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2017 (3) TMI 781
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....ection or order prohibiting the Respondent No. 3 and / or 4 from adopting any proceedings pursuant to impugned show cause notice dated 26th August 2011 and to quash the impugned show cause notice dated 26th August 2011; C. To issue a writ of mandamus or an appropriate writ direction or order directing Respondent No. 3 and / or 4 from taking any steps in furtherance or in implementation of the impugned show cause notice dated 26th August 2011;" 2. Appellant is a company mainly engaged in the manufacture of 2/3 wheeler motor vehicles; the vehicles are chargeable to excise duty under the Central Excise Act, 1944 (hereinafter referred to as the Act). 3. On 7th January, 2003, the Prime Minister visited Uttaranchal from 29th to 31st March, 2002. He made certain announcements that Central Excise concessions will be made to attract investments in the industrial sector for certain special categories of States, including the State of Uttaranchal. Annexure - 1 dated 07.01.2003 to the writ petition further bears out that discussions were held with various related Ministries / Agencies. The Office Memorandum under the head 3.1. relating to fiscal incentive reads as follows: ....
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....trial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area of Uttarakhand and Himachal Pradesh.-In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944) read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Txtiles Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the goods specified in Annexure-I appended hereto, and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, specified in [Annexure-II and Annexure III] appended hereto, from the whole of the du....
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....ion. 8. We heard Sri Arshad Hidayatullah, Senior Advocate assisted by Mr. Makrand Joshi and Ms. Puja Banga, learned counsel for the appellant and Sri H.M. Bhatia, learned counsel on behalf of respondent nos. 2 to 4. 9. Sri Arshad Hidayatullah, learned Senior Counsel would submit that the appellant, acting on the basis of the policy, which promised 100 percent outright excise duty exemption for a period of 10 years from the date of commencement of the commercial production, was persuaded to invest in the State of Uttaranchal. Having made the promise, as is embedded in the Office Memorandum dated 07.01.2003, which is a policy decision taken after the announcement by the Prime Minister earlier, the Notification, which we have adverted to earlier, must be read as an implementing notification. The Notification is issued to secure the object, namely, to spur growth in a backward area. Having acted upon the promise and having set up the unit in the State, it does not lie in the mouth of the respondents to make a demand for NCCD and the cesses as it would amount to allowing the respondent Authorities to go back on the promise, they have made of their being 100 percent outright excise....
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....d obviously generate employment and create wealth, which will pave the way for economic development of the State. Such Notification calls for a liberal approach, runs the argument. 12. Next, he would contend that even proceeding on the basis that NCCD being a levy is imposed under the 2001 Finance Act, having regard to the fact that it is treated as a duty of excise in addition to the excise duty, which is levied under the Act, the Notification is capable of being interpreted as embracing NCCD and the cesses within its scope. So, NCCD also falls within the four walls of the Notification. In this regard, he relied on the judgment of the Rajasthan High Court in the case of Banswara Syntex Ltd. vs. Union of India reported in 2007(216) E.L.T. 16 (Raj.), which judgment was confirmed by the Hon'ble Apex Court. Besides the same, he would also rely on the judgment of the Gujarat High Court in the case of Vipore Chemicals Pvt. Ltd. vs. Union of India reported in 2009 (233) E.L.T. 44 (Guj), judgment of the Madras High Court in the case of Loyal Textile Mills vs. Jt. Secretary, MF reported in 2012 (280) E.L.T. 8 (Mad.), and the judgment of the Kerala High Court in the case of TVS Motor Co.....
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.... the writ petition has been imposed at the rate of 100 percent. He would pose the question that even proceeding on the basis that the appellant is liable to pay NCCD and other levies, having regard to the facts there is absolutely no justification for imposition of penalty and, that too, at the rate of 100 percent. 16. As far as the cesses are concerned, there are two cesses. Education Cess is imposed by the 2004 Finance Act and the Secondary & Higher Education Cess is imposed by the Finance Act of 2007. The cesses are actually levied on NCCD. At the time of argument, it is the submission on behalf of the appellant that the main challenge is to NCCD and if the challenge to levy of NCCD is not upheld, then, we need not be detained by any separate argument based on the cesses. 17. Per contra, Sri Hari Mohan Bhatia, learned counsel appearing on behalf of respondent nos. 2 to 4 would distinguish the decision relied on by the appellant in the case of Manuelsons Hotels Pvt. Ltd. vs. State of Kerala reported in (2016) 6 SCC 766 and would submit that the facts are completely different. In this case, the unit is admittedly put up only in the year 2007 much after the Notification dated....
