 21/2007-CE dated 25-4-2007 further amending th....
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.... clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification in the Official Gazette at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first notification or order, as the case may be. (3) An exemption under sub-section (1) or sub-section (2) in respect of any excisable goods from any part of the duty of excise leviable thereon (the duty of excise leviable thereon being hereinafter referred to as the statutory duty) may be granted by providing for the levy of a duty on such goods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the statutory duty. Explanation.-"Form or method", in relation....
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....arge his strict legal rights, intending the other party to act on the faith or promise, and the other party actually does act on it, then it is contrary, not only to equity but also to good faith, to allow the promisor to go back on his promise. It should not be necessary for the other party to show that he acted to his detriment in reliance on the promise. It should be sufficient that he acted on it." The Apex Court in Amrit Banaspati Co. Ltd. v. State of Punjab,(1992) 2 SCC 411 also explained doctrine in the following manner: "3. Law of Promissory Estoppel which found its 'most eloquent exposition' in Union of India v. Indo-Afghan Agencies Ltd. (1968) 2 SCR 366 : AIR 1968 SC 718 crystallised in Motilal Padampat Sugar Mills Co. (P) Ltd. v. State of U.P. (1979) 2 SCC 409 : 1979 SCC (Tax) 144 : (1979) 2 SCR 641 as furnishing cause of action to a citizen, enforceable in a court of law, against government if it or its officials in course of their authority extended any promise which created or was capable of creating legal relationship, and it was acted upon, by the promisee irrespective of any prejudice. It was reiterated in Union of India v. Godfrey Philips India Ltd. (1985) 4....
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....e promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. This aspect has been dealt with fully in Motilal Sugar Mills case (supra) and we find ourselves wholly in agreement with what has been said in that decision on this point." 22. To give a complete picture of the legal position with respect to the doctrine of promissory estoppel, we may also refer to and reproduce hereunder para 30 of the judgment of the Apex Court in Pawan Alloys & Casting Pvt. Ltd., Meerut v. UP State electricity Board and others, (1997) 7 SCC 251: "30. Shri Dave next invited our attention to a three-Judge Bench judgment of this Court in the case of Shrijee Sales Corpn. wherein A.M. Ahmadi, C.J., speaking for the Bench considered the correctness of the aforesaid decision in Kasinka Trading10. As the decision in Shrijee Sales Corpn. (1997) 3 SCC 398 has laid down the parameters of the field in which the doctrine of promi....
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....isee a reasonable opportunity of resuming his position" provided of course it is possible for the promisee to restore status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. Vide Emmanuel Ayodeji Ajayi v. Briscoe (1964) 3 All ER 556.' 4. Two propositions follow from the above analysis: (1) The determination of applicability of promissory estoppel against public authority/Government hinges upon balance of equity or 'public interest'. (2) It is the Court which has to determine whether the Government should be held exempt from the liability of the 'promise' or 'representation'. In the present case, the first notification exempting the customs duty on PVC itself recites '... Central Government being satisfied that it is necessary in public interest to do so ...'. In the notification issued later which gave rise to the present cause of action, the same recitation is present." It is, therefore, obvious that even though it may be found that the Government or any other competent authority had held out any promise on the basis of which the promisee might have acted, if public interest....
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....ase of the appellant that acting upon such promise, it invested a total of Rs. 69 crores for construction of land, building, plant & machineries, furnitures and fixtures, office equipments, vehicles, stocks. Having satisfied the criteria stipulated in the said two Notifications, the appellant availed of the benefit of exemption from payment of excise duty and additional excise duty for the goods manufactured and cleared by it and also claiming refund of the duty deposited by it in cash during the period from 17-11-2000 to 28-2-2001. The Excise Department, in turn, after verifying the claims for the refund used to refund the excise duty deposited into it during that period. 24. By announcing the North East Industrial Policy, 1997 implemented by the Notifications No. 32/99-CE and 33/99-CE, it can truly be said that the respondents have held out a promise to exempt the manufacturer of the specified goods from payment of excise duty and additional excise duty for the next ten years subject, however, to fulfilment of the criteria stipulated therein. As already noticed, the "flip-flop" of the Central Government issuing notifications granting, then withdrawing, again granting before fi....
