TMI Blog2010 (3) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... . Harin P. Raval for the Respondent. [Judgment D.A. Mehta J.] - Sr. No. Contents Paragraphs Nos. 1. Facts 1-7 2. Contentions (a) Petitioners (b) Respondents 8-8.1 9-9.3 3. Reasoning 10-34 4. Summary. 35 5. Conclusion, Direction, Order 36-39 With the consent of the counsel of both the sides, the petition has been taken up for final hearing. RULE. Learned counsel appearing for respondents are directed to waive service of rule. 1. The petitioner, the Limited Company, having its unit at survey No.254 paiki, Kidana Bharapar Road, Village Bharapar, Taluka Gandhidham, District Kutch, is engaged in the business of manufacturing steel bars and other related products. The goods manufactured by the petitioner company fall in Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985 (the Tariff Act). 2. By this petition, the petitioner originally challenged Notification No.16/2008 CE dated 27.03.2008 (Annexure E). Subsequently vide amendment permitted on 10.07.2008 the petitioner has also challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme before expiry of the entire period of five years from the date of commencement of commercial production. The said Notification dated 27.03.2008 has been made effective from 01.04.2008 and thus the petitioner has been adversely affected by substantial withdrawal of the benefit to which the petitioner was undisputedly entitled to under the Original Notification. 6. On 16.05.2008 the Court adjourned the matters to 25.06.2008 in view of the Summer Vacation, with a direction that in the meantime, the Central Government shall consider the representations of the petitioner along with similarly situated other petitioners. 7. In compliance with the aforesaid order the petitioner made a representation dated 26.05.2008 through the Kutch Chamber of Commerce and Industry. The respondents thereupon issued fresh Notification dated 10.06.2008 bearing No.33/2008 CE. 8. Learned Senior Counsel appearing on behalf of the petitioner assailed the impugned Notification dated 27.03.2008 No.16 of 2008 and impugned new Notification dated 10.06.2008 No.33 of 2008 stating that the exemption benefit granted to the petitioner under the Original Notification was withdrawn within the period of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to permit the modification restricting the exemption by changing the entire basis. That mere loss of revenue by itself would not be a good ground for modifying the Original Notification before the stipulated period was over and making the modification effective midstream. In support of the submissions made reliance has been placed on the following judgments: i. M/s. Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh And Others., (1979) 2 SCC 409; ii. U.P. Power Corporation Ltd. Another Vs. Sant Steels Alloys (P) Ltd. Ors., AIR 2008 SC 693; iii. Southern Petrochemical Industries Co. Limited Vs. Electricity Inspector ETIO and Anr., 2007 (5) SCC 447; iv. MRF Ltd. Vs. Assistant Commissioner (Assessment) Sales Tax, 2006(206) ELT 6; v. Mahabir Vegetable Oil (P) Ltd. and Anr. Vs. State of Haryana Ors., 2006(3) SCC 620; vi. State of Punjab Vs. Nestle Indua Ltd Anr., 2004(6) SCC 465; vii. Dai Ichi Karkaria Ltd. Vs. Union of India and Ors., 2000 (4) SCC 57 : 2000(119) ELT 516; viii. Pawan Alloys Castings Pvt. Ltd. Vs. U.P. State Electricity Board Ors., 1997 (7) SCC 251; ix. Pournami Oil Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who do not undertake actual supply of goods. The actual supplier of these goods issued 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 . 1. It was submitted on the basis of illustrations set out in the Affidavit in Reply that the same are general illustrations of misuse of exemption, which exemption was meant to be available to genuine manufacturers. That units in the Kutch region were wanting to pay maximum amount of duty in cash so that refund of the entire amount can be claimed. A study was undertaken to verify this aspect and find out percentage of excise duty paid in cash as well as percentage of excise duty paid by utilizing CENVAT credit by similar units located elsewhere when compared with units situated in the notified area availing exemption. That the units in the specified area were paying high percentage of duty in cash when compared to payment of duty on an all India basis in relation to manufacture of similar goods. The Government therefore realized that purpose of exemption was being defeated, exemption being available onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nwari Lal Vs. Sukhdarshan Dayal , AIR 1973 SC @ 814; vi. 1655 Advanced Law Lexicon, 3rd Edition, by B. Ramanatha Iyer. vii. AIR 1979 @ 629 [Pages 629, 630 and 631]; viii. AIR 1979 SC 621 @ 644. ix. Union of India and Ors. Vs. Godfrey Philips India Ltd., AIR 1986 SC @ 806; x. 1994 (74) E.L.T. 782 (S.C.) = Kasinka Trading Vs. Union of India = 1995(1) SCC 274. xi. Textile Ltd. Vs. Union of India ; 1997 (92) E.L.T.@ 28; xii. Dai-Ichi Karkaria Ltd. Vs. Union of India ; 2000(119) E.L.T.@ 516 (S.C.); xiii. Shrijee Sales Corporation Vs. Union of India, 1997 (89) E.L.T. 452 (S.C.); xiv. Indian Express Newspapers (Bom.) Private Ltd. Others Etc. Vs. Union of India Others Etc. Etc., 1999(110) E.L.T.@ 3 (S.C.); xv. Union of India Vs. Jalyan Udyog, 1993 (68) E.L.T.@ 9 (S.C.); xvi. Union of India Vs. Bharat Commerce Industries Ltd., 1999 (107) E.L.T. @ 582; xvii. R.C. Tobacco Pvt. Ltd. Vs. Union of India, 2005(188) E.L.T. 129 (S.C.); xviii. State of Punjab Vs. Nestle India Ltd. And Another, AIR 2004(6) SCC @ 465; xix. MRF Ltd. Vs. Assistant Commissioner (Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original value of investment in plant and machinery installed in the factory as on the date of commencement of commercial production, to the jurisdictional authority. Condition No.(iv) obliges a manufacturer to produce a certificate from the said Committee confirming the original value of investment within a period of one month from the date of commencement of commercial production, or such extended period as the jurisdictional authority may allow. In so far as condition No.(v) is concerned it provides for return of the refund availed of in case, on the basis of certification as aforesaid, or otherwise, the original value of investment in plant and machinery is found to be below the specified limit as stipulated in Proviso to paragraph No.1 of the Notification. Condition No.(vi) lays down the outer time limit by stating that the exemption shall apply for a period not exceeding five years from the date of commencement of commercial production. In the Explanation appearing after paragraph No.4 the expression set up on or after the date of publication of this Notification in the Official Gazette has been defined to mean that any civil construction work on the factory premises and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt it is not necessary to refer to other clauses which are procedural in nature. 7. Vide Notification No.9/2000-CE dated 21.01.2004 titled as Kutch (Gujarat) Goods cleared from new units situated therein Time limit for exemption extended Amendment to Notification No.39/2001-C.E it is provided that the last date for setting up shall stand extended from 31st July, 2004 to 31st December, 2004, with further provision that not only the unit will have to be set up but commercial production shall have to commence not later than 31st December, 2004. 8. Vide Notification No.55/2004-CE dated 09.11.2004 the aforesaid period upto 31st December, 2004 has been extended upto 31st December, 2005. 9. Thereafter, Notification No.16/2008-Central Excise dated 27.03.2008 has been issued by substituting in paragraph No.1 for the words and figures, to the amount of duty paid by the manufacturer of the goods other than the amount of duty paid by utilization of CENVAT credit under the CENVAT Credit Rules, 2001 , the words to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit . Thereafter paragraph Nos. 1A, 2 and 2A have been substituted with par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shall henceforth be equivalent to the duty payable on value addition carried out by the unit in these areas; in case the actual value addition undertaken by a unit exceeds the prescribed rate by more than 25%, the unit may apply for a special rate to be fixed by the jurisdictional Commissioner; Details of amending notifications and their original notifications are as under: Original Notifications Amending Notifications (All dated 27.3.2008, effective from 1.4.2008). 32/99 - Central Excise dated 8.7.99 17/2008-Central Excise 33/99 - Central Excise dated 8.7.99 18/2008-Central Excise 39/2001 - Central Excise dated 31.7.2001 16/2008-Central Excise 56/2002 - Central Excise dated 14.11.2002. 19/2008-Central Excise 57/2002 - Central Excise dated 14.11.2002. 22/2008-Central Excise 56/2003 - Central Excise dated 25.6.2003. 21/2008-Central Excise 71/2003 - Central Excise dated 09.09.2003. 23/2008-Central Excise 20/2007 - Central Excise dated 25.04.2007. 