IN THe gaUHaTI HIgH CoURTghconline.gov.in/Judgment/WA2432009.pdf · in the gauhati high court ......

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IN THe gaUHaTI HIgH CoURT

(THe HIgH CoURT oF aSSaM; NagaLaND; MIZoaM & aRUNaCHaL PRaDeSH)

Wa 243 oF 2009 1. THE UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF FINANCE, (DEPARTMENT OF REVENUE) NORTH BLOCK, CENTRAL SECRETARIAT, NEW DELHI-110011. 2. THE COMMISSIONER OF CENTRAL EXCISE, SHILLONG, HAVING OFFICE AT MORELLOW COMPOUND, SHILLONG-1, 3. THE COMMISSIONER OF CENTRAL EXCISE, GUWAHATI HAVING ITS OFFICE AT G.S. ROAD, BHANGAGARH, GUWAHATI-5. 4. THE DEPUTY COMMISSIONER OF CENTRAL EXCISE, GUWAHATI DIVISION, BHANGAGARH, GUWAHATI-5. ----- Appellants.

Versus 1. KAMAKHYA COSMETICS AND PHARMACEUTICALS PLOT.NO. 11 & 12, INDUSTRIAL AREA, BAMUNIMAIDAM, GUWAHTI-21, REPRESENTED THROUGH ITS CONSTITUTED ATTORNEY AND AUTHORISED SIGNATORY, SRI DEBAJIT DEBROY. 2. HERBO FOUNDATION PVT. LTD. A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AND FACTORY SITUATE AT SHED NOS. 21,22,23 & 24, INDUSTRIAL ESTATE, BAMUNIMAIDAM, GUWAHATI-781 021(ASSAM) REPRESENTED BY SRI SAMIT GHATAK, THE COMMERCIAL MANAGER OF THE PETITIONER COMPANY AND RESIDENT OF SHED NOS. 21,22,23 & 24, INDUATRIAL ESTATE, BAMUNIMAIDAM, GUWAHATI-781021 3. ICON HOUSEHOLD PRODUCTS PRIVATE LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT PLOT NO. A-103, PIPDIC INDUSTRIAL ESTATE, METTUPALAYAM, PONDICHERRY-605009, HAVING ONE OF ITS UNITS AT B-5 (A&B), B-6 (A&B), C2 (A), RANI INDUSTRIAL AREA, RANI KAMRUP, ASSAM. REPRESENTED BY ITS AUTHORISED SIGNATORY AND BUSINESS MANAGER (GUWAHATI OPERATIONS), SRI RAJESH S. PRASAD. 4. R.C.L. CEMENTS, A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT SILPUKHURI, GUWAHATI AND FACTORY SITUATED AT JAMUNANAGAR, UMRANGSHO IN THE DIST. OF N.C. HILLS, ASSAM-788 931, REPRESENTED BY SRI SUBHANKAR GHOSE, THE AUTHORIZED SIGNATORY OF THE PETITIONER COMPANY AND RESIDENT OF SILPUKHURI, GUWAHATI. 5. ICON HOUSEHOLD PRODUCTS PRIVATE LIMITED. A COMPANY ACT. 1956 HAVING ITS REGISTERED OFFICE AT PLOT NO. A-103, PIPDIC INDUSTRIAL ESTATE, METTUPALAYAM, PONDICHERY-605009, HAVING ONE OF ITS UNITS AT B-5 (A&B), B-6(A&B), C2 (A), RANI INDUSTRIAL AREA, RANI KAMRUP, ASSAM.REPRESENTED BY ITS AUTHORISED SIGNATORY AND BUSINESS MANAGER (GUWAHTI OPERATION), SRI RAJESH S. PRASAD. 6. NORTH EAST ROOFINGS LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE SITUATED AT ESPLANADE MANSION, GOVERNMENT PLACE, EAST, KOLKATA-700069 IN THE STATE OF WEST BENGAL AND ITS FACTORY SITUATED AT BONDA NARRENGI, ASSAM REPRESENTED BY SRI MISHRILAL RAJAK, THE DEPUTY MANAGER (ACCOUNTS) OF THE PETITIONER COMPANY AND RESIDENT OF HATIGAON CHARALI SIJOO BARI ROAD, GUWAHATI-781038. 7. ASSAM ROOFING LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT. 1956 HAVING ITS REGISTERED OFFICE SITUATED AT ESPLANADE MANSION, GOVERNMENT PLACE, EAST, KOLKATA-700069 IN THE STATE OF WEST BENGAL AND ITS FACTORY SITUATED AT BONDA NARENGI, ASSAM REPRESENTED BY SRI MISHRILAL RAJAK, THE DEPUTY