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....ted prior to the said three Notifications, it has no relevance in this case nor can it have any adverse effect on the rights already accrued to the petitioners thereunder. The impugned Notification No. 11/2007-CE dated 1-3-2007 was issued in exercise of the powers conferred under Section 5A(1) of the Excise Act. The contention of the learned senior counsel for the appellant is that the impugned Notification, in so far as it takes away the rights already accrued to the appellant in terms of the Notifications No. 11/04-CE and 28/04-CE is concerned, is illegal inasmuch as the parent Act i.e. Excise Act does not give the Ministry of Finance the power to issue such Notification with retrospective effect, and has also infringes Section 38A of the Excise Act, which provides that the rights which have accrued or vested in a party by prior Notification shall not be affected by an amendment to the Notification. If any authority is required in this behalf, we may conveniently refer to Mahabir Vegetable Oils (P) Ltd. V. State of Haryana, (2006) 3 SCC 620. This is what the Apex Court said: "38. The promises/representations made by way of a statute, therefore, continued to operate in the fiel....
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....se exemptions would be given to those investors who started production of identified goods for a period of ten years; (b) The appellant believed that the promise was true and, if acted upon, would be entitled to a refund of excise duty, and had, therefore, acted upon such promise; and (c) While acting upon such promise, the appellant altered its position by investing sixty-nine crores of rupees in land, buildings, plants and machineries, office equipments, vehicles and stocks. (d) The authority issuing the Notifications Nos. 11/04-CE and 28/04-CE acted within the scope of his authority. (e) The impugned Notification No. 11/07-CE is ultra vires Section 5A of the Excise Act and is, therefore, not operative; there is thus no difficulty in invoking the doctrine of promissory estoppel. 27. It is not, however, necessary for the appellant to further prove that any damage, detriment or prejudice was caused to it by making such investment. What is now to be seen is whether there is overriding public interest compelling the State-respondents to withdraw the benefits already extended to the appellant and whether it may still be within the competence of the respondent authoritie....
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..... Indisputably, the units of the appellant had commenced commercial production on or before 31-3-2007. This is evident from the Office memorandum dated 1-4-2007 which categorically stated that industrial units which had commenced commercial production on or before 31-3-2007 would continue to get benefits/incentives under NEIP, 1997. Under the circumstances, the right of the appellant to get benefits/incentives made available under the Notifications No. 11/04-CE and 28/04-CE cannot be abrogated by the impugned Notification. Once it is found that the appellant has admittedly acted upon the promise held out by the respondents in the Notifications No. 11/04-CE and 28/04-CE and made some investment, though the quantum whereof is not ascertainable at this stage as will be evident hereafter, it may not no longer be possible to restore the status quo ante. Therefore, the State-respondents are barred by the doctrine of promissory estoppel from issuing the impugned Notifications No. 11/2007-CE dated 1-3-2007 withdrawing full and partial exemption of excise and excise tariff extended to the appellant made available to it by the Notification No. 8/2004-CE dated 21-1-2004 and Notification No. 2....
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.... invested an amount of rupees one hundred crores out of which only rupees 34 crores was certified by the Investment Appraisal Committee by way of investment in plants and machineries and social infrastructure project, whereas the balance remained un-invested which was subsequently appropriated by the respondent authorities. The respondents also point out that the Commissioner had initiated recovery measures against the appellant by issuing demand notices under Section 11A of the Excise Act for the period of 25-8-2003 to 8-7-2004 as it defaulted in paying back duty to the public exchequer on its own. It is further pointed out by the respondents that during the period from 25-8-2003 to 8-7-2004, the appellant availed of duty exemption to the order of Rs.96,61,11,858/- which required it to invest the equivalent amount. It was also required to produce investment certificates for the said amount, but it produced the investment certificate only to the tune of rupees thirty-four crores. According to the respondents, the balance amount of rupees sixty-three crores not so invested in the manner specified in the notification is required to be deposited back with the public exchequer. Instead....