20/2008-Central Excise 2. Revenue implication of the above cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centive to set up new industrial units to generate employment, and the others issued from time to time for development of backward areas. The two objects cannot be equated and put at par. The notifications issued for the North-Eastern States, Sikkim, Jammu Kashmir cannot be considered as being pari materia in so far as Notification No.39/2001 relatable to only Kutch District of Gujarat State is concerned, as the said notification is not primarily in relation to a backward area as such. This is more so because Notification No.39/2001 was not issued in light of backwardness of Kutch District being notified for the purpose of development. Therefore, the subsequent Notifications dated 27.03.2008 and 10.06.2008 cannot be upheld as they treat unequals as equals. Merely because the power to issue notifications is available in both cases under Section 5A of the Act authority exercising powers of delegated legislation under the said provisions cannot be permitted to equate what is inherently not equal. 16. Section 5A of the Act reads as under: [5A. Power to grant exemption from duty of excise.-- (1) If the Central Government is satisfied that it is necessary in the public interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods at a rate expressed in a form or method different from the form or method in which the statutory duty is leviable and any exemption granted in relation to any excisable goods in the manner provided in this sub-section shall have effect subject to the condition that the duty of excise chargeable on such goods shall in no case exceed the statutory duty. Explanation: Form or method , in relation to a rate of duty of excise means the basis, namely, valuation, weight, number, length, area, volume or other measure with reference to which the duty is leviable. (4) Every notification issued under sub-rule (1), and every order made under sub-rule (2) of rule 8 of the Central Excise Rules, 1944, and in force immediately before the commencement of the Customs and Central Excise Laws (Amendment) Act, 1987 shall be deemed to have been issued or made under the provisions of this section and shall continue to have the same force and effect after such commencement until it is amended, varied, rescinded or superseded under the provisions of this section.] [(5) Every notification issued under sub-section (1) [or sub-section (2A)] shall, -- (a) unless otherwise provided, come into force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods manufactured and cleared from new industrial units set up in Kutch District of Gujarat within the period specified and the said Notification was issued in exercise of powers under Section 5A(1) of the Act. The said provision itself provides for vesting of powers in the Central Government to issue a notification to exempt from whole or any part of duty of excise leviable on specified excisable goods. Hence, the concept of the Central Government foregoing certain amount of revenue is inherent in the provision and the contention that a loss occurs to the Central Government by virtue of operation of an exemption notification and hence, the same is required to be modified, or varied or rescinded cannot be countenanced. An authority exercising delegated legislation cannot read in the provision granting powers of delegated legislation something more than what such provision in fact provides. In other words, a delegatee of powers of delegated legislation cannot exercise such powers, even by attempting to read intent, in excess of the powers granted by the provisions. 20. In the present case the respondent authority has sought to curtail the exemption in purported exercise of powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial units in the District of Kutch cannot be permitted. It is not possible to even ascertain as to whether the other units, not located in the District of Kutch, were put up within the same period; and even if so put up, were put up in an area affected by a devastating earthquake. The object and purpose of issuing Original Notification was in relation to a region, namely, District Kutch, which was almost razed to ground by the earthquake in January 2001, and the package for economic and social revival thereof cannot be treated at par with industries set up in other areas of India and, therefore, the assimilation of percentile figures of two incomparable regions would give a misleading picture. The entire exercise of issuing subsequent notifications on 27.03.2008 and 10.06.2008 is thus without any basis, i.e. the basis adopted has no nexus with the object, intent and purpose which formed the basis for issuing Original Notification in 2001. 22. Section 38A of the Act is in relation to effect of amendments, etc., of Rules, Notifications or Orders. The said provision reads as under: [38A. Effect of amendments, etc., of rules, notifications or orders. -- Where any rule, notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc. which means that where under a notification any right or privilege has been acquired or has accrued, the same shall not be affected by the amendment, etc. of the notification, and correspondingly an obligation or liability incurred under the notification shall have to be discharged even after the amendment, etc. Clauses-(d) and (e) similarly provide for permitting continuation of leviability of any penalty, etc. and continuation of any investigation, legal proceeding or remedy, etc. 24. Thus, the scheme which emerges on a plain reading of Section 38A of the Act is that even in a case where a Rule, Notification, etc. is amended, etc., unless the amending Rule, Notification, etc. specifically denotes a contrary intention, everything that has taken place under the Rule, Notification, etc. prior to amendment shall continue to its logical end. This provision is not only a saving provision, but is a provision which correspondingly obligates both the person who was a beneficiary under the existing Rule, Notification, etc. and the authority under the existing Rule, Notification, etc. to continue to comply with the requirements of the Rule, Notification, etc. as it existed even a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and thereafter the other party resiles, such act cannot be stated to be fair and reasonable. This principle is applicable even in a case where one of the parties, namely, the party making a representation may be the State. It is also stated that promissory estoppel cannot be invoked against legislation. This is only partly correct. A distinction has to be made between the delegated legislation and the primary legislation. So far as the primary legislation is concerned, no estoppel can be applied against an Act. However, in case of delegated legislation it is not so. The general principle will come into play and if a subject is able to establish having acted on the promise made, put himself in a detrimental position, the other party is obliged in law to make good the promise, even if the promise is by way of a delegated legislation. The State cannot be heard to complain that the promise has resulted in financial loss. If the nature of promise is such where in exercise of delegated legislation the State has consciously agreed to forego certain revenue the State cannot resile from the said position only on the ground of loss to the exchequer. Of course, it is equally well settled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to lead to perceived misuse which forms the basis for issuing the subsequent Notifications impugned herein. In the Original Notification in paragraph No. 2 it is provided that a manufacturer is obliged to submit a statement of the duty paid, other than the amount of duty paid by utilization of CENVAT credit, and such statement has to be furnished to the Jurisdictional Commissioner by the seventh day of the next month in which the duty has been paid in cash. Upon receipt of the statement the Jurisdictional Commissioner is required to undertake verification, which he deems necessary, and thereafter refund the amount of duty paid in cash by the fifteenth day of the next month. It is further provided that in case of likelihood of delay in verification the Jurisdictional Commissioner shall refund the amount on provisional basis and thereafter adjust the amount of refund by such amount as may be necessary, at the time of payment of subsequent refunds. Thus it is not as if the statement made by a manufacturer is accepted at face value. If any claim for refund is made and approved by the Jurisdictional Commissioner, revenue will have to show by co-relating with the specific transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Original Notification. The Court cannot be expected to accept a bald generalized statement as to misuse of the scheme as otherwise it would mean that the Certificates issued by the Committee are doubted, the role of the Jurisdictional Commissioner who is empowered to undertake verification, withdraw the refund, etc. is also doubted. The revenue cannot be permitted to plead such a state of affairs without bringing case specific cogent evidence in this regard on record. In fact, in the written submissions and the Affidavit-in-Reply where certain instances are referred to alleging violation/misuse of the scheme it is apparent that the said instances are of action initiated in 2009, namely, after the impugned Notifications dated 27.03.2008 and 10.06.2008 have already been issued. Thus on facts also it is not possible to state that the respondent authorities have even prima facie been able to establish any such wide scale misuse of the scheme. 