2005 (3) TMI 146 - HC - Central Excise

Validity of Duty exemption certificates - Benefit of the exemption in terms of Notification No. 108/95 - Conditional exemption - Estoppel - promissory estoppel - Whether A.P. TRANSCO is authorized/empowered to issue the certificates which it did and which were subsequently cancelled by it - HELD THAT - The scope of the exemption under Notification No. 108/95 is restricted. Unless eligible for exemption in terms of the notification a certificate by the implementing authority can be of no avail. The goods which do not qualify for exemption in terms of Notification No. 108/95 cannot be held entitled to such exemption by mere issuance of a certificate by the implementing authority. There is force in the submission of Shri A. Rajasekhara Reddy learned Senior Standing Counsel for Central Government that if the statutory notification is construed as permitting the implementing authority to prescribe its own conditions for exemption it will be impermissible being beyond the scope of the powers conferred upon it. We therefore have to reject the submission on behalf of the petitioner that as power has been conferred upon high-ranking authorities to issue the certificates it must be assumed that the conditions specified in the Exemption Notification have been satisfied. Once it is held as it must be that the petitioner does not qualify for exemption under Notification No. 108/95 the position in law becomes clear that a certificate issued in terms of para (c)(ii) by the implementing authority can be of no avail or assistance to the petitioner claiming exemption. The implementing authority (A.P. TRANSCO) is only empowered or authorised to issue a certificate as already noticed if the project being implementing is financed by an international organisation. A certificate in terms of para (c)(ii) by the implementing authority cannot by itself confer exemption as it is not the implementing authority that is empowered to grant exemption. The implementing authority is merely empowered to issue certificates certifying the facts to the extent specified in para (c)(ii). It is not the certificate by the implementing authority which confers the exemption but the fulfilment of the conditions specified in the Exemption Notification which alone confers the eligibility to exemption in terms of para (c) of the Notification. As held the conditions specified in the Exemption Notification are not satisfied. Thus it must be held that the certificates issued by A.P. TRANSCO were beyond its authority and ultra vires its powers. The plea of promissory estoppel pressed against Excise authorities is misconceived. There is no material brought on record to establish that any promise was made by the Central Government or the Excise authorities with respect to the exemption of goods supplied by the petitioner to A.P. TRANSCO. The letter of Excise Superintendent relied upon by the petitioner cannot be construed as such representation by the Excise authorities. We are inclined to uphold the contention of the learned Standing Counsel for Central Government that the principle of estoppel based on the letter dated 8-1-2001- Annexure P13 is not attracted. The letter granting such permission by the Excise authorities is traceable to Rule 173(b) of the Excise Rules. Unless the petitioner satisfies the condition precedent for grant of exemption specified in Notification No. 108/95 the question of availing of exemption from payment of excise duty or additional excise duty in respect of the goods in question does not arise. There is nothing in the language of the Exemption Notification which incorporates the provisions of Act 46 of 1947 by reference or otherwise. No provision of the said Act 46 of 1947 has been incorporated as contended. It is only in the clause defining an international organisation that mention is made to that international organisation which has been so declared by the Central Government in pursuance of Section 3 of Act 46 of 1947. The definition clause in the Exemption Notification states that for the purpose of the notification international organisation means an organisation so declared by the Central Government in pursuance of Section 3 of Act 46 of 1947. There is nothing in the language of the said Notification which incorporates any provision of Act 46 of 1947. Neither Act 46 of 1947 or any provision thereof has been made applicable to the Exemption Notification so as to attract the principle of incorporation by reference. The clear intention of the exemption Notification cannot be defeated by resort to the provisions of Act 46 of 1947 which have not been incorporated. The petitioner having failed to establish its entitlement to the exemption in terms of the Exemption Notification cannot press into effect the doctrine of promissory estoppel against the Central Government or the Excise authorities. The liability to pay tax arising out of the cancellation of incentives it was directed would start from the date on which the orders of cancellation became effective. Similar directions as was pleaded cannot be issued in the case on hand. Therein the matter was with respect to sales tax a subject within the domain of the State of A.P. Pursuant to the policy framed by the State of A.P. (Target 2000 Scheme) being the representation held out by the State eligibility certificates having been issued for availing of exemption from sales tax/deferment of tax all such acts were within the province of the State of A.P. In the case on hand as already noticed supra the case is one relating to payment of excise duty within the province of the Central Government. There being no such representation made by the Central Government for granting exemption to the goods to be supplied to A.P. TRANSCO save in the case specifically covered by the Exemption Notification No.108/95 issued in pursuance of Section 5A of the Central Excise Act. Thus it must be held that the action impugned in the instant writ petition suffers from no legal infirmity. The certificates issued by A.P. TRANSCO on a misconception of its authority have been corrected by cancelling the same. Admittedly the condition precedent for issuing such certificates by A.P. TRANSCO in terms of Notification No. 108/95 not having been satisfied the question of applicability of principles of natural justice is also not attracted as it would be a futile exercise when admittedly JBIC is not a recognised international organisation. In the result the writ petition is liable to be and is accordingly dismissed.