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MANAGER (ACCOUNTS) OF THE PETITINER COMPANY AND RESIDENT OF HATIGAON CHARALI SIJOO BARI ROAD, GUWAHATI-781038. 8. PRAG ELECTRICALS PVT. LTD, A PRIVATE LIMITED COMPANY WITHIN THE MEANING OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AND FACTORY AT INDUSTRIAL ESTATE, BAMUNIMAIDAM GUWAHATI-781 021 REPRESENTED BY SRI KISHLOY PURKAYASTHA, AUTHORIZED REPRESENTATIVE OF THE PETITIONER COMPANY AND RESIDENT OF KAHILIPARA COLONY, GUWAHTI-781 038. 9. EMAMI LTD, A PRIVATE LIMITED COMPANY HAVING ITS REGISTERED OFFICE AT STEPHEN HOUSE, 6A, R.N.MUKHERJEE ROAD, KOLKATA-700001 AND ITS MANUFACTURING UNIT SITUATED AT EPIP COMPLEX, AMINGAON, GUWAHTI, REPRESENTED BY ITS AUTHRIZED SIGNATORY SRI JASWANT SRTHIA, ARESIDENT OF NILGIRI APARTMENT, ADABARI TINIALI, GUWAHATI. 10. VINAY CIMENTS LIMITED. A COMPANY INCORPORATED UNDER THE PROVISION OF THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AND FACTORY AT JAMUNANAGAR, UMRANGSHO IN THE DIST. OF N.C. HILLS, ASSAM-788931 REPRESENTED BY SRI SUBHANKAR GHOSH, THE AUTHORIZED SIGNATORY OF THE PETITIONER COMPANY AND RESIDENT OF SILPUKHURI, GUWAHATI. 11. GUWAHATI CARBON LIMITED, PUB-BORGAON, MOUZA- JALUKBARI, DIST. KAMRUP, GUWAHATI REPRESENTED THROUGH ITS DIRECTOR, SHRI JAGADISH CHANDRA PAUL. 12. BRAHMAPUTRA CARBON LIMITED , INSUSTRIAL ESTATE, NEW BONGAIGAON, ASSAM-783380 REPRESENTED THROUGH ITS CONSTITUTED ATTORNEY AND AUTHORIZED SIGNATORY, SYED JAKIR HUSSAIN. 13. PDP STEELS LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE SITUATED AT ESPLANADE MANSION, GOVERNMENT PLACE, EAST, KOLKATA-700069 IN THE STATE OF WEST BENGAL AND ITS FACTORY SITUATED AT BONDA NARENGI, ASSAM REPRESENTED BY SRI MISHRILAL RAJAK, THE AUTHORIZED SIGNATORY OF THE PITITIONER COMPANY AND RESIDENT OF HATIGAON CHARIALI SIJOO BARI ROAD, GUWAHATI-781038. 14. M/S DHARAMPAL SATYAPAL LIMITED (GUWAHATI UNIT), A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT. 1956 AND HAVING ITS REGISTERED OFFICE AT 1711, S.P. MUKHERJEE MARG, DELHI-110006. B) M/S AVICHAL BUILDCON PVT. LTD. (GUWAHATI UNIT), A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT 1711, S.P. MUKHERJEE MARG, DELHI-110006. 15. M/S GODREJ SARA LEE LTD. A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND HAVING ITS REGISTERED OFFICE AT PIROZESHA NAGAR, EASTERN EXPRESS HIGHWAY, VIKHROLI (EAST) MUMBAI-400079 AND ONE OF ITS FACTORIES AT BYE LANE NO. 5, NO. 38 INDUSTRIAL ESTATE, BAMUNIMAIDAM, GUWAHTI-781 021. 16. M/S OZONE AYURVEDICS, A PROPRIETORSHIP FIRM HAVING ITS FACTORY AT EPIP, AMINGAON, GUWAHATI-31. KAMRUP, ASSAM. 17. M/S OZONE AYURVEDICS (UNIT II) A PROPRITIRSHIP FIRM HAVING ITS FACTORY AT EPIP, AMINGAON, GUWAHATI-31, KAMRUP, ASSAM. 18. M/S OZONE PHARMACEUTICALS LIMITED. A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS OFFICE AT EPIP, AMINGAON, GUWAHTI-31, KAMRUP, ASSAM. 19. M/S. S. JOHNSON PRODUCTS PRIVATE LTD. A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE LOCATED AT M-69, M-BLOCK MARKET, GREATER KAILASH-II, NEW DELHI-110048 AND ITS UNIT 4 SITUATED AT BONDA INDUSTRIAL AREA, GUWAHTI (ASSAM) AND THE UNIT 6 SITUATED AT BAMUNIMAIDAM INDUSTRIAL AREA,

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GUWAHATI(ASSAM) REPRESENTED BY MR. ANOOP ADITYA, THE AUTHORIZED SIGNATORY OF THE PETITIONER COMPANY AND RESIDENT OF C.P.B. ROAD, PUB SARANIA, BYE LANE NO. 6, CHANDMARI, GUWAHATI. 20. M/S N.E. THERMISION PRIVATE LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT 75/B, ANANDA BHAWAN, G.S. ROAD, ULUBARI, GUWAHATI-781007 AND REPRESENTED BY SRI JUGAL KISHOR MAHANTA , MANAGING DIRECTOR OF THE PETITIONER COMPANY AND RESIDENT OF USHA COURT, R.G. BARUAH ROAD, GUWAHTI-781 024.

