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2009 (6) TMI 624 - HC - Central ExciseExemption, area based exemption - North-East region - Modification in the exemption scheme - Held that:- merely because of the fact that some persons are indulging in bogus production, and the State’s monitoring and inspecting machinery is either incompetent to detect the violators or connive with them, the State cannot punish bona fide investors. When the State itself does not know as to which one of the two industrial units, one set up under the IPRs, and the other, set up in areas outside the IPRs, is genuinely paying excise duty, merely because of the fact that in the areas, covered by the IPR, a higher duty of excise duty is paid, through PLA, the State cannot claim that there is bogus production; if there is bogus production, it is the duty of the State to arrest such bogus producers. The respondents also do not accuse that the investors, as a class, have been indulging, in the specified areas, in bogus production and, especially, when the State does not affirm, on oath, that the basis, which it has selected for withdrawing the concessions, is correct. In such circumstances, the State cannot claim that it has placed adequate materials before the Court showing existence of overriding public interest, which compelled the State to withdraw the promises made. A Government has no obligation to make promises; but if it chooses to make promise, it cannot withdraw the promise merely because it does not have desirable wherewithal to ensure that its enforcement machinery functions efficiently and properly. For the failure of its own machinery to check bogus production, a State cannot punish the bona fide investors. When there was inducement, the State can resile from the promises made by it only when it establishes, to the satisfaction of the Court, that overriding public interest so requires. Only when such a nature of public interest is established by the State can the State be allowed to withdraw the concessions, which might have lured the investors. However, even in the case of statutory exemption, which was granted by the State not pursuant to any promises made but under its sovereign power, the State, if it choses to withdraw exemption, has the obligation to satisfy the Court that its act of withdrawing the concession is fair and just. In the present case, though the Government has not, even for a moment, categorically admitted that the impugned notifications have reduced the promised incentives and though the Government still insists that whatever incentives were available, in the 1997 IPR, have remained available to an investor even after the impugned notifications have been issued, this contention of the Government, as already pointed put above, is wholly incorrect. Thus, the Government has not boldly taken the stand that it has withdrawn the incentives, if not completely, at least, partially, the fact of the matter remains that the Government has gone back on its promise made in the 1997 IPR as well as 2007 IPR. The impugned notifications, dated 27-3-2008 and 10-6-2008, are hereby set aside and quashed. The petitioners are hereby held entitled to receive 100% exemption from payment of excise duty as were available to them in terms of the relevant notifications, dated 8-7-99 and 25-4-2007, as the case may be.
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