2010 (6) TMI 858 - HC - Central Excise

Issues Involved:
1. Quashing of the Notification No. 1/2008 dated 18-1-2008.
2. Entitlement to benefits under Notification No. 50/2003-C.E., dated 10-6-2003.
3. Application of Doctrine of Promissory Estoppel.
4. Public interest versus individual equity.

Issue-wise Detailed Analysis:

1. Quashing of the Notification No. 1/2008 dated 18-1-2008:
The petitioner sought to quash the Notification No. 1/2008, dated 18-1-2008, which amended Notification No. 50/2003-C.E., dated 10-6-2003. The amendment excluded certain peripheral activities like packing, repacking, labeling, etc., from the scope of excise duty exemption. The court held that the amending Notification No. 1/2008-C.E., dated 18-1-2008, is prospective and affects only those industrial units that came into operation on or after the date of its issue. The petitioner's unit, established prior to this Notification, is not covered by it and is entitled to the benefits of the earlier Notification dated 10-6-2003.

2. Entitlement to benefits under Notification No. 50/2003-C.E., dated 10-6-2003:
The petitioner company, engaged in manufacturing 2/3-wheeled motor vehicles, set up its plant in Uttarakhand based on the fiscal incentives promised in Notification No. 50/2003-C.E., dated 10-6-2003. These incentives included 100% excise duty exemption for ten years. The court directed the respondents to allow the petitioner company to avail of the benefits of the exemption Notification No. 50/2003-C.E., dated 10-6-2003, as the petitioner had made a substantial investment of Rs. 150 crores and generated employment based on the promise of these benefits.

3. Application of Doctrine of Promissory Estoppel:
The petitioner argued that the amending Notification dated 18-1-2008 violated the doctrine of promissory estoppel, as the company had acted on the promise of excise duty exemption for ten years. The court agreed, citing the Supreme Court's judgments in MRF Ltd. v. Assistant Commissioner and State of Punjab v. Nestle India Ltd., which held that the government cannot resile from its promise if it causes unfairness and arbitrariness. The court emphasized that the government's promise had induced the petitioner to make a substantial investment, and withdrawing the benefit before the stipulated period was unfair, arbitrary, and unreasonable.

4. Public interest versus individual equity:
The respondents argued that the withdrawal of the exemption was in public interest, relying on the Supreme Court's judgment in Kasinka Trading v. UOI, which held that promissory estoppel is not available against the state in fiscal matters. However, the court distinguished this case, noting that the public interest sought to be achieved by the original Notification was to promote industrial development and generate employment in backward states. The court held that the respondents failed to prove that the withdrawal of the exemption was in superior public interest and that the petitioner had a legitimate expectation based on the original Notification.

Conclusion:
The court allowed the writ petition, quashing the prospective application of Notification No. 1/2008-C.E., dated 18-1-2008, and directed the respondents to allow the petitioner to avail the benefits of the exemption Notification No. 50/2003-C.E., dated 10-6-2003. No order as to costs was made.

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