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2008 (12) TMI 71 - HC - Central ExciseArea based exemption - doctrine of Promissory Estoppel - Not. No. 1/08 dated 18-1-08 denies the benefit of the Exemption Not. No. 50/2003 to the Petitioner-Unit in Himachal Pradesh as petitioner unit is engaged in packing only held that amending notification is prospective and applicable to units engaged in peripheral activities coming into operation after issuance of such amending notification, and not affects the industrial units, like that of the petitioners, which was already in existence
Issues Involved:
1. Accrued Right to Exemption under Notification Annexure P-1. 2. Doctrine of Promissory Estoppel. 3. Arbitrariness and Violation of Article 14 of the Constitution. 4. Violation of Article 301 of the Constitution. Detailed Analysis: Issue 1: Accrued Right to Exemption under Notification Annexure P-1 The petitioners argued that they had a right to continue claiming exemption from excise duty for ten years under Notification Annexure P-1, which could not be taken away by Notification Annexure P-11. This right was claimed to be protected under clause (c) of Section 38A of the Central Excise Act, 1944, which states that any right accrued under a notification cannot be affected by a subsequent notification unless a different intention is explicitly stated. The court agreed, noting that Notification Annexure P-1 granted exemption to new industrial units commencing production before March 31, 2007, for a period of ten years. The court found that the right to exemption for the entire ten-year period was saved by Section 38A(c) and that Notification Annexure P-11 did not express any intention to affect this accrued right. Issue 2: Doctrine of Promissory Estoppel The petitioners contended that the respondents were estopped from withdrawing the exemption due to the doctrine of Promissory Estoppel. They had set up their unit based on the promise of exemption for ten years, investing Rs. 32 crores and employing 385 persons. The court upheld this argument, citing several Supreme Court judgments that established the applicability of Promissory Estoppel against the State, especially when the State had induced action by making a promise. The court found that the petitioners had acted on the promise and that the withdrawal of the exemption would cause them significant financial harm. The court also noted that the respondents failed to demonstrate any superior public interest that would justify the withdrawal of the exemption. Issue 3: Arbitrariness and Violation of Article 14 of the Constitution The petitioners argued that the enforcement of Notification Annexure P-11 against them was arbitrary and violative of Article 14 of the Constitution. The court agreed, stating that the right to exemption had accrued to the petitioners and could not be retrospectively affected by Notification Annexure P-11. The court found the respondents' action to be arbitrary, unfair, and unreasonable, thus violating Article 14. The court cited the Supreme Court's judgment in MRF Ltd. v. Assistant Commissioner, which held that taking away an already accrued right is arbitrary and violative of Article 14. Issue 4: Violation of Article 301 of the Constitution The petitioners claimed that Notification Annexure P-11 violated Article 301 of the Constitution, which ensures freedom of trade and commerce. The court dismissed this argument, stating that the withdrawal of certain concessions under Notification Annexure P-11 did not affect the freedom of trade, commerce, and intercourse. The court noted that the original notification aimed to promote industrial development in backward states and that the amendments did not hinder this objective. Conclusion The court allowed the writ petition, holding that Notification Annexure P-11 is prospective and does not affect industrial units that commenced operations before its issuance. The court directed the respondents not to insist on the registration of the petitioners' unit under the Central Excise Rules, 2002, and not to demand excise duty for the goods covered by Notification Annexure P-1 until the expiry of the ten-year exemption period. The writ petition was disposed of with no order as to costs.
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