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TMI Blog2016 (5) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... its position by investing sixty-nine crores of rupees in land, buildings, plants and machineries, office equipments, vehicles and stocks. (d) The authority issuing the Notifications Nos. 11/04-CE and 28/04-CE acted within the scope of his authority. (e) The impugned Notification No. 11/07-CE is ultra vires Section 5A of the Excise Act and is, therefore, not operative; there is thus no difficulty in invoking the doctrine of promissory estoppel. Detail averments were made by the respondent authorities as to the effect that between 25-8-2003 and 21-1-2004, which is known as the pre-escrow account period, the appellant was shown to have invested an amount of rupees one hundred crores out of which only rupees 34 crores was certified by the Investment Appraisal Committee by way of investment in plants and machineries and social infrastructure project, whereas the balance remained un-invested which was subsequently appropriated by the respondent authorities. The respondents also point out that the Commissioner had initiated recovery measures against the appellant by issuing demand notices under Section 11A of the Excise Act for the period of 25-8-2003 to 8-7-2004 as it defaulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amit Goyal, Mr. Santanu Tyagi, Mrs. Gargi Tha, Mr. Pritam Baruah, Advocates. For The Respondent : Mr. S.C. Keyal, Asstt. S.G.I. JUDGMENT AND ORDER (CAV) (T. Vaiphei, J.) The validity of the Notification No. 11/2007-CE dated 1-3-2007 issued by the Central Government in the Ministry of Finance (Department of Revenue) taking away the benefits allowed to the appellant-firm under the Notifications No. 32/1999-CE and 33/1999-CE both bearing dated 8-7-1999 was challenged before the learned Single Judge, who, by the judgment dated 10-12-2010 in WP(C) No. 750 of 2010, dismissed the writ petition. Aggrieved by this, this appeal is NOW filed by the appellant-firm. 2. The facts giving rise to this appeal may be briefly noticed at the outset. The appellant is a company registered under the Companies Act, 1956 and has its units in Guwahati and Agartala and is engaged in the production of Jarda scented tobacco/pan masala containing tobacco falling under the heading of tariff 2403 99 30 and 2403 99 10 of the First Schedule to the Central Excise Tariff Act, 1985 ( Tariff Act for short). In order to uplift the North Eastern India from economic backwardness and to attract in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was entitled to a refund of the excise duty paid. The exemption was available to all industrial units which had commenced commercial production on or after 24-12-1997 or those industrial units that were in existence before 24-12-1997 but had undertaken substantial expansion by way of increased in installed capacity by not less that twenty five per cent on or after 24-12-1997. The total period of the concession was to be for a period of ten years from the date of publication of the notification or from the date of commencement of commercial production, whichever was later. 3. It is the case of the appellant that acting on the exemption so granted and in anticipation of the benefits so assured, it set up a total of 15 manufacturing units at Guwahati in the Industrial Estate, Bamunimaidan, out of which 4 are involved in the manufacturing of tobacco. Three tobacco manufacturing units were also set up at Agartala pursuance to the 1997 Industrial Policy and the Notifications issued in connection therewith. According to the appellant, it has invested huge amounts in the North East by providing employment to the locals and stimulating industrialization in the region. Presently, it prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government issued another notification, namely, Notification No. 1/2001-CE, removing the said exemption. This was soon followed by another Notification bearing No. 6/2001-CE dated 1-3-2001 excluding all goods falling under Chapter 24 of the First Schedule and the Second Schedule to the Tariff Act from the ambit of the exemption. The Central Government, however, issued another Notification bearing No. 69/2003-CE, dated 25-8-2003 partially restoring the exemption that was withdrawn to the extent of 50% of the duty payable. It was stipulated therein that the exemption would be subject to certain conditions that it would be available only in respect of units that were located in the State of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland or Tripura and for those units that commenced commercial production on or after 24-12-1997 but not later than 28-2-2001 and that the units should have continued their manufacturing activities after 28-2-2001 and should have availed of the benefits under Notification Nos. 32/99-CE and 33/99-CE. The Notification further stipulated that the sum of duty payable but for the exemption was to be utilized by the manufacturer only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions specified in the said Notification. The Notification also required the manufacturer to invest the amount so deposited in the Escrow Account within two years from the date of the deposits and the said amount withdrawn from the Escrow Account was to be utilized for the purpose specified within 60 days of its withdrawal. Condition (EA) of the said Notification provided that if the manufacturer failed to make the deposit or invest the amount specified within the stipulated period and in accordance with the Notification, then the duty equivalent to that amount would be recoverable from the manufacturer along with