----- Respondents.

Wa 230 oF 2009 UNION OF INDIA & ORS, THROUGH THE SECRETARY, MINISTRY OF FINANCE, (DEPARTMENT OF REVENUE), NORTH BLOCK, CENTRAL SECRETARIAT, NEW DELHI-110011.

----- Appellants. Versus

M/S MANAKSIA LTD. A PUBLIC LIMITED COM. DULY INCORPORATED AND REGISTERED UNDER THE COMPANIES ACT, 1956 REPRESENTED BY ONE OF ITS DIRECTORS, SRI MAHABIR PRASAD AGARWAL, HAVING ITS REGISTERED OFFICE AT 8/1, LALBAZAR STREET, BIKANER BUILDING, KOLKATA 700001 AND HAVING ITS INDUSTRIAL UNIT AT EXPORT PROMOTION INDUSTRIAL PARK, AMINGAON, GUWAHATI, ASSAM.

----- Respondent.

WP(C) No. 2138 oF 2009 ZOBELE INDIA PVT. LTD. ----- Petitioner.

Versus

THE UNION OF INDIA & ORS ----- Respondents.

WP(C) No. 3376 oF 2009 GODREJ CONSUMER PRODUCTS LTD. ----- Petitioner.

Versus


WP(C) No. 3377 oF 2009 GREENPLY INDUSTRIES LTD. ----- Petitioner.

Versus


WP(C) No. 3387 oF 2009 BULLAND CEMENTS PRIVATE LTD. ----- Petitioner.

Versus


WP(C) No. 3940 oF 2009 KITPLY INDUSTRIES LTD. ----- Petitioner.

Versus


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WP(C) No. 4869 oF 2009 HINDUSTAN UNILEVER LIMITED ----- Petitioner.

Versus


WP(C) No. 4119 oF 2010 M/S KAMRUP PERSONAL CARE ----- Petitioner.

Versus


WP(C) No. 2468 oF 2012 VARUN BEVERAGES (INTERNATIONAL) LTD. ----- Petitioner.

Versus


WP(C) No. 5968 oF 2012 M/S. BARAK ALLOY ----- Petitioner.

Versus


WP(C) No. 5969 oF 2012 M/S. BALAJI INDUSTRIES ----- Petitioner.

Versus


WP(C) No. 6161 oF 2012 CENT PLY ----- Petitioner.

Versus


WP(C) No. 2918 oF 2010 M/S SRD NUTRIENTS PVT. LTD. ----- Petitioner.

Versus


WP(C) No. 4112 oF 2010 KAMRUP EXPORTS PVT. LTD. ----- Petitioner.

Versus


WP(C) No. 84 oF 2013 M/S. CACHAR ISPAT PVT. LTD ----- Petitioner.

Versus


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WP(C) No. 104 oF 2013 M/S GATTANI INDUSTRIES ----- Petitioner.

Versus


WP(C) No. 109 oF 2013 M/S SM CEMENT INDUSTRIES ----- Petitioner.

Versus


WP(C) No. 187 oF 2013 M/S JUMBO PACKAGING INDUSTRIES ----- Petitioner.

Versus


WP(C) No. 235 oF 2013 UDAYAK AGRO PRODUCTS PRIVATE LTD. ----- Petitioner.

Versus


WP(C) No. 239 oF 2013 M/S RAKSHA CEMENTS PVT LTD. ----- Petitioner.

Versus


WP(C) No. 240 oF 2013 M/S SHANDAR PAINTS INDUSTRY. ----- Petitioner.

Versus


WP(C) No. 242 oF 2013 M/S SATYA MEGHA INDUSTRIES. ----- Petitioner.

Versus


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WP(C) No. 279 oF 2013 M/S JOYSHREE GENERATORS. ----- Petitioner.

Versus


WP(C) No. 312 oF 2013 M/S SHREE SALASAR INDUSTRIES. ----- Petitioner.

Versus


WP(C) No. 319 oF 2013 M/S TIRUPATI PLYWOOD INDUSTRIES. ----- Petitioner.

