2017 (11) TMI 1395 - SC - Central Excise

Doctrine of Promissory Estoppel - tax holiday - Section 5A of the Central Excise Act, 1944 - Held that - In the present case, what was promised, i.e., exemption from the payment of central excise duty for a period of 10 years, had been fully complied with by the Union of India though the starting point of the grant of the benefit could be not from the date of commercial production but from the date of the notification making the exemption notification dated 08.07.1999 applicable to the State of Meghalaya. The promise made in the Office Memorandum dated 24.12.1997 having been implemented and no prejudice being caused to the respondent-industry, merely because the starting point of the exemption is shifted to a later date i.e., the date of the notification, we are of the view that the High Court was not correct in applying the principle of Promissory Estoppel to grant the benefit of exemption to the industrial unit from the date of production instead of the date of the exemption notification. Relief accorded to parties - Held that - the position that would emerge is that the respondent-industrial unit would be liable to pay excise duty for the period from 14.07.1999 to 01.03.2000 and would be entitled to refund for excise duty paid for the period from 14.07.2009 to 01.03.2010 - It would, therefore, really be a question of adjustment of accounts between the Revenue and the assessee. To prevent any further litigation over issues that may arise on account of demand of interest etc., we are of the view that the ends of justice would be met by the declaration of the law as has been made hereinabove leaving the parties to continue with their respective position as on date. Appeal disposed off.

Summary

Issues:
Interpretation of Doctrine of Promissory Estoppel in granting tax exemption from central excise duty; Application of statutory dispensation under Section 5A of the Central Excise Act, 1944; Determination of liability for excise duty payment and refund entitlement.

Analysis:

The case involved a dispute regarding the grant of tax exemption from central excise duty to eligible industrial units in the North Eastern region. The issue arose when a respondent-industry sought exemption from the date of commercial production, which was earlier than the date of subsequent notifications extending the exemption. The High Court granted the benefit to the respondent based on the Doctrine of Promissory Estoppel, considering the promises made in the Office Memorandum of 1997.

The Supreme Court analyzed the application of the Doctrine of Promissory Estoppel in the context of statutory dispensation under Section 5A of the Central Excise Act. It noted that the exemption notifications were issued after the commercial production date of the respondent, and the High Court's decision to grant retrospective exemption was deemed incorrect. The Court distinguished the present case from precedent, emphasizing that the promised benefit had been fully implemented, albeit from a later date as per the notifications.

The Court concluded that the respondent-industrial unit was liable to pay excise duty for the period before the notifications came into effect and entitled to a refund for the subsequent period. It emphasized the need for adjustment of accounts between the Revenue and the assessee to avoid further litigation over interest demands. The judgment aimed to maintain the status quo of the parties while declaring the law on the retrospective application of exemption notifications.

In summary, the Supreme Court clarified the application of Promissory Estoppel in tax exemption cases, upheld the statutory provisions under the Central Excise Act, and determined the liability and refund entitlement of the parties involved. The judgment focused on preventing future disputes by providing a clear declaration of the law and directing an adjustment of accounts between the parties.