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2017 (12) TMI 638 - HC - Central ExciseArea Based Exemption - doctrine of promissory estoppel - notifications whittling down the exemption benefits - It is the case of the Petitioner that the Petitioner started investing for setting up its first unit from the year 2005 only. Evidently therefore, the Petitioner had started the investment only after issuance of impugned Notification No. 27/2004 amending N/N. 56/2003 which notification put into operation the Industrial Policy, 2003. The said Notification is cogent and clear. The Petitioner does not fall in any of the two categories of units as mentioned therein - whether the Petitioner has been able to establish that the Respondents had vide the Industrial Policy, 2007 and Notification No. 20/2007 made a promise, which the Petitioner had acted upon putting itself in a detrimental position which would compel the Respondent No.1 to make good the promise. Held that - the Petitioner started its investment only in the year 2005 and thereafter. When the Petitioner thus started its investment in the year 2005 the incentive scenario in Sikkim was that under the previous regime Notification No. 56/2003 by which the Industrial Policy, 2003 was operationalized had been amended vide impugned Notification No.27/2004 by making it clear that only those new industrial units which have commenced commercial production on or after 23.12.2002 but not later than 31.03.2007 would be entitled to the exemption. It is an admitted fact that the Petitioner started its commercial production on and from 20.04.2009 for its first unit. However, the intention of the Respondent No.1 to offer central excise duty exemption was unequivocal. The Respondent No. 1 had both knowledge and intention that the said promise would be acted upon. It is evident that the Petitioner could not avail the benefit of Notification No. 56/2003 as amended by Notification No. 27/2004 as it did not commence commercial production till 31.03.2007 i.e. the cut of date. It is also evident that the Respondent No.1 had made a promise and pursuant thereto the Petitioner had made substantial investments. Between the periods 09.07.2004 i.e. the date of issuance of impugned Notification No. 27/2004 till 01.04.2007 the date on which the Industrial Policy, 2007 was declared the policy continued to be as provided in Notification No. 56/2003 and as amended by impugned Notification No. 27/2004 i.e. that of 100% exemptions from excise duty. Thus the submission of the Petitioner that the investments were made in establishing its unit due to the clear promise held out by the Respondent No.1 is surely not out of place. As the Petitioner had failed to commence commercial production within the period 23.12.2002 to 31.03.2017 as specified by Notification No. 56/2003 as amended by Notification No.27/2004 it was not entitled to claim exemption under the aforesaid notification as held above. Consequently, we shall refrain from examining the challenge to the impugned Notification Nos. 27/2004, 21/2008 and 36/2008. Whether by issuing the impugned N/N. 20/2008 the Respondents has done away or curtailed the benefit granted under N/N. 20/2007? - Held that - The intention of the Respondent No.1 was made clear. After the amendment to Notification No.20/2007 by impugned Notification No.20/2008 the exemption of excise duty equivalent to the amount of duty paid other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2004 was now to be equivalent only to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit - Under the amended paragraph 2A of Notification No.20/2007 as amended by impugned Notification No. 20/2008 the duty payable on value addition shall be equivalent to the amount calculated as a percentage of the total duty payable on the excisable goods. For the goods i.e. P & P medicaments falling under chapter 30 of the first schedule, the rate prescribed in the table to the amended paragraph 2A was 56%. Reading of the amended paragraph 2A leaves no room for doubt that the total 100% exemption once declared by the Industrial Policy, 2007 and as put into operation by Notification No. 20/2007 was hugely reduced to only 56% that too only on the value addition undertaken in the manufacture of the said goods. Simply put value addition is the amount by which the value of any good is increased at each stage of its production, exclusive of initial cost. Whereas in the original Notification No. 20/2007, the exemption on payment of excise duty was referable to the excise duty payable on the finished goods in the impugned Notification No. 20/2008 the excise duty was restricted to the quantum of value addition only. This surely was something not promised vide the Industrial Policy, 2007 and Notification No. 20/2007. In the present case the Petitioner seeks to enjoy the benefit promised by the Respondent No.1 for the period of 10 years as declared by the Respondent No.1 - In the present case no