TMI Blog2009 (6) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centive package would stimulate development of industries, for, such incentive package would attract investors. Thus, with a view to fostering industrial growth in North-Eastern region, the then Prime Minister of India made, on 27-10-96, at Guwahati, a statement that new incentives would be announced for industrial development of the North-Eastern region. Expert groups/committees were accordingly constituted to concretize the initiatives. By a notification, dated 24-12-1997, Government of India, eventually, announced a new Industrial Policy Resolutions (hereinafter referred to as 1997 IPR ) containing a package of incentives and concessions for the investors in the North-Eastern region. As a measure of fiscal incentives, Government approved conversion of the growth centers into total tax free zones for a period of ten years. All industrial activities, in these zones, were to be, under the 1997 IPR, free from payment of income tax and excise duty for a period of ten years from the date of commencement of production and the State Governments were to be requested to grant exemptions in respect of sales and municipal taxes. The 1997 IPR also announced that the Ministry of Finance, Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f various commercial products, which the said notifications, granting exemption from payment of excise duty, had envisaged. Another set of writ petitioners plead that their industrial units had already existed, when the 1997 IPR came into force and, acting upon the incentives promised, they made substantial expansion by increasing the installed capacity of their respective industrial units to the extent as mentioned in the relevant notifications. (iv) In course of time, the petitioners were granted certificates of eligibility showing that they were entitled to receive various exemptions from payment of excise duty, which was, otherwise, leviable on their products. In fact, many of the petitioners, having set up their industries, started receiving refund of central excise duty in terms of the notifications issued in this regard. Those, who claim to have expanded the installed capacity of their respective industrial units, in terms of the relevant notifications, too claim that they are entitled to receive refund of excise duty in terms of the notifications aforementioned. (v) Be it mentioned that the earliest Notification No. 32/99-C.E., dated 8-7-99, aforementioned, whereby exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years of exemption. This apart, the manufacturers, who did not use the Cenvat credit, were able to utilize the accumulated amount for payment of excise duty on such products, which were not eligible for exemption under the Notification Nos. 32/99-C.E. and/or 33/99-C.E., aforementioned. Since the inputs, in respect of which Cenvat credit had been taken, were to be utilized in the manufacture of finished goods, which were eligible for exemption as per Notification Nos. 32/99-C.E. and 33/99-C.E., dated 8-7-99, the Cenvat credit, in respect of such inputs, could not have been utilized for payment of excise duty in respect of finished products, which were not eligible for exemption under the said notifications, dated 8-7-99. Similarly, the act of accumulating Cenvat credit (in respect of the inputs, used in the manufacture of finished products, eligible for exemption, under Notification Nos. 32/99-C.E. and 33/99-C.E.), with the object of utilization the same for payment of excise duty after expiry of the period often years of promised exemption, was against the spirit of Notification Nos. 32/99-C.E. and 33/99-C.E., aforementioned as well as 1997 IPR. The modus operandi, so adopted, wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of goods cleared under this Notification. (ix) The amendments, so introduced, made it mandatory for a manufacturer of those goods, which were made eligible for exemption under Notification No. 32/99-C.E., to, first, utilize the Cenvat credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and to pay balance amount only in cash. The substituted proviso further took care to see that refund is not claimed in respect of the duty paid on goods, which were not eligible for exemption. (x) Before expiry of the 1997 IPR, the Government of India announced a new industrial policy resolution by a Memorandum, dated 1-4-2007, namely, North-East Industrial and Investment Promotion Policy, 2007 (NEIIPP), (hereinafter referred to as the 2007 IPR ), whereunder a package of fiscal concessions and other concessions for the North-Eastern region were promised. (xi) Under the 2007 IPR too, the incentives were promised in respect of those industrial units, which were to be set up, on coming into force of the 2007 IPR, as well as those industrial units, which had existed before coming into force of the 2007 IPR, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having started production from such industrial units within the prescribed period, they had been receiving, without any interruption, 100% refund of the amount of excise duty paid in terms of the notification Nos. 32/99-C.E., 33/99-C.E. and 25-4-2007. (xiv)The grievance of the petitioners is that with the help of the Notification No. 17/2008, dated 27-3-2008, the Ministry of Finance, Department of Revenue, Govt. of India has amended the notification, dated 32/99-C.E., aforementioned and by the notification, dated 27-3-2008, the excise duty refund has been restricted to the maximum limits as specified in the rate column of the table appended to the said notification, whereunder different rates of maximum limits of exemption have been specified in respect of different goods. For instance, the goods produced by the petitioners, as stated in WP (C) No. 2143/2008, fall under Chapter 85 of the Schedule to the Central Excise Tariff Act, 1985. The maximum limits of excise duty refund in respect of such goods would, now, be 31%, whereas, according to the petitioners in WP (C) No. 2143/2008, they were entitled to receive 100% refund as had been promised under the 1997 IPR and also the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods in other parts of the country without actual production being carried out and in absence of actual receipt of goods. (ii)Reporting of bogus production by such units in these areas where actual production takes place elsewhere in the country. (iii)Over valuation of goods resulting in availment of excess of credit by buyer. (iv) Goods are supplied by manufacturers, importers to these units without issuance of sales invoice and these are backed by bogus sale invoices issued by traders who do not undertake actual supply of goods. The actual supplier of these goods issue bogus duty paid invoices to other manufacturers who take credit based on such invoices without receipt of goods. To elaborate the above modus operandi, I beg to give the following illustration. Illustration 1: - A Unit in North east reports fictitious production of Rs. 100, which has actually not taken place and pays full duty of Rs. 16/- in cash. It is submitted that obviously there is no Cenvat credit available in as much no input or raw material has been purchased by him. Such a purchaser claims full refund from the Government under the scheme. No-doubt one can argue that there is no loss to the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become entitled to a claim of refund of entire amount of duty paid in cash. In order to verify this aspect, a study has been made by the Excise department on receipt of information from the Director General, Central Excise Intelligence and other such agencies to find out the percentage of excise duty paid in cash and from the Cenvat Credit account by the units availing this area based exemption. On receipt of these details they were compared with the duty payment details of the same industry groups for all the units across the country to find out whether the percentage of duty paid by the units in cash in the specified areas is comparable with the units in the rest of the country. An analysis of these details, clearly shows that the industry sectors in the specified areas were paying a very high percentage of duty in cash i.e. through Personal Ledger Account in comparison to the all India, payment of duty through PLA on similar goods. It is submitted that had these units in the specified areas paid excise duty without indulging in deliberate manipulations, as referred to hereinabove, there was no reason, why the cash portion of the excise duty in the specified region would be so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting the refund of same amount under the scheme before and after the modification, because if the inputs are duty paid then the refund under the earlier scheme and modified scheme should be of the same amount. (ii) Unscrupulous manufacturers reporting bogus production and who are resorting to fictitious purchase of inputs on the strength of invoices which are non duty paid invoices would be getting excise duty refund of duty paid on actual value addition made by such manufacturers who have industries in these specified areas. (iii) The excise duty exemption would be available only to the extent of actual value addition made in these areas and not for the value of raw material manufactured in other part of the country, which are received by the units in these areas without cover of duty paying invoices. 