2003 (3) TMI 632 - HC - Central Excise

Summary

Issues Involved:
1. Whether a 100% Export Oriented Unit (EOU) is exempt from payment of textile cess under Section 5A of the Textile Committee Act, 1963.
2. Application of the principles of promissory estoppel in the context of exemption from textile cess.

Detailed Analysis:

Issue 1: Exemption from Textile Cess for 100% EOU

The petitioner, a 100% Export Oriented Unit (EOU), challenged the demand for textile cess levied under Section 5A of the Textile Committee Act, 1963, arguing that they were exempt from such cess. The petitioners relied on a letter dated 18-5-1994 from the Ministry of Industry, which stated that EOUs would be exempt from duties, cesses, and other central levies in the nature of excise. The petitioner argued that since Section 5A levied a "duty of excise," they should be exempt from it.

The court, however, clarified that the levy under Section 5A was a cess and not an excise duty. The court referred to previous judgments, including the Division Bench of the Delhi High Court in Nath Brothers Exim International Ltd. v. Union of India, which held that the cess under Section 5A had traces of a fee rather than a tax. The Andhra Pradesh High Court in M/s. Sanghi Spinners India Ltd. v. Union of India also supported this view, stating that the government had decided not to exempt EOUs from textile cess. The court concluded that the petitioner was liable to pay the cess as it was not an excise duty but a fee.

Issue 2: Principles of Promissory Estoppel

The petitioner also argued that the principle of promissory estoppel should apply, as the government had initially represented that EOUs would be exempt from all central duties and cesses. The petitioner cited the Supreme Court judgment in M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh and others, which upheld the principle of promissory estoppel.

The court rejected this argument, stating that the promise made by the government was for exemption from excise duties, not cess. The court noted that there was no notification under Section 5E of the Textile Committee Act exempting EOUs from textile cess, unlike the notifications issued under the Central Excises and Salt Act, 1944, which provided exemptions from excise duties. Therefore, the principle of promissory estoppel did not apply in this case.

Conclusion:

The court dismissed the writ petition, emphasizing that the petitioner had not availed the efficacious remedy of appeal provided under sub-section (7) of Section 5A of the Act. The court also noted that the petitioner had continued to pay the cess for several periods without challenging the assessments. The petitioner's claim for a refund of the cess paid was rejected, and the court imposed costs of Rs. 5,000/- on the petitioner.