2013 (5) TMI 733 - HC - Central Excise

Withdrawal of exemption - principle or doctrine of promissory estoppel - Indian Mouth Freshner - Pan Masala - unit in Sikkim - held that - Undisputedly, the petitioner acted on the assurance, promise and representation of the Government of India through its IPR and exemption Notification dated 9-9-2003 and the State of Sikkim by virtue of its Notification dated 17-2-2003 and invested huge amount of about Rs. 3.00 crores by altering its position. The respondents are bound to honour their promises, commitments and assurances and are not entitled to breach the same on mere conjectures, whims and absolute discretions. The respondents are, however, entitled to recall benefits of such promise on the basis of valid, justifiable policy and supervening public interest or in exercise of its sovereign authority or if any statute authorises them. In Mahavir Vegetable Oil (P) Ltd. (2006 (3) TMI 234 - Supreme Court), Hon ble Supreme Court held that doctrine of promissory estoppel operates even in legislative field and accrued rights cannot be taken away by amendment of statutory notification. Since both, i.e. the exemption and withdrawal notifications, are issued in exercise of delegated legislation, the first contention of the respondents deserves to be rejected. Coming to the real and basic question of public interest, the only public interest indicated in the reply is about the nature of the product being manufactured by the petitioner, i.e. Pan Masala, which has been termed to be falling in the category of demerit goods and health hazardous. Both the contentions deserve to be rejected in view of the observations made hereinabove. At the cost of prolixity, it may be noticed that the demerit goods have not been defined anywhere. Pan Masala has not been declared as a health hazardous by any notification or order of the Government of India or the State Government. Even no material or scientific reports have been placed on record to demonstrate that the Pan Masala containing no tobacco is health hazardous. Mere ipse dixit terming the goods manufactured by the petitioner as health hazardous or under the category of demerit goods does not in any manner constitute justifiable public interest. The doctrine of promissory estoppel thus becomes enforceable in the present case. The petitioner is entitled to exemption from payment of excise duty on the manufacture of Pan Masala from its unit situated in the State of Sikkim for a period of 10 (ten) years from the date of commencement of commercial production, i.e. 27-6-2006. - Decided in favor of assessee.

Issues Involved:
1. Legality, propriety, and validity of Notification No. 21/2007-Central Excise, dated 25-4-2007.
2. Application of the doctrine of promissory estoppel.
3. Public interest and health hazards related to Pan Masala.
4. Justification for withdrawal of excise duty exemption.
5. Statutory authority and legislative principles.

Issue-wise Detailed Analysis:

1. Legality, Propriety, and Validity of Notification No. 21/2007-Central Excise:
The petitioner challenged the legality, propriety, and validity of Notification No. 21/2007-Central Excise, dated 25-4-2007, which included Pan Masala in the list of excluded articles from Notification No. 71/2003-Central Excise, dated 9-9-2003. The petitioner argued that this notification unjustly withdrew the excise duty exemption granted to their product, Pan Masala, which was previously eligible for exemption under the earlier notification. The court examined the statutory basis for the notification and the circumstances under which it was issued.

2. Application of the Doctrine of Promissory Estoppel:
The petitioner invoked the principle of promissory estoppel, arguing that they were induced to set up their manufacturing unit in Sikkim based on the promises and assurances of excise duty exemption for ten years as per the Government's industrial policy. The court noted that the doctrine of promissory estoppel is enforceable where a promise or assurance is unequivocally extended, and the promisee alters their position to their detriment based on such promise. The court held that the petitioner had indeed altered its position by investing in the manufacturing unit based on the Government's promises.

3. Public Interest and Health Hazards Related to Pan Masala:
The respondents justified the withdrawal of the excise duty exemption on the grounds that Pan Masala is a demerit good and health hazardous. However, the court found that the respondents failed to provide any scientific evidence or material to support the claim that Pan Masala, specifically the one manufactured by the petitioner without tobacco, is hazardous to health. The court emphasized that mere assertions without concrete evidence do not constitute justifiable public interest.

4. Justification for Withdrawal of Excise Duty Exemption:
The court scrutinized the justification provided by the respondents for the withdrawal of the excise duty exemption. The withdrawal was claimed to be in public interest due to the health hazards associated with Pan Masala. However, the court found that the respondents did not present any substantial evidence or scientific reports to support this claim. The court concluded that the withdrawal of the exemption lacked a valid public interest basis and was therefore unjustified.

5. Statutory Authority and Legislative Principles:
The court examined the statutory authority under which both the original and the impugned notifications were issued. It was noted that both notifications were issued under the delegated legislative authority vested in the Central Government. The court reiterated that while there can be no estoppel against primary legislation, the principle of promissory estoppel is applicable to delegated legislation unless justified by a valid public interest. The court found that the respondents failed to establish a valid public interest for the withdrawal of the exemption, making the application of promissory estoppel enforceable in this case.

Conclusion:
The court held that the petitioner is entitled to the excise duty exemption for a period of ten years from the date of commencement of commercial production, i.e., 27-6-2006. The respondents' action to withdraw the exemption was not justified by any valid public interest or statutory authority. The petition succeeded, and the petitioner was granted the relief sought. No order as to costs was made.

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