TMI Blog2002 (12) TMI 623X X X X Extracts X X X X X X X X Extracts X X X X ..... challenging the said impugned notification. In the forefront, it was submitted that the Central Government is bound by the principles of promissory estoppel to continue excise exemption to the new industries set up for a period of 10 years as integrated in the exemption notification from the date of establishment of the industry and consequently, the Central Government could not have arbitrarily withdrawn the said excise exemption prior to expiry of 10 years period available to the industries concerned under the exemption notification and the policy decision of the Government. The new Industrial Policy dated 24.12.1997 framed by the Government of India, after Expert Groups/Committees concretized the initiatives to be offered and after Inter-Departmental Meetings were held having remained in force and has not been altered by the Government, the Ministry of Finance is incompetent to unilaterally withdraw the concessions that was given by it in pursuance of the policy. 3. As questions involved were identical in all these writ petitions all the writ petitions were disposed of by the learned Single Judge by common judgment dated 11th April, 2002, therefore, all these appeals arise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on goods cleared from units located in the Growth Centre or Integrated Infrastructure Centre or Export Promotion Industrial Park or Industrial Estates or Industrial Area or Commercial Estate specified in the annexure appended to the said Notification. The said Notification dated 8th July, 1999, is reproduced hereunder : New Delhi, dated the 8th July, 1999 NOTIFICATION No. 32/99-Central Excise GSR(E) - In exercise of the powers conferred by Sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1944), read with Sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and Sub-section (3) of Section 3 of the Additional Duties of Excise (Textile and Textile Articles) Act, 1978, (40 of 1978), 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 and the Second Schedule to the Central Excise Tariff Act, 1985 (1 of 1986) and cleared from a unit located in the Growth Centre or Integrated Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estates or Industrial Area or Commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification in the Official Gazette or from the date of commencement of commercial production, whichever was later. The exemption contained in the notification was applicable only to the New Industrial Units, which has commenced commercial production after 24.12.1997. 6. The appellant in WA 219/2002 (petitioner in WP(C)No. 1470/2001) had stated in the writ petition that it set up a manufacturing plant at Arundhati Nagar, Agartala, which is an Industrial Estate of the State of Tripura listed in the Annexure to the Notification No. 32/1999-CE, and also set up a Pan Masala containing tobacco unit at Bamunimaidan in Guwahati, which is an Industrial Estate listed in the annexure to the Notification No. 32/1999-CE, and while the unit at Agartala commenced production with effect from 29.11.1999, the Unit at Guwahati commenced production with effect from 17.11.2000. The appellant in WANo. 220/2002 (petitioner in WP(C) No. 1525/2001), had stated in the writ petition that it has set up a manufacturing plant at Arundhati Nagar, District Agartala (Tripura), which is one of the Industrial Estates listed in the annexure to the Notification No. 32/99-CE, and the said unit commenced commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount, as may be necessary in the subsequent refunds admissible to the manufacturer. Thus, under the notification, the excise duty paid is refundable by 15th of the next month by the Excise Department. Under the notification, the manufacturers are required to deposit the excise duty on goods cleared first and thereafter, the said excise duty would be refunded back to the manufacturer under the Exemption Notification. 8. On 31.12.1999, the excise exemption given to the appellant's units was withdrawn by issuance of impugned notification, where under the exemption of Central Excise was withdrawn by Ministry of Finance from goods falling under Chapter 21.06 - Pan Masala and Chapter 24 - Tobacco and Tobacco substitutes which includes Cigarettes and Chewing Tobacco. However, within 17 days, another notification was issued on 17th January, 2000 by the Central Government, whereby exemption benefit of central excise on Pan Masala and Tobacco was restored back. The excise benefit initially granted to the appellant's industrial units to be established in Assam and Tripura was further extended to different States and benefit of exemption was extended to Meghalaya on 1.3.2000. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d infrastructure development center or Export Promotion Industrial Park or Industrial Estates or Industrial Area of Commercial Estate in the North Eastern Region as specified in the Annexure to the notification from excise duty in the manner indicated therein. The learned Single Judge has further held that the exemption under the notification No. 32/1999-CE has been granted to new industrial units, which have commenced commercial production on or after 24.12.1997 and the existing industrial units which have undertaken substantial expansion by way of increase in installed capacity on or after 24.12.1997 indicates that the exemption under the said notification had been granted pursuant to the promise held out in the office memorandum dated 24.12.1997 that all industrial activity in the zone would be free from excise for a period of 10 years from the commencement of production. Paragraph 4 of the exemption notification No. 32/1999-CE will have to be read consistent with the promise made in the office memorandum dated 24.12.1997 that all industrial activities in the zone would be free from excise for a period of 10 years from the commencement of production. It has also been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Such an interest has to be established by the Government before the Court with relevant material. Mere ipse dixit of the Government is not enough. The respondent/Government has failed to produce any material before the Court on the basis of which promise made to the appellants could have been withdrawn. It is further urged by the learned counsel for the appellants that even though the learned Single Judge has rightly held that the Central Government was bound by the principles of promissory estoppel in the light of the policy decision taken by the Central Government on 24.12.1997 and the notification dated 8.7.1999 issued by it granting excise exemption to the new industries set up in the North East Region covered by the notification dated 8.7.1999 failed to see that consequently, the notification withdrawing the excise exemption dated 1.3.2001 was hit by principles of promissory estoppel. 