material whatsoever has been placed by the Respondent No.1 to show that the withdrawal was in public interest save stating that the notification itself states that it is in public interest leave alone showing a superior public interest to resile from the promise held out clearly vide Industrial Policy, 2007 and 100% exemption granted pursuant thereto vide Notification No. 20/2007 Coming now to the point raised by Mr. Vikram Nankani, learned Senior Advocate that the Petitioner having inadvertently sought exemption under Notification No. 56/2003 whereas the Petitioner was in fact eligible for exemption under the Industrial Policy, 2007 and the Notification No.20/2007 the benefit which the Petitioner was otherwise eligible to avail of could not be prohibited from claiming the same - the Petitioner which was entitled to exemption benefit under N/N. 20/2007 but sought benefit under Industrial Policy, 2003 and N/N. 56/2003 would be entitled for the benefit under the Industrial Policy, 2007 as put into operation vide impugned N/N. 20/2007. The facts and circumstances of the present writ petitions, therefore, squarely falls within the parameters of the doctrine of promissory estoppel and that it would be unconscionable on the part of the Respondent No.1 to shy away from it without fulfilling its promise. The relief that must, therefore be granted on the facts of the present case is that for the period declared vide N/N. 20/2007 the Petitioner would be entitled to the excise duty exemption as promised therein - Consequently impugned N/N. 20/2008 and 38/2008 are liable to be quashed to the extent they curtail and whittle down the 100% excise duty exemption benefit as promised vide Notification No.20/2007 and is hereby quashed. All impugned orders/ demand notices/show cause notices which are against the aforestated declarations of law are also quashed. Petition allowed.
Issues Involved:
1. Promissory estoppel against the government. 2. Validity of impugned notifications reducing excise duty exemption. 3. Entitlement to excise duty exemption under Notification No. 20/2007. 4. Challenge to show cause notices and orders demanding excise duty. Issue-wise Detailed Analysis: 1. Promissory Estoppel Against the Government: The petitioner invoked the doctrine of promissory estoppel, arguing that the government had promised a 100% excise duty exemption under the Industrial Policy, 2007, which led the petitioner to make significant investments. The court recognized that the petitioner had altered its position based on this promise and invested substantial amounts. The court cited precedents where promissory estoppel was upheld against the government, emphasizing that the government cannot resile from its promises if the promisee has acted upon them to their detriment unless overriding public interest justifies such action. 2. Validity of Impugned Notifications Reducing Excise Duty Exemption: The impugned notifications (Nos. 20/2008 and 38/2008) reduced the excise duty exemption from 100% to 56% of the value addition. The court examined whether these notifications were justified and found that the government failed to demonstrate any overriding public interest necessitating the reduction. The court held that the notifications substantially curtailed the promised benefits and were contrary to the doctrine of promissory estoppel. The court quashed the impugned notifications to the extent they reduced the 100% excise duty exemption. 3. Entitlement to Excise Duty Exemption Under Notification No. 20/2007: The petitioner argued that it was entitled to the 100% excise duty exemption under Notification No. 20/2007, which was part of the Industrial Policy, 2007. The court found that the petitioner had commenced commercial production within the stipulated period and thus qualified for the exemption. The court emphasized that the petitioner’s investments were made based on the clear promise of a 100% exemption, and the government could not unilaterally reduce this benefit without demonstrating a superior public interest. 4. Challenge to Show Cause Notices and Orders Demanding Excise Duty: The court examined various show cause notices and orders issued by the excise authorities demanding excise duty from the petitioner at the reduced exemption rate. The court held that these notices and orders were based on the impugned notifications, which had been quashed. Consequently, the court quashed all show cause notices and orders that demanded excise duty contrary to the 100% exemption promised under Notification No. 20/2007. Conclusion: The court upheld the doctrine of promissory estoppel against the government, quashed the impugned notifications reducing the excise duty exemption, and affirmed the petitioner’s entitlement to a 100% excise duty exemption under Notification No. 20/2007. All show cause notices and orders demanding excise duty contrary to this exemption were also quashed.
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