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....grieved party. 20. The above statement, based on various earlier English authorities, correctly encapsulates the law of promissory estoppel with one difference - under our law, as has been seen hereinabove, promissory estoppel can be the basis of an independent cause of action in which detriment does not need to be proved. It is enough that a party has acted upon the representation made. The importance of the Australian case is only to reiterate two fundamental concepts relating to the doctrine of promissory estoppel - one, that the central principle of the doctrine is that the law will not permit an unconscionable departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of a course of conduct which would affect the other party if the assumption be not adhered to. The assumption may be of fact or law, present or future. And two, that the relief that may be given on the facts of a given case is flexible enough to remedy injustice wherever it is found. And this would include the relief of acting on the basis that a future assumption either as to fact or law will be deemed to have taken place so as to afford relief....
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.... suitably and the Government have decided to amend the Kerala Building Tax Act 1975 for the purpose. As the above proposal had to be given effect to immediately and as the Legislative assembly was not in session the Kerala Building Tax (Amendment) Ordinance, 1990 (Ordinance 8 of 1990) was promulgated by the Governor of Kerala on the 2nd day of November, 1990, and published in the Kerala Gazette Extraordinary dated 6th day of November, 1990. The Bill seeks to replace the said Ordinance by an Act of legislature. (Published in KG Ex No.1159 dated 7-12-1990)" 4. In pursuance of the said object, Section 3-A was added, which reads as under: "3-A. Power to make exemption:- (1) The Government may, if they consider it necessary so to do for the promotion of tourism, by notification in the gazette make exemption from the payment of building tax under the Act in respect of any building or buildings the construction of which is completed during such period and in such areas as may be specified in the notification and having such specifications as may be prescribed in the rules in this behalf." Also, to effectuate the said exemption provisio....
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.... of promissory estoppel in terms of this Court's judgments in Motilal Padampat and Nestle (supra). This is for the reason that non-exercise of such power is itself an arbitrary act which is vitiated by non- application of mind to relevant facts, namely, the fact that a G.O. dated 11.7.1986 specifically provided for exemption from building tax if hotels were to be set up in the State of Kerala pursuant to the representation made in the said G.O. True, no mandamus could issue to the legislature to amend the Kerala Buildings Tax Act, 1975, for that would necessarily involve the judiciary in transgressing into a forbidden field under the constitutional scheme of separation of powers. However, on facts, we find that Section 3A was, in fact, enacted by the Kerala legislature by suitably amending the Kerala Buildings Tax Act, 1975 on 6.9.1990 in order to give effect to the representation made by the G.O. dated 11.7.1986. We find that the said provision continued on the statute book and was deleted only with effect from 1.3.1993. This would make it clear that from 6.9.1990 to 1.3.1993, the power to grant exemption from building tax was statutorily conferred by Section 3-A on the Government....
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....olicy, which would give benefits to its subjects, the State must think about pros and cons of the policy and its capacity to give the benefits. Otherwise, it would be in violation of the principles of promissory estoppel and also it would be unfair and immoral on the part of the State not to act as per its promise. 22. The case of Devi Multiplex vs. State of Gujarat reported in (2015) 9 SCC 132 is also produced alongwith the compilation, but not expressly relied on by the appellant. Announcement by the Government relating to New Package Schemes of Incentives for Tourism Projects led to the appellants seeking temporary registration, which was granted leading the appellant to begin construction of the multiplex. The Scheme promised an extension for two years subject to satisfaction of State Level Committee and further entitled the Unit to approach the Government even after the aforesaid aggregate period of four years. The Court applied the principle of promissory estoppel on the basis that once the Government makes a promise, it should enforce it notwithstanding that there is no consideration for the promise and nor is it recorded in the formal contract under Article 299 of the Co....
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.... the Government cannot rely on a representation made without complying with the procedure prescribed by the relevant statute, but a citizen may and can compel the Government to do so if the factors necessary for founding a plea of promissory estoppel are established. It was also found that the Government was not able to establish any overriding public interest, which would make it inequitable to enforce estoppel. We may notice in this regard paragraph 48 of the judgment, where the Court has held as follow: "48. In the case before us, the power in the State Government to grant exemption under the Act is coupled with the word "may"-signifying the discretionary nature of the word. We are of the view that the State Government's refusal to exercise its discretion to issue the necessary notification "abolishing" or exempting the tax on milk was not reasonably exercised for the same reasons that we have upheld the plea of promissory estoppel raised by the respondents. We, therefore, have no hesitation in affirming the decision of the High Court and dismissing the appeals without costs." 24. We may also notice paragraph 28 of the judgment: "28. This Court rejected all ....