13. It is further contended by the learned counsel for the appellants that the new Industrial Policy dated 24.12.1997 framed by the Government of India after expert committees concretised the initiatives to be offered and after Inter-Departmental Meetings were held, still remains in force, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by series of decisions of the Apex Court that the State and the State authorities 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 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. 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 not necessarily to its detriment, and if this promise does not offend any provision of law or does not fetter any legislative or quasi-legislative power inhering in the promisor, then on the principle of promissory estoppel the promisor can be pinned down to the promise offered by it by way of representation containing such promise for the benefit of the promisee. Reliance is placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the Central Government as well as in the notification issued. This investment in setting up factory and commencement of manufacturing process of Pan Masala, tobacco, was undertaken relying on the representation, thinking that they would be assure at least 10 years period granting them excise exemption in toto. 18. The Government has also given effect to the policy decision taken by the Central Government and the concession declared under notification dated 8.7.1999 by giving excise refund to the appellants' Units till the impugned notification was issued by the Government. A bare reading of the policy decision taken by the Central Government and the notification clearly indicates that the promise was made to the appellants and they have set up the industries in pursuance of the promise made to them. We have no hesitation in confirming the findings arrived at by the learned Single Judge that the Government is bound by the principles of promissory estoppel. 19. The next question, which requires consideration, is whether the respondents are entitled to resile from the promise and to withdraw the concession on the ground of supervening or overriding public interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoke the doctrine of promissory estoppel against the State. It must, therefore, be held that the aforesaid decision had clearly proceeded on the basis that 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. The Apex Court further held that the said decision is not an authority for the proposition that even if a claim of exemption from import duty was resorted to in public interest by way of an incentive for a class of importers and even though such public interest continued to subsist during the currency of such an exemption notification and that promises 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 even though public interest did not require the said exercise to be undertaken and even though there were subsisting equities in favour of the promisee importers. 20. On the facts of the present case, the decision in the case of Kasinka Trading (supra) does not apply for the reasons given in the judgment of the Apex Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Emmanuel Ayodeji Ajayi v. Briscoe. 4. Two propositions follow from the above analysis : (1) The determination of applicability of promissory estoppel against public authority/Government hinges upon balance of equity or 'public interest'. (2) It is the Court, which has to determine whether the Government should be held exempt from the liability of the 'promise or representation'. In the present case the first notification exempting the customs duty on PVC itself recites Central Government being satisfied that it is necessary in public interest to do so. In the notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te, prior to 10 years, is not based on any overriding public interest, if it is shown that by such premature withdrawal the appellants-promisees would be restored to status quo ante and would be placed in the same position in which they were prior to grant of such rebate by earlier notifications, the appellants would not be entitled to succeed. 25. At the very outset, we now examine the case in the light of the settled law and we must, at once, be stated that it is not a case of the respondents that it sought to withdraw the excise exemption made available earlier by it to the new industries on the ground that such premature withdrawals, the appellants-promisees would be restored the status quo ante and would be placed in same position in which they were prior to grant of such rebate by earlier notification. On the facts on record, it is apparent that the Central Government has not given a reasonable opportunity to the appellants to resume their earlier position nor it is shown by the Central Government that it is possible for the appellants-promisees to restore the status quo ante. Once the new industries were established the factory in the region on being assured 10 years tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related products and it was decided that the unintended benefits flowing to these kind of manufacturers was thoroughly disproportionate to the benefit which the State would get from this fiscal revenue foregone by the Centre. It was, therefore, decided in public interest to discontinue forthwith this exemption, which interest to discontinue forthwith this exemption, which have completely distorted the entire working of this law in the State insofar as this product is concerned. 