2014 (9) TMI 327 - HC - Customs

100% EOU - cement plant with units both in India and Bangladesh - doctrine of promissory estoppel - revenue appeal - initially board has given LOP in favor of assessee - assessee made investment in crores with regard to long conveyor belt - writ petitioner has taken the plea that the withdrawal of duty free import facility in respect of long conveyor belt and the appellants are bound of doctrine of promissory estoppel. - learned single Judge has quashed the the decision of withdrawing the exemption granted earlier to the writ petitioner vide Board Resolution dated 31-5-2004 from payment of import duty. Held that - On behalf of the appellants, it is argued that since the writ petitioner (assessee) had made misrepresentation as such the appellants were justified in changing their decision and withdrawing the facility. We agree with the principle that in case of misrepresentation, decision can be withdrawn but having gone through the entire record on the evidence discussed as above, we do not find any misrepresentation made by the writ petitioner. No doubt, area of warehouse was mentioned in the licence dated 25-5-2004 of the writ petitioner as 100 hectares for limestone mining area, and 7.6 hectares of land for crushing area. But the project report submitted in July, 2002 with application for licence clearly shows that the writ petitioner had mentioned in para 18 that it proposes to install the long belt conveyor from the mine site to the cement plant at Chhatak in Bangladesh to transport crushed limestone. Summary capital cost of 977 millions which is also part of the project discloses the amount to be spent on long belt conveyor facility. As such it cannot be said that the writ petitioner had concealed any fact from the appellants. The principle contained in above cases cannot be made applicable to the cases where two different companies registered in two different countries have established their units dependant on each other. In our view the ground on which this writ appeal is liable to be dismissed is that the learned single Judge has rightly applied doctrine of promissory estoppel against the appellants, particularly when there was no misrepresentation made by the writ petitioner. - Decided against the revenue.

Summary

Issues Involved:
1. Withdrawal of exemption by the Board of Approval (BOA).
2. Promissory estoppel and misrepresentation.
3. Inclusion of long belt conveyor system in the Export Oriented Unit (EOU) premises.
4. Procedural fairness and natural justice.

Detailed Analysis:

1. Withdrawal of Exemption by the Board of Approval (BOA):
The primary issue was the withdrawal of an exemption by the BOA, which had initially granted the writ petitioner exemption from import duty. The BOA's decision dated 23-9-2004, which revoked the earlier exemption granted on 31-5-2004, was quashed by the learned single Judge. The demand notice dated 8-4-2009 issued by the appellants was also set aside, and they were restrained from enforcing the BOA decision dated 23-9-2004.

2. Promissory Estoppel and Misrepresentation:
The writ petitioner argued that the withdrawal of the duty-free import facility for the long conveyor belt system was against the principle of promissory estoppel, as they had made substantial investments based on the initial approval. The appellants contended that the petitioner had misrepresented facts, justifying the withdrawal. However, the court found no evidence of misrepresentation by the writ petitioner. The project report submitted in July 2002 clearly mentioned the installation of the long belt conveyor, and the capital cost included the conveyor system. Thus, the court upheld the principle of promissory estoppel, noting that the petitioner had made investments based on the BOA's approval.

3. Inclusion of Long Belt Conveyor System in the Export Oriented Unit (EOU) Premises:
The petitioner sought to include the long belt conveyor system within the EOU premises, arguing that it was an integral part of the manufacturing process. The BOA had initially approved the procurement of the conveyor belt as capital goods for duty-free import, recognizing the project as a composite cement plant involving units in both India and Bangladesh. The court agreed with the petitioner, noting that the conveyor belt was not merely a means of transportation but a machine essential for the production process. The court cited precedents like Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes, Bihar, and Vikram Cement v. Commissioner of Central Excise, Indore, to support the view that integrated processes in manufacturing should be considered as a whole.

4. Procedural Fairness and Natural Justice:
The court also addressed the procedural fairness of the BOA's decision-making process. The earlier decision to withdraw the exemption was made without giving the petitioner an opportunity to be heard, violating principles of natural justice. The court noted that the petitioner was not provided with minutes of the BOA meetings held on 3-6-2008, 29-8-2008, and 19-11-2008, and no reasons were given for rejecting their application. The court emphasized that decisions affecting substantial investments should be made transparently and with due process.

Conclusion:
The court upheld the writ petitioner's claims, finding no misrepresentation and recognizing the integrated nature of the manufacturing process. The principle of promissory estoppel was applied, and the procedural lapses by the BOA were highlighted. The judgment of the learned single Judge was affirmed, and the appeal was dismissed, ensuring that the petitioner retained the duty-free import facility for the long belt conveyor system.