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TMI Blog2017 (12) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... compel the Respondent No.1 to make good the promise. Held that: - the Petitioner started its investment only in the year 2005 and thereafter. When the Petitioner thus started its investment in the year 2005 the incentive scenario in Sikkim was that under the previous regime Notification No. 56/2003 by which the Industrial Policy, 2003 was operationalized had been amended vide impugned Notification No.27/2004 by making it clear that only those new industrial units which have commenced commercial production on or after 23.12.2002 but not later than 31.03.2007 would be entitled to the exemption. It is an admitted fact that the Petitioner started its commercial production on and from 20.04.2009 for its first unit. However, the intention of the Respondent No.1 to offer central excise duty exemption was unequivocal. The Respondent No. 1 had both knowledge and intention that the said promise would be acted upon. It is evident that the Petitioner could not avail the benefit of Notification No. 56/2003 as amended by Notification No. 27/2004 as it did not commence commercial production till 31.03.2007 i.e. the cut of date. It is also evident that the Respondent No.1 had made a promise and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusive of initial cost. Whereas in the original Notification No. 20/2007, the exemption on payment of excise duty was referable to the excise duty payable on the finished goods in the impugned Notification No. 20/2008 the excise duty was restricted to the quantum of value addition only. This surely was something not promised vide the Industrial Policy, 2007 and Notification No. 20/2007. In the present case the Petitioner seeks to enjoy the benefit promised by the Respondent No.1 for the period of 10 years as declared by the Respondent No.1 - In the present case no material whatsoever has been placed by the Respondent No.1 to show that the withdrawal was in public interest save stating that the notification itself states that it is in public interest leave alone showing a superior public interest to resile from the promise held out clearly vide Industrial Policy, 2007 and 100% exemption granted pursuant thereto vide Notification No. 20/2007 Coming now to the point raised by Mr. Vikram Nankani, learned Senior Advocate that the Petitioner having inadvertently sought exemption under Notification No. 56/2003 whereas the Petitioner was in fact eligible for exemption under the Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d invest huge amount of money has now been indiscriminately curtailed giving rise to the present cause of action to challenge the impugned notifications whittling down the exemption benefits and resulting in the passing of a series of impugned show cause notices and impugned orders by the Central Excise Commissionerate confirming demands of Central Excise duties, interest and penalties thereon. W.P.(C) No. 41/2015 2. W.P. (C) No. 41/2015 impugns Notification No. 21/2008-C.E. dated 27.03.2008 (impugned Notification No.21/2008) and Notification No. 36/2008-C.E dated 10.06.2008 (impugned Notification No.36/2008) and seeks a prayer for the Petitioner units to be permitted to avail the benefit of exemption of payment of excise duty as provided in terms of Notification No. 56/2003 C.E dated 25.06.2003 (Notification No. 56/2003). The said writ Petitions also impugns Notification No. 20/2008-C.E dated 27.03.2008 (impugned Notification No. 20/2008) and Notification No. 38/2008-C.E dated 10.06.2008 (impugned Notification No. 38/2008) and seeks a prayer for the Petitioner units to be permitted to avail the benefit of exemption from payment of excise duty as provided in terms of Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 11 AC (1) (c) of the Central Excise Act, 1944. However, the Petitioner was given the offer to pay only 25% of such amount as penalty on fulfilment of the conditions as prescribed under Section 11 AC (1) (e) of the Central Excise Act, 1944. By the said order the Commissioner also ordered the forfeiture of self credit facility as available to the Petitioner under the said Notification No. 56/2003 as amended by the impugned Notification No. 21/2008 in terms of the provision of sub- paragraph 2C (f) of the said notification. (iii) OIO No.22/COMM/CE/SLG/15-16 dated 08.01.2016 of the Commissioner by which he confirmed the demand of central excise duty (i) amounting to ₹ 2,27,27,200.00 pertaining to the month of February 2014 on the Petitioner under the provision of Section 11 A (1) of the Central Excise Act, 1944 read with Rule 8 of the Central Excise Rule, 2002 and sub-paragraph 2C (g) of the Notification No. 56/2003 as amended by the impugned Notification No. 21/2008 and the appropriate interest on the said confirmed amount of duty at appropriate rate in terms of Section 11 AA of the Central Excise Act, 1944 and the penalty amounting to ₹ 2,27,27,200.00 on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation read with clause 2B (b) of the said notification should not be deposited forthwith as undertaken by the Petitioner to do so in the undertaking submitted to the department at the time of submitting its refund claim. The said show cause notice also required the Petitioner to show cause as to why the said amount, erroneously refunded to the Petitioner, if not deposited forthwith as per the undertaking, should not be demanded in terms of Section 11A of the Central Excise Act, 1944. It further required to show cause as to why the interest in terms of Section 11AA of Central Excise Act, 1944, should not be demanded. (iv) C.No.V(18)58/CE/Refund/Sun-754/GTK-Divn./2016-17/605 dated 20.02.2017, issued by the Deputy Commissioner, directing the Petitioner to show cause as to why the refund of ₹ 4,49,82,808/-, ₹ 5,19,93,070/-, ₹ 4,85,03,864/-, ₹ 5,01,55,727/-, ₹ 1,88,94,680, ₹ 5,09,23,261/- and ₹ 4,55,74,646/- for the months of July 2016, August 2016, September 2016, October 2016, November 2016, December 2016 and January 2017 respectively, in total amounting to ₹ 31,10,28,056/- claimed by the Petitioner in terms of clause 2B(b) of Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner to show cause as to why the irregular re-credit availed and utilised by the Petitioner, amounting to ₹ 43,98,61,414.00 should not be demanded and recovered in terms of Section 11A of the Central Excise Act, 1994, as amended, for violating the