4.By way of an additional affidavit, the respondents have also placed on record the notification, dated 10-6-2008, whereby some further amendments to the earlier Notification No. 31/2008, dated 27-3-2008, has been introduced. In this regard, the respondents submit that following the impugned notification, dated 27-3-2008, many representations were received from different indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-, the refund would be to the extent of Rs. 40A and no more. 6. I may pause here to point out that in some of the writ petitions even the notification, dated 10-6-2008, aforementioned, whereby Commissioner has been given the power to determine the actual value addition has been challenged on the ground that the mechanism, provided thereunder, does not make available to the petitioners exemption from payment of excise duty to the same extent as had been promised to them by the 1997 IPR and various notifications issued earlier in this regard. 7. I have heard learned counsel for the petitioners and Mr. K.N. Choudhury, learned Senior counsel, appearing on behalf of the respondents. The arguments of Mr. P.K. Goswami, learned Senior counsel, who has appeared on the behalf of one of the petitioners, have been, by and large, adopted by the learned counsel for the remaining petitioners, except, to some extent, as would be indicated hereinbelow, the arguments of Dr. Saraf, learned Senior counsel, who has also appeared on behalf of some of the writ petitioners. 8. Pithily speaking, the challenge, posed to the impugned notifications, is based on the doctrine of promissory estoppel. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not necessary that the value addition, in a given product, by two different industrial units would be to the same extent. 9. It is submitted by Mr. Goswami that if the statutory authority or an executive authority of the State, functioning on behalf of the State, in exercise of its legally permissible powers, had held out any promise to a party, who, relying on the same, has changed its position to its detriment and when such a promise made to the party does not offend any provisions of law or does not fetter any legislative or quasi judicial power inhering the promisor, then, on the strength of the principle of promissory estoppel, the promisor can be pinned down to keep to the promise made by the promisor. Only in the cases, contends Mr. Goswami, where there is supervening public interest that the Government would be allowed to change its stand and withdraw from the representation made by it, which had induced persons to take certain steps, which might go adverse to the interest of such persons on account of such withdrawal. However, the Court must satisfy itself, agrees Mr. Goswami, that such a supervening public interest exists. Determination of the question as to whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tantamount to not taking action against their own departmental personnel and, instead thereof, punishing the genuine manufacturers. 11. Punishing the petitioners for the acts, if any, of some unscrupulous manufacturers would be, submits Mr. Goswami, nothing, but arbitrary, for, having established their industrial units, the petitioners had legitimate expectation that so long as they continued to conduct their business in terms of the relevant IPR and various notifications issued thereunder, 100% exemption from payment of excise duty on their finished products, as had been envisaged and promised and had been earlier made available to them would be continued. Such legitimate expectation, contends Mr. Goswami barred the Government from resiling from their promises barred the Government from resiling from their promises on the basis of the alleged bogus production by some unscrupulous manufacturers. Support for his submission is sought to be derived by Mr. Goswami from the case of MRF v. Asstt. Commissioner of Sales Tax Ors., reported in (2006) 8 SCC 702 = 2006 (206) E.L.T. 6 (S.C.), and U.P Power Corporation v. Sant Steel Alloys Pvt. Ltd., reported in (2008) 2 SCC 777. The petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Senior counsel, do not furnish adequate materials warranting application of the doctrine of promissory estoppel. In this respect, Mr. Choudhury seeks to derive support from Union of India v. Ganpati Rolling Mills Pvt. Ltd., reported in (2006) 4 GLT 1. 15. It is further submitted by Mr. K.N. Choudhury that the impugned notifications merely give effect to the real indentment of the Union Government inasmuch as the 1997 IPR, according to Mr. Choudhury, aimed at giving benefit of exemption from payment of excise duty to such value additions, which may be made, in the specified areas, in the north eastern region, but when the Government of India found that some unscrupulous manufacturers had been indulging in bogus productions by misusing the earlier notifications, the impugned Notifications were issued in order to plug the loopholes, in the earlier Notifications, so that the genuine manufacturers continue to receive such degree of exemption as the 1997 IPR had intended to make available to the genuine manufacturers. The genuine manufacturers would, therefore, according to Mr. Choudhury, not suffer, and whatever reliefs they had been receiving, by way of exemption, prior to the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a policy, the petitioners were receiving some benefits, there is no legal impediment, on the part of the Government, to adopt another policy and withdraw such benefit if withdrawing of such benefit is necessary in public interest. When the Government takes a decision, as in the present case, keeping in mind all relevant considerations, such a policy decision, contends Mr. Choudhury, cannot be interfered with and the doctrine of promissory estoppel cannot estop the Government from changing its policy if such change in policy is not irrational or arbitrary The adequacy of materials, which prompted the Government to resile from its earlier promises, cannot be looked into by the Court for the purpose of determining as to whether the changes in policy is justified. In order to show that the equitable doctrine of promissory estoppel is not at all attracted to the facts of the present case, Mr. Choudhury places reliance on Bannari Amman Sugar Ltd. v. Commercial Tax Officer, reported in (2005) 1 SCC 625, Sreeji Sales Corporation v. Union of India Ors., reported in (1997) 3 SCC 398 = 1997 (89) E.L.T. 452 (S.C.), Dia Ichi Karkari Ltd. v. Union of India Ors., reported (2000) 4 SCC 57 = ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven under the policy decision of the Union of India. In the present case, the impugned notifications have curtailed, according to Dr. Saraf, the extent of exemption, which were, otherwise, available to the petitioners, as manufacturers, and, when the 1997 IPR has remained, even according to the respondents, unaltered or unchanged, one of the Ministries of the Union of India, such as, the Department of Finance, cannot reduce the extent of exemption, which the 1997 IPR had promised and made available to the present petitioners, as manufacturers. Even if such a notification, under Section 5A, was issued with the approval of the Union Cabinet, the fact remains that that such exercise of power is, according to Dr. Saraf, not permissible in law. In support of his submissions, Dr. Saraf, besides what Mr. Goswami has relied upon, referred to the case of Union of India v. Godfrey Philips India Ltd., reported in (1985) 4 SCC 369 = 1985 (22) E.L.T. 306 (S.C.), to show that when, acting on the basis of the promise made by the Government, the petitioners have set up their industrial units, the Government cannot withdraw the earlier promise made by it without proving to the satisfaction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills Pvt. Ltd. (supra), concluded, points out Dr. Saraf, that the petitioners had not laid a clear foundation for invoking the equitable doctrine of promissory estoppel. To the case at hand, submits Dr. Saraf, the decision in Ganapati Rolling Mills Pvt. Ltd. (supra) has no application at all inasmuch as the respondents have not even cited one case, in the present set of writ petitions, to clearly show as to which writ petition does not lay adequate foundation for attracting the application of the doctrine of promissory estoppel. Thus, a bald assertion by the respondents that no clear foundation for attracting the doctrine of promissory estoppel has been laid in the writ petitions does not, according to Dr. Saraf, carry any weight. 