31. One more aspect of the scheme which came by way of amendment dated 06.08.2003 vide Notification No.65 of 2003-CE further makes it more rigorous to ensure that no undue advantage is derived by a manufacturer, when the said Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that in a case where there is evidence of misuse the provisions of the Act are sufficient to take care. At the cost of repetition, it is required to be borne in mind that the object, intent and purpose of Original Notification was to ensure immediate revival of Kutch District, which was worst affected by the massive earthquake which occurred on 26.01.2001, by ensuring that new industrial units are established so as to revive the economy and generate employment. Thus, loss of revenue by way of exempting such new industrial units from payment of duty of excise was inherent and the subsequent lame explanation that exemption was to be limited only to value addition is nothing else but an afterthought to reduce loss of revenue. The policy was not in relation to inflow or otherwise of revenue, but was to invite establishment of new industrial units. That was the public interest. Hence, respondents cannot be permitted to plead supervening public interest on the basis of perceived revenue loss or misuse of the scheme of exemption. The primary inquiry that is required to be undertaken is as to whether a new industrial unit has been set up in the District of Kutch and whether such a new i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation dated 27.03.2008 the respondent authority has mixed up the object of the two notifications, Original Notification issued immediately after the earthquake of January 2001 and the others issued from time to time for development of backward areas. The two objects cannot be equated and put at par. iv. Merely because power to issue notifications is available in both cases under Section 5A of the Act in exercise of delegated legislation authority cannot be permitted to equate what is inherently not equal. v. The concept of the Central Government foregoing certain amount of revenue is inherent in Section 5A of the Act. vi. The contention that a loss occurs to the Central Government by virtue of operation of an exemption notification and hence, the same is required to be modified cannot be countenanced. vii. In exercise of delegated legislation the authority cannot read in the provision something more than what such provision in fact provides. viii. The authority has to be alive to the fact that the power under Section 5A of the Act is essentially a power to grant exemption in relation to duty of excise which is otherwise leviable under other provisions of the Act. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise of delegated legislation the State has consciously agreed to forego certain revenue the State cannot resile from the said position only on the ground of loss to the exchequer. xviii. A person cannot be permitted to misuse the concession or benefit and invoke promissory estoppel. If one party abuses the concession it is always open to the other party to revoke such concession. But there has to be cogent material in the form of direct evidence pointing out misuse of the concession. xix. Supervening public interest is always a good ground for modifying or withdrawing an exemption. But the same has to be established by direct cogent evidence and not based on general and vague apprehensions. 36. Hence, on application of the law in the form of provisions of Sections 5A and 38A of the Act as well as the general principles relating to promissory estoppel it becomes clear that even if one were to uphold the powers of the Central Government to issue a notification in exercise of powers under Section 5A of the Act, it would not be possible to uphold the said exercise in so far as impugned Notification No.16/2008-CE dated 27.03.2008 and Notification No.33/2008-CE dated 10.06.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Units, and other Industrial Units operating in the Kutch District of State of Gujarat, have challenged the Notifications issued by respondent No. 1 bearing No. 16/2008-C.E., dated 27-3-2008 as well as Notification No. 33/2008-C.E., dated 10-6-2008 on the ground that they have effect of depriving the petitioners and other similarly situated industries and industrial units, set up pursuant to the Notification No. 39/2001-C.E, dated 31-7-2001, providing for the exemption from payment of excise duty for five years from the date of commencement of commercial production, to the newly set up industrial units with specific minimum investments as an incentive to set up new industries in Kutch region after the devastating earthquake. The Government of India in exercise of power conferred upon it under 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 (Textiles and Textile Articles) Act, 1978, issued Notification No. 39/2001-C.E dated 31-7-2001 providing incentives in form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 in exercise of 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 (Textiles and Textile Articles) Act, 1978, issued Notification No. 39/2001 (hereinafter referred to as the Exemption Notification ) dated 31-7-2001 on being satisfied that it was necessary in the public interest so to do exempting the goods specified in the First Schedule to the Central Excise Tariff Act, 1985 and other than the goods specified in the Annexure appended to the Notification and cleared from a unit located in the Kutch District of Gujarat from so much of the duty of excise or the additional duty of excise, as the case may be, leviable under provisions of the said Acts as is equivalent to the amount of duty paid by manufacturing of goods till then the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilization of Cenvat credit under the Cenvat Credit Rules, 2001 on certain terms and conditions mentioned therein. 44. Under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries only for and on account of excise exemption. Suffice it say that it was the say of the petitioners in these petitions that all the petitioners set up their units and made investment of huge amount of money for putting up the units in Kutch so as to seek benefit of excise duty exemption as envisaged under the Exemption Notification. 45. As submitted by the petitioner, the respondent no. 1 issued the impugned notifications, which is made effective from 1-4-2008 and altered the entire basis on which the benefits were available to the eligible units, during the period of five years as originally promised. The petitioners submit that under the impugned notifications, the basis of exemption has been arbitrarily changed to value addition undertaken in the manufacturing of goods, instead of exemption on total duty actually paid. The refund available is limited to, the duty payable on value addition undertaken, which shall be equivalent to the amount calculated as a percentage of total duty payable on the excisable goods at the rate specified in table given in the said impugned Notification. The petitioners have on page-9 produced it in a more articulated manner, which is reproduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most 5 years. However, the members of the petitioner Nos. 1 and 2, who also acted on the promise contained in the Exemption Notifications, will be left high and dry, after having invested huge sums of money and undertaken irreversible steps in order to avail the benefit promised. The petitioners have further submitted that the entire basis of the benefit available to them has been altered to their detriment without any reason, rationale or justification, more so when the Exemption was available for a period not exceeding 5 years. Thus, the petitioners being aggrieved with the issuance of Notifications dated 27-3-2008 and 10-6-2008, preferred present petitions under Article 226 of the Constitution of India. 47. The counsel for the petitioners has mainly contended that the impugned Notifications are contrary to the scheme of exemption contained in the Exemption Notifications, without any basis, rationale or justification, discriminatory, unfair and unscientific, vague and with inherent contradictions. The counsel for the petitioners further contended that the alteration of basis is inherently contrary to the Exemption Notifications and also prejudicial to the members of the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12-2005, the said promise of availability of 100% exemption of actual duty paid, for 5 years remained constant. The petitioners submit that thus the promise contained in the Exemption Notifications, the intend and conduct of the authorities, including the respondents, was to provide exemption for a period of 5 years, after which only, the manufacturers will join the usual duty regime. The impugned Notifications thus constitutes a breach and contravention of the promise by the respondents, of their promise. Such breach would cause the investment made by the manufacturers useless and unviable and the petitioners as well as the beneficiaries of the said investment, including the Kutch area, will suffer a death-blow. The respondents are thus bound to continue their promise and not to change their stand, after having led the manufacturers to alter their position. The impugned Notifications are thus required to be struck down on the ground of Promissory Estoppel. The counsel for the petitioners submitted that the exemption Notification solicited investment and participation of industry in redevelopment of Kutch area by offering benefits, since