2015 (4) TMI 814 - SC - Central Excise

Withdrawal of exemption notification in the North Eastern Region from goods under Chapter 21.06 (Pan Masala) and Chapter 24 (tobacco and tobacco substitutes), including cigarettes chewing tobacco etc. - Principle of promissory estoppel - Held that - After the filing of this appeal, certain subsequent events have taken place and as a result thereof, the issue is not even required to be adjudicated upon in the present appeal. It so happened that vide Section 154 contained in Finance Act, 2003, the withdrawal of the benefit was effected from retrospective effect. Validity of Section 154 was considered by this Court in R.C. Tobacco Pvt. Ltd. And Anr. vs. Union of India and Another 2005 (9) TMI 80 - SUPREME COURT OF INDIA . This Court has upheld the constitutional validity of the aforesaid provision. The effect thereof would be that the respondent would not be entitled to any such benefit by virtue of Section 154 of the Finance Act, 2003, and the impugned judgment of the High Court loses its validity on the aforesaid ground. - Decided in favour of Revenue.

Summary

Issues:
1. Validity of withdrawal Notification affecting industrial policy in North Eastern Region.
2. Application of principle of promissory estoppel.
3. Effect of subsequent events on the appeal.

Analysis:

1. The Supreme Court addressed the validity of a withdrawal Notification issued by the Union of India affecting the industrial policy in the North Eastern Region. The Union of India had introduced a new industrial policy providing tax incentives for industrial development in the region, making it a tax-free zone for ten years. However, a subsequent Notification withdrew the exemption of Central Excise on certain goods, including Pan Masala and tobacco products. The respondent challenged this withdrawal in the High Court of Guwahati, where the single Judge dismissed the writ petition but the Division Bench allowed the appeal, applying the principle of promissory estoppel. The appellant, Union of India, appealed against this decision.

2. The High Court held that the principle of promissory estoppel applied in this case, as the Union of India had promised a ten-year tax exemption to promote industrial infrastructure in the North Eastern Region. The High Court ruled that once such a promise was made, it could not be withdrawn by the Union of India. However, the Supreme Court noted that subsequent events had occurred after the appeal was filed, rendering the issue moot. Through Section 154 of the Finance Act, 2003, the benefit withdrawal was given retrospective effect. The Supreme Court had previously upheld the constitutional validity of Section 154 in a different case. Consequently, the respondent was no longer entitled to the benefit, and the High Court's judgment lost its validity on this ground.

3. In light of the subsequent events and the retrospective effect of Section 154 of the Finance Act, 2003, the Supreme Court disposed of the appeals with the observation that the respondent was no longer entitled to the benefit under the industrial policy in the North Eastern Region. The judgment of the High Court, which applied the principle of promissory estoppel, was no longer valid due to the effect of the Finance Act provision.