provisions of Clause 2C(g) of Notification No.56/2003-CE dt.25.06.2003, as amended, read with Rule 8 (3) of the Central Excise Rules, 2002. The said show cause notice further required the Petitioner to show cause as to why the Interest in terms of Section 11AA of the Central Excise Act, 1944, as amended should not be demanded and recovered till the date of deposit of the said amount and Penalty in terms of Section 11 AC 1(a) of the Central Excise Act, 1944, as amended, should not be imposed on them for having contravened the provisions of the Central Excise Act, 1944 as amended, issued under Section 5A of the Central Excise Act,1944 as amended. (ii) C.No.V(15)21/ADJ/CE/COMM/SLG/2016/895 dated 13.01.2017, issued by the office of the Commissioner directing the Petitioner to show cause as to why the total re-credit of ₹ 15,12,61,747/- availed and subsequently utilized during the period February, 2016 and March, 2016 should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ends that based on the Industrial Policy of 2003 which also exempted from so much of the duty of excise leviable thereon as is equivalent to the amount of duty paid by the manufacturer of the goods other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2002 for a period of 10 years from the date of commencement of commercial production, the Petitioner in the year 2005 and thereafter commenced the process of establishing a new unit for manufacture of P P Medicaments, falling under Sl. No. 11 of the schedule to the Notification No. 56/2003 including leasing of the land for establishing the said unit, generating employment in the State etc. It is the contention of the Petitioner, in the meanwhile, Office Memorandum dated 01.04.2007 was issued notifying the Industrial Policy, 2007, which also granted 100% excise duty exemption as provided in the Industrial Policy, 2003. However, the Industrial Policy, 2007 specifically provided that the new industrial units which commenced production within 10 years of the said memorandum would be eligible for the incentive thereunder. In line with the Industrial Policy, 2007, Notification No. 20/2007 was is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner informed the authorities that it would avail 100% self- credit of the excise duty paid placing reliance on the aforesaid Judgments of this Court and the High Court of Jammu and Kashmir. For the period June, 2012 to February, 2014 the authorities denied self-credit on monthly basis on the ground that the Petitioner was not eligible to claim the benefit @ 100% of the amount paid in cash but was eligible for refund @ 56% on account of the amendment vide impugned Notification No. 21/2008 which reduced the benefit from 100%. It is the case of the Petitioner that it has invested an amount of ₹ 186.08 crores up to March 2014 and being a large project investment continued thereafter and an amount of ₹ 337.51 crores have been invested up to March 2016. 8. Mr. Vikram Nankani, learned Senior Advocate for the Petitioner would argue that the Petitioner had acted on the basis of the promise set out in the Industrial Policy, 2003 and 2007 and the original Notification No.20/2007 which was amended by the impugned Notifications No. 20/2008 and 21/2008 reducing the 100% excise duty guarantee to 56% by making huge investment and therefore, on the ground of promissory estopp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y @ 6% Input cost Input credit @ 12% Duty payment from PLA/account current 100% re-credit/refund ₹ 100 ₹ 6 ₹ 22 ₹ 2.64 ₹ 6-Rs. 2.64 = ₹ 3.36 ₹ 3.36 Re-credit/Refund as per value addition (Not no. 20/2008):- Value of the finished goods Duty @ 6% Input cost Input credit @ 12% Duty payment from PLA/account current Value addition @ 56% on total duty 100% recredit/ refund Rs. 100 Rs. 6 Rs. 22 Rs. 2.64 Rs. 6- Rs. 2.64= Rs. 3.36 Rs. 3.36 Rs. 3.36 10. The Respondents would admit that the Petitioner started industrial production w.e.f. 20.04.2009 but would contest the assertion of the Petitioner that the new unit of the Petitioner was started within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In rejoinder, Mr. Vikram Nankani, learned Senior Advocate for the Petitioner would submit that the chart set out by the learned Additional Solicitor General for the Respondents is flawed because whereas the previous notification provided 100% exemption from Excise Duty the offending notifications sought to curtail the same by limiting the exemption to 56% only to the duty payable on value addition undertaken in the manufacture of the goods and not on the entire excise duty payable as promised. The attention of the Court was drawn to the explanation to clause 3(4) of the impugned Notification No. 20/2008 which provides: .................. Explanation: For the purpose of this paragraph, the actual value addition in respect of said goods shall be calculated on the basis of the financial records of the preceding financial year, taking into account the following: (i) Sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods; (ii) Less: Cost of raw materials and packing material consumed in the said goods; (iii) Less: Cost of fuel consumed if eligible for input credit under CENVAT Credit Rules, 2004; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incentives would provide required incentives as well as an enabling environment for industrial development, improve availability of capital and increase market access to provide a fillip to the private investment in the State. The relevant paragraph 3.1 read thus:- 3.1 Fiscal incentives to new Industrial Units and substantial expansion of existing units: i. i.) New industrial units and existing industrial units on their substantial expansion as defined, set up in Growth Center, Industrial Infrastructure Development Centers (IIDCs) and other locations like Industrial Estates, Export Processing Zones, Food Parks, IT Parks, etc. as notified by the Central Government are entitled to 100% (hundred percent) income tax and excise duty exemption for a period of 10 years from the date of commencement of commercial production. Thrust Sector Industries as mentioned in Annexure II are entitled to similar concessions in the entire State of Sikkim without area restrictions. [Emphasis supplied] 16. Notification No. 56/2003 was issued by the Respondent No.1 by which the 100% excise duty exemption under Industrial Policy, 2003 was operationalized. The relevant preamble of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstalled capacity by not less than twenty five per cent on or after the 23rd day of December 2002, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2007. 