otherwise, the said area was not a desirabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions. In the circumstances, the impugned Notifications is violative of Article 14 of the Constitution of India and also seriously impairs the freedom conferred by Article 19(1)(g) of the Constitution of India and is also hit by the principles of legitimate expectation and is required to be struck down. The counsel for the petitioners further submits that the impugned Notifications are unfair, unscientific, unworkable and treats all divergent situation with a common yardstick, making its application extremely harsh to a few and beneficial to others. The impugned Notifications clubs all types of factories in one category. The impugned Notifications also does not distinguish between efficient units employing state of the art technology as opposed to units employing old and archaic methods of manufacturing. The counsel for the petitioners further submits that the impugned Notification ex-facie discriminates between those units who use only Iron Ore as an input as against such units who may be using other duty paid/non-duty paid inputs. The said classification of goods falling under the same chapter head on the basis of inputs, only for the purpose of refund under the exemption Notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked by the Excise Department and the representations received from the Industry Associations has revealed that the following modus operandi is broadly being followed :- (i) The incorrect and false reporting of production by mere issuance of sale invoices without actual production of goods and supply/clearance of excisable goods, would result in availment of Cenvat credit by buyers of such excisable goods in other parts of the country without actual production being carried out and in absence of actual receipt of goods. (ii) The incorrect and bogus reporting of production by such units in these areas whereas the actual production takes place elsewhere in the country. (iii) Overvaluation 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 above modus operandi, the respondents gave following illustr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without cover of duty paying invoices. The counsel for the respondent has justified the methodology of Value Addition and submitted that in order to keep the scheme simple and litigation free, the modified scheme has prescribed value addition percentages for broad industry groups based on all India average of percentage of duty paid in cash and through Cenvat credit. In other words, all India percentage of PLA payment by excise paying units in the country has been considered as value addition for an industry. However, in case of few units the said percentage may be at variance with actual value addition carried out by the unit. Keeping this eventuality in mind, option is also made available to a manufacturer in specified areas to have the actual value addition calculated in his case from his financial records. These facts evidently show that the action of the Government which is sought to be challenged is neither illegal nor arbitrary nor irrational and therefore, the petitions are required to be dismissed. Learned counsel for the respondents has invited this Court s attention in case of Kasinka Trading v. Union of India, reported in 1994 (74) E.L.T. 782 (S.C.), more particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the public interest which moved the respondents to curtail the period of an exemption Notification but, in the circumstances, it must be assumed that such public interest exists. That in yet another judgment rendered in the case of Dai-Ichi Karkaria Ltd. v. Union of India, reported in 2000 (119) E.L.T. 516 (S.C.) it is held that doctrine of promissory estoppel, is not applicable. That in respect of exemption for modification made by the Government, the doctrine of promissory estoppel, will not be applicable if the change in stand of the Government is made on account of public policy. The said judgment also reiterates the settled legal position as enunciated by the Hon ble Supreme Court in Kasinka Trading v. Union of India. 52. Learned counsel for the respondent has also relied upon the decision in case of R.C. Tobacco Private Ltd. v. Union of India, reported in 2005 (188) E.L.T. 129 (S.C.) in the context of consideration of a separate industrial policy announced by the Government of India for North-Eastern Region of the country, which proposed to stimulate Synergetic development of industries in the region by giving a package of incentives which included exemption from excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must thereafter adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse of any of its provisions come to light, the Legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the Legislature in dealing with complex economic issues. 54. Learned counsel for the respondent has also invited this Court s attention to a judgment reported in 1975 S.C. 994, wherein, the Supreme Court held that a classification made by Legislature is almost always sustained because, the Courts with respect, would lack both expertise familiarity with the local problems so necessary for making considered decisions with respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Industries; (xx) 1999 (110) E.L.T. 3 (S.C.), in case of Indian Express Newpapers; (xxi) 2000 (119) E.L.T. 516 (S.C.) = 2000 (4) SSC 57 = AIR 2000 S.C. 1741; in case of Dai-ichi Karkaria Ltd. 58. The Apex Court has in case of Motilal Padampat Sugar Mills v. State of UP, reported in AIR 1979 SC 621, observed as under: (The most relevant paras are extracted from the judgment so as to avoid any possibility of missing out real ratio of the decision though it has effect of lengthening the judgment) Para-19. When we turn to the Indian law on the subject it is heartening to find that in India not only has the doctrine of promissory estoppel been adopted in its fullness but it has been recognized as affording a cause of action to the person to whom the promise is made. The requirement of consideration has not been allowed to stand in the way of enforcement of such promise. The doctrine of promissory estoppel, has also been applied against the Government and the defense based on executive necessity has been categorically negatived. It is remarkable that as far back as 1880, long before the doctrine of promissory estoppel, was formulated by Denning, J., in England, a Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the events which had transpired had created an equity in favour of the Municipality which afforded an answer to the claim of the Government to eject the Municipality. This defence was upheld by a Division Bench of the High Court and Jenkins, C. J., speaking on behalf of the Division Bench, pointed out that, in view of the following facts, namely, .... the Municipality gave up the old stables, levelled the ground, and erected the moveable stables in 1866 in the belief that they had against the Government an absolute right not be turned out until not only the expiration of six months notice, but also other suitable ground was furnished: that this belief is referable to an expectation created by the Government that their enjoyment of the land would be in accordance with this belief: and that the Government knew that the Municipality were actioning in this belief so created. an equity was created in favour of the Municipality which entitled it to appeal to the Court for its aid in assisting them, to resist the Secretary of State s claim that they shall be ejected from the ground . The learned Chief Justice pointed out that the doctrine which he was applying took its origin f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not, under the circumstances of the case, entitled to assess land revenue on the land in question, because the Municipal Corporation had taken possession of the land in terms of the Government resolution and had continued in such possession openly, uninterruptedly and of right for over seventy years and thereby acquired the limited title it had been prescribing for during the period, that is to say, the right to hold the land in perpetuity free of rent. Chandrasekhara Aiyer, J., agreed with the conclusion reached by the majority but rested his decision on the doctrine of promissory estoppel. He pointed out that the Government could not be allowed to go back on the representation made by it and stressed the point in the form of an interrogation by asking : if we do so, would it not amount to our countenancing the perpetration of what can be compendiously described as legal fraud which a court of equity must prevent being committed? He observed that even if the resolution of the Government amounted merely to the holding out of a promise that no rent will be charged in the future, the Government must be deemed in the circumstances of this case to have bound themselves to fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e them over again. These observations undoubtedly supported the contention of the Government but it was pointed out by this Court that these observations were disapproved by Denning, J., in Robertson v. Minister of Pensions (1949) 1 KB 227 (supra) where the learned Judge said that the Crown cannot escape by praying in aid of the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action.....the defence of the executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract and this statement of Denning, J., was to be preferred as laying down the correct law on the subject. Shah, J., speaking on behalf of the Court, observed (at p. 723 of AIR SC) :- We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set-up no person may be deprived of his right or liberty except in due course of and by authority of law : if a member of the executive seeks to deprive a ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen. The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Govt. would be held bound by the promise and the promise would be enforceable against the Govt. 