Versus


WP(C) No. 399 oF 2013 M/S R.J. CEMENT INDUSTRIES. ----- Petitioner.

Versus


WP(C) No. 410 oF 2013 M/S SMS SMELTERS LTD. ----- Petitioner.

Versus


WP(C) No. 411 oF 2013 M/S PLATINUM ALLOYS PVT. LTD. ----- Petitioner.

Versus


WP(C) No. 417 oF 2013 M/S RIVER VALLEY CEMENT CORPORATION. ----- Petitioner.

Versus


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WP(C) No. 457 oF 2013 M/S ASSAM TIMBER PRODUCTS(P) LTD. ----- Petitioner.

Versus


WP(C) No. 632 oF 2013 M/S SILVER DROP FOODS AND BEVERAGES (P) LTD. ----- Petitioner.

Versus


WP(C) No. 809 oF 2013 ASSENT CARAMICS (A UNIT OF ASSENT CHEMICALS LTD.). ----- Petitioner.

Versus


WP(C) No. 810 oF 2013 KAMAKHYA PLASTICS PVT. LTD. ----- Petitioner.

Versus


WP(C) No. 811 oF 2013 M/S ASSENT CHEMICALS LTD. ----- Petitioner.

Versus


WP(C) No. 1151 oF 2013 M/S CEMENT INTERNATIONAL LTD. ----- Petitioner.

Versus


WP(C) 1153/2013

M/S BARAK VALLEY CEMENTS LTD. ......... Petitioner

VS.

THE UNION OF INDIA & 6 ORS .......... Respondents

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WP(C) 1242/2013

M/s. PURBANCHAL CEMENT LTD. ......... Petitioner

VS.

THE UNION OF INDIA & ORS .......... Respondents

WP(C) 1472/2013

M/s. BALAJI UDYOG LTD. ......... Petitioner

VS.


WP(C) 1975/2013

M/s. KAMLANG SAW & VENEER MILLS PVT. LTD. ......... Petitioner

VS.


WP(C) 2660/2013

M/s. JERICHO DETERGENT PVT. LTD. ......... Petitioner

VS.


WP(C) 317/2014

CALCOM CEMENT INDIA LTD. ......... Petitioner

VS.


WP(C) 724/2014

M/S DAYA ENGINEERING WORKS PVT. LTD. ......... Petitioner

VS.


WP(C) 723/2014

M/S SUREKA PROJECTS PVT. LTD. ......... Petitioner

VS.


WP(C) 729/2014

R.P. ASSOCIATES PVT. LTD. ......... Petitioner

VS.


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WP(C) 1694/2014

M/S GATTANI POLYMERS ......... Petitioner

VS.


WP(C) 1723/2014

M/S KESHARI INDUSTRIES ......... Petitioner

VS.


WP(C) 2887/2014

ADHUNIK CEMENT LTD. ......... Petitioner

VS.


WP(C) 1696/2014

M/S. PCL CEMENT & PIPE INDUSTRIES. ......... Petitioner

VS.


WP(C) 3457/2014

M/S. UNITED PACKAGERS ......... Petitioner

VS.


WP(C) 3458/2014

M/S. PURBANCHAL PACKAGING INDUSTRIES ......... Petitioner

VS.


WP(C) 6685/2013

M/S. INDIA CARBON LIMITED ......... Petitioner

VS.


WP(C) 6698/2013

M/S. NEW AGE PETCOKE PVT. LTD ......... Petitioner

VS.


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WP(C) 6786/2013

M/S. UPPER ASSAM PETROCOKE PVT. LTD ......... Petitioner

VS.


WP(C) 5444/2014

GAIL (INDIA) LTD. ......... Petitioner

VS.


WP(C) 5538/2014

NATURAL PANEL INDUSTRIES PVT. LTD. ......... Petitioner

VS.


P R E S E N T

HON’BLE THE CHIEF JUSTICE (ACTING) MR. K. SREEDHAR RAO HON’BLE MR. JUSTICE UJJAL BHUYAN

Advocates present:

For the Appellants/respondents :Mr. KN Choudhry, Mr. R Dubey, Mr. M Mahanta Mr. BK Kashyap, Mr. D Bora, Ms. J Huda, CGC.

For the writ petitioners/respondents:Dr. Ashok Saraf, Dr. BP Todi, Mr. GN Sahewalla

Mr. CS Lodha, Advocates. Ms. ML Gope, Ms. N Hawelia, Mr. K Choudhry, Mr. P Baruah, Mr. A Chutia, Md. Aslam, Mr. D Senapati, Ms. K Kalita, Mr. P Deka, Mrs. SS Bawari, Advocates.

Date of hearing & judgment : 20th of November, 2014

JUDGEMENT AND ORDER [ O R A L ]

(K Sreedhar Rao, CJ (Actg.)