Summary

Issues Involved:
1. Legality of the cancellation of duty exemption certificates (P5, P6, P7) issued by A.P. TRANSCO.
2. Eligibility for exemption under Notification No. 108/95.
3. Authority of A.P. TRANSCO to issue and cancel the certificates.
4. Applicability of the doctrine of promissory estoppel.
5. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Legality of the Cancellation of Duty Exemption Certificates:
The petitioner questioned the cancellation of duty exemption certificates issued by A.P. TRANSCO, arguing that the certificates were validly issued and should entitle them to exemption from excise duty under Notification No. 108/95. However, the court held that the certificates were issued under a misconception and beyond the authority of A.P. TRANSCO. The certificates were correctly canceled as they did not meet the conditions specified in the exemption notification.

2. Eligibility for Exemption under Notification No. 108/95:
The court analyzed whether the petitioner was eligible for exemption under Notification No. 108/95. The notification exempts goods supplied to projects financed by recognized international organizations. The court found that JBIC was not a notified international organization under the United Nations (Privileges and Immunities) Act, 1947. Therefore, the petitioner did not satisfy the condition precedent for exemption, rendering the certificates issued by A.P. TRANSCO ineffective.

3. Authority of A.P. TRANSCO to Issue and Cancel Certificates:
The court examined whether A.P. TRANSCO had the authority to issue and subsequently cancel the certificates. It was concluded that A.P. TRANSCO was not authorized to issue certificates for exemption from excise duty as JBIC was not a recognized international organization. The cancellation of the certificates was thus within the authority of A.P. TRANSCO, as the initial issuance was ultra vires.

4. Applicability of the Doctrine of Promissory Estoppel:
The petitioner argued that the doctrine of promissory estoppel should apply, preventing the cancellation of the certificates. The court, however, held that promissory estoppel could not be invoked as there was no clear and unequivocal promise by a competent authority. The certificates were issued based on a mistake, and the doctrine cannot validate an ultra vires act or override statutory provisions. Furthermore, there was no representation made by the Central Government or the Excise authorities that could bind them under promissory estoppel.

5. Compliance with Principles of Natural Justice:
The petitioner contended that the cancellation of certificates without a hearing violated principles of natural justice. The court dismissed this argument, stating that since JBIC was not a recognized international organization, any hearing would be futile. The condition precedent for issuing such certificates was not satisfied, thus the principles of natural justice were not applicable in this context.

Conclusion:
The writ petition was dismissed. The court upheld the cancellation of the duty exemption certificates issued by A.P. TRANSCO, concluding that the petitioner was not eligible for exemption under Notification No. 108/95. The actions of A.P. TRANSCO in issuing and subsequently canceling the certificates were found to be beyond its authority. The doctrine of promissory estoppel was not applicable, and the principles of natural justice were not violated.