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 Art. 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. Every one is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promissee and enforce the promise against the Government. The doctrine of promissory estoppel, would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts which have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government cannot, as Shah, J., pointed out in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst a public authority like a Municipal Council in Century Spg. and Mfg. Co. Ltd. v. Ulhasanagar Municipal Council (1970) 3 SCR 854 : (AIR 1971 SC 1021). The question which arose in this case was whether the Ulhas Nagar Municipal Council could be compelled to carry out a promise made by its predecessor Municipality that the factories in the industrial area within its jurisdiction would be exempt from payment of octroi for seven years from the date of the levy. The appellant-company, in the belief induced by the assurance and undertaking given by the predecessor Municipality that its factory would be exempt from octroi for a period of seven years, expanded its activities, but when the Municipal Council came into being and took over the administration of the former Municipality, it sought to levy octroi duty on the appellant-company. The appellant-company thereupon filed a writ petition under Art. 226 of the Constitution in the High Court of Bombay to restrain the Municipal Council from enforcing the levy of octroi duty in breach of the promise made by the predecessor Municipality. The High Court dismissed the petition in limine but, on appeal, this Court took the view that this wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be recognised by the courts in this country as well as in England. The full implication of promissory estoppel. is yet to be spelled out. The learned Judge, after referring to the decisions in High Trees case, (1956-1 All ER 256) Robertson v. Minister of Pensions (1949) 1 KB 227 (supra) and the Indo-Afghan Agencies case (AIR 1968 SC 718) pointed out that the rule laid down in these decisions undoubtedly advances the cause of justice and hence we have no hesitation in accepting it. 27. We must also refer to the decision of this Court in M. Ramanatha Pillai v. State of Kerala (1974) 1 SCR 515 : (AIR 1973 SC 2641) because that was a decision strongly relied upon on behalf of the State for negativing the applicability of the doctrine of estoppel, against the Government. This was a case where the appellant was appointed to a temporary post and on the post being abolished, the service of the appellant was terminated. The appellant challenged the validity of termination of service, inter alia, on the ground that the Government was precluded from abolishing the post and terminating the service, on the principle of promissory estoppel. This ground based on the doctrine of prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its governmental, public or sovereign capacity, the Court would unhesitatingly allow the doctrine to be invoked in cases where it is necessary in order to prevent fraud or manifest injustice. This passage leaves no doubt that the doctrine of promissory estoppel, may be applied against the State even in its governmental, public or sovereign capacity where it is necessary to prevent fraud or manifest injustice. It is difficult to imagine that the Court citing this passage with approval could have possibly intended to lay down that in no case can the doctrine of promissory estoppel, be invoked against the Government. Lastly, a proper reading of the observation of the Court clearly shows that what the Court intended to say was that where the Government owes a duty to the public to act differently, promissory estoppel, cannot be invoked to prevent the Government from doing so. This proposition is unexceptionable, because where the Government owes a duty to the public to act in a particular manner, and here obviously duty means a course of conduct enjoined by law, the doctrine of promissory estoppel, cannot be invoked for preventing the Government from actiong in discharge of its duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omissory estoppel, against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice of the limitations of his authority. The Court can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of the Government. It would be open to the authority to plead and prove that there were special considerations which necessitated his not being able to comply with his obligations in public interest. (Emphasis supplied) It is important to note at this stage that in subsequent ruling in case of Union of India v. Godfrey Phillips, reported in AIR 1986 SC 806 = 1985 (22) E.L.T. 306 (S.C.), three judges Bench rendered its judgment on 3-9-1985, overruled many of the observations in the decision in case of Jit Ram (supra) however some observations in case of Union of India v. Godfrey Phillips (Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n granted by the Government as already stated, was only by way of concession for encouraging entrepreneurs to start industries in rural and undeveloped areas and as such it was always open to the State Government to withdraw or revoke the concession. We must, however, observe that the power of revocation or withdrawal would be subject to one limitation viz. the power cannot be exercised in violation of the rule of Promissory Estoppel. In other words, the Government can withdraw an exemption granted by it earlier if such withdrawal could be done without offending the rule of Promissory Estoppel and depriving an industry entitled to claim exemption from payment of tax under the said rule. If the Government grants exemption to a new industry and if on the basis of the representation made by the Government an industry is established in order to avail the benefit of exemption, it may then follow that the new industry can legitimately raise a grievance that the exemption could not be withdrawn except by means of legislation having regard to the fact that Promissory Estoppel cannot be claimed against a statute. In the present case the appellants had not raised the plea of Promissory Estop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous circumstance and by no stretch of imagination can it ever be said that the commissioning of the industry was directly the outcome of the Government s Notification granting tax exemption. The concession offered by the Government under the first Notification dated 29-4-70 did not prescribe any period or time limit, and hence the appellant cannot claim anything more than the benefit of the Notification for such period the exemption was in force. Once the Government decided, in exercise of the powers vested in it, to revoke the original Notification, the benefit of exemption from sales tax enjoyed by the appellant came to an automatic end. The period of five years mentioned in the second Notification will have no reference to the appellants oil mill commissioned much earlier because the Notification had only prospective effect. We have, therefore, to affirm the view of the High Court that the appellants will be entitled to the benefit of tax exemption only for the limited period during which the concession was offered by the Government. (emphasis supplied) 62. The Apex Court in case of Amrit Banaspati Co. Ltd. v. State of Punjab reported in AIR 1992 Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational v. Asstt. Director General of Foreign Trade {(1996) 2 SCC 439 = 1996 (82) E.L.T. 164 (S.C.)} also reported in AIR 1996 SC 2921 has observed as under : 10. So far as the argument of promissory estoppel, is concerned, it is equally unsustainable in the facts and circumstances of the case. Having regard to the nature of the advance licence - import first and export later - there is no room for this argument. The discretion inhering in the authority to take into consideration the exports effected after the date of filing of the application for advance licence does not detract from its essential character, as explained hereinabove. We may also mention that no precise data has been furnished by the appellant in support of the said plea. In the absence of such data, the plea of promissory estoppel, is misconceived. The appellant has to establish the various ingredients of this rule, as enumerated by this Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, (1979) 2 SCR 641 : (AIR 1979 SC 621), and other subsequent decisions. It is not a pure question of law. (Emphasis supplied) 65. The Apex Court in case of M/s. Pawan Alloys and Casting Pvt. Ltd. v. U. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraphs 11 and 12 (of SCC) : (Paras 12 and 13 of AIR) of the Report : The doctrine of promissory estoppel, or equitable estoppel, is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties. It has been settled by this Court that the doctrine of promissory estoppel, is applicable against the Government also particularly where it is necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orters that the notification s life will not be curtailed earlier. Nor was the issuance of the notification based on any claim of incentives to be offered to anyone. It was issued in exercise of statutory powers vested in the Government which could be exercised from time-to-time in public interest. Earlier the public interest might have required issuance of such a notification granting cent per cent exemption from customs duty on import of PVC resin. Under changed circumstances public interest itself required reduction of such an exemption and as no promise was held out that this could not be done at any time the Court on the facts of that case justifiably rejected the plea of promissory estoppel. It is also to be observed that the said notification was issued in exercise of sovereign taxing power and had created no legal relationship between the authority issuing the notification on the one hand and the prospective importers of PVC resin on the other. The said decision is not an authority for the proposition that even if a claim of exemption from import duty was resorted to in public interest by way of an incentive for a class of importers and even though such public interest cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent but in case there is a supervening public equity, the Government would be allowed to change its stand; it would then be able to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. However, the Court must satisfy itself that such a public interest exists. The law on this aspect has been emphatically laid down in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409 : (AIR 1979 SC 621). The portion relevant for our purpose is extracted below : 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 the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h can override individual equity, the principle should be applicable even in cases where a period has been indicated. It was further observed that the Government is competent to resile from a promise even if there is no manifest public interest involved, provided, of course, no one is put in any adverse situation which cannot be rectified. To adopt the line of reasoning in Emmanuel Ayodeji Ajayi v. Briscoe quoted in M. P. Sugar Mills even where there is no such overriding public interest, it may still be within the competence of 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 the status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. (emphasis supplied) 66. The Apex Court in case of Sales Tax Officer v. Shree Durga Oil reported in AIR 1998 SC 591 observed as under : 13. There are several reasons why we are unable to uphold the contention based on the principle of promissory estoppel, raised by the respondents in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in the instant case, initially issued the exemption notifications under S. 6. The State Government subsequently decided to withdraw the exemption notification in respect of some of the industries which had commenced production after 1-4-1977. The State Government was fully competent to do so under the provisions of S. 6 of the Act. The respondent must have been aware of this when its industry was set up. Everybody is presumed to know the law. Section 6 of the Orissa Sales Tax Act which empowers the State Government to issue a notification granting exemption from sales tax, also empowers the State Government to withdraw, amend or modify any such notification as and when it thinks necessary to do so. Section 6 of the Orissa Sales Tax Act is as under : 6. Tax-free Goods. - The State Government may, by notification, subject to such conditions and exceptions, if any, exempt from tax the sale or purchase of any goods, or class of goods and likewise withdraw any such exemption. 16. When the respondent set up its Oil Mill and was granted exemption from sales tax, it should have known that the notification granting exemption of tax under S. 6 could be withdrawn at any point of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under amounts to a piece of subordinate legislation, even then the notification is liable to be questioned on the ground that it is an unreasonable one inasmuch as a piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent legislature. Subordinate legislation may be questioned on any of grounds on which plenary legislation can be challenged; (i) that it does not conform to the statute under which it is made; (ii) that it is contrary to some other statute inasmuch as subordinate legislation must yield to plenary legislation, (iii) that it is unreasonable in the sense that it is manifestly arbitrary. The embargo of arbitrariness is embodied in Article 14 of the Constitution. An enquiry into the vires of delegated legislation must be confined to the ground on which the plenary legislation may be questioned, except that subordinate legislation cannot be questioned on the ground of violation of the principle of natural justice on which administrative action may be questioned. In cases where power vested in the Government is a power has got to be exercised in public interest, as is the case in the present case, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient. Right of exemption with a valid notification issued gives rise to an accrual right. The doctrine of promissory estoppel, would undoubtedly be applicable where an entrepreneur alters his position pursuant to or in furtherance of the promise made by a State to grant inter alia exemption from payment of taxes of charges on the basis of the current tariff. The doctrine of promissory estoppels would also apply to Statutory Notification (Paras 121 and 128). 70. The Apex Court in case MRF Ltd., Kottayam v. Asstt. Commissioner (Assessment) Sales Tax and Others reported in (2006) 8 SCC 702, the Supreme Court has held that the findings of the High Court that the Notification being statutorily no plea of estoppel would be applicable to the statutory notification was fond to be erroneous and the plea of promissory estoppel, is required to be determined in case of each and every case. (Paras 30 and 35). 71. The Apex Court in case of Mahabir Vegetable Oils (P) Ltd. v. State of Haryana others reported in (2006) 3 SCC p620 held that subordinate legislature cannot take away accrued right. 72. The Apex Court in case of State of Punjab v. Nestle India Ltd. reported in (2004) 6 SCC 465, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine of promissory estoppel has been recognized as such and is being now permitted to be wielded as sword rather than merely a shield. Thus, the old principle that promissory estoppel is a shield and not a sword has undergone sea change in its application. iii. As it is observed by the Apex Court in case of Motilal Padampat Sugar Mills (supra), since the doctrine of promissory estoppel is an equitable doctrine it must yield to the requirement of equity. iv. When the State based on subsequent events show that it would be inequitable to keep its promise then the Court would not raise an equity in favour of the promissee, the doctrine of promissory estoppel would be displaced in such a case and the State would not be bound by such promise. v. It would be open to the State, and the Government against whom the doctrine of promissory estoppel is invoked, to convince the Court that the public interest requires the State to act unfettered by its earlier promises and in such situation the Court would not be justified in enforcing the promise against the Government and State. vi. The doctrine of promissory estoppel cannot be invoked to compel the Government, State or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration Ltd. v. Sant Steel (supra) held that the delegated legislation is not an Act framed by the State Legislature and the principle of doctrine of promissory estoppel would not get whittled down in case of delegated legislation. xiii. The Apex Court in case of MRF Ltd. (supra) has held that the findings of the High Court that the Notification being statutory no plea of estoppel could be applicable, was erroneous. The Apex Court held that the plea of estoppel is required to be determined in facts and circumstances of each case. xiv. At this stage, it is required to be noted that the Apex Court in case of Kamlaprasad v. Union of India reported in AIR 1957 SC 676 observed that a statutory order can be amended and revoked under the same authority which had issued the same meaning thereby, the authority which is exercising delegated functions has a right to revoke the same in exercise thereof and the same was found just and proper. The five Judges Bench of the Apex Court in case of Indian Express News Paper v. UOI reported in AIR 1958 SC 578, every notification and orders issued under the statutorily power of rule making authority has to be read as if they are forming part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conomic zone and brought to an other place in India; or (ii) by a hundred per cent. export-oriented undertaking and brought to any other place in India. Thus, Section 5A of the Act provides for various exigencies and the power vested in the Central Government to deal with the same. In a way, therefore, it can be said that Section 5A is a code within itself to be operative in the arena of exemption. 