The material facts concerning the litigation are set out hereunder in a

brief and laconic manner.

2. The Government of India, by official memorandum, dated 24-12-1997,

formulated a new Industrial Policy declaring total exemption of Central Excise

Duty in the Northeastern region for a period of 10 years. The silent object of

the said policy is to stimulate development of industries in the Northeastern

region, which continued to be the backward region. Therefore, in order to

Page No. 11

boost and stimulate industrial activity in the Northeastern region, the policy

was formulated. The significant concessions offered in the policy are in the

nature of fiscal incentives to the new industrial units and their substantial

expansions. The Clause C of the policy reads thus:

“FISCAL INCENTIVES TO NEW INDUSTRAIL UNITS AND THEIR SUBSTANTIAL EXPANSION.

i. Government has approved for converting the growth centers and IIDs into a total Tax Free

Zone for the next 10 years. All industrial activity in these zones would be free from Income Tax,

Excise for a period of 10 years from the commencement of production. State Government would

be requested to grant exemptions in respect of Sales Tax and Municipal Tax.

ii. Industries located in the growth centers would also be given Capital Investment Subsidy at

the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of

Rs.30.0 lakhs.”

3. Pursuant to the said policy, dated 08-07-1997, a notification is issued by

the Central Government, under Section 5A (1) of Central Excise Act, 1944 (in

short, ‘Act of 1944’) and under Section 3 (3) of the Additional Duties of Excise

(Goods of Special Importance) Act, 1957 (in short, ‘Act of 1957’), wherein the

nature of industries and the areas, which are entitled to benefits are specified.

The Industrial Policy of 1997 came to be expired by 23-12-1997. The

Government of India, again, issued another Industrial Policy on 01-04-2007

reiterating the same terms and conditions of the earlier Industrial Policy, dated

24-12-1997. A notification, dated 24-12-1997, under Section 5A(1) of the Act of

1944 and under Section 3(3) of the Act of 1957 was issued. Both the policies

and the notifications issued, pursuant to the Industrial Policies envisaged 100%

exemption of excise duty on the products manufactured in the Northeastern

region. The Government of India issued separate modified notifications under

Section 5A of the Act of 1944 and under Section 3 of the Act of 1957,

whereunder the concessions of exemption of 100% excise duty was modified

and limited to the extent of value addition with varying rates of exemption of

the central excise duty.

4. The respondents, in WA No. 243 of 2009 and WA No. 230 of 2009,

aggrieved by the modified notifications, which withdrew the concessions

earlier offered in the previous Industrial Policy and the notifications issued

pursuant thereto, challenged the validity of the modified notifications as

being bad in law. The learned Single Judge upheld the contention of the

respondents and struck down the modified notifications, dated 27-03-2008,

which were issued in respect of both the Industrial Policies.

Page No. 12

5. The State aggrieved by the said judgment and order, has filed the two

appeals. The other petitioners, who are also aggrieved by the modified

notifications, have filed writ petitions challenging the validity of the said

modified notifications. Since the question involved in the said writ petitions

and the question involved in the writ appeals being substantially one and the

same, the writ petitions have been clubbed along with the writ appeals for

consideration.

6. Elaborate and enlightened arguments were canvassed by the Senior

counsel, Dr. Ashok Saraf, Dr. BP Todi, Mr. GN Sahewalla and Mr. CS Lodha,

counsel for the petitioners and they submitted the following grounds in

support of the judgment of the learned Single Judge:

(a) The Government of India, by virtue of the two Industrial Policies of 1997

and of 2007, had declared complete exemption from payment of excise duty

on the products produced in the North-eastern region as a public policy to

stimulate the economic development in the North-eastern region. The

petitioners in the writ petitions and the respondents in the appeal inspired by

the concessions offered by the Industrial Policy, have made substantial and

heavy investments. In fact, the first Industrial Policy of the year 1997, operated

successfully. The Government felt that a further extension of the said

concession will boost the industrial activity in the North-eastern region.

Therefore, the second Industrial Policy of 2007, on similar line, was published for

a further period of 10 years. The Government in the year 2008 abruptly modified

the rates of concession by the modified notifications, which is contrary to the terms of

the Industrial Policy. The State cannot issue notifications contrary to the Industrial

Policy in view of the judgment of the Supreme Court in Suprabhat Steel Ltd. and

others –vs- State of Bihar and others, reported in (1999) 1 SCC 31.

(b) The State having held out a solemn promise to the investors to invest in the

North-eastern region, declared concessions. Reposing faith in the promise, the

investors have invested substantial sums of money in the North-eastern region.

The abrupt withdrawal of concessions by the modified notifications, in

question, is impermissible in view of the doctrine of promissory estoppel

enunciated by the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd –vs-

State of Uttar Pradesh and others, reported in (1979) 2 SCC 409, which applies

to the facts of the cases.

