2010 (8) TMI 925 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the notification dated 19-5-2004 issued by the Commissioner of Customs, Shillong.
2. Applicability of the doctrine of promissory estoppel.
3. Whether the long belt conveyor system (LBC) qualifies for duty exemption under the Export Oriented Unit (EOU) scheme.
4. Legality of the Board of Approval's (BOA) decision to reverse its earlier decision granting duty exemption to the petitioner.

Detailed Analysis:

1. Validity of the Notification Dated 19-5-2004:
The petitioner-company was aggrieved by the notification issued by the Commissioner of Customs, Shillong, which declared only a part of its limestone mining area and crushing area as a Customs Warehousing Station. The petitioner argued that the entire EOU premises, including the long belt conveyor system (LBC), should be declared as a Customs Warehousing Station. The notification limited the Customs Warehousing Station to 100 hectares of limestone mining area and 7.6 hectares of the crushing area, excluding the LBC.

2. Applicability of the Doctrine of Promissory Estoppel:
The petitioner-company contended that the doctrine of promissory estoppel should apply, as it had made substantial investments based on the initial approval and assurances given by the Government of India. The petitioner argued that it altered its position to its disadvantage by investing approximately Rs. 977 million, including the capital cost of the LBC, based on the promise of duty exemptions.

The court referred to the legal principles concerning the doctrine of promissory estoppel as explained by the Supreme Court in Kasinka Trading v. Union of India. The doctrine represents a principle evolved by equity to avoid injustice and is applicable against the Government to prevent fraud or manifest injustice. The court found that a definite representation/assurance was made by the respondent authorities to the petitioner that its unit is a composite unit and that the petitioner would be entitled to duty exemptions, including for the LBC.

3. Whether the Long Belt Conveyor System (LBC) Qualifies for Duty Exemption:
The petitioner argued that the LBC was an integral part of its integrated cement manufacturing facility, which included units both in India and Bangladesh. The BOA initially approved the procurement of the LBC as capital goods liable for duty-free import, recognizing the project as a composite cement plant. The petitioner claimed that the LBC should be considered part of the manufacturing process and thus eligible for duty exemption.

The court noted that the BOA had initially granted approval for duty-free procurement of the LBC, recognizing it as part of the integrated cement plant. The subsequent decision by the BOA to reverse this approval was based on the view that the LBC was merely a means of transportation. The court found that the LBC was an integral part of the manufacturing process and should be included in the EOU.

4. Legality of the BOA's Decision to Reverse its Earlier Decision:
The petitioner challenged the legality of the BOA's decision to reverse its earlier decision granting duty exemption for the LBC. The court observed that the BOA discharges quasi-judicial functions and that the order disposing of the application for exemption of duty involved civil consequences. The court held that the BOA, being a quasi-judicial body, had no power to review its own order unless such power was conferred by statute.

The court found that the BOA's decision to reverse its earlier approval was made without jurisdiction and in violation of the principles of natural justice. The court held that the doctrine of promissory estoppel applied, and the BOA could not be permitted to go back on its earlier decision.

Conclusion:
The writ petition succeeded, and the court quashed the impugned decision of the BOA dated 23-9-2004 and the consequential notice of demand. The court issued a writ of prohibition forbearing the respondent authorities from giving effect to the impugned decision and the notice of demand. The parties were directed to bear their respective costs.