24. A policy decision, according to Dr. Saraf, may be, otherwise, legal or rational; but if it tends to take away the rights, which an industrial unit has acquired, because of the application of the doctrine of promissory estoppel, the Government cannot use the policy decision as a shield to deny and resile from the promises made by it unless it satisfies the Court that overriding public interest requires that the Government should not be held bound by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f their respective excise duty liability and, consequently, paying less excise duty than the present petitioners. In such circumstances, further points out Dr. Saraf, the Government s assumption, that the industrial units, not covered by 1997 IPR, have been paying as much excise duty as were payable by them, cannot be readily and safely relied upon. Such a presumptuous approach by the Government is without any rational basis inasmuch as the Government has not placed any material to show, submits Dr. Saraf that the quantum of excise duty paid by the industrial units, not covered by 1997 IPR, have been correct. When the Government, contends Dr. Saraf, does not claim, on oath, that the industrial units, which fall outside 1997 IPR, have been paying so much of excise duty as are actually payable by them, one cannot, safely and confidently, reach the conclusion that because of the fact that the industrial units, covered by 1997 IPR, have been paying more excise duty through PLA, they have been indulging in bogus production compared to those, which are not covered by 1997 IPR and which pay less excise duty through PLA. Relying upon such inconclusive materials, the Government, contends Dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment would be requested to grant exemptions in respect of Sales Tax and Municipal Tax. (ii) Industries located in the growth centers would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of Rs. 30.0 lakhs. 30. From a bare reading of the fiscal incentives offered by the 1997 IPR, it becomes clear that the incentive, which the 1997 IPR had promised, was that in the specified zones, which were to be treated as tax-free zones, all industrial activities, for a period often years, with effect from the date of commencement of production, would be free from payment of, inter alia, excise duty. In the face of the declaration, so clearly and unequivocally made under the 1997 PR, there can be no room for doubt that the 1997 IPR did, indeed, promise that the industrial activities, in the specified zones, would remain, for the said specified period, free from payment of, inter alia, excise duty. It is this promise, which was sought to be concretized by issuing the Notification No. 32/99-C.E., dated 8-7-99. This Notification read as under : No. 32/99-CENTRAL EXCISE DATED 8th JULY, 1999 G.S.R. 508(E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the buyer of such a product and when the manufacturer realizes excise duty from the buyer, he is required to deposit excise duty, so collected, in the Government treasury. The benefit of excise duty exemption mean that though the buyer would pay excise duty and such excise duty is deposited by the manufacturer with the Government, the Government would return, in the form of refund, excise duty, which had been collected by the manufacturer from the buyer and deposited, on such collection, with the Government. There is nothing either in the 1997 IPR or in the Notification, dated 8-7-99, to even faintly indicate that excise duty exemption would be available only to the extent of such value as may be added to the raw materials used by the manufacturer. 32. I have also pointed out above that Cenvat credit rules were framed simplifying the credit provision and procedure for availing credit of the duty paid on input and capital goods used, whether directly or indirectly, in, or in respect of, manufacture of final products. The credit of the duty, so allowed, could be used for payment of excise duty leviable on the finished goods subject to the conditions laid down in the relevant Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n goods, which are, otherwise, not specified goods and are not eligible for exemption. The amendments, thus, plugged some loopholes, which existed in the notification, dated 8-7-1999. The extent of benefit of exemption was, however, continued to be made available as were available to a manufacturer at the very inception of the scheme of exemption. No wonder, therefore, that clause (v) of 2007 IPR shows (as will be noticed hereinbelow) that the Government has promised that 100% excise duty exemption will be continued, on finished products, in the North-Eastern region, as was available under the 1997IPR. 36. Though the contents of the 1997 IPR, the notification, dated 8-7-99, and the scheme of the subsequent notifications, on the subject of Cenvat credit, as already indicated above, is sufficient to conclude and hold that at all relevant point of time, the Union Government had promised and made available to the manufacturers complete exemption from payment of excise duly, the subsequent industrial policy, namely, 2007 IPR, makes, in fact, the position more explicit and clearer inasmuch the 2007 IPR states : (v) Excise duty exemption : 100% Excise duty exemption will be continued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism until before issuance of the impugned notifications. The written submission reads like this : ..............that the exemption envisaged to the industrial units following the New Industrial Policy and the notification dated 8-7-99 was granted by way of refund mechanism. The mechanism operates in the following manner. The manufacturer who sets up new unit/undertakes substantial expansion and commences commercial production pays excise duty on the sale value of the goods while clearing excisable goods from his factory. The excise duty paid by the manufacturer initially out of the excise duty/Cenvat credit available with him on the purchase of duty paid raw materials and the balance duty is paid in cash. It is only when the balance duty is paid in case from the Personal Ledger Account (PLA) then the question of paying refund of the duty amount paid in cash in succeeding month arises. It was noticed by the competent authority that some unscrupulous manufacturers were indulging in paying duty in cash without utilizing the Cenvat credit paid on inputs and, thereby, were getting an unintended benefit. Following detection of the aforesaid mischief, the same was sought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppearing on behalf of the respondents, Mr. K.N. Choudhury, learned Senior counsel, cites the following table for the purpose of showing that the petitioners were never entitled to 100% exemption from payment of excise duty : Value of input Excise duty on input Value of finished goods Excise duty on finished goods Amount to be paid through PLA Amount refunded by Excise Deptt. Excise duty collected from customer A B C D E = (D-B) F G 100 10 500 50 40 (50-10) 40 50 42. A bare glance, at the table, relied upon by Mr. Choudhury, reveals that if excise duty on the input is Rs. 10/- and the excise duty on the finished good is Rs. 50/-, the manufacture recovers from his customer Rs. 50/-. Out of recovery of Rs. 50/- as excise duty, the manufacturer, admittedly, pays, through PLA, Rs. 40/- and retains with him remaining amount of Rs. 10/-. Thus, the manufacturer recovers Rs. 10/- by retaining the said amount with him and the sum of Rs. 40/-, which was paid by him through PLA, is refunded to him by the Department of Excise. Hence, the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the manufacturer, remained the same, i.e., 100%. There is considerable force in the submission of Dr. Saraf that exemption can be granted by prescribing various modes like making payment of the excise duty first and, then, get refund of the amount or by not making payment of excise duty at all and receive remission. It is clear from the scheme, as depicted from the above chart, that while exemption to the extent of Rs. 80/- was granted by way of refund, Rs. 20/- was by way of remission inasmuch as the manufacturer collected Rs. 100/- from the customer, but paid Rs. 80/- which too was returned by way of refund. 