(c) Although the State, under Section 5A (1) of the Act of 1944, is invested with

the power to curtail the concessions by modified notifications, but

Page No. 13

nonetheless such notifications should be in public interest. The Supreme Court,

in Motilal Padampat Sugar Mills Co. Ltd (supra) has laid down that promissory

estoppel is an equitable doctrine and yielded when equity so requires. When

the public interest would be prejudiced, the doctrine of promissory estoppel

cannot be invoked; however, it is observed that the Government cannot

claim exemption from the liability to carry out the promise on some indefinite

and undisclosed ground of necessicity or expediency. The Government

cannot be the sole judge of its liability and repudiate it on an ex party

appraisement of the circumstances. If the Government wants to resist the

liability, it would have to disclose the facts and circumstances. If the

Government wants to resist the liability, it would be for the Court to decide if it

is inequitable to enforce the liability against the Government.

7. In the instant case, the Government has not come up with any credible

material to disable the petitioners and the respondents in the appeals to

invoke the doctrine of promissory estoppel. The report of the Directorate

General of Central Excise Intelligence (DGCEI) relied on by the State, points

out only 41 cases of fraudulent availment of the benefit in Kutcch, J&K, H.P.,

Assam, Meghalaya, Arunachal and Sikkim. The statistical details of the

industries in the said areas and the result of the investigation is furnished as

Annexure-A to the said report. For convenient reference, the said Annexure-A

is extracted hereunder:

ANNEXURE-A

Sl. No.

Name of the unit

Place Duty invoked

Modus operandi Remarks

1. Welspun Stahl Rohren

Kutcch No refund was claimed by the party

Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption.

Following detection of the case the unit withdrew their application for availment of exemption. CC has sanctioned prosecution against the unit.

2. GPT Steel Industries Ltd.



Following detection of the case the unit withdrew their application for availment of exemption.

3. Sanghi Industries Ltd.

Kutcch 40.12 Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption, as the unit was already in existence even prior to issuance of Notification.

Following detection of the case the unit voluntarily deposited Rs. 25.00 Crores. SCN is being issued.

4. Sumangal Glass Pvt. Ltd.



Detailed report sent to CC. Case is yet to be decided by the Committee.

Page No. 14

5. Gran Electronics Pvt. Ltd.




6. Hinron Steel Industries

Kutcch No refund was claimed by the party.

Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption, as the investment made in Plant & Machinery was less than 20 Crores.


7. Kush Synthetics Ltd.




8. Manaksia Ltd. Kutcch No refund was claimed by the party.

Fraudulent availment of Notification No. 39/2001-CE dated 31-07-2001 without being entitled for the exemption, as the value of investment in Plant & Machinery was highly inflated.

Investigation is progress

9. Trendz Manufacturing Co.



Investigation in progress.

10. Divine Petrochemicals Ltd.



Investigation in progress.

11. Bhagwati Metal Works

J&K 47.26 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs.

12. Chetan Cabletronics (P) Ltd.


13. HSS (Dinesh International Limited)


14. J&K Metals J&K 0.13 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs.

15. Jain Metal Works

J&K 1.27 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices

Page No. 15

issued by these companies without physical receipt of any inputs.

16. Kashmir Wire J&K 0.35 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs.

17. M/S Shree Vaishnov Devi Metals Pvt. Ltd.


18. M/S V.K. Metal Works


19. Nav Bharat Metals


20. Shiv Giri Metal Indst.


21. Shree Sita Ram Castings


22. Shree Vaishno Devi Metals Pvt. Ltd.


23. V.M.I. Industries J&K 1.31 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs.

24. Vaishno Metal & Allied Industries


25. Viraj Inds., Jammu

J&K 2.34 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any

Page No. 16

inputs.

26. Him Valves & Regulators (P) Ltd.

H.P. 0.37 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs.

27. Swastik Wires H.P. 0.37 Cenvat credit has been fraudulently availed by the buyers on the basis of invoices issued by these companies without physical receipt of any inputs.

28. Koolminit Manufacturing Company, Industrial, Gouripur, Dlaubri, Assam.

Assam 0.95 The unit showed bogus production and issued bogus invoices. Overvaluation of products.

SCN issued. Case pending adjudication.

29. Ishan Technologies Pvt. Ltd., Bymihat, Meghalaya

Meghalaya 9.98 The unit showed bogus production and issued bogus invoices. Overvaluation of products.


30. Khushi Aromatic, Cinamara, Jorhat, Assam

Assam 4.34 Over-valuation of goods sold to their related unit situated in non-exempted area; thus facilitating availment of excess Cenvat credit.