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....promissory estoppel, it is necessary for the promisee to show that by acting on promise made by the other party, he altered his position. The alteration of position by the promisee is a sine qua non for the applicability of the doctrine. However, it is not necessary for him to prove any damage, detriment or prejudice because of alteration of such promise. 5. In no case, the doctrine of promissory estoppel can be pressed into aid to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. No promise can be enforced which is statutorily prohibited or is against public policy. 6. It is necessary for invocation of the doctrine of promissory estoppel that a clear, sound and positive foundation is laid in the petition. Bald assertions, averments or allegations without any supporting material are not sufficient to press into aid the doctrine of promissory estoppel. 7. The doctrine of promissory estoppel cannot be invoked in abstract. When it is sought to be invoked, the Court must consider all aspec....
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.... period of tenyeas from the date of commencement of commercial production and [b] 100% Income Tax exemption for initial period of five years and thereafter 30% for companies and 25% for other than companies for a further period of five years from the date of commencement of commercial production." 28. Next paragraph is Paragraph 3, which reads as follows: "3. That in implementation of the excise duty exemption promised by the said Industrial Policy and in exercise of power conferred under Section 5A of the Act, Respondent No. 2 issued a Notification bearing No. 50/2003 CE dated 10th June 2003 (hereinafter referred to as "the Notification") thereby granting full exemption from duty of excise levied on the goods specified in Schedule I and Schedule II of the Tariff Act in respect of specified excisable goods, subject to, amongst other, the fulfillment of condition that the excisable goods are cleared by new industrial undertaking set up located in the area of the State of Uttarakhand or in the State of Himachal Pradesh, during the period of June 2003 upto 31st March 2010." 29. We may further notice paragraphs 7 & 8 of the writ petition: "7. That the Petitioner....
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....inadequate or rather non-existent to successfully found the plea of promissory estoppel. A glance at the admitted factual position may be highly relevant. The policy is dated 07.01.2003. The Notification was issued on 10.06.2003. All that is stated in the writ petition is that the petitioner has been manufacturing at the Pant Nagar Industrial Estate since April, 2007 after obtaining Central Excise Registration. We must bear in mind that an indispensable pre-requisite to found the plea of promissory estoppel is that a person must change its position acting on the basis of the promise. Can we safely conclude in the state of pleadings, which we have adverted to that the appellant has established that it was acting on the promise contained in the Office Memorandum dated 07.01.2003, namely, that there will be 100 percent outright Excise Duty exemption, that the unit was set up in the sense that it is understood by the appellant that it would cover NCCD and other cesses on the same, also as part of the Excise Duty. In this regard, we must, at once, consider the express terms of the Notification. In the Notification, reference is, no doubt, made to Section 5-A of the Act, Section 3(3) of ....
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.... can safely proceed on the basis that the Notification does not extend the benefit of exemption from NCCD. This interpretation flows from the plain words used and there is no room for ambiguity or construction. 33. The appellant has no case that it has changed its position relying upon the policy decision dated 07.01.2003. The policy decision dated 07.01.2003 is followed up by the Notification to effectuate the policy decision is what apparently understood by the Authorities. The Notification took shape in a little over six months from the date of the policy decision. It is nearly after four years that the Industrial Unit commences the commercial production. By the time, the industrial unit was set up, in fact, the appellant must be attributed with clear notice of the express terms of the Notification, which does not provide for exemption from NCCD. This is, as already noted in Paragraph 7 of the writ petition, the appellant's case that the Notification has duly put into effect the policy. 34. Still further, we must notice that NCCD was levied by the Finance Act of 2001. The Author of the Notification must indeed be attributed with the knowledge that NCCD was a product ....
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....morandum dated 07.01.2003 were understood or are capable of being understood as comprehending within its scope only the duty of excise under the Act. Contrast this fact scenario with that obtaining in the case of Manuelsons Hotels Pvt. Ltd. vs. State of Kerala (2016) 6 SCC 766. Therein, the promise was clear that the building, which was put up for the purpose mentioned, would be exempted from building tax. It is the said promise, which was sought to be breached. In the cases, which have been cited, there could be no doubt about the content of the promise. 39. Therefore, we can safely conclude that the appellant cannot be permitted to raise a plea of promissory estoppel in the facts of this case based on the policy decision dated 07.01.2003 as there is neither pleading nor materials placed to support a finding that the appellant had altered its position acting on a promise as is said to be contained in the policy decision dated 07.01.2003. Is the Notification Contrary to the Policy and Whether the Notification Being An Implementing Notification is entitled to beneficial interpretation 40. In the case of Lloyd Electric and Engineering Limited vs. State of Himachal Pradesh an....