19. The Respondent No.1 vide the said Notification No. 27/2004 thus restricted the date of commencement of commercial production which was open ended earlier to the period 23.12.2002 till 31.03.2007. 20. On 01.04.2007 vide an office memorandum the Respondent No.1 notified the Industrial Policy, 2007. The Industrial Policy, 2003 was discontinued on and from 01.04.2007. This Industrial Policy, 2007 covered the State of Sikkim as well. In the said Industrial Policy, 2007 it was provided:- (ii) Duration: all new units as well as existing units which go in for substantial expansion, unless otherwise specified and which commence commercial production within the 10 year period from the date of notification of NEIIPP, 2007 will be eligible for incentives for a period of ten years from the date of commencement of commercial production. ..................... .................... (v) Excise Duty Exemption: 100% Excise Duty exemption will be conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Act, 1944, read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and sub-section (3) of Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978 made further amendments to Notification No.56/2003. The Preamble was amended. In the Preamble, for the words and figures, to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2002 , the words to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit were substituted. Paragraphs 1A, 2 and 2A of Notification No. 56/2003 was substituted with new paragraphs 2, 2A, 2B, 2C and 2.1. 24. The Respondent No.1 vide impugned in exercise of the powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944, amended Notification No.20/2007. In the Preamble, for the words and figures, to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2004 , the words to the duty payable on value ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y payable on value addition, shall be deemed to be equal to the duty so paid other than by CENVAT credit. 25. Paragraph 3 of impugned Notification No. 20/2008 provided:- 3. (1) Notwithstanding anything contained in paragraph 2A, the manufacturer shall have the option not to avail the rates specified in the said Table and apply to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, having jurisdiction over the manufacturing unit of the manufacturer for fixation of a special rate representing the actual value addition in respect of any goods manufactured and cleared under this notification, if the manufacturer finds that four-fifths of the ratio of actual value addition in the production or manufacture of the said goods to the value of the said goods, is more than the rate specified in the said Table expressed as a percentage. For the said purpose, the manufacturer may, within sixty days from the beginning of a financial year, make an application in writing to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, for determination of such special rate, stating all relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be calculate on the basis of the financial records of the preceding financial year, taking into account the following : (i) Sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods; (ii) Less : Cost of raw materials and packing material consumed in the said goods; (iii) Less : Cost of fuel consumed if eligible for input credit under CENVAT Credit Rules, 2004; (iv) Plus : Value of said goods available as inventory in the unit but not cleared, at the end of the financial year; (v) Less : Value of said goods available as inventory in the unit but not cleared, at the end of the financial year preceding that under consideration. Special rate would be the ratio of actual value addition in the production or manufacture of the said goods to the sale value of the said goods excluding excise duty, Value Added Tax and other indirect taxes, if any, paid on the goods. (5) The manufacturer shall be entitled to refund at the special rate fixed under sub-paragraph (2) in respect of all clearances of excisable goods manufactured and cleared under this notification with effect from the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter of the First Schedule Description of goods Rate Description of inputs for manufacture of goods in column (3) (1) (2) (3) (4) (5) 1. ..... ..... ..... ..... 2. 30 All goods 56 Any goods 3. ..... ..... ..... ..... 4. ..... ..... ..... ..... 5. ..... ..... ..... ..... 6. ..... ..... ..... ..... 7. ..... ..... ..... ..... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application within the aforesaid time, allow such manufacturer to make the application within a further period of thirty days : Provided further that the manufacturer supports his claim for a special rate with a certificate from his statutory auditor containing a calculation of value addition in the case of goods for which a claim is made, based on the audited balance sheet of the unit for the preceding financial year; Provided also that a manufacturer that commences commercial production on or after the 1st day of April, 2008 may file an application in writing to the Commissioner of Central Excise or the Commissioner of Customs and Central Excise, as the case may be, for the fixation of a special rate not later than the 30th day of September of the financial year subsequent to the year in which it commences production. 29. Pursuant to the said impugned Notification No. 36/2008, the Department of Central Excise vide letter bearing No.C.No.V(30)01/CE/SPS/GTK/2009/528 dated 14.12.2011 informed the Petitioner that they were not eligible for 100% self credit and requested certain information in this respect. The Petitioner provided the required information vide letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notices were (i) SC Notice No.V(15)07/ADJ/CE COMM/SLG/2013/17243 for the period December 2012 to June 2013 (ii) SC Notice No. V(15)09/ADJ/CE/COMM/SLG/14/11061 for the period July 2013 to January 2014 and (iii) SC Notice No. V(15)20/ADJ/CE/COMM/SLG/2014/1863 for the period February 2014. 30. Thus Writ Petition (C) No. 41 of 2015 was filed challenging the various impugned Notifications as detailed above. 