interest as stipulated, inter alia, by forfeiture of amount in the said Escrow Account. To safeguard the revenue of the Government, measures were taken in two ways, namely, (i) by way of execution of bond at the time duty deposition in Escrow Account and (ii) by execution of tripartite agreement in which the manufacturer is bound to pay in case of failure to invest the amount so withdrawn within the prescribed time. 6. Pursuant to the said Notifications No. 8/2004-CE and No. 28/2004-CE, the appellant executed a bond and entered into a Tripartite Escrow Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tariff Act even though the said units including the appellant had already commenced their productions on or before 31-3-2007. Aggrieved by this, the appellant made various representations before the respondent authorities requesting them to withdraw the impugned Notifications No. 11/2007-CE and 21/2007-CE as they are contrary to the Notifications No. 32/99-CE, 33/99-CE, 69/03-CE, 08/04-CE and 28/04-CE. Contending that such unilateral withdrawal is arbitrary and unwarranted as well as defeats its legitimate expectation and the doctrine of promissory estoppel, the appellant unsuccessfully represented before the various authorities of the concerned Departments of both the Governments. However, it has come to the notice of the appellant that the Ministry of Commerce and Industries vide the Office Memoranda dated 22. 11. 2007, 24. 1. 2008 and 23. 2. 2009 requested the Ministry of Finance, Department of Revenue for taking a decision on the appellant s request for reconsideration of the withdrawal of excise duty exemption made under the Policy 1997, but it came a cropper. It is further pointed out by the appellant that it had faced enormous difficulties in obtaining the benefit of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s No. 32/99-CE and 33/99-CE dated 8.7.99 and the Notification No. 33/99-CE dated 8-7-99. According to the answering respondents, the Government of India, on a due consideration of the achievements in the realm of industrial development in the North East Region, mushroom growth of tobacco related companies and heavy refund due to excise duty exemptions, the Government of India in public interest amended the Finance Act, 2003 by inserting Section 154 therein and consequently rolled back the benefit of excise duty exemption with retrospective effect thus effecting cessation of the benefits under Policy 1997 vis- -vis tobacco. Reference to the determination made by the Apex Court in R. C. Tobacco (P) Ltd. versus Union of India, (2005) 7 SCC 725 sustaining the aforementioned amendment of the Central Act, 1944 by the Finance Act 2003 has been made to fortify their contention. 10. On a post-assessment of the arrangement so contemplated, the Government decided against the retention of Central Excise Duty for investment and thus issued notification No. 28/04 dated 9.7.2004 introducing Escrow Account Mechanism System and accordingly amended the contents of the notification No. 8/2004 date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tobacco and tobacco based products. The impugned notification dated 25.4.2007 has also been endorsed stating that the grant of exemption of excise duty in respect of tobacco products did not yield any noticeable progress or industrial development as contemplated. 12. Reiterating its pleaded assertions, the appellant highlighted the inconsistency in the approach of the respondents in withdrawing the exemption from central excise duty on tobacco while sustaining the income tax exemption/rebate extended by the Policy 1997. According to it, the grant of exemption of excise duty after the incorporation of Section 154 of the Finance Act, 2003 by the Notification No. 69/2003-CE dated 25/8/2003 negated the case of the respondents that the promise of the said incentive came to end by such amendment. While insisting that the Policy of 2007 saved the manufacturing units of the appellant that had commenced production on or before 31.3.2007, it reiterated its attack against the impugned notification dated 25.4.2007 as illegal, arbitrary and mala fide. It submitted that it was entitled to the protection of Section 38A of the Act and refuted the justification of public interest in issuing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 11/2007-CE and Notification No. 21/2007-CE is arbitrary and unreasonable inasmuch as the respondent authorities could not have withdrawn the Excise Duty exemption when the same units are still allowed to avail of 100% Income Tax exemption under Section 80-IB of the Income Tax Act, 1961. He, therefore, submits that such withdrawal is without any application of mind and is arbitrary and, as such, the Notification No. 11/2007-CE and Notification No. 21/2007-CE cannot be sustained in law and are liable to be quashed. In defending the impugned judgment and the impugned Notifications, Mr. S.C. Keyal, the learned Assistant Solicitor General of India (ASG), reiterated the same contentions urged before the learned Single Judge and further submits that the legality of the withdrawal of the benefit granted to the tobacco manufacturing units such as the appellant under the 1997 Industrial Policy by Section 154 of the Finance Act, 2003 was already upheld the Apex Court in R.C. Tobacco (P) Ltd., v. Union of India, (2005) 7 SCC 725. He, therefore, submits that the impugned judgment is perfectly in order and does not warrant the interference of this Court. 15. We have perused the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification was published in the Gazette of India, Extraordinary, vide number G.S.R.60(E), dated 21st January, 2004, and was last amended by Notification No. 28/2004-Central Excise, dated 9th July, 2004, and published vide number G.S.R. 419(E), dated 9th Jly, 2004. 