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....d to the concession with immediate effect. Merely because such an expression has been used, it cannot be held that the State Government can levy the tax against its own policy. The State Government is bound by the policy decision taken by the Council of Ministers and duly notified by the Department concerned viz. Department of Industries." 41. We cannot also be oblivious to the following passages from the judgment: "17. Even otherwise, it is not altogether a new concession that has been notified by the Excise and Taxation Department in the impugned Notification dated 18-6-2009. As we have noted above, it is an extension of the 2004 Industrial Policy and the resultant tax concession to the eligible units which was available upto 31-3-2009. Therefore, for all purposes, what is notified by the Excise and Taxation Department on 18-6-2009 is an extension of the said concession beyond 31-3-2009 and that is why the notification has used the expression "...for the period ending 31-3-2009" without otherwise indicating the concession already being enjoyed by the eligible units till 31-3-2009. 18. The High Court, with great respect, has gone wrong in not appreciating the ....
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....l 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 industrial policy itself. In this view of the matter, any notification issued by government order in exercise of power under Section 7 of the Bihar Finance Act, if is found to be repugnant to the industrial policy declared in a government resolution, then the said notification must be held to be bad to that extent. In the case in hand, the notification issued by the State Government on 4-4-1994 has been examined by the High Court and has been found, rightly, to be contrary to the Industrial Incentive Policy, more particularly, the policy engrafted in claus....
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....t is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the industrial policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the industrial policy and not in a strict sense as in the case of exemption from tax liability under the taxing statute. 17. Applying the above tests to the facts of the present case, the object behind enactment of the Industrial Policy, 1995 was to confer incentives on industries set up in the State. As part of the incentives, the industrial policy envisaged allotment of land / building in growth centres to companies for setting up industrial units on lease for 99 years with an option for renewal. As a part of the incentives, it was also envisaged under clause 16 t....
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....be a policy, the case appears that the Notification is in consonance with the policy (an argument, which we shall consider in later stage in this judgment). Indisputably, there is no challenge to the Notification. The justification for the omission to challenge is stated to be that if the appellant challenges the Notification, it would amount to questioning the benefits, which the appellant is admittedly entitled to. It is pointed out, however, that the reliefs sought by way of Prayer No. 1, namely, declaration that the appellant is entitled to the benefit of exemption under Notification in respect of levy of duty of Excise as NCCD for a period of 10 years would suffice. 48. We may also at this juncture refer to the case of Commissioner of Customs (Import), Mumbai vs. Konkan Synthetic Fibers reported in 2012 (278) E.L.T. 37 (S.C.). Matter arose in the said case under the Notification No. 17/01-Cus., dated 01.03.2001, as amended by Notification No. 44 /2001-Cus., dated 26.04.2001 and the question was, whether he was entitled to the benefit of Notification. It is a case, where the Court laid store by the opinion of the experts and, thereafter, the Court proceeded to also refer to ....
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....l Excise, Shillong v. North-Eastern Tobacco Co. Ltd., (2003) 1 SCC 161= 2002 (146) E.L.T. 490 (S.C.), this Court has held: "10. The other important principle of interpreting an exemption notification is that as far as possible liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed." 13. In Associated Cement Companies Ltd. v. State of Bihar (2004) 7 SCC 642, this Court while explaining the nature of the exemption notification and also the manner in which it should be interpreted has held: "12. Literally "exemption" is freedom from liability, tax or duty. Fiscaly it may assume varying shapes, specially, in a growing economy. In fact, an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on economic justification of inequitable burden of progressive approach of fiscal provisions intended to augment State revenue. But once exception or exemption becomes applicable no rule or principle requires it to be construed strictly. Truly speaking, liberal and strict construction....