31. By an Order dated 28.07.2016 this Court directed the CESTAT to examine (i) Appeal No. E/75930/2014-DB; (ii) Appeal No. E/76003/2015; (iii) Appeal No. E/76004/2016 and (iv) Appeal No. E/75290/2016 filed by the Petitioner and to take decision by reasoned order on his own merit, in accordance with law, at the earliest, preferably within a period of two months. The said Writ Petition was directed to be listed on receipt of the order rendered by the CESTAT. 32. On 21.11.2016 this Court granted further period of three months to CESTAT for disposal of the appeals. 33. Between the periods 05.08.2016 to 20.02.2017 four show cause notices were issued for the total period March 2014 to January 2017 seeking to demand and recover 100% benefit on the ground that Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner started paying excise duty in cash only from January 2015. For the period prior thereto, the Petitioner had sufficient CENVAT credit amount for payment of excise duty. 41. W.P.(C) No.40/2017 filed on 21.06.2017 challenges the said two show cause notices issued by the Commissioner being (i) C.No.V(15)20/ADJ/CE/COMM/SLG/2016/24091 dated 02.12.2016 and (ii) C.No.V(15)21/ADJ/CE/COMM/SLG/2016/895 dated 13.01.2017. The said Writ Petition also seeks a writ of Certiorari to quash and set aside impugned Notification No. 20/2008 and Notification No. 38/2008. Consideration 42. It is the case of the Petitioner that the Petitioner started investing for setting up its first unit from the year 2005 only. Evidently therefore, the Petitioner had started the investment only after issuance of impugned Notification No. 27/2004 amending Notification No.56/2003 which notification put into operation the Industrial Policy, 2003. The said Notification is cogent and clear. The Petitioner does not fall in any of the two categories of units as mentioned therein. On the date of the said impugned Notification No.27/2004 the Petitioner was aware that the exemption of payment of excise duty as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not later than 31.05.2017. It would also apply to those industrial units existing before 01.04.2007 but which have undertaken substantial expansion by way of increase by not less than 25% in the value of fixed capital investment in plant and machinery for the purpose of expansion on capacity/modernization and diversification and have commenced commercial production from such expanded capacity on or after 01.04.2007 but not later than 31.05.2017. The exemption contained in Notification No.20/2007 were to apply to any of the said units for a period not exceeding 10 years from the date of publication of the said notification or from the date of commercial production whichever is later. 47. The crucial question which must necessarily be answered is whether the Petitioner has been able to establish that the Respondents had vide the Industrial Policy, 2007 and Notification No. 20/2007 made a promise, which the Petitioner had acted upon putting itself in a detrimental position which would compel the Respondent No.1 to make good the promise. If the answer to the first question is in the affirmative then the second question which also needs to be answered is whether by issuing the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50. In paragraph 4 of the rejoinder filed by the Petitioner it has been pleaded:- 4. That with regard to the statements contained in Para 6 and 7 of the counter affidavit, it is submitted that the effective step of implementation has been taken and proper intimation has been filed with appropriate authorities. It is further submitted that the capital expenditure for establishing new unit has started in the year 2005, and year wise investment is already given in the petition. The deponent craves leave of this Hon ble Court to rely upon and produce documents to substantiate the above facts at the time of hearing. 51. In paragraph 3(iii) of W.P. (C) No.08 of 2017 it is pleaded by the Petitioner that:- 3(iii) Based on the aforesaid statutory guarantee of 100% excise duty exemption, the process for establishing a Unit for the manufacturing of P P medicaments falling under Serial No. 11 of the Schedule to the 2003 Notification was commenced as early as in 2005-06. An area of 1.5750 hectares (i.e. location of the present Sikkim Unit) was taken on lease. Right from the project stage, nearly 100 employees / workmen were engaged by the Petitioner for the construction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Year Net Investments in fixed assets Capital Work in Progress Cumulative Investments in fixed assets Capital Work in Progress 2005-06 50.31 50.31 2006-07 1799.83 1850.14 2007-08 191.84 2041.98 2008-09 2970.81 5012.79 2009-10 3657.79 8670.58 2010-11 2523.82 11194.40 2011-12 2744.04 13938.44 2012-13 3481.78 17420.22 2013-14 4012.93 21433.15 Total 21433.15 52. In paragraph 6, 7, 8 and 9 of the counter-affidavit filed by the Respondents to W. P. (C) No. 08 of 2017 it is pleaded:- 6. That with referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (C) No.40 of 2017 it is pleaded by the Petitioner that:- 7. Based on the aforesaid statutory guarantee of 100% excise duty exemption, the Petitioner, in 2005 and thereafter, the process for establishing a New Unit ( Unit-1 ) for the manufacture of P P medicaments, falling under Serial No. 11 of the Schedule to the Notification 56/2003 was commenced, including leasing of the land for establishing the said unit, generating employment in the State, etc. 56. In paragraph 8 of the counter-affidavit filed by the Respondents to W. P. (C) No.40 of 2017 it is pleaded:- 8. That with reference to the statements made at paragraphs 6 to 9 of the Writ Petition, no comment. 57. A conjoint and wholesome reading of the pleadings in the present proceedings and specifically those quoted above makes it unequivocally clear that the Petitioner started its investment only in the year 2005 and thereafter. When the Petitioner thus started its investment in the year 2005 the incentive scenario in Sikkim was that under the previous regime Notification No. 56/2003 by which the Industrial Policy, 2003 was operationalized had been amended vide impugned Notification No.27/2004 by making it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2005 till the year 2014 is 21433.15 lakhs. The Respondents in its counter affidavit states that they have no comment to make. Thus the investments made by the Petitioner as detailed in the investment chart must be accepted. It is quite evident that the Petitioner had in fact altered its position and made further huge investments to avail of the promise held out by the Respondent No. 1 to its detriment. 