1985 (7) TMI 112 - HC - Central Excise

Summary

Issues Involved:
1. Whether the Jute Manufactures Cess Act, 1983 imposes an additional duty of excise.
2. Whether the petitioner, being a 100% export-oriented unit, is liable to pay cess under the Jute Act.
3. Validity of Rule 3 of the Jute Manufactures Cess Rules, 1984.
4. Application of the principle of promissory estoppel against the imposition of cess under the Jute Act.

Detailed Analysis:

1. Whether the Jute Manufactures Cess Act, 1983 Imposes an Additional Duty of Excise:
The petitioners argued that the duty imposed under the Jute Act is an additional excise duty, and hence, they should be exempt from it under the 1980 Government scheme for 100% export-oriented units. The court, however, concluded that the immunity from duty granted by the 1980 resolution was only from excise and other central levies existing at that time. The Jute Act was passed after the resolution and was intended to fund the Jute Manufactures Development Council, benefiting all jute manufacturers, including exporters. The court held that the Jute Act imposes a special levy distinct from the excise duty under the Central Excises and Salt Act, 1944.

2. Whether the Petitioner, Being a 100% Export-Oriented Unit, is Liable to Pay Cess Under the Jute Act:
The petitioners claimed entitlement to the benefits of Section 3(4) of the Jute Act, which applies provisions of the Central Excises and Salt Act, 1944, to the levy and collection of duty under the Jute Act. The court rejected this argument, stating that Section 3(4) does not create a legal fiction treating the duty under the Jute Act as if it were imposed under the Central Excises and Salt Act. The court emphasized that the Jute Act is an independent legislation with its own schedule of excisable items and rates, and any exemptions must be explicitly provided for within this Act.

3. Validity of Rule 3 of the Jute Manufactures Cess Rules, 1984:
The petitioners contended that Rule 3, which makes cess payable on finished jute manufactures meant for export, is ultra vires the Jute Act if the Act itself does not levy such a charge. The court agreed that Rule 3 cannot limit or enlarge the scope of the Jute Act. However, it found that the Jute Act does not exempt jute manufactures meant for export from the cess. Therefore, Rule 3, which sets the rate of cess and provides for refunds, is not ultra vires or contrary to the Act.

4. Application of the Principle of Promissory Estoppel Against the Imposition of Cess Under the Jute Act:
The petitioners argued that they set up their export unit based on the Government's assurance of exemption from excise and other central levies, invoking the principle of promissory estoppel. The court distinguished this case from the Supreme Court's ruling in M/s. Motilal Padampat Sugar Mills Co. Ltd. v. The State of Uttar Pradesh, where the Government was bound to honor its promise. Here, the court noted that the Government had granted the promised exemption, and the issue was whether the legislature could impose a new tax. The court held that there can be no promissory estoppel against the legislature's power to enact laws, especially when the legislation aims to benefit the industry as a whole.

Conclusion:
The writ petition was dismissed, and the interim order was vacated. The court ruled that the Jute Act imposes a special levy distinct from the excise duty under the Central Excises and Salt Act, 1944, and the petitioner, being a 100% export-oriented unit, is not exempt from this cess. The principle of promissory estoppel does not apply to prevent the legislature from enacting the Jute Act. The operation of the order was stayed for two weeks on the petitioners' oral prayer.