47.Correctly, therefore, has emphasized Dr. Saraf that excise duty exemption was granted by notification, dated 8-7-99, on finished products to the extent of 100% and such exemption continued to be 100%, on the finished products, even after the notice, dated 29-6-2001, 23-12-2002 and 6-8-2003, had been issued. 48. Though the above conclusion, reached by this Court, is, once again and as before, sufficient to reject the respondents contention that even before the impugned notifications, dated 27-3-2008 and 10-6-2008, were issued, a person, covered by the 1997 IPR, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc, there is definitely some value added to the goods, but such addition of value, not being significant and material, would not be regarded, under the 2007 IPR, as activities, which would entitle a manufacturer to claim exemption from payment of excise duty on the finished product. But when an activity, which is, otherwise, regarded as an industrial activity, is carried on under the 2007 IPR, the benefit of exemption would be available to the manufacturer. What is, however, of immense importance to note is that the 2007 IPR does not say that the quantum of excise duty exemption is limited to the extent of value addition made. Thus, when there is value addition in manufacturing a product, such a manufacturer is entitled to claim exemption from payment of excise duty on his finished product whatever may be the quantum of such excise duty, but when excise duty refund is limited to the quantum of value addition, then, exemption becomes restricted to the value addition only. This is clearly not what the 1997 IPR had announced or even the 2007 IPR contemplates. 53. As a matter of fact. R.C. Tobacco (supra) is one of such cases, where Government withdrew the promised exemption from pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einbefore, would not be regarded as activities, which would entitle a manufacturer to claim exemption from payment of excise duty. 55. There is yet another flaw in the submissions, made on behalf of the respondents, that the excise duty exemption was available only to the extent of value addition. It is not necessary that in every finished product, the input must also involve an excise duty payable item. There may be a finished product, which involves input, which is entirety exigible to excise duty or which is not at all exigible to excise duty or partly exigible to excise duty and partly not. It may, therefore, happen that in a given case, the inputs are totally free from payment of excise duty. If such an input or raw material is used for the purpose of finished product and the finished product, so manufactured, is leviable to excise duty, can it be contended that since no addition of value, in excise duty input, has been made, while manufacturing the final product, the final product, though leviable to excise duty, would not entitle the manufacturer to claim exemption from payment of excise duty? On a specific query made, in this regard, Mr. K.N. Choudhury, learned Senior cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentations received from the association of the industries, revealed bogus production by mere issuance of sale invoices without actual production of goods and supply/clearance of excisable goods. This would result, according to the respondents, in availing of Cenvat credit by buyers of such excisable goods, in other parts of the country, without actual production being carried out and also in absence of actual receipt of goods. The respondents further claim that they have calculated the average excisable duty payable on a product and it is on this basis that they have specified different rates in respect of different specified items under the impugned notification, dated 27-3-2008. 59. Thus, what, eventually, transpires, in the light of the discussions held, as a whole, above, is that the 1997 IPR made an unambiguous promise that 100% exemption from payment of excise duty would be available to a manufacturer, on his goods, in the specified areas. This promise was concretized by issuance of Notification Nos. 32/C.E.-99 and 33/C.E.-99, both dated 8-7-1999, whereby it was made clear that excise duty refund would be available equivalent to the amount of duty paid by the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned notification, dated 10-6-2008, suffice it to point out, as already indicated at para 5 of this decision, that under the notification, dated 10-6-2008, if a representation is made by a manufacturer, in a specified areas, the jurisdictional Commissioner shall determine the actual value addition in the production of the goods and, then, refund accordingly the excise duty to the extent of value addition actually made. The determination of such actual value addition by the jurisdictional Commissioner has been termed as special rate. This concept of special rate takes out the very foundation of the average rates of exemption, which were introduced by the earlier impugned notification, dated 27-3-2008. Had the average rates, mentioned in the impugned notification, dated 27-3-2008, reflected the actual quantum of excise duty payable by a manufacturer on his final product, the question of modification of average rate and introduction of special rate by the subsequent impugned notification, dated 10-6-2008, would not have arisen at all. 62. It is, therefore, clear, if I may repeat, that the subsequent notification, dated 10-6-2008, is an acknowledgement of the fact that even, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified area, would continue. Had the respondents been sure that 100% exemption for payment of excise duty would remain available to manufacturers, in the specified areas, as had been promised to them under the 1997 IPR, the respondents could have asserted, on oath, that the genuine manufacturers will not be affected by the changes in the policy. The respondents have not done so; rather, they aver, genuine manufacturers are not likely to be affected . Coupled with this, when one considers the subsequent Notification, dated 10-6-2008, in the light of the scheme, embodied therein and discussed above, it becomes transparent that this Notification acknowledges that the rates, specified in the impugned Notification, dated 27-3-2008, may not be correct in every Case and that even the impugned Notification, dated 10-6-2008, does not any longer promise, or assure, the manufacturers, covered by the 1997 IPR, that they would receives complete exemption from payment of excise duty as had been promised and assured to them earlier. In short, thus, the Government has, indeed, resiled from the promises it had made under the 1997 IPR and re-assured by the Notification, dated 8-7-99, that a man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant statute. Acting, however, on this resolution, the Municipal Corporation gave up the site on which the old markets were situated and spent a sum of Rs. 17 lakhs in erecting and maintaining markets on the new site. In 1940, the Collector of Bombay assessed the new site to land revenue and the Municipal Corporation, thereupon, filed a suit for a declaration that the order of assessment was ultra vires and it was entitled to hold the land forever without payment of any assessment. The suit was dismissed, for, notwithstanding the said resolution, the fact remained that no formal grant, in terms of the relevant statute, had