21. The said notification has been issued in public interest and specifically withdraws benefits granted to tobacco and tobacco products. It would be relevant to state that several factors have been taken into account to advance public interest particularly, since tobacco products apart from being injurious to public health, it was found that the units set up did not generate the necessary employment as anticipated. There was the aspect of backward and forward linkages to be considered in the context of utilization of raw materials. When it was found that the units manufacturing tobacco products did not advance the objects of the policy envisaged for the North Eastern Region it was deemed in public int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on 17.11.2000. Apart from the present petitioner, there are number of industries who set up their units in the State of Assam after the announcement of exemption. The Government of India has withdrawn the exemption vide Notification No. 6/2001 dated 1.3.2001 on tobacco products. The said withdrawal of exemption will encourage the shifting of the existing unit and will discourage other industries to invest in the State. Withdrawal of notification of 8.7.1999 will go to defeat the very purpose of inviting industries to invest and the industrial growth of the State. It has been further stated that withdrawal of the notification dated 8.7.1999 has rendered the much needed boost in the promotion of industrial growth of the State and that the withdrawal of the notification was made without any consultation with the State Government. 30. In WP(C) No. 1525/2001 the State of Tripura and the Director of Industries and Commerce, Government of Tripura, have filed a joint affidavit-in-opposition contending therein that withdrawal of the notification by the Government of India all of sudden granting exemption shall affect the units already set up on the basis of the uneconomical due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y generating the direct employment and opportunities in the field of Road Transportation, travel, housing, construction, communication and other allied industries. The quantum of investments made in plant and machinery is not the key factor to adjudicate upon the process of industrialization and economic growth of the State. The key factor to determine the growth of industrialisation is the momentum of the business activities generated. 31. From the averments made in the affidavits filed on behalf of the respondent Union of India, the reason for withdrawal of exemption of excise duty appears to be that after thorough review of the exemption granted, it was found that the unintended benefit flowing to the manufacturers of tobacco related products was thoroughly-disproportionate to the benefit which the State would get from this fiscal revenue foregone by the Centre and consequently the units set up did not generate the necessary employment as anticipated. That there was the aspect of backward and forward linkages to be considered in the context of utilization of raw materials and when it was found that the units manufacturing tobacco products did not advance the objects of the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is overriding public interest over such public interest if such public interest is placed on record by the Government for consideration of the Court. Mere fiscal loss which has already taken care of while granting exemption cannot be a ground for withdrawal of exemption in the public interest and the public interest pleaded by the Government for withdrawal cannot obviously be the loss of revenue. Nor can it be the alleged failure of consideration such as non-fulfilment of policy objectives in the sense that sufficient employment was not generated. 34. No material is placed before the Court to indicate as to what are the benefits which are not intended to be given to the industries under the exemption policy or exemption notification, which industries have got and then how they are disproportionate to the benefits which State would get on account of excise exemption given to industries. There is no material placed on record except allegations in affidavit of the respondent Union of India to indicate what benefit was achieved by the North Eastern State after the implementation of the policy decision, for the Court to Judge and ascertain whether the benefit appended to the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the policy decision is taken, viz., setting up industries in the region, the region overcomes its continuing backwardness failed the Government can certainly withdraw the exemption notification. The Government cannot withdraw the Notification if the process is slow or it does not generate revenue as expected. The reason given by the Government for withdrawal of exemption of excise duty by issuing notification dated 1.3.2001 cannot also beheld to be for the reason which reflects an overriding and supervening interest, 35. It is urged by Shri Bharat Agarwal, learned counsel for the appellant that the Central Government having taken a policy decision it is not open to the Ministry of Finance to withdraw the concession given in pursuance of the policy. In other words, the impugned notification dated 1.3.2001 issued by the Ministry of Finance is repugnant to the Industrial Policy of the Government of India as incorporated in the Office Memorandum of 24.12.1997, Reliance is placed on the case in Suprabhat Steels Ltd. (supra). It may be appropriate to consider the case in the light of the facts and circumstances of the present case. 36. The question came before the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy of 1986. The notification dated 4.4.1994 issued by the State Government was challenged in the High Court and the High Court struck down the notification. The State of Bihar approached the Supreme Court challenging the order passed by the High Court. While dealing with the question, the issuance of notification under Section 7 of the Bihar Finance Act, the Apex Court held that - 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 Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent on or after 24.12.1997. The exemption contained in the said notification was made applicable for a period not exceeding ten years from the date of publication of the notification in the Official Gazette or from the date of commencement of commercial production. Under the notification issued new units set up after 24.12.1997 are entitled to excise duty exemption for a period of 10 years from the date of commencement of the commercial production. It is an admitted position that in pursuance of this notification the appellants/petitioners have set up their industries in the Region falling under the notification and commenced their production. Under the policy decision taken by the Government, notification was issued giving tax exemption to the units for a period often years from the date of publication of the notification or from the date of commencement of commercial production, whichever is later. The Government notification dated 1.3.2001 wherein the benefits of the Central Excise tax was withdrawn on Pan Masala containing chewing tobacco is contrary to the policy decision ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