58. The Appellant in re: Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh Ors (1979) 2 SCC 409 was engaged in the business of manufacture and sale of sugar. The State Government gave an assurance that new vanaspati units in the State which went into commercial production by 30.09.1970 would be given concession in sale tax for a period of 3 years. The Appellant set up the vanaspati unit and went into commercial production on 02.07.1970 and sought exemption. In August 1970, by which time the Appellant had already gone into commercial production, the Government rescinded its earlier decision taken in January 1970. A Writ Petition filed in the High Court was rejected and the matter travelled to the Apex Court. After a detailed discussion of its authorities the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. But if the Government makes such a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the courts and the legislature, must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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, 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 status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. Vide Ajayi v. R.T. Briscoe (Nigeria) Ltd. [Ajayi v. R.T. Briscoe (Nigeria) Ltd., (1964) 1 WLR 1326 (PC)] 59. In re: Pournami Oil Mills Ors. v. State of Kerala Anr (1986) supp. SCC 728 under the order dated 11.04.1979 of the Kerala Government, new small scale units were invited to set up their industries in the State of Kerala and wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of U.P., (1979) 2 SCC 409: 1979 SCC (Tax) 144] directly applies and the plea of estoppel is unanswerable. 8. It is not disputed that the first order namely, the one dated April 11, 1979 gave more of tax exemption than the second one. The second notification withdrew the exemption relating to purchase tax and confined the exemption from sales tax to the limit specified in the proviso of the notification. All parties before us who in response to the order of April 11, 1979 set up their industries prior to October 21, 1980 within the State of Kerala would thus be entitled to the exemption extended and/or promised under that order. Such exemption would continue for the full period of five years from the date they started production. New industries set up after October 21, 1980 obviously would not be entitled to that benefit as they had notice of the curtailment in the exemption before they came to set up their industries. 60. In re: Manuelsons Hotels Private Limited v. State of Kerala Ors. the State Government by a Government Order, on the recommendation of the Respondent No.1, declared tourism as an industry enabling those involved in tourism promotional activities to bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted the question of exempting the Appellants from building tax would not arise. After examining its authorities as well as various English authorities, the Apex Court would hold:- 14. It is important to notice that the necessary exemption notification in Motilal Padampat case [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409 : 1979 SCC (Tax) 144 : (1979) 2 SCR 641] had not been issued under Section 4 of the U.P. Sales Tax Act, 1948. Yet, this Court held that sales tax for the period in question could not be recovered. This was done presumably because promissory estoppel is itself an equitable doctrine. One of the maxims of equity is that one must regard as done that which ought to be done. In this view of the matter, it is obvious that the High Court judgment is incorrect when it holds that as no exemption notification was, in fact, issued by the Government under Section 3-A, the petitioner would have to be denied relief. This judgment has been followed repeatedly and has been applied to give the benefit of sales tax exemption in similar circumstances in Pournami Oil Mills v. State of Kerala [Pournami Oil Mills v. State of Kerala, 1986 Supp SCC 728 : 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch power is itself an arbitrary act which is vitiated by non- application of mind to relevant facts, namely, the fact that a G.O. dated 11-7- 1986 specifically provided for exemption from building tax if hotels were to be set up in the State of Kerala pursuant to the representation made in the said G.O. True, no mandamus could issue to the legislature to amend the Kerala Building Tax Act, 1975, for that would necessarily involve the judiciary in transgressing into a forbidden field under the constitutional scheme of separation of powers. However, on facts, we find that Section 3-A was, in fact, enacted by the Kerala Legislature by suitably amending the Kerala Building Tax Act, 1975 on 6-11-1990 in order to give effect to the representation made by the G.O. dated 11-7-1986. We find that the said provision continued on the statute book and was deleted only with effect from 1-3-1993. This would make it clear that from 6-11-1990 to 1-3-1993, the power to grant exemption from building tax was statutorily conferred by Section 3-A on the Government. And we have seen that the Statement of Objects and Reasons for introducing Section 3-A expressly states that the said section was introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Policy, 2003 admitted that Sikkim is one of the least industrially developed States in India, heavily dependent on the Respondent No.1 for grants and there was a need to undertake an all round development effort to be at par with other States of the country. Thus, it was felt necessary to identify the priorities and emphasise the significance of the twin objective of speedy industrial development and generation of adequate employment opportunities. It was stated that keeping these objectives in mind, the industrial policy attempts to satisfy the aspirations of the people through economic and industrial development of the State. One of the main strategies for the implementation of the policy of the Industrial Policy, 2003 was to announce attractive package and fiscal objectives. The Respondent No.1 described the current scenario and future prospects in the Industrial Policy, 2003 in the following words:- 2. THE CURRENT SCENARIO AND FUTURE PROSPECTS. 1. 1.80 percent of the population lives in rural Sikkim and agriculture plays a dominant role in the State economy. With the total cultivable land of around 70.000 hectares, the per capita availability of land is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quartzite, graphite, talc etc. Commercial exploitation of some of these minerals is being carried out by the Sikkim Mining Corporation. 