TaxTMI 
TaxTMI 
2017 (3) TMI 781
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.... 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: "3.1 Fiscal Incentives to new Industrial Units and to existing units on....
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....ial 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 duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts. [Provided that the exempt....
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....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 duty exemption for a period of ten years. The unit was set up in the year 2007 and, therefore, the appellant was entitled to the benefit of the policy decis....
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.... 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. Ltd. vs. CCE, Mysore reported in 2013 (295) E.L.T. 42 (Ker). 13. Further Sri Arshad Hidayatullah, learned Senior Counsel would submit that the demand for interes....
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.... 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 10.06.2003. At the time, they put up the unit, they must be attributed with the knowledge of the specific terms of the Notification. Reading out the Notification, he would contend that it is clear as ....
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....romissory 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 to the wronged party. 19. It is, however, necessary to advert to the facts, which led to the judgment: "On 11th July, 1986, the State Government, by a Government Order (G.O.), accepted the recommendations of the G....
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....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 provision, Rule 14-A was added in the Kerala Buildings Tax Rules, 1974 as under: "14-A. (1) The exemption contemplated in Section 3-A of the Kerala Building Tax Act, 1975 shall be applicable to the buildings having the following specifications in such tourism sector and the construction of which is completed....
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....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. And we have seen that the statement of objects and reasons for introducing Section 3A expressly states that the said Section was introduced in order to fulfill one of the promises contained in the G.O. dated 11.7.1986. We find that, the appellants, having relied on the said G.O. dated 11.7.1986, had, in fact, constructed a hotel building by 1991. It is clear, therefore, that the non- ....
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....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 Constitution of India. It reiterated that the doctrine is applicable against the Government in the exercise of its Governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the said principle. 23. In the case of State of Punjab vs. Nestle India (2004) 6 SCC 465, respondents were p....
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.... 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 the three pleas of the Government. It reiterated the well-known preconditions for the operation of the doctrine: (1) a clear and unequivaocal promise knowing and intending that it would be acted upon by the promise; (2) such acting upon the promise by the promisee so that it would be inequitable to allow the promisor to go back on the promise." 25. We may, however, also advert to the following judgment ....
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.... 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 aspects including the result sought to be achieved and the public good at large. The fundamental principle of equity must forever be present to the mind of the court. Absence of it must not hold the Government or the public authority to its promise, assurance or representation." 26. Thus, clear and positive foundation has to be laid in the petition. Bald assertions, averments or allegations without any supporting material do not suffice. The Court is obliged to also consider all asp....
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....er 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 attracted by the fiscal incentives promised by the said Industrial Policy and duly put into effect by the said Notification, set up a new Industrial Unit in the specified area of State of Uttarakhand viz. Pantnagar, Integrated Industrial Estate. 8. That it is an admitted position that the Petitioner has duly complied with all the conditions set out by the said Notification and had commenced commercial production in April 2007 i.e. well before the cut-off date of 31st March 2010." 30. Our attention was a....
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....ange 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 the Additional Duties of Excise (Goods of Special Importance) Act 1957 and Section 3(3) of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978. These sections are provisions, which enable Government to grant exemption. The Central Government, thereafter, it is recited on being satisfied that it is necessary in the public interest so to do, exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985, other than certain goods which are excluded. The Notificati....
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....ecision. 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 of the Finance Act of 2001, which was an existing levy provided for by an enactment different from laws, which are expressly referred to in the Notification. Consciously, the Author of the Notification has not included the Finance Act of 2001 or NCCD in the Notification. Non-inclusion of NCCD or the Finance Act of 2001 is not made a complaint in the pleadings. 35. Had NCCD been levied by an enactment later than the Notification, it may have been open for the appellant to contend that it involves a breach of the promise contained in the policy decision of 07.01.200....
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....onclude 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 and others reported in (2016) 1 SCC 560, on which much reliance is placed by the appellant, the question, which was raised before the Hon'ble Apex Court was, whether the appellant was liable to pay Central Sales Tax at concessional rate of 1% on the inter-State sales in view of the industrial policy of the State for the period from 1-4-2009 to 17-6-2009. The appellants were beneficiaries of concessional rate till 31.03.2009. The Cabinet took a decision to extend the period of concession upto 31.03.2013 or till CST is phased out. The Department of Industries had, in fact, issued a Notification e....
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....t 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 background of the case and the decision of the Council of Ministers to extend its own Industrial Policy announced in 2004 and the tax concession beyond 31-3-2009. Once the Council of Ministers takes a policy decision, the implementing Department cannot issue a notification contrary to the policy decision taken by the Government." 42. The Court, we notice, relied on the judgments of the Hon'ble Apex Court in the cases of State of Bihar vs. Suprabhat Steel Ltd. reported in (1999) 1 SCC 31 and State of Jharkhand vs. Tata Cummins Ltd. reported in (2006) 4 SCC 57. Since the appellant has also referred to the said judgments, w....