31. Dharampal Satyapat Limited, Bamunimaidan, Guwahati, Assam

Assam 0.23 Over-valuation of goods sold to their related unit situated in non-exempted area; thus facilitating availment of excess Cenvat credit.

SCN issued. Demand confirmed.

32. Shree Sai Rolling Mills (India) Ltd., Rangsakona, Bymihat, Meghalaya

Meghalaya 1.00 Bogus sale of goods to their related unit situated in non-exempted area; thus facilitating availment of inadmissible Cevat credit.

SCN is likely to be issued soon.

33. Trishul Hitech Industries, EPIP, Bymihat, Meghalaya



34. Satyam Ispat, NH 52A, Banderdewa, Arunachal Pradesh

Arunachal Pradesh

0.31 Bogus sale of goods to their related unit situated in non-exempted area; thus facilitating availment of inadmissible Cevat credit.


35. Satya Megha Ispat (P) Ltd., Tamiulkuchi, Bymihat.



36. Foto Industries, Meghalaya & M/S Photo Film Industries, Pondicherry

Meghalaya 8.66 Goods claimed to have been manufactured at the Meghalays factory of M/S Foto Industries, Meghalaya were, in fact, being produced at their sister concern, namely, M/S Photo

Case settled under settlement commission. Entire duty alongwith interest has been realized.

Page No. 17

Film Ind, Pondicherry from where the goods were cleared without payment of duty to their customers.

37. M/S Matiz Metals Pvt. Ltd.

Meghalaya 19.57 The unin has shown bogus purchase of raw materials availing Cenvat credit, bogus production and fraudulently issued invoices showing clearance of excisable goods in order to facilitate the buyers to avail Cenvat credit.

One SCN to the party and 58 SCN’s to various manufacturers who have availed cenvat credit on the strength of invoices issued by the party have been served. Commissioner, Central Excise, Adjudication, Mumbai has been appointed as common adjudicator. Case pending adjudication.

38. M/S Jindal Drugs Limited

Jammu 44.26 Clearance of raw material (Crude Mentha Oil) without manufacturing excisable goods and by misdeclaring it as finished goods (Deterpinated/ fractionated Mentha Oil) and wrongly claiming benefit of area based exemption and irregularly passing on a Cenvat credit to the purchaser. Goods are further exported by M/S Jindal Drugs Limited as merchant exporter claiming rebate of duty paid.

SCN has been issued. Case is pending adjudication. The party has deposited Rs. 2.00 crores during investigation.

39. M/S Sharp Menthol India Limited, Delhi

New Delhi 25.00 Clearance of raw material (Crude Mentha Oil) without manufacturing excisable goods and by misdeclaring it as finished goods (Deterpinated/ fractionated Mentha Oil) and wrongly claiming benefit of area based exemption and irregularly passing on a Cenvat credit to the purchaser. Goods are further exported by M/S Jindal Drugs Limited as merchant exporter claiming rebate of duty paid.

Investigating is under process.

40. M/S SPM Industries

Jammu To be quantified

Procurement of fake bills of raw materials and showing huge production out of this without actually doing any production. Issued invoices only without actually sending the goods in order to facilitate the buyers of invoices to fraudulently avail Cenvat credit.

Under investigation.

41. M/S Bio Veda Technologies Pvt. Ltd.

Guwahati 0.29 The unit has shown bogus production and fraudulently issued bogus invoices against which inadmissible refund of duty was claimed.


8. On the basis of the above materials, it is argued that in respect of North-

eastern area, there is not even a single case of detection of fraudulent

availment of benefit. The cases of bogus production, overvaluation, bogus

sale of goods and fraudulent import of goods by the industries from its sister

Page No. 18

concerned of other area, which has no exemption, has been alleged. But

except 2/3 cases, in rest of the cases, the adjudication is pending. The report

of the DGCEI, has given the following reasons in support of the impugned

modified notifications:

“8. To sum up, in order to minimize misuse of area based excise duty exemption applicable to J&K, North East and Kutch areas (by way of bogus production, bogus purchases of input, purchase of input against non duty paid invoices, overvaluation etc), following proposals are submitted for modification of existing scheme.

i) To provide that refund of excise duty would be allowed only to the extent of duty payable on the value addition made by the units in these areas

ii) The quantum of value addition may be determined by fixing an all industry ratio based on CENVAT Credit and PLA (Cash) ration for non-POL items with an option to assessee to get the ratio fixed based on actual financial data from audited profit and loss account.”

9. It is submitted that the above said fraudulent and dishonest acts of

cheating by the industries, if any, can very well be verified at the time of

refund and also by periodical inspections, the Department can detect the

acts of cheating, if any, indulged by the industries. There are investigatory and

regulatory mechanism envisaged under the Central Excise Act, which can

effectively take care of the above instances of malfeasance and

misfeasance. Merely because there are strong instances of misuse, it would

not be a valid ground to call it in public interest to partially withdraw the

concessions.