16. A close look at the Notification No. 8/2004, dated 21-01-2004 will show that all goods falling under sub-heading 2401.90, 2402.00, 2404.41, 2404.49, 2404.50 or 2404.50 of the First Schedule and the Second Schedule to the Tariff Act were exempted from payment of the whole of the duties of excise, additional duties of excise leviable under the Tariff Act, the Additional Duties of Excise (Goods of Special Importance) Act and National Calamity Contingent Duty leviable thereon under sub-section (1) of section 136 of the said Finance Act subject to the conditions stipulated therein. As already noticed, all tobacco products including pan masala containing tobacco, chewing tobacco and cigarettes were excluded from the ambit of exemption off and on. At this stage, it may also be noticed that these items are enumerated in Chapter 24 of First Schedule to the Tariff Act. However, by the impugned Notification No. 11/07-CE, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obacco falling under sub-heading No. 2106.00 or 2404.49, as the case may be. 18. Another Notification No. 69/2003-CE was issued on 25-8-2003 partially restoring the exemption of goods mentioned in Table 3 of the Notification of Chapter 24 of the Schedule I (2401.90, 2402.00, 2404.41, 2404.49, 2404.50 and 2404.99) of the CET Act that was withdrawn by the said Notification No. /2001-CE to the extent of 50% of the duty payable which was made available only to the units located in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Nagaland and Tripura and for those units which had commenced commercial production on or after 24-12-997 but not later than 28-2-2001 and the units should have continued its manufacturing activities after 8-2-2001 and should have availed of the benefits under the Notification No. 32/99-CE and 33/99-CE subject, however, to their fulfilling certain conditions stipulated therein. This was followed by another Notification No. 8/2004-CE dated 21-1-2004 exempting goods falling under the said the Notification No. 69/2003-CE from 100% duties of excise subject certain conditions. Subsequently, another Notification No. 28/2004-CE was issued on 9-7-2004 by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, unless specifically provided in such notification, no exemption therein shall apply to excisable goods which are produced or manufactured- (i) in a free trade zone and brought to any other place in India; or (ii) by a hundred per cent export-oriented undertaking and [brought to any other place in India. Explanation.-In this proviso, free trade zone and hundred per cent export-oriented undertaking shall have the same meanings as in Explanation 2 to sub-section (1) of Section 3. (1-A) For the removal of doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods. (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt from payment of duty of excise, under circumstances of an exceptional nature to be stated in such order, any excisable goods on which duty of excise is leviable. (2-A) The Central Government may, if it considers it necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1963. (6) Notwithstanding anything contained in sub-section (5), where a notification comes into force on a date later than the date of its issue, the same shall be published and offered for sale by the said Directorate of Publicity and Public Relations on a date on or before the date on which the said notification comes into force. 20. It may be noted that the above Notifications for exemption were issued by the Central Government from time to time under Section 5-A of the Excise Act. In this state of affairs of flip-flop decisions by the Central Government, the appellants are seeking the protection of the doctrine of promissory estoppel. What is the doctrine of promissory estoppel is explained in by Lord Denning in his inimitable words: A man should keep his word. All the more so when the promise is not a bare promise but is made with the intention that the other party should act upon it. Just as contract is different from tort and from estoppel, so also in the sphere now under discussion promises may give rise to a different equity from other conduct. The difference may lie in the necessity of showing detriment . Where one party deliberately promises to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the estoppel . (Underlined for emphasis) 21. The doctrine, however, has certain limitations as held by the Apex Court in Godfrey Philips India Ltd. (supra) . This is what it said: 13. Of course we must make it clear, and that is also laid down in Motilal Sugar Mills case (supra) that there can be no promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or, power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (1997) 2 SCC 409 : 1979 SCC (Tax) 144 The portion relevant for our purpose is extracted below: It is only if the Court is satisfied, on proper and adequate material placed by the Government, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. The Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. But even where there is no such overriding public interest, it may still be competent to the Government to resile from the promise on giving reasonable notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sugar Mills (1997) 2 SCC 409 : 1979 SCC (Tax) 144 even where there is no such overriding public interest, it may still be within the competence of the Government to resile from the promise on giving reasonable notice which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position, provided, of