2010 (11) TMI 544 - HC - Central Excise

Refund - Notification No. 71/2003-Centrtal Excise dated 9-9-2003, namely, General Exemption No. 51B and Office Memorandum dated 1-4-2007 in File No. 10(3)/2007-DBA-II/NER, both issued by the Government of India exercising the powers conferred under section 5A of the Central Excise Act, 1944 - In order to apply the principle of reasonable construction to give effect to the purpose or intention of the provision, as apparent from the scheme of the Act, the Court must ensure to harmonize different provisions in the same Act and prefer an interpretation which would lead to harmonized construction rather than to lead to inconsistency; because, the cardinal principle is that the statute should be interpreted in such a way as to avoid absurdity and to have harmonious effect - It is also a well-settled principle in law that the Court cannot read anything into a statutory provision or a stipulated condition which is plain and unambiguous - it is necessary that the benefits conferred vide notification dated 9.9.2003 are extended and benefits conferred under Office Memorandum dated 1.4.2007 are given similar effect as that of notification dated 9.9.2003 and the same shall be curtailed in the manner which is not known to law whether the Government is empowered, invoking the right to reserve, to modify the provisions under notification dated 9.9.2003 and Office Memorandum dated 1.4.2007 as contended by Mr. A. Moulik, learned Senior Counsel appearing for the respondents/ revenue - Once it is established that the respective Governments are giving the impugned duty exemption in public interest, the same cannot, at any stretch, be withdrawn unless there is a larger public interest involved - It is a settled law that an authority exercising delegated legislation cannot read in the provision granting powers of delegated legislation something more than what such provision in fact provides - to deny the benefits statutorily conferred upon the petitioners/assessees in the public interest, pursuant to the New Industrial Policy of the Central and State Governments, reducing the percentage of such statutory concessions, suffers from elements of arbitrariness and unreasonableness, which, in turn, are relatively illogical and irrational - the writ petitions are allowed

Summary

Issues Involved:
1. Whether the respondent-State (Revenue) is justified in issuing Notification No. 23/2008-Central Excise dated 27-3-2008 and Notification No. 37/2008-Central Excise dated 10-6-2008, thereby withdrawing the exemption granted by Notification No. 71/2003-Central Excise dated 9-9-2003 and Office Memorandum dated 1-4-2007 under Section 5A of the Central Excise Act, 1944.

Detailed Analysis:

Issue 1: Justification of Withdrawal of Exemption by Notifications Dated 27-3-2008 and 10-6-2008
Background:
The petitioners/assessees were granted certain exemptions from Central Excise Duty under Notification No. 71/2003-Central Excise and Office Memorandum dated 1-4-2007. These exemptions were part of a policy to promote industrial development in Sikkim. The exemptions were later modified by Notifications No. 23/2008 and 37/2008, which reduced the benefits.

Legal Framework:
Section 5A of the Central Excise Act, 1944 allows the Central Government to grant exemptions from duty of excise in public interest. The proviso under this section restricts exemptions for goods produced in free trade zones or by export-oriented undertakings unless specifically exempted.

Arguments by Petitioners/Assessees:
1. The impugned notifications are without jurisdiction and contrary to the New Industrial Policy.
2. They are arbitrary, unreasonable, and exceed the power conferred under Section 5A of the Act.
3. The notifications violate the principles of promissory estoppel.

Arguments by Respondents/Revenue:
1. The notifications aim to ensure that the exemption benefits reach actual manufacturers and prevent misuse.
2. They are issued in public interest under Section 5A of the Central Excise Act.
3. The modifications are necessary to prevent revenue loss due to bogus production claims.

Court's Analysis:
1. Principle of Reasonable Construction: Fiscal statutes should be strictly construed, but reasonable construction should be applied to give effect to the legislative intent. The statute should be interpreted to avoid absurdity and ensure harmonious construction.
2. Statutory Guarantee: The exemptions were granted based on a statutory guarantee under Section 5A of the Central Excise Act, following policy decisions by the Central and State Governments under Articles 73 and 162 of the Constitution.
3. Modification of Exemptions: While the government has the power to modify exemptions, such modifications must be based on reasons and not be arbitrary. The modification should be in public interest, and larger public interest must be shown for curtailing or withdrawing an exemption.
4. Promissory Estoppel: The principle of promissory estoppel applies where a representation has been made, and the other party has acted upon it to their detriment. The government cannot withdraw benefits arbitrarily, especially when investments have been made based on the granted exemptions.
5. Bogus Claims: The court acknowledged the need to prevent bogus claims but emphasized that individual proceedings should be initiated against faulty claimants rather than a blanket withdrawal of exemptions.

Conclusion:
The court concluded that the impugned notifications dated 27-3-2008 and 10-6-2008 were arbitrary, unreasonable, and contrary to the doctrine of promissory estoppel. The exemptions granted under Notification No. 71/2003 and Office Memorandum dated 1-4-2007 should not be curtailed without a greater public interest. The court quashed the impugned notifications but allowed the Revenue to deny duty exemptions in appropriate cases based on material facts and cogent reasons after following due process of law.

Judgment:
The writ petitions were allowed, and the petitioners/assessees were entitled to work out their refund in the manner known to law. No costs were awarded.