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....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 clause 10.4(i)(b). Consequently, the High Court was fully justified in striking down that part of the notification which is repugnant to sub- clause (b) of clause 10.4(i) and we do not find any error committed by the High Court in striking down the said notification. We are not persuaded to accept the contention of Mr. Dwivedi that it would be open for the Government to issue a notification in exercise of power under Section 7 of the Bihar Finance Act, which may override the incentive policy itself. In our considered opinion, the expression "such conditions and restrictions as it may impose" in sub- section (3) of Section 7 of the Biha....
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....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 that sales tax benefit / exemption shall be granted to attract investments in order to sustain industrial development in the State. It is this background, that we have to consider clause 16.1 and clause 16.2 of the Industrial Policy, 1995. The two notifications are merely instruments giving effect to the policy envisaged under the Industrial Policy, 1995." 45. It is also a case, where both the Notifications were sought to be quashed as being repugnant to the incentive policy. We may, however, also notice the following findings: "13. The facts found by the High Court are, that, after obtaining 37.19 acres of land from TELCO, out of the lands....
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....d 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 the principle of beneficial notifications and the manner of interpreting them. Relevant paragraphs of the said case read as follows: "10. Before we discuss the issue involved, we intend to notice how this Court has construed beneficial notifications issued under the Act. In Commissioner of Customs (Preventive), Mumbai v. M. Ambalal and Company, (2011) 2 SCC 74=2010(260) E.L.T. 487 (S.C.), (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpretation: 16. It is settled law that the notification has to be red as a whole. If any of the conditions laid do....
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....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 of an exemption provision is to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification or in the exemption clause then it being in the nature of exception is to be construed strictly and against the subject but once ambiguity or doubt about applicability is lifted and the subject falls in the notification then full play should be given to it and it calls for a wider and liberal construction. (See Union of India v.Wood Papers Ltd. and Mangalore Chemicals and Fertilisers Ltd. v. Dy. Commr. Of Commercial Taxes to which reference has been made earlier.)" 14. In G.P. Ceramics Private Limited v. Commissioner, Trade Tax, Uttar Pradesh, (2009) 2 SCC 90, this Cour....
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....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 notification, it is clear that the benefit of the exemption envisaged is for those goods that are imported." 51. Thus, the Court specifically declared that 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. We notice that similar reasoning is adopted by the Court in the judgment in the case of Commissioner of Central Excise, Shillong v. North-Eastern Tobacco Co. Ltd., (2003) 1 SCC 161, which is in paragraph 12 of the judgment in 2012 (278) E.L.T. 37 (S.C.), namely, that as far as possible, liberal interpretation should be imparted to the language provided no violence is done to the language employed. 52. We have already appreci....
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....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 and other decisions viz. each such exception / exemption increases the tax burden on other members of the community correspondingly. Once, of course, the provision is fond applicable to him, full effect must be given to it. As observed by a Constitution Bench of This Court in Hansraj Gordhandas v. CCE and Customs, AIR 1970 SC 755 that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption." 17. As we have already noti....
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.... 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 Education Cess on excisable goods) which are levied and collected by the Central Government in the Ministry of Finance (Department of Revenue), under the provisions of the Central Excise Act, 1944 or under any other Law for the time being in force. It was further declared in Section 93(2) that the Education Cess shall be in addition to any other duties of excise chargeable on such goods under the Central Excise Act, 1944 or any other law for the time being in force. The provisions of the Excise Act and the Rules, including those relating to refunds and exemptions from duties and imposition of penalty was to apply in relation to the levy and collection of the Education Cess. The dispute related to the period 09.07.2004 to 05.09.2004. This is for the reason that on 06.09.2004....
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.... 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. Secretary, MF 2012 (280) E.L.T. 8 (Mad) and CCE, TVS Motor Co. Ltd. vs. CCE, Mysore 2013 (295) E.L.T. 42 (Ker). 57. We would think that the appellant is not justified in seeking to draw support from the principle enunciated in the said cases in the facts of the present case. Therein, the Court relied upon the fact that the Education Cess was treated even under the earlier Notification as an additional Duty of Excise. This is for the reason that the statutory Notification of an earlier date, included within the ambit of Excise Duty, any special Excise Duty collected under any Finance Act. It was, therefore, that when the Education Cess was treated as a Duty of Excise under the Finance Act 2004, Education Cess became a special Duty of Excise in terms of the 2001 Notification. Theref....
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....e 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 the schedule to the Excise Act mentioned in the notification. It is true that by virtue of sub-section (3) of Section 136, the provision relating to exemption from duty is made applicable to NCCD. This only means that it is open to the Authority acting under Section 5-A of the Excise Act to grant exemption from NCCD invoking the power therein, but that is of far cry from saying that since the Notification was issued under Section 5-A, it must be treated as having also impliedly granted exemption from payment of NCCD. Thus, we see no scope for applying the principles laid in Banswara Syntex Ltd. vs. Union of India reported in 2007(216) E.L.T. 16 (Raj.) and other cases. 58. The upshot of the above discussion is that on no ground canvassed before us by the appellant, we are pers....