course, it is possible for the promisee to restore the status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. (Underlined for emphasis) 23. As already noticed earlier, it was on the basis of the North East Industrial Policy dated 24-12-1997 that the two Notifications No. 32/99-CE and 33/99-CE were initially issued by the Central Government to give effect to the new initiatives for industrial development in the region. The object of the policy is to attract investment by promising exemption from payment of excise duty, additional duty of excise and income tax for a period of ten years from the date of commencement of commercial production or the date of issue of such Notification, whichever, was later, to bring about the development of infrastructural facilities and industries i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable which was made available only to the units located in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Nagaland and Tripura and for those units which had commenced commercial production on or after 24-12-997 but not later than 28-2-2001 and the units should have continued its manufacturing activities after 8-2-2001 and should have availed of the benefits under the Notification No. 32/99-CE and 33/99-CE subject, however, to their fulfilling certain conditions stipulated therein issued the Notifications No. 8-4-04-CE dated 21-1-2004 exempting goods falling under the said the Notification No. 69/2003-CE from 100% duties of excise subject certain conditions. Subsequently, another Notification No. 28/2004-CE was issued on 9-7-2004 by the GOI amending the said Notification No. 8/2004-CE stipulating for the first time the mechanism of escrow account for ensuring that money earned from exemption is re-invested in the State itself. 25. Obviously, these three Notifications were issued subsequent to the enactment of the Section 154 of the Finance Act, 2003. Therefore, there is force in the contention of the learned senior counsel for the appellant that inasmuch as Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We, in this case, are not concerned with the quantum of exemption to which the appellants may be entitled to, but only with the interpretation of the relevant provisions which arise for consideration before us. 41. We may at this stage consider the effect of omission of the said note. It is beyond any cavil that a subordinate legislation can be given a retrospective effect and retroactive operation, if any power in this behalf is contained in the main Act. The rule-making power is a species of delegated legislation. A delegatee therefore can make rules only within the four corners thereof. 42. It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. (See West v. Gwynne(1911) 2 Ch 1 : 104 LT 759 (CA).) 26. Thus, in our opinion, prima facie, the impugned Notification No. 11/2007-CE is hit by the doctrine of promissory estoppel for the following reasons: (a) By the North East Industrial Policy, 1997 implemented by the Notifications No. 32-1999-CE and No. 33-1999-CE, a promise was held out by the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period between the Notification No. 69/03 dated 25-8-2003 and the Notification No. 8/04-CE dated 21-1-04 which is known as pre-escrow period, the appellant is shown to have invested ₹100 crores out of which only an amount of ₹34 crores was certified by the Investment Appraisal Committee to have been invested and (ii) the Industrial Policy Resolution dated 1-4-2007 issued by the Ministry of Industry and Commerce inserted negative list which included tobacco products and pan masala enabling the withdrawal of these two items from tax exemption with retrospective effect in public interest taking into account health hazard and various other factors. 28. In so far as the impact of negative list is concerned, there is no difficulty in holding that these two items are still entitled to exemption inasmuch as towards of the end of the North East Industrial and Investment Promotion Policy, 2007 (NEIP, 2007) i.e. Clause 2, it is clearly provided that industrial units which had commenced commercial production on or before 31-3-2007 will continue to get benefits/incentives under the NEIP, 1997 notwithstanding the inclusion of tobacco products and pan masala among the negative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es without any justification or reason whatsoever. In fact, the Central Excise Authorities and the Investment Appraisal Committee have been conducting their functions under the Notifications Nos. 8 and 28 illegally and arbitrarily and have been denying investment certificates to the Petitioner and its Group Companies. Aggrieved by numerous illegalities and irregularities conducted by the Central Excise Authorities, the Petitioner was constrained to file writ petitions challenging the arbitrary actions of the Respondents and the other Central Excise Authorities. The Petitioner has accordingly filed WP(C) Nos. 591/2008, 1048 of 2008 and 2148 of 2008 challenging various aspects of illegal and arbitrary functioning of the authorities motivated at depriving the Petitioner of benefits granted under the excise exemption notifications and these petitions have been allowed in favour of the Petitioner vide judgment dated 6-1-2010. 29. The paragraph extracted above is conspicuous by the lack of details and particulars in the case set up by the appellant. Detail averments were made by the respondent authorities as to the effect that between 25-8-2003 and 21-1-2004, which is known as the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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