been made by the Government. An appeal was preferred before the High Court. The High Court of Bombay held that the Government had lost its right to assess the land, in question, by reason of the equity arising on the facts of the case in favour of the Municipal Corporation. The High Court accordingly reversed the decision of the trial Court and held the Corporation entitled to hold the land forever without payment of any rent. The Collector preferred an appeal before the Apex Court. There was no dispute that by reason of non-compliance with the statutory formal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no rent will be charged in the future, the Government must be deemed in the circumstances of this case to have bound themselves to fulfil it. Whether it is the equity recognised in Ramsden s case, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power. As pointed out by Jenkins C.J. in Dadoba Janardban s case, a different conclusion would be opposed to what is reasonable, to what is probable, and to what is fair. 71. A careful reading of the above observations made by Chandrasekhara Aiyer, J., would indicate that the doctrine was applied, in Municipal Corporation of the City of Bombay (supra), without there being any formal contractual or legal relationship existing between the parties concerned, for, the representation sought to be enforced against the Government, in Municipal Corporation of the City of Bombay (supra), was legally invalid inasmuch as the representation had not been made in the manner as the statute had prescribed. This apart, the doctrine was resorted to not merely as a shield for defence, but for founding the cause of action against the Government. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has arisen. 74. The decision, in Anglo Afghan Agencies (supra), shows that the Supreme Court laid down one of the important principles of good governance, the principle being that the Government, same as any other individual, cannot be exempted from carrying out its liability, which it has incurred as a result of the representations, which it had made to a person, who, relying on such representations, has altered his position to his detriment. What was also made clear, in Anglo Afghan Agencies (supra), was that if questioned in Court, the Government cannot, on some indefinite and undisclosed ground of necessity and expediency, decline to carry out its promises. Further, and more particularly, what Anglo Afghan Agencies (supra) made clear to everyone was that the Government alone cannot be the judge of its own obligation to the citizen on its ex parte appraisement of the circumstances, wherein its obligation has arisen, meaning thereby that when questioned in the Court, the Government must disclose to the Court the grounds of necessity and expediency, which had made it impossible to carry out its promises and it is, then, for the Court to decide as to whether such plea of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held 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. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned : the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel . If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liability and repudiate it on an ex parte appraisement of the circumstances . If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempt from the liability and it would be for the Court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from the liability : the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Court what are the facts and circumstances on account of which the Government claims to be exempted from the liability and it would, then, be for the Court to decide whether those facts and circumstances are such as would render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from its liability; the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. The Court would not act on the mere ipse dixit of the Government, for, the Government cannot be the judge of its own cause and it is the Court, which has to decide, and not the Government, as to whether the Government should be held exempt from liability. This is, as Bhagawati, J., in Motilal Padmapat Sugar Mills Co. Ltd. (supra), observes, the essence of the rule of law . 80. What emerges, as the clear position of law, from what have been held, in Motilal Padmapat Sugar Mills Co. Ltd. (supra), is that it would not be enough for the Government to say that there is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (S.C.), make it clear that a mere claim by the Government that larger public interest permits the Government not to abide by its representation will not be enough to free the Government from the commitments that it had made, for, the Government cannot be the judge of its own cause and the Government would have to lay bare all the facts and circumstances, which had induced the Government not to carry out the representation that it had made, and if, on balancing the two competeting equities, that is, the commitment made to the promissee, on the one hand, and the public interest, on the other, the Court finds that the public interest has the overriding effect, the promise would not be enforced, for, the doctrine of promissory estoppel, being an equitable relief, must yield, when so required. 83. The true meaning and scope of the doctrine of promissory estoppel, in the realm of governmental promises and application of this doctrine to the facts of the present case, may be summarized thus : Where the Government makes a promise knowing or intending that it would be acted upon by the promisee and in fact, the promisee, acting upon the promise, alters his position, the Government would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bar the Government from making the promise, as might have been made by the Government, or when making of the promise itself is not contrary to law, the Government would be required to abide by the promise. The Government has to function as a cohesive body and its different organs or departments have to act in tandem with each other and in harmony with each other on the principles of collective responsibility. The constitutional scheme of governance of the Government does not permit the Government to work in violation of the principles of collective responsibility. However, even when the promise is not barred by law and there is no supervening public interest permitting the Government to resile from the promise, it will be still permissible for the Government to resile from the promise made by it if it is possible for the promisee to resume its original position or to restore status quo ante if, on a reasonable opportunity being given to the promisee, the promisee can resume his original position. If the status quo ante cannot be restored, the promise would become irrevocable and can be enforced against the Government. 84. From what has been summarized above, it becomes abundant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient to invoke the doctrine. It is, therefore, duty of the Court to examine in a case, such as, the present one, if the petitioners have laid a clear foundation attracting the doctrine of promissory estoppel. 86. What is, however, necessary to note is that in Shree Ganapati Rolling Mills (supra), which Mr. Choudhury relies upon, it has been pointed out that in order to invoke doctrine of promissory estoppel, a clear foundation must be laid in the petition itself by the person invoking the doctrine. The Division Bench, in Shree Ganapati Rolling Mills (supra), in this regard, referred to Sharma Transport v. Government of Andhra Pradesh, reported in (2002) 2 SCC 188, wherein the Apex Court, in paragraph 48 of its decision, held asunder : 48........there is preponderance of judicial opinion to invoke the doctrine of promissory estoppel, clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expression, without any supporting material, to the effect that the doctrine is attracted because of the party invoking the doctrine has altered its position relying on the assurance of the Government would not be suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been able to lay a clear foundation, which could attract the doctrine of promissory estoppel. The cases at hand, however, are quite different inasmuch as there are adequate pleadings and materials, in the writ petitions, showing that the petitioners have established their industries, or enhanced the installed capacity of their industries, as the case may be, on the basis of the promises made by the Government and, hence, in such circumstances, the Government Cannot withdraw the promises made by it under the said two industrial policy resolutions unless the Government can show that supervening public interest Compels the Government to withdraw its promise. The case of Shree Ganapati Rolling Mills (supra), has, therefore, as already indicated above no application to the present cases. 