8. The traditional, cottage industries and specially handicrafts enjoy a good national and international market but more needs to be done on upgrading quality and design, as well as production and also improvement in the marketing network. 9. The abundant natural beauty of Sikkim offers a good potential to attract foreign and domestic tourists, and is conducive to the setting up of tourist spots, holiday resorts leisure camps of trekking and adventure sports activities. However, to develop and sustain the tourism industry, adequate travel and tourism related infrastructure needs to be created, conference tourism can also be promoted. 10. The state is dependent only on a network of roadways for transportation. At present, no air or water transport facilities are available. During the monsoon period transportation is hampered due to landslides etc. Therefore there is an urgent case for upgrading the road transportation network to and from Sikkim to other parts of India. 11. Accommodation facilities at present only adequate for tou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Industrial Policy, 2007 the Petitioner who admittedly commenced commercial production on and from 20.04.2009 for the first unit and 14.04.2014 for the second unit was well within the 10 year period from the date of notification of the declaration of the Industrial Policy, 2007 i.e. 01.04.2007. The said Industrial Policy, 2007 clearly declared that 100% excise duty exemption would be continued, on finished products made in the North Eastern Region, as was available under the North Eastern Industrial Policy (NEIP), 1997 announced on 24.12.1997. It was by this notification declaring the Industrial Policy, 2007 that the NEIP, 1997 and other concessions in the North Eastern Region seized to operate w.e.f. 01.04.2007. The natural corollary to the declaration of the Industrial Policy, 2007 was the issuance of Notification No. 20/2007 on 25.04.2007 which exempted P P medicaments manufactured by the Petitioner and cleared from the units located in the State of Sikkim from so much of the duty of excise leviable thereon as is equivalent to the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as held above. Consequently, we shall refrain from examining the challenge to the impugned Notification Nos. 27/2004, 21/2008 and 36/2008. 65. Coming now to the next point canvassed by the Learned Additional Solicitor General that, in fact, the impugned Notification No. 20/2008 does not actually digress from the Industrial Policy, 2007 as put into operation by Notification No. 20/2007 as in actuality, as demonstrated by the chart quoted and adverted to above, the Petitioner would still be entitled to the 100% excise duty exemption. The Notification No.20/2007 was amended by the impugned Notification No. 20/2008. Consequently the preamble to the amended Notification No.20/2007 would read thus: In exercise of the powers. conferred by sub-section (1) of the section 5A of the Central Excise Act, 1944 (1 of 1944), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule to the Central Excise Tarrif Act, 1985 (5 of 1986) other than those mentioned in the Annexure and cleared form a unit located in the State of Assam or Tripura or Meghalaya or Mizoram or Manipur or Nagaland or Arunacha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said fixation of special rate must be representing the actual value addition in respect of any goods if the manufacturer finds that four fifth of the ratio of actual value addition in the production or manufacture of the said goods to the value of the said goods, is more than the rate specified in the table expressed as a percentage. The impugned notification therefore substantially curtails the 100% exemption from the whole of excise duty other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2004. Notification No. 20/2007 provided exemption of full refund of the actual duty paid less CENVAT credit. The impugned Notification No.20/2008 however did away with full refund of the actual duty paid less CENVAT credit and instead the exemption was now to be based on value addition undertaken by the manufacturer made available product wise on varied rates of exemption. The proviso to paragraph 3(6) of the amended Notification No. 20/2007 as amended by impugned Notification No. 20/2008 which reads Provided that the refund shall not exceed the amount of duty paid on such goods, other than by utilisation of CENVAT credit. perhaps makes it cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as its limbs like the Board covered by the sweep of Article 12 of the Constitution of India being treated as State within the meaning of the said article, can be made subject to the equitable doctrine of promissory estoppel in cases where because of their representation the party claiming estoppel has changed its position and if such an estoppel does not fly in the face of any statutory prohibition, absence of power and authority of the promisor and is otherwise not opposed to public interest, and also when equity in favour of the promisee does not outweigh equity in favour of the promisor entitling the latter to legally get out of the promise. 11. In this connection we may usefully refer to a decision of this Court rendered in the case of State of H.P. v. Ganesh Wood Products [(1995) 6 SCC 363] . B.P. Jeevan Reddy, J. speaking for a Bench of two learned Judges of this Court made the following pertinent observations in this connection in paras 54 and 55 of the Report: (SCC pp. 390-91) 54. The doctrine of promissory estoppel is by now well recognised in this country. Even so it should be noticed that it is an evolving doctrine, the contours of which are not yet fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution . We may say at this stage that at the time the aforesaid decision was rendered, judgment of this Court in the case of Kasinka Trading v. Union of India [(1995) 1 SCC 274] was pending scrutiny before a larger Bench. Subsequently the said decision came to be confirmed by the decision of a Bench of three learned Judges of this Court speaking through A.M. Ahmadi, C.J. in the case of Shrijee Sales Corpn. v. Union of India [(1997) 3 SCC 398] . We will refer to these decisions in the latter part of this judgment. Suffice it to say at this stage that if a statutory authority or an executive authority of the State functioning