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TMI Blog2010 (6) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... er or direction in the nature of mandamus commanding the respondents to allow the petitioner company to avail of the benefits of the exemption Notification No. 50/2003-C.E., dated 10-6-2003. (iii) issue a writ, order or direction in the nature of mandamus commanding the respondents not to insist upon the petitioner company to pay and or to deposit excise duty for a period of ten years from April, 2007 i.e. the commencement of commercial production by the petitioner company. (iv) pass any other suitable writ, order or direction, as this Hon ble Court may deem fit and proper in the facts and circumstances of this case. (v) to award the cost of the petition in favour of the petitioner. 2. Brief facts of the case, as emerge out from the record, are that the petitioner is a company registered under the Companies Act, 1956 (hereinafter referred to as the Company). The Company is mainly engaged in the manufacture of 2/3 wheeled motor vehicles which are chargeable to excise duty under Central Excise Act, 1944 (hereinafter referred to as the Act) and vehicles are classified under Chapter 87 of Central Excise Tariff Act, 1985 (hereinafter referred to as the Tariff Act). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the excisable goods are manufactured in a new industrial undertaking set up or substantial expansion of an existing unit, located in specified area(s) of the State of Uttarakhand or Himachal Pradesh, during the period of June, 2003 upto 31st March, 2007. By the amended Notification No. 38/2006, dated 2nd August, 2006 (Annexure No. 3) the aforesaid time limit for setting up/substantial expansion of units and start of commercial production for being eligible for excise duty exemption, was extended from 31st March, 2007 to 31st March, 2010. It is stated that vide letter dated 24th February, 2006, the petitioner submitted an application to State Industrial Development Corporation of Uttarakhand Limited (for brevity SIDCUL) for allotment of a plot in the notified location of IIE, Pant Nagar and in response, the SIDCUL vide Letter No. 1199/AGM/ SIDCUL/06, dated 17th March, 2006 informed the petitioner for allotment of Plot No. 2, Sector 10, IIE, Pant Nagar with the assertion that the terms and conditions of the allotment shall be complied with. Accordingly, the petitioner invested a large sum approximately ₹ 150 crores in setting up the industrial unit at the allotted site. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition that the effect of the amended Notification was that the benefit of full exemption from excise duty under the preceding Notification dated 10-6-2003 would not be available to goods which have been subjected only to one or more of the following processes viz. preservation during storage, cleaning operations, packing or re-packing of such goods in a unit container or labelling or re-labelling of containers, sorting, declaration or alteration of retail sale price, and which goods have not been subjected to any other process or processes amounting to manufacture in the States of Uttarakhand or Himachal Pradesh. 8. In the petition, the petitioner has further submitted that petitioner has paid duty and cleared goods believing that the above amended Notification No. 1/2008 had the effect of curtailing the benefit of full exemption w.e.f. 18-1-2008, although the benefit was promised to them to be continued for a period of continuous ten years from the date of commencement of commercial production. The petitioner s products that were affected adversely by the said amending Notification No. 1/2008 were various motor vehicle parts/components procured from manufacturers outside Uttar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a unit container, MRP labelling etc. only, are carried out in the State of Uttarakhand, from the benefit of full duty exemption available under Notification No. 50/2003-C.E., dated 10-6-2003, thereby arbitrarily breaking the promise of full excise duty exemption for a period of ten years from the date of commencing commercial production, held out to entities the petitioner and inducing the company for setting up new industrial unit in specified locations in the State of Uttarakhand. Therefore the aforesaid amending Notification dated 18-1-2008 is militates against the doctrine of promissory estoppel apart from causing immense financial losses, present and future. 12. The Respondent Nos. 5 6 filed a joint counter-affidavit in which they have stated that by the amended Notification No. 1/2008-C.E., dated 18-1-2008 the manufacturers who have set up manufacturing plant in Uttarakhand and opted for the areas based exemption are restrained from availing the exemption in respect of those items which are covered under Section 4A of the Act. It is further stated that the issue has been answered by the decision of Shimla High Court in the case of Gillete India Ltd. v. UOI - CWP No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the goods were manufactured or not in the industrial unit or even in the State in some other units. The public interest that was sought to be achieved by this Notification No. 50/2003-C.E., dated 10-6-2003, was not achieved hence Notification No. 1/2008-C.E., dated 18-1-2008 was issued in the superior public interest. The party has not been able to prove that the exemption was withdrawn for any oblique or extraneous consideration and was not in public interest . 