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....arly that the general rule is strict interpretation while special rule of beneficial and promotional exemption is liberal interpretation and they are related to two different sets of circumstances. This paragraph is extracted by the Apex Court as already noted in 2012 (278) E.L.T. 37. It is pertinent to notice that in the said judgment, in the very next paragraph, namely, Paragraph 17, which was quoted from (2011)2 SCC Page 74, the Court held as follows: "17. The notification issued by the Central Government is exercise of the powers conferred by Section 25(1) of the Act exempts the articles enumerated in the Table annexed when imported into India from payment of duty under the Act. The language used in the notification is plain and unambiguous. Therefore, we are required to consider the same in their ordinary sense. A construction which permits one to take advantage of one's own wrong or to impair one's own objection under a statute should be disregarded. The interpretation should as far as possible be beneficial in the sense that it should suppress the mischief and advance the remedy without doing violence to the language. From the wording of the above exemption notifica....
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....notification must be given its natural meaning and the object and purpose of the notification need not be looked into. (CCE v. Favourite Industries, (2012) 7 SCC 15). In Novopan India Ltd. v. CCE and Customs, 1994 Supp (3) SCC 606, dealing with the same issue in relation to an exemption notification, a three-Judge Bench of this Court, stated the principle as follows: 16. We are, however, of the opinion that, on principle, the decision of this Court in Mangalore Chemicals and Fertilisers Ltd. vs. CCT, 1992 Supp (1) SCC 21 and in Union of India v. Wood Papers Ltd., (1990) 4 SCC 256 referred to therein-represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee-assuming that the said principle is good and sound-does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the taxliablity must establish clearly that he is coverd by the said provision. In case of doubt or ambiguity, benefit of it must go to the State. This is for the reasonexplained in Mangalore Chemicals an....
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....s, therefore, necessary to examine the facts of the said case. The petitioner, therein, was engaged in the manufacture of yarn, gray fabrics and in getting man made fabrics processed. It paid Excise Duty, including Education Cess under the provisions of the Finance Act, 1994. The man made processed fabrics were exported. Thereupon, it filed a refund claim under Rule 18 of the Central Excise Rules. The claim for rebate relating to Education Cess was rejected in Appeal and the Appellate Order was confirmed by the Revisional Authority. Section 91 of the Finance Act provided that it would be levied and collected, in accordance with the provisions of the Chapter as surcharge for purposes of the Union, a Cess to be called as the Education Cess. Section 93 provided that Education Cess levied under Section 91, in the case of goods specified in the First Schedule to the Central Excise Tariff Act, 1985, being goods manufactured or produced, shall be a duty of excise (in this section referred to as the Education Cesson excisable goods), at the rate of two per cent, calculated on the aggregate of all duties of excise (including special duty of excise or any other duty of excise but excluding E....
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.... thereof. At the time of surcharge it had taken the character of parent levy and it became subject to the provisions relating to Excise Duty applicable to it in the manner of collecting the same obligation of the tax payer in respect of its discharge as well as exemption concession by way of rebate. The surcharge was for the purpose of Union and was to be utilized to provide and finance unversalised quality of basic education. 56. On reading of Section 93, as a whole, it was found that the existing Notification providing exemption to the Duty of Excise was otherwise applicable to the Education Cess also w.e.f. it became payable as part of the duty of Excise or at any rate special Excise Duty collected under the Finance Act and it did not require a separate Notification in that regard. These were the facts, on which, the Court took the view that the orders impugned in the petition were unsustainable. Undoubtedly, the Special Leave Petition and the Civil Appeal were dismissed; the Court saw no reason to interfere. Apparently, this has been followed later on in the cases of Vipore Chemicals Pvt. Ltd. vs. Union of India 2009 (233) E.L.T. 44 (Guj), Loyal Textile Mills vs. Jt. Secreta....
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.... Notification. On the other hand, it is admittedly a levy under the Finance Act of 2001, which is a separate enactment. As far as the duties of excise, which are covered under the Excise Act, as already noticed, are concerned, they would be the excise duties payable under Section 3 of the Central Excise Act, 1944 or any other duties that is levied under the Act and the other enactments. We cannot lose sight of the fact that what is mentioned in Section 136 is that it is stated to be a duty of Excise or that it is in addition to the duties of Excise chargeable under the Act would not make a duty of Excise levied under the Act. It is, no doubt, true that sub section (3) of Section 136, it is also to be noticed that NCCD is a duty in respect of the goods, which is specified in the Seventh Schedule of the Finance Act, 2001. In the Notification, the goods specified in the First and Second Schedule to the Central Excise Tariff Act, 1985, other than the goods specified in Annexure 1, are exempted from the duties under the Excise Act and the other two Acts. It may be true that the goods manufactured by the appellant is to be found in the seventh schedule to the Finance Act of 2001 as also ....