on behalf of the State in exercise of its legally permissible powers has held out any promise to a party, who relying on the same has changed its position not necessarily to its detriment, and if this promise does not offend any provision of law or does not fetter any legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n granted earlier by the first notification could not be reduced by the second one. The following pertinent observations are found in paras 11 and 12 of the Report: (SCC pp. 283-84) 11. The doctrine of promissory estoppel or equitable estoppel is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties. 12. It has been settled by this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat by issuing the earlier notification under Section 25 of the Customs Act no promise was held out to any of the importers that the notification's life will not be curtailed earlier. Nor was the issuance of the notification based on any claim of incentives to be offered to anyone. It was issued in exercise of statutory powers vested in the Government which could be exercised from time to time in public interest. Earlier the public interest might have required issuance of such a notification granting cent per cent exemption from customs duty on import of PVC resin. Under changed circumstances public interest itself required reduction of such an exemption and as no promise was held out that this could not be done at any time the Court on the facts of that case justifiably rejected the plea of promissory estoppel. It is also to be observed that the said notification was issued in exercise of sovereign taxing power and had created no legal relationship between the authority issuing the notification on the one hand and the prospective importers of PVC resin on the other. The said decision is not an authority for the proposition that even if a claim of exemption from import duty was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rebate prior to three years is not based on any overriding public interest, if it is shown that by such premature withdrawal the appellant-promisees would be restored to status quo ante and would be placed in the same position in which they were prior to the grant of such rebate by earlier notifications the appellants would not be entitled to succeed. We, therefore, now proceed to examine these twin aspects of the controversy. 71. In re: State of Punjab v. Nestle India Ltd. Anr. (2004) 6 SCC 465 the Chief Minister of Punjab declared in a State level function of dairy farmers that the State Government had abolished purchased tax on milk and milk products in the State which was widely published in newspapers. The Chief Minister reiterated that declaration in his budget speech also and the Finance Minister stated that such exemption would assist the milk producers and milk cooperatives. The circular issued by the Excise and Taxation Commissioner intimated the field officers that the Government had decided to abolish purchase tax on milk. The representatives of the Respondent companies were also informed of the circular. Finally, the Finance Department formally approved the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had arisen in the State of Gujarat. In the wake of massive earthquake in the Kutch region of Gujarat the Respondent No.1 notified an exemption scheme exempting goods produced by new industrial units from paying duty of excise by issuing the original notification. By the two offending notifications issued subsequently, the basis of the original notification of granting refund of the amount of duty of excise or additional duty of excise leviable on the goods other than the amount of duty paid by utilisation of CENVAT credit was changed. The impugned notifications substituted the previous exemption by the words to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit , and further provided that the rate of percentage of the total duty payable at which the relief would be available. These notifications impugned therein were challenged before the High Court of Gujarat at Ahmedabad. There was a conflict of opinion in the Division Bench. D.A. Mehta J. held in favour of the Petitioner and set aside the impugned notifications which curtailed/modified/substituted the basis laid down in the original notification declaring it to be bad in law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove date. It was also provided that the exemption contained in the said notification shall apply to any of the aforementioned units for a period not exceeding 10 years from the date of publication of the notification or from the date of commencement of commercial production, whichever is later. The said notification was amended vide Notification No. 05/2003 dated 13.02.2003 by adding a proviso which read: provided that such refund shall not exceed the amount of duty paid less the amount of CENVAT credit availed of, in respect of the duty paid on the inputs used in or in relation to the manufacture of goods cleared under this notification. Vide Notification impugned therein No. 19/2008 dated 27.03.2008 and 34/2008 dated 10.06.2008 further amendments were carried out whereby excise duty refund had been restricted to a maximum limit as mention in the tables appended to the said notification in respect of the different goods. The said notifications change the entire scenario by reducing 100% exemption provided by the earlier notifications to a limited percentage in respect of different goods manufactured by the units. Further, the said notifications also restricted the exemption fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for exemption of excise duty, the Petitioner therein invested and started new units. Notification No. 23/2008 dated 27.03.2008 and Notification No.37/2008 dated 10.06.2008 were challenged before this Court. Notification No.23/2008 amended the earlier Notification No.71/2003 dated 09.09.2003 by amendments identical to the amendments made in the impugned Notification No.20/2008. The preamble to Notification No. 71/2003 was amended substituting for the words to the amount of duty paid by the manufacturer of the said goods other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2002 , the words to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit . Identically, as in the impugned Notification No.20/2008, Notification No.23/2008 also provided a table in which for goods falling under chapter 33 a rate of 56% was prescribed. Similarly Notification