2007 (9) TMI 56 - HC - Central Excise

Exemption to Pan masala unit was granted in the state of Sikkim since 2003 for 10 years on the basis of this exemption that appellant has set up its industry in Sikkim in 2007 exemption withdrawn appellant has suffered huge financial loss principal of promissory estoppel is applicable - Stay granted

Summary

Issues Involved:
1. Validity of an impugned Notification affecting exemption from Central Excise for Pan Masala units in Sikkim.
2. Claim of estoppel based on substantial investment and alteration of position.
3. Request for an interim order to prevent economic implications due to withdrawal of exemption.

Analysis:
1. The writ petitioner established a Pan Masala production unit in Sikkim based on Notifications providing exemption from Central Excise for new units. However, an impugned Notification issued in April 2007 removed Pan Masala units from the exemption scope, impacting the unit's economic viability. The petitioner argued that paying Central Excise would render the unit non-viable, leading to production cessation and employee distress. The court noted the proximity of the exemption withdrawal to the unit's establishment and deemed an interim order necessary to address the situation promptly.

2. The petitioner invoked the doctrine of estoppel, highlighting substantial investment and altered circumstances due to reliance on the exemption. The court acknowledged the elements necessary for estoppel, such as significant investment and reliance on the exemption for economic viability. The petitioner's case emphasized the impact of the exemption withdrawal on decision-making and operational aspects, underscoring the potential injustice caused by the sudden change in policy.

3. Considering the potential financial implications and operational challenges arising from the exemption withdrawal, the court granted an interim order to maintain the status quo until further proceedings. The order aimed to prevent adverse consequences for the petitioner, given the economic repercussions of paying Central Excise. The court reserved liberty for the Central Government to contest the interim order and emphasized the need for expedited proceedings to address any outstanding Central Excise dues effectively.

In conclusion, the judgment addressed the legal implications of the impugned Notification on Pan Masala units in Sikkim, recognized the petitioner's claim of estoppel based on substantial investment, and issued an interim order to mitigate immediate economic repercussions. The court underscored the importance of timely resolution and active participation from both parties to address the evolving circumstances effectively.