90. Except making repeated assertions that the present set of petitions do not lay any clear and positive foundation to attract the doctrine of promissory estoppel, and though reliance, in this regard, is placed by the petitioners, on Union of India v. Shree Ganapati Rolling Mills, reported in 2006 (4) GLT, 1, I do not find that to the present cases, the decision, in Shree Ganapati Rolling Mills ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public interest, which must be allowed to override the interest of the manufacturers, such as, the present petitioners. It is further contended by the respondents that it was, as a matter of policy, that the Government had made certain incentives available and it is within the domain of the Government to change its policy. It is also contended that the adequacy of materials on which such a change, in the policy decisions, rests, cannot be a subject-matter of determination in a proceeding under Article 226. 94. Let me, first, deal with the question as to whether it is open to this Court to examine, in a proceeding under Article 226, the adequacy of materials, based on which the Government has, according to the respondents, made a change in its policy. 95. In the face of the clear and emphatic declaration of the position of law on the doctrine of promissory estoppel applicable to the case of a promise made by the government, in Motilal Padmapat Sugar Mills Co. Ltd. (supra), as early as in 12-12-1978, and subsequent decisions referred to above, it does not, now, remain open for the respondents to contend, before this Court, that it was, as matter of policy decision, that the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adequacy of materials, based on which such a changed policy decision was taken, cannot be examined by the Court. To put it a little more clearly, one can say, and not unjustifiably, that when Government cannot be the judge of its own cause and when a decision to withdraw the incentives promised cannot be ipse dixit of the Government, the Court is bound, when the promisee approaches the Court, to examine if the materials, considered by the Government, justify the Government s decision to withdraw from its promises made. Determination of such justification would, obviously, demand that the Court considers as to whether the materials were adequate to reach such a decision as the Government has reached. The adequacy of materials would obviously mean examination of the question as to whether Government has taken into account all such factors, which are relevant, and eschewed from its consideration all such factors, which were irrelevant. Considered in this light, it becomes clear that if the Government has not taken into account a particular factor, which it ought to have taken note of, such a decision would be nothing, but irrational and arbitrary. As the arbitrariness strikes at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me product, was 90% of the total excise duty. Input purchased which are all excisable Excise duty Input purchased on non-excisable or purchased from SSI unit Sale value on finished goods Excise duty on finished goods Amount available for Cenvat credit Amount to be paid Through PLA 0% of payment from PLA to total duty (a) (b) (c) (d) (e) (f) (g) (h) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) 50 5 150 500 50 5 50-5=45 40*100/50 = 90 100. By a third chart, Dr. Saraf has depicted a case, where the raw materials, used by an industrial unit, were from SSI units. In such a case, the percentage of payment of excise duty, through PLA, may be as much as 100%. This becomes evident from the following chart : Input purchased from SSI Unit Excise duty on input Cenvat credit Sale value of finished goods Excise duty on finished goods Amount paid through PLA 0% payment from PLA to total duty (a) (b) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction or manufacture of his goods is, at least, 115% of the rate specified in the table in the said notification. Thus, those manufacturers, whose actual value addition would be less than 115%, will, eventually, receive less than the actual amount of excise duty, which they may pay on their products, because such a manufacturer would not be covered by the impugned notification, dated 10-6-2008. 105. Referring to MRF Ltd. v. Asstt. Commissioner (Assessment) Sales Tax, reported in (2006) 8 SCC 702 = 2006 (206) E.L.T. 6 (S.C.), Mr. P.K. Goswami, learned Senior counsel, has submitted that when a person, acting upon the promises made by the Government under its industrial policy, establishes an industry and carries on his business in accordance with the relevant statutory provisions and also in tune with the objectives of the pronounced industrial policy, he must be inferred to have legitimate expectation that so long as he does not behave in a manner, which defeats the objectives of the industrial policy, his interest would be protected by the State. Such protection would demand, contends Mr. Goswami, that the State allows such an investor to continue his business in terms of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s arbitrary. The basic requirement of Article 14 is fairness in every State action. This, in turn, implies non-arbitrariness and obliges the State to act in a manner, which cannot be regarded as arbitrary. If the State has to avoid arbitrariness in its action, it must show that its decision is based by taking into account all relevant factors and by keeping excluded from consideration all such factors, which were irrelevant. Consideration of the relevant factor, in such a case, would also be covered by the legitimate expectation of an investor. [See Bannari Amman Sugars Ltd. v. Commercial Tax Officer, reported in (2005) 1 SCC 625]. 110. In the present cases too, if some of the manufacturers are indulging in bogus production and when the petitioners are not accused of any bogus production and when it is not alleged by the respondents that the manufacturers, as a class, are misusing the concessions by indulging in bogus production and when, as already indicated above, no accusation against any of the present petitioners of misusing of the concessions has been made by the respondents, it would be within the realm of Article 14 if the present petitioners legitimately expect that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government, amazingly enough, does not assert, on oath, or assures the Court, or prove before the Court, that their basis is correct. The correctness of this basis could have been taken as proved, had the State asserted, on oath, as rightly complained by Dr. Saraf, that the quantum of excise duty paid by the industrial units, which fall outside the two industrial policies, is the correct quantum of excise duty payable by an industrial unit. 113. 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. It cannot really punish its honest investors, because of the deeds of some, who have been indulging in bogus production (if bogus production is assumed to have been taking place) with the connivance of the administrative machinery or because of the complete incompetence of the administrative mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e large scale theft of energy, the State cannot persuade the Court to hold that revocation of concession was in public interest; so observed the Apex Court. 