No.37/2008 is identical to the impugned Notification No.38/2008. After examining the matter in detail this Court would hold that once it is established that the exemption had been granted in public interest the same cannot at any stretch be withdrawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Union of India (1995) 1 SCC 274. The distinction drawn by the Apex Court in re: Pawan Alloys Casting (P) Ltd. (supra) would be squarely applicable to the present case. The said decision, therefore, cannot be of any real assistance to the learned Additional Solicitor General on the facts of the present Writ Petitions. In the present cases, as we have seen earlier, a definite scheme of incentives for new industries was put forward vide Industrial Policy, 2007 which held out a promise by the Respondent No.1 for 100% excise duty exemption so that more and more industries could be attracted to State of Sikkim. The Respondent No.1 translated the said promise declared vide Industrial Policy, 2007 into Notification No. 20/2007 for the obvious reason that thereby more and more new industries would be attracted to the North East Region including Sikkim. 77. In re: Kothari Industrial Corporation Limited (supra) relied upon by the learned Additional Solicitor General, the Apex Court would hold that a recipient of a concession has no legally enforceable right against the Government to grant or continue to grant concession except to enjoy benefits of concession during the period of its gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting retrospectively. It is nobody‟s case that the Petitioner was not willing to contribute to the object of industrial growth and their investment in the manufacture of P P medicaments was co-extensive with the period of the exemption. 81. In re: DG of Foreign Trade v. Kanak Exports (supra) a challenge to a notification issued by the Respondent No.1 making some notes inserted to EXIM Policy, 2002-2007 on the ground that under the guise of the said notes, some benefits which had already accrued to the exporters under the EXIM policy i.e. their vested rights, had been taken away was repelled by the Apex Court holding that the said notification was only clarificatory in nature and valid and did not amount to amendment. It also held that the incentive scheme under the EXIM Policy is in the nature of concession or incentive which is a privilege of the Respondent No.1 and it is for the Government to take the decision to grant such privilege or not and further where there is withdrawal of such incentive and it is also shown that the same was done in public interest, the Court would not tinker with these policy decision. In the facts of the said case it was held that if the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be prohibited from claiming the same. 84. In re: Unichem Laboratories (supra) the Apex Court would hold:- 13. For the aforementioned reasons, we are of the view that denial of benefit of the notification to the appellant was unfair. There can be no doubt that the authorities functioning under the Act must, as are in duty bound, protect the interest of the Revenue by levying and collecting the duty in accordance with law - no less and also no more. It is no part of their duty to deprive an assessee of the benefit available to him in law with a view to augment the quantum of duty for the benefit of the Revenue. They must act reasonable and fairly. 85. In re: Share Medical Care (supra), the Appellant society imported certain medical equipments for the use in its charitable hospital. According to the Appellant, under notification in question, exemption were granted to hospital equipments imported by the specified category of hospitals (charitable) subject to certification by Directorate General of Health Services (DGHS). The table in the notification classified hospitals in four categories. According to the Appellant, it fell under Para No. 3 of the table of the said not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be done. The appellant approached this Court. 13. Allowing the appeal and setting aside the order, this Court held that if no time is fixed for the purpose of getting benefit under the exemption notification, it could be claimed at any time. If the notification applies, the benefit thereunder must be extended to the appellant. The Court held that the authorities as well as the Tribunal were not right in holding that the appellant ought to have claimed the benefit of the notification at the time of filing of classification lists and not at a subsequent stage. The Court then stated: (SCC p. 150, para 12) There can be no doubt that the authorities functioning under the Act must, as are duty-bound, protect the interest of the Revenue by levying and collecting the duty in accordance with law-no less and also no more. It is no part of their duty to deprive an assessee of the benefit available to him in law with a view to augment the quantum of duty for the benefit of the Revenue. They must act reasonably and fairly. (Emphasis supplied) 14. In Kerala State Coop. Marketing Federation Ltd. v. CIT [(1998) 5 SCC 48: JT (1998) 4 SC 145], interpreting Section 80-P(2)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not start commercial production until 20.04.2009 by which time, by the operation of a subsequent impugned Notification No.27/2004, the Petitioner did not qualify to take the benefit of the said Industrial Policy, 2003. The Petitioner therefore, is not entitled to the benefit of Notification No. 56/2003. The industrial policy however, did not change. In 2007 the Respondent No.1 declared the Industrial Policy, 2007 by which identical 100% excise duty exemption was once again promised. This Industrial Policy, 2007 was put into operation vide Notification No.20/2007. The Petitioner‟s subsequent investments were obviously intended to reap the benefit of the said Notification No.20/2007. The Petitioner having commenced commercial production on and from 20.04.2009 for the first unit and from 14.04.2014 for the second unit were well within the period notified therein. The policy of the Respondent No.1 was clear and cogent. It was intended to draw investors to Sikkim which was industrially backward. Having acted on the said promise made by the Respondent No.1, the Petitioner made huge investments and altered its position to its detriment. Having issued the said Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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