79. Thus it is required to be noted that petitioners have prayed for judicial review of the impugned Statutory Notifications under Article 226 of the Constitution. The Scope of Judicial Review of Legislative action needs no elaborate discussion. The court has to examine the impugned notification within its limited jurisdiction of judicial review of legislative action of the State. The Court also need to be mindful of the fact that it is called upon to take judicial review of statutory notifications in realm of fiscal policy of Union of India. 80. It is also required to be borne in mind that Original Notification dated 31-7-2001 contained that for getting benefit of exemption the Unit with specific minimum investment had to start commercial production on or before 2003 and than it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make appropriate modification in the scheme on account of peculiarity of the region but by and large the object of granting exemption would remain same and from that angle the impugned notifications are required to be viewed. When such duty exemption only on the basis of actual value addition made on the article or goods in the beneficiary region is made applicable to all the industrial units in other regions also the Industrial Units of Kutch District cannot be permitted to contend that it amount to giving similar treatment to two differently situated parties. In fact as it is stated herein above there could be different reasons for promulgation of duty exemption schemes in different regions namely backwardness of region needing more incentives and regions like Kutch affected on account of natural calamities but that would not change the real object of introducing the exemption schemes and as such when it is noticed that on account of certain glaring lacunae in the original scheme the real purpose of exemption scheme is not served or is likely to be defeated than correctional measures like amendments notifications would always be required to be issued and if they are made applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise Act, 1944 provides that the Central Government has requisite power to implement change or revoke the scheme of exemption of payment of excise duty. The petitioners themselves have taken a plea of discrimination qua the industries which were established in an initially period as provided under a notification dated 31-7-2001 that those industrial units initially set up, enjoyed wider benefits than the industries like present petitioners which came to be set up subsequently during the extended period of eligibility namely around the end of November, December, 2005, as the impugned notifications came to be issued only on 27-3-2008 and 10-6-2008. Thus, it can be culled out from the submission of the petitioner themselves that by and large the industries which were set up earlier by now must have exhausted the period of five years or must be in the verge of exhausted for five years when the impugned notifications came to be promulgated. These factors borne to be in mind while examining the impugned notification dated 27-6-2008 and 10-6-2008. 85. The purpose of the notification dated 31-7-2001 was to help the people of Kutch region in overcoming the crises that had befa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and such inequities. There may be even possibilities of abuse but that itself cannot be the ground for invalidating a legislation because it is not possible for any Legislature to anticipate as if by some divine prescience distortion and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortion and abuses. The Court must therefore, adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudity or inequity or by the possible hardships that may cause to a section. The Apex Court in the very same judgment further observed that if any crudities, inequities or possible abuse of any of its provisions come to a light, the Legislature always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the Legislature in dealing with complex economic issues. Thus, when the Central Government upon noticing the various abuses and misuses of the provisions of notification dated 31-7-2001, brought about suitable amendment in form of Notification Nos. 16 and 33 respectively dated 27-3-2008 and 16-6-2008 cannot be said to be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that the possibility of creating anomaly voiced by the petitioner in the representation to the Central Government has been taken care of, as could be seen from the amendments. The economic legislation therefore as stated by the Apex court has to be viewed from its proper prospective. 90. The Court while taking judicial review of fiscal statutory Notification would certainly not examine the adequacy of reasons warranting any amendment in the fiscal scheme promulgated by the respondent no. 1. The scope of judicial review of such fiscal policy and measures under Article 226 would not permit the Court to substitute its own reasoning with regard to the requirement of amendment and adequacy of reasons warranting such amendments. 91. This Court is of the view that the principles of promissory estoppel stricto-senso cannot be invoked by the petitioner in challenging the notifications dated 27-3-2008 and 16-6-2008. The notification though statutory in nature has nonetheless effect of carving out an exception to statutory obligation of paying duty. The petitioners were therefore under duty to establish manifest injustice in promulgating of said notifications. The respondent Central G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8A of the Act also would be of no avail to the petitioners as in fact a plain reading of Section 38A would go to show that it is meant for not undoing the benefits which have been so far received under the existing and/or repealed notification amendments etc. Section 38A of the Act reads as under :- Section 38A.: Effect of amendments, etc. of rules, notifications or orders. - where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not- (a) revive anything not in force or existing at the time at which the amendment, repeal, supersession or rescinding takes effect; or (b) affect the previous operation of any rule, notification or order so amended, repealed, superseded or rescinded or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded; or (d) affect any penalty, forfeiture or punishment incurred in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100. [Judgment per : Jayant Patel, J. (Oral)]. - I have heard Mr. Mihir Joshi, learned Senior Advocate with Mr. Mathur, Mr. Paresh Dave, Mr. Modh, Mr. B.Y. Mankad and Mr. H.D. Dave for the concerned petitioners, and Mr. Harin Raval, Additional Solicitor General with Mr. Chayya, learned Standing Counsel to the Central Government. 101. I had the benefit of going through the reasons and conclusions recorded by brother D.A. Mehta, J. as well as by brother S.R. Brahmbhatt, J. 102. On the factual aspects, both my brother Judges have elaborately dealt with. However, I find that the factual aspects may be required to be recorded, in order to consider the controversy and the issues arise for consideration, therefore, to that extent, the same shall be narrated at appropriate places. 103. Following aspects arise for considering the controversy in the present group of petitions. (1) Whether any declaration was made by the Central Government in formulating fiscal policy and if yes, whether the same was by way of exemption simplicitor or by way of an incentive offered for establishment of the industry in a particular area or a specific region, to new entrepreneur? (2) Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present petitions. Thereafter on 2-9-2002, the aforesaid period of 31-7-2003 was substituted by 31-7-2004. On 13-2-2003, the amendment was made in the notification by adding the proviso that such refund would not exceed the amount of duty paid less the amount of CENVAT credit availed of in respect of the duty paid on inputs used or in relation to the manufacture of goods cleared under this notification. Thereafter, there were changes in the modalities, but until the impugned notification dated 27-3-2008, it is undisputed position that the policy was continued for granting exemption to the duty paid less the CENVAT credit availed of. To say in other words, the duty was to be refunded, if paid in actual, either in cash or in personal ledger account of the unit concerned. 107. On 27-3-2008, vide notification No. 16/2008, the words and the figure to the amount of duty paid by the manufacturer of the goods other than the amount of duty paid by utilisation of the CENVAT credit under CENVAT Credit Rules was substituted by the words to the duty payable on value addition undertaken in the manufacture of the said goods by the said unit . In the said notification, the duty payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the new industry to be established in the Kutch District. The whole tenor of the notification if considered as it is with the language used in the notification, is for the incentive to be given for establishment of the industrial unit in Kutch district of Gujarat for a period of 5 years from the date of the commencement of the commercial production of the unit. Therefore, it was a specific incentive given to only new industrial units to be established in the Kutch district. Hence, the first aspect remains answered accordingly. 