115. Clarified the Supreme Court, in U.P. Power Corporation Ltd s case (supra), that since the benefit was given to the units in the hill areas, there should have been overwhelming evidence to show some mala fide on the part of the investors. The Court held that if one parry abuses the concession, then, it is always open to the other party to revoke such concession. But when one party avails the benefit and is acting upon the same representation made by the other party, then, the other party, who has granted the said benefit, cannot, under the garb of public interest, revoke the same. 116. Though, in U.P. Power Corporation Ltd s case (supra), as correctly pointed by Mr. Choudhury, the Court had not been given adequate data, whereas some data have been made available to this Court, the fact remains that the data, so placed by the respondents, are wholly inadequate and inconclusive inasmuch as even a rough estimate of the number of people, indulging in alleged bogus production, is not made known to the Court and the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... century, when there is global economy, the question of faith is very important. When the Government offers certain benefits to attract the investors, it cannot withdraw such benefits, for, such action of the State would shake the faith of the people in governance. The relevant observations, made in this regard, read : 35. In this 21st century, when there is global economy, the question of faith is very important. The Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers. Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the shortsightedness of governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellant Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith, of the people in governance. Therefore, in order to keep the faith and maintain good governance it is necessary that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to withdraw exemption, has the obligation to satisfy the Court that its act of withdrawing the concession is fair and just. 121. Let me, now, turn to the decision, in Kaniska Trading v. Union of India, reported in (1995) 1 SCC 274 = 1994 (74) E.L.T. 782 (S.C.), which the respondents have relied upon, to show that an exemption granted does not vest any indefeasible right in an investor and that the Government can withdraw exemption, whenever it so feels necessary. In Kaniska Trading (supra), the Apex Court was required to consider the question as to whether the notification issued, under Section 25 of the Customs Act, 1962, granting complete exemption from payment of customs duty to PVC resin imported into India by manufactures of certain products requiring the said resin as one of the raw materials, which was issued in public interest and which had stated that the exemption would remain in force up to 31-3-1981, could have been withdrawn before the expiry of the said period by a fresh notification issued by the Government in exercise of the very same power under Section 25 of the Customs Act. The Apex Court took the view that while issuing the notification, in question, no promis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein. In Shrijee Sales Corporation (supra) too, the specific finding of the Court was that there is a supervening public interest and hence it should not be mandatory for the Government to give a notice before withdrawing the exemption and it was, in these circumstances, that the Court, in Shrijee Sales Corporation (supra), declared that the decision, in Kaniska Trading (supra), has been correctly reached. 125. In Shrijee Sales Corporation (supra), the Apex Court has reiterated its earlier decision that in case there is supervening public equity, the Government would be allowed to change its stand. What the Court, however, made it, once again, clear that the Court must satisfy itself that such a supervening public interest exists before it upholds Governments decision to withdraw the incentive. The three Judges bench, in Shrijee Sales Corporation (supra), approved the position of law, propounded in Motilal Padmapat Sugar Mills Co. (supra) to the effect that 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom import duty was resorted to in public interest by way of an incentive for a class of importers, though such public interest continued to subsist during the currency of such exemption notification, and even though the promisee, for whose benefit such exemption was granted, had changed their position, relying on the said exemption notification, it could still be withdrawn before the time mentioned therein. 130. In Pawan Alloys Casting Pvt. Ltd. v. UP State Electricity Board Ors. reported in (1997) 7 SCC 251, the Court s specific finding, based on the given fact situation, was that the notification, in question, had, indeed, held out promises and made representations to the general public inviting them to set up industries on the basis of the said representations and it was, acting upon such promises, that the industries had, in fact, been set up. 131. I may pause here to point out that in Shrijee Sales Corporation (supra), the Court had quoted, with approval, the observations made in Motilal Padmapat Sugar Mills Co. Ltd. (supra) that even where there is no such overriding public interest, it may still be within the competence of the Government to resile from the promi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of supervening public interest, resile from its promise until such a stage is reached, when the promise becomes irrevocable due to the fact that the promisee cannot resume his original position or that the status quo ante cannot be restored. In the present cases, it is not even contented by the respondents that status quo ante can be reached by the investors even if the impugned notification are taken to have withdrawn or reduced the promises incentives. 135. Before proceeding further, it needs to be pointed out that in terms of the provisions of a fiscal statute, a State or Central Government may, grant certain exemptions. Exemption from certain fiscal obligations may also be granted, because of the promises, which the Government may have made in its industrial policy. These two cases of exemption are not one and the same. In the former case, the Government has the freedom of withdrawing the exemptions without the doctrine of promissory estoppel stepping in; whereas, in the later case, the Government can withdraw the exemption only if it can show that the promises made and the exemptions granted were prohibited by law or that the withdrawal of the exemption by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d exercise such powers, from time to time, in public interest and that the notification, in Kaniska Trading (supra), was in exercise of sovereign taxing power of the State and had created no relationship between the authority, which issued the notification, and the prospective importers. 138. In the present case too, the Notifications, under Section 5A of the Central Excise Act, 1944, was admittedly, issued to give effect to the Industrial Policy Resolutions, and the public interest, which had inspired the Government to announce the Industrial Policy and issue Notifications, for implementing such a policy, continued to subsist inasmuch as the said exemption and incentives were also promised to be continued under the 2007 IPR, for, it was promised, even in 2007 IPR, that an industrial unit, which commenced its commercial production on or before 31-3-2007, would continue to receive benefit incentives as had been promised under 1997 IPR. Even in the 2007 IPR, incentives, by way of excise duty exemption, for, a period of ten years, has been granted to the new industries established after 1-4-2007, or whose capacity has been expanded to the extent as the 2007 IPR requires. Consequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the doctrine of promissory estoppel will not be applicable if the change in the stand of the Government is made on account of public policy. This position has been explained in detail by this Court in Kaniska Trading and reiterated in Shrijee Sales Corpn. v. Union of India. In both these cases this Court is concerned with notifications issued under Section 25 of the Customs Act. In Kaniska Trading case it is stated that the exemptions granted under Section 25(1) of the Customs Act in public interest is designed to offset the excess price which the local entrepreneurs were required to pay for importing PVC resin at a time when the difference between the indigenous product and the imported product was substantial and at a time when the notification was withdrawn by the Government there was no scope of any loss to be suffered by the importers and, therefore, the change of policy was permissible. This decision is the same as in Shrijee Sales Corpn. wherein it was noticed that once public interest is accepted as the superior equity which can override individual equity, the principle would be applicable even in cases where a period has been indicated for