2016 (5) TMI 1384 - HC - Central Excise

Doctrine of promissory estoppels - Exemption to units set up in North-Eastern Region - Pan masala with and without Tobacco - negative list was provided in the policy of 2007 inter alia covering all goods falling under Chapter 24 of the First Schedule of the Central Excise Tariff Act 1985 so as to include all tobacco products and manufactured tobacco subsidies as well as pan masala - N/N. 21/2007-C.E. dated 25-4-2007 - notification dated 1-3-2007 bearing No. 11/2007-C.E - Held that - reliance placed in the case of M/s. Dharampal Satyapal Limited Versus Union of India and Others 2016 (5) TMI 1074 - GAUHATI HIGH COURT where the Division Bench has held that the notification impugned therein i.e. No. 11/2007-C.E. was hit by the doctrine of promissory estoppels and was not sustainable in law. Since the notifications dated 1-3-2007 as well as 25-4-2007 arise out of the similar transactions and under similar circumstances the only difference being that the former notification applies to the pan masala containing tobacco whereas the notification dated 25-4-2007 relates to pan masala without tobacco we are of the opinion that the ratio of the decision rendered by the Division Bench would be squarely applicable even in the facts of this appeal and will be binding upon this Court. The respondents are directed to refund the Excise duty component to the appellant as per its entitlement under the law - appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenge to withdrawal of excise duty exemption on pan masala products under specific notifications.

Detailed Analysis:

1. Background of the Case:
The case involved the withdrawal of excise duty exemption on pan masala products under specific notifications issued in 2007. The government had earlier announced incentives under the "New Industrial Policy and Other Concessions for North Eastern Region, 1997" to promote industrialization in the northeastern region. Subsequently, notifications were issued providing exemptions but were later withdrawn and partially restored over the years.

2. Legal Challenge:
The appellant challenged the notifications dated 1-3-2007 and 25-4-2007, which withdrew the excise duty exemption on pan masala products. The challenge was based on the doctrine of promissory estoppel, arguing that the government's actions were not sustainable in law due to the promises made under the Industrial Policy of 1997.

3. Judgment of the Single Judge:
The Single Judge dismissed the writ petitions, stating that the products were included in the negative list under the 2007 policy, and the government was not estopped from revoking the earlier exemptions in the interest of public welfare.

4. Division Bench Decision:
The Division Bench allowed the appeal, holding that the notification dated 1-3-2007 was hit by the doctrine of promissory estoppel. The Bench emphasized that the appellant had acted upon the promises made under the earlier notifications by investing significantly, and the government was bound by the doctrine of promissory estoppel.

5. Application of Doctrine of Promissory Estoppel:
The Division Bench highlighted that the government's actions were barred by the doctrine of promissory estoppel as the appellant had relied on the promises made under the earlier notifications and had made substantial investments based on those promises.

6. Outcome of the Appeal:
The Division Bench quashed the impugned notifications and directed the respondents to refund the excise duty component to the appellant as per its entitlement under the law. The decision was based on the application of the doctrine of promissory estoppel and the appellant's reliance on the promises made by the government.

7. Conclusion:
The judgment emphasized the importance of honoring promises made by the government to investors and held that the government could not resile from such promises without reasonable cause. The application of the doctrine of promissory estoppel played a crucial role in deciding the case in favor of the appellant, highlighting the legal principle of protecting the legitimate expectations of parties based on promises made.