15. In the rejoinder affidavit filed against the counter-affidavit of Respondent Nos. 5 6, the petitioner has stated that vide amending Notification No. 8/2008, dated 18-1-2008, the respondents have purported to exclude goods on which activities such as packing, re-packing in a unit container, MRP labelling etc. are carried out in the State of Uttarakhand, from the benefit of all excise duty exemptions under the Notification No. 50/2003, dated 10-6-2003 thereby breaking the promise of full excise duty exemption for a period of 10 years from the date of the commencement of commercial production, held out to the entrepreneurs such as the petitioner and inducing the petitioner company for setting up new industrial unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, in fact, and in law militates against the doctrine of promissory estoppel apart from causing immense financial losses to the petitioner, who having acted on the promise given to it by the Central Govt. He vehemently argued that where a Notification has been issued granting exemption from excise duty under a policy of the Government and exemption from paying excise duty for a certain period of time specified in the Notification, the Government is not entitled to resile from the same and/or to withdraw the rights accrued thereunder unless it is able to show that such withdrawal was in public interest and if such public interest is not established despite opportunity, then the amending Notification is arbitrary. In this regard learned counsel for the petitioner relied on the decisions of the Hon ble Apex Court in the matter of MRF Ltd., Kottayam v. Assistant Commissioner, Sales Tax and Others, reported in (2006) 8 SCC-702 wherein it was held that action of the Government cannot be permitted to operate if it is arbitrary or unreasonable. Equity that arises in favour of a party as a result of such a representation is founded on the basic concept of justice and fair play . It was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government for full excise duty exemption for a period of 10 years the petitioner acting on the promise established its industry in Uttarakhand and has made an investment of ₹ 150 crores and has generated employment which has not been disputed by the respondents. 22. The learned Senior Counsel for the petitioner further argued that position regarding incentive Notification is a fortiori, subject to the principle of promissory estoppels. He submitted that incentive Notification are those where the Government makes a representation and invites the entrepreneurs by showing various benefits for encouraging to make investment by way of industrial development of backward and for hill areas. These Notifications are subject to promissory estoppels. He relied on U.P. Power Corporation s case (supra) and submitted that even in Kasinka s case (supra) the earlier cases dealing with such incentive Notification are distinguished as falling into a separate class. He argued that the Notification dated 50/2003 is clearly an incentive Notification issued under a policy decision adopted by the Central Government granting incentives, including total exemption from levy of Excise Duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e other unit. Lastly he argued that the public interest that was sought to be achieved by this Notification No. 50/2003-C.E., dated 10-6-2003, was not achieved, hence Notification No. 1/2008-C.E., dated 18-1-2008 was issued in the superior public interest. He further argued that however, in the present case the circumstances and purpose for which exemption was issued vide Notification No. 50/2003-C.E., dated 10-6-2003 are different from those involved in MRF case. In fact, this entire issue is dealt by Hon ble Supreme Court in Paras 35, 36 and 37 in MRF s case. He further submitted that the petitioner failed to prove that the Notification withdrawing benefit is arbitrary or unreasonable and in the absence of such contention the right of accrual of benefit does not survive. 24. Rebutting the arguments advanced by respondents, Shri Arshad Hidayatullah, the learned Senior Counsel for the petitioner submitted that the only ground of defence taken by the respondents in the counter-affidavit is [referring the case of Kasinka Trading v. Union of India, reported in 1994 (74) E.L.T. 782 (S.C.)] that promissory estoppel is not available against the State in fiscal matters and that the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle that emerges is that once a representation has been made by one party and the other party acts on that representation and makes investment and thereafter the other party resiles, such act cannot be stated to be fair and reasonable. When the State Government makes a representation and invites the entrepreneurs by showing various benefits for encouraging to make investment by way of industrial development of backward areas or the hill areas, and thereafter the entrepreneurs on the representations so made bona fidely make investment and thereafter if the State Government resiles from such benefits, then it certainly is an act of unfairness and arbitrariness. 27. Factual aspect of the case has not been disputed by the respondents. It is also not disputed that petitioner company made investment of ₹ 150 crores. Such investment was made by the petitioner for getting the benefit of Notification No. 50/2003-C.E., dated 10-6-2003 for a period of ten years. Had such exemption benefit not been there, the petitioner company would not have established its unit in State of Uttarakhand. Investment made by the petitioner company was bona fide and therefore, petitioner company i ..... 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