110. On the second aspect for establishment of the new units by the petitioners in Kutch District, it appears that there is no change nor withdrawal or the alteration in the policy on account of non-compliance of conditions for establishment of new industrial units. If based on the aforesaid fiscal policy of the Central Government by way of incentive for establishment of new industrial unit in Kutch District, the petitioners have established their industrial unit in Kutch District, it could hardly be said that the petitioners have not altered their position. Even otherwise also, if the condition of notification of new industrial units is not fulfill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n act of unfairness and arbitrariness. Consideration of public interest and the fact that there cannot any estoppel against a Statute are exceptions. 28. Learned senior counsel for the appellant has cited nine instances which can be loosely categorised into two i.e. (i) that there cannot be any estoppel against the statute and (ii) overriding public interest. So far as the first part is concerned i.e. the revocation has the statute flavour i.e. the benefit which was extended under Section 49 of the Act of 1948 and the notification had been issued revoking the same benefit under Section 49 of the Act of 1948 by invoking the provisions of the General Clauses Act that an authority granting exemption has a right to revoke the same also. It is true that it has a right to revoke the same but if the other party has suffered on that account then such representation will be against the public policy and the morality. Notification issued under Section 49 of the Act of 1948 for giving the benefit of exemption for the hill areas was in the nature of delegated legislation and not an Act framed by the State Legislature. The pertinent aspect is that in the very decision, the Apex Court while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it or there was theft of the energy at a large scale by these persons to whom the concession had been given then of course such factors, if all the datas were brought on record of course could have persuaded the Court to take a different view of the matter. But simply because there was theft of energy allow the State cannot persuade us to hold that the revocation of such concession can be said to be in public interest. Since the benefit was given to these units in the hill areas, there should have been overwhelming evidence to show some mala fide on the part of these consumers which have persuaded the Corporation to revoke it. If there was no misuse of the energy by these units in the hill areas to whom the concession had been granted then in that case it cannot be taken that there was really public interest involved which persuaded the Corporation to revoke the same. 32. No person can be permitted to misuse the concession or benefit and invoke promissory estoppel. Promissory estoppel is not one sided affair, it is rather two sided affair. If one party abuses the concession then it is always open to the other party to revoke such concession but if one party avails the benefit an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the statute. He also contended that even if it is read that such power is to be exercised in public interest, then also, in the affidavit in reply, there is enough material shown with the facts and figures that the duty paid in such exempted area is much more in comparison to other area where exemption is not granted on the same product. Such prima facie shows that since the refund is made available by way of exemption, such policy is misused by the industrial units. He submitted that if it came on record before the Government that the policy is being misused, it has tried to rationalise the same by fixing a particular rate prescribed for the duty and the refund as per the impugned notification. In the submission of the learned Additional Solicitor General, such rationalisation is not having retrospective character, but is having retroactive character. He further submitted that the powers for fixation of rates are expressly provided to enable the concerned authority to alter the same if sufficient material is produced, therefore, he submitted that such could be said to be made permissible in fiscal policy to the Government in exercise of the power under Section 5A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and its scope and ambit is by now well settled and the same can be summarised as under : (1) The doctrine of promissory estoppel is to be treated as a preserved right, but such right is subject to the limitation that - (2) Such promise or the representation made must be given under the authority of law and in consonance with the statute and not unauthorisedly or in contravention to any statutory provision on the principle that there cannot be any estoppel against the statute. (3) Such cannot be permitted to be invoked against the overwhelming public interest. (4) The Legislature or the Parliament has power for diluting its effect retrospectively by enacting any law. 116. If the facts of the present case are examined in light of the aforesaid, it is apparent that by the notification dated 31-7-2001 and others, special incentive was given to the entrepreneur for establishment of new industrial units in Kutch district granting full refund of the actual duty paid as observed in the earlier paragraph and further, as observed earlier, for establishment of new industrial undertaking, the petitioners have altered their position and right has accrued based on the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawing the benefit or not may vary from facts to facts. But it will be for the State to satisfactorily demonstrate before the Court of such direct public interest to the object was to be achieved and is not achieved or the overwhelming public interest attracting the power of withdrawal. Unless such exceptions are satisfactorily demonstrated before the Court, it is not possible to hold that merely because there is power to withdraw the exemption granted by way of a special incentive can be permitted to be withdrawn with retrospective effect. 117. If the record produced on behalf of the Central Government is considered, it appears that none is concerning to the object which was at the time of formulation of the policy or achievement of the said object. On the aspects of public interest, the ground as sought to be canvassed is that the duty paid in such area where incentive provided was higher in comparison to the other places and it was orally contended by the learned Additional Solicitor General that such would show that the exemption policy was being misused or there were manipulations for getting the refund. The contention considered in either way may at the most attract for ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id that by the impugned notification which is a delegated legislation, the retrospective effect is given. It is by now well settled that the subordinate legislation or a delegated legislation can be made with prospective effect and cannot be made with retrospective effect. The reason being that once a retrospective effect is given, the accrued right of a person is altered or may be prejudiced, which can only be taken away by any express provision of the statute and not by way of any delegated or subordinate legislation. Under these circumstances, even if it is considered that in fiscal matter, the Government has power to alter or withdraw the exemption benefit, such cannot be permitted to be exercised with the retrospective effect de hors the doctrine of promissory estoppel, if it is established that a specific representation by way of a special incentive was made to attract new entrepreneur have established the industry in a particular area or region. 120. It is not the case of the respondent Central Government that the Parliament has passed any Act to alter the rights accrued with retrospective effect. Therefore, the question as to whether such Act of Parliament or the Legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly with no order as to costs. Sd/- (Jayant Patel, J.) 124. After the pronouncement of the order, Mr. Chhaya, learned Standing Counsel prays that the Union of India is desirous to carry the matter before the higher forum, therefore, this Court may suspend the operation of the order for some time so as to enable the respondent-Union of India to approach before the Apex Court. 125. As such, in view of two different views expressed by two Hon ble Judges, the matter was referred to me. The view is expressed and the reference would stand disposed of. However, if the final effect is to be stayed, the matter may be required to be placed before the appropriate Bench. 126. It will be for the office to place the matter before the appropriate Bench after obtaining suitable orders of Hon ble the Chief Justice on administrative side. Hence, at the request of Mr. Chhaya, learned Standing Counsel, matter be now placed before the appropriate Bench, preferably on 12th March, 2010. Sd/- (Jayant Patel, J.) 127. [Order per : D.A. Mehta, J.]. - In light of the majority view, all the petitions are allowed in terms of the opinion expressed by the majority. Rule made absolute to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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