which period the notification wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jasthan Sales Tax Act, and Section 8(5) of the Central Sales Tax Act, 1956, the Court held that the State Government is competent to modify or revoke the grant of exemption, if public interest so require, unless the government is shown to be precluded from making such withdrawal on the ground of promissory estoppel inasmuch as the doctrine of promissory estoppel is, again, subject to considerations of equity and public interest. It is in this context that the Apex Court observed that vesting of indefeasible right in such a case is contradiction in terms. The relevant observations, made, in this regard, in J.K. Udaipur Udyog (supra), read as under : In this case the scheme being notified under the power in the State Government to grant exemptions both under Section 15 of the RST Act and Section 8(5) of the CST Act in the public interest, the State Government was competent to modify or revoke the grant for the same reason. Thus what is granted can be withdrawn unless the Government is precluded from doing so on the ground of promissory estoppel, which principle is itself subject to considerations of equity and public interest. The vesting of a defeasible right is therefore, contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (1998) 9 SCC 693, which the respondents rely upon, it may be pointed out that this case too is a case, where the exemption was granted not due to a promise made in an industrial policy, but in exercise of the statutory powers of the Government. This case is, therefore, same as the case of Dai Ichi Karkaria (supra). This apart, in TATA Cummins Ltd. reported in (2006) 4 SCC 57, the Apex Court has clearly indicated that when a notification, granting exemption, is issued pursuant to any promise made, in any industrial policy, such implementing notification has to be interpreted bearing in mind the objective set forth by the industrial policy concerned, and not strictosens, as one may do in the case of exemption, which is granted by the government in exercise of its statutory powers. To the cases at hand, I do not find that the decision, in Sun Paper Mills (supra), has any application. 145. Reverting to the decision, rendered in Assistant Commissioner of Commercial Taxes v. Dharmendra Trading Company reported in (1988) 3 SCC 570, it needs to be noted and reiterated that, in this case, the Supreme Court clearly held that if the government wants to resile from its promise or assuranc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, as a class, had not been conducting themselves in a manner, which would have sub-served the objectives with which the relevant industrial policy had been announced. In such circumstances, the overriding public interest, undoubtedly, was that the government be allowed to withdraw the concessions granted, when the cigarette manufacturers, as a class, were not satisfying the objectives with which the concessions had been granted. The relevant observations made, in R.C. Tobacco Pvt. Ltd. (supra), in this regard, read as under : 24. The particular context of the section impugned in this case was the industrial policy formulated by the Central and the State Government of Assam for the development of that State. The obvious intention behind the grant of the package of incentives including an exemption from payment of excise duties was to stimulate further industrial growth in the area with enduring benefits not only to the local populace by way of employment opportunities but also to the economic welfare of the State. The State Government s insistence from the very outset on the need to regulate the industries which were claiming the benefit of the exemption was to ensure that thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercised by introspectively enacting what the executive ought to have achieved. 149. In the present case, unlike R.C. Tobacco (supra), the respondents have not been able to show that the investors, as a class, have defeated the object of the 1997 IPR and/or the 2007 IPR. It is not the respondents case, as already pointed out above, that the manufacturers, as a class, or that the petitioners have indulged in bogus production. In fact, the basis for determining the question as to whether there is bogus production or not is, as already discussed above, wholly incorrect inasmuch as the basis for determination is the quantum of excise duty, paid through PLA, in the areas, where the two Industrial Policy Resolutions are not in force. The Government, however, does not assert, on oath, that the quantum of excise duty, which the manufacturers, in the said areas, pay, through PLA, is the quantum of excise duty, which is actually payable by them. When the correctness of the quantum of excise duty paid by the said manufacturers are not claimed, on oath, to be correct, such quantum of payment of excise duty could not have been made a basis for reaching the conclusion, which the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Government in the spirit of collective responsibility. Bearing in mind this subtle, but definite pre-requisite for effective functioning of the Government, let me, now, turn to the 1997 IPR. 152. There is no dispute, in the case at hand, that certain promises were made by the Union Government under the 1997 IPR as well as the 2007 IPR. Notwithstanding what the respondents have contended, the conclusion, reached above, clearly shows that the Government has assured the investors that 100% exemption from payment of excise duty would be available, on the specified products, in the specified areas. Since this decision has been taken as matter of policy by the Union Cabinet, the Department of Finance, Government of India, could not have acted in a manner, which would set at naught the said promises made by the Union Cabinet. This proposition of law could not be disputed and is, in fact, not in dispute. What is, however, of great significance to note is that it is not in dispute that it is not the Department of Finance, Government of India, alone, which has issued the impugned notifications, withdrawing the promises made earlier. Far from this, it is the Union Cabinet, once ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification, the Apex Court observed and held as under :- 7. Coming to the second question namely, the issuance of notification by the State Government in exercise of power under Section 7 of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power, it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. The industrial incentive policy is issued by the State Government after such policy is approved by the Cabinet itself. The issuance of the notification under Section 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out the objectives and the policy decisions taken in the industrial policy itself. In this view of the matter, any notification issued by government order in exercise of power under Section 7 of the Bihar Finance Act, if is found to be repugnant to the industrial policy declared in a government resolution then the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d warrant reduction in the quantum of refund of excise duty. 156. As already indicated above, in the present case, when the Government, after a decade of experience, announced its industrial policy in the year 2007, it chose to promise the investors complete exemption from payment of excise duty, in respect of specified goods, if a manufacturer, in the specified areas, carries on industrial activity, which is not peripheral in nature. Thus, the Government has reiterated, in the IPR 2007, the promise of complete exemption from payment of excise duty, as the Government had announced and promised in the 1997 IPR. Hence, when the Government had chosen to reiterate its promise of complete exemption from payment of excise duty in the year 2007, and when the petitioners claim to have altered their position, to their detriment, relying upon the promise made by the Government in the 1997 IPR and/or 2007 IPR, it no longer remains open to the Government to withdraw the incentives so promised unless it can show that public interest, supervening in nature, requires that the Government, notwithstanding the promises made by it, be held not bound by its promise. In the present case, though the G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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