10. The learned counsel relied upon the decisions of Gujarat High Court in

the case of SAL Steel Ltd. –vs- Union of India, reported in 2010 (260) E.L.T. 185

(Guj.). A particular, reference is made to the observations in paragraph 9 of

the judgment of Hon’ble DA Mehata, J. The various types of allegations of

misuse and fraud, which are sought to be urged in the present case, were

similarly urged in the case aforementioned. In paragraphs 9, 25, 26, 32, 115

and 117 the learned Judge has extracted different cannons upon which the

modified notification of 2008 came to be issued. Paragraph 9, 25, 26, 32, 115

and 117 are extracted hereunder:

“9. On behalf of Respondents it was submitted that in the field of taxation a wide discretion vests in the Legislature to classify items for tax purpose, and same principle be applied for granting exemption and/or withdrawal, and/or modification of the exemption. Under Section 5A of the Central Excise Act, 1944 (the Act) Central Government is vested with statutory powers to issue necessary Notification to grant exemption from duty of Central Excise on being satisfied that it is necessary in public interest so to do. As such Notification is placed before both the Houses of Parliament the Notification would have statutory flavor. There is no limitation on the power available under Section 5A of the Act. The power to grant exemption by its very nature permits revocation, annulment, modification or variation. It was submitted that the provision for granting refund of duty paid in cash had prompted certain unscrupulous manufacturers to indulge in different types of tax evasion tactics. According to learned Counsel on the basis of analysis of

Page No. 19

cases booked by the Excise Department as well as representations received from Industry Association following modus operandi was broadly followed:

(i) Reporting of bogus production by mere issuance of sales invoice without actual production of goods and supply/clearance of excisable goods. This 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) Reporting of bogus production by such units in these areas where actual production takes place elsewhere in the country.

(iii) Overvaluation of goods resulting in availment of excess of credit by buyer.

Goods are supplied by manufacturers, importers to these units without issuance of sales invoice and these are backed by bogus sales invoice issued by traders 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 only in respect of genuine manufacturing activities carried out in specified areas. That the policy manifesting the intention of the Government was to grant excise duty exemption only to actual value addition made in the specified areas. Hence the exercise of powers under Section 5A of the Act.

2. It was submitted that as a result of the modification the manufacturers are required to pay duty on the full value of goods manufactured and cleared in the same manner as per existing scheme, but refund would be granted only to the extent of duty paid on the actual value addition according to the percentages fixed in the Notification, or as may be fixed as a special case as provided in the Notification. In the written submissions filed by the Counsel the effect of modification is stated in the following words:

"The effect of modification is as follows:

(i) It is submitted that genuine manufacturers would not at all be affected inasmuch as they would be getting the refund of same amount under the present modification as also in the proposed scheme.

(ii) Unscrupulous manufacturers reporting bogus production was resorting to fictitious purchase of inputs on the strength of invoices which are not duty paid invoices would be getting excise duty refund equivalent only to the duty paid on actual value addition made by such manufacturers who have industries in these specified areas.

(iii) The excise duty exemption would be available only to the extent of actual value addition made in these areas and not for the value of raw materials manufactured in other part of the country, which are received by the units in these areas without cover of duty paying invoices".

3. The methodology of calculating value addition has also been explained in part 3 of written submissions. In support of the submissions made as regards the exercise of legislative power and Courts not being entitled to question policy decision as well as on inapplicability of principle of promissory estoppel .

Page No. 20

“25. 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 after amendment once the parties have duly done anything or suffered under the existing Rule, Notification, etc. An Assessee, who is required to act in a particular manner as specified by the Rule, Notification, etc. as existing before the amendment, is obliged in law to act accordingly, and correspondingly the authority is equally obliged in law to act as if the amendment had not taken place, such act on part of the authority being not only in relation to collection of revenue and other attendant provisions like penalty, etc., but also in relation to the entitlements of an Assessee. This provision, namely, Section 38A of the Act incorporates in the statute the principle of a completed contract between the parties, whereunder the parties are obliged to fulfil their respective part of the concluded contract, and in case of failure, the Court may step in and direct the defaulting party to specifically perform his part of the promise. To put it differently, one may say that the principle of promissory estoppel, as normally understood, has been incorporated in the statute.

26. Hence, neither by virtue of powers under Section 5A of the Act, nor by virtue of operation of Section 38A of the Act can the Respondent authority be permitted to resile from the promise statutorily made by way of notification issued under Section 5A(1) of the Act, being Original Notification No. 39 of 2001 dated 31-7-2001. The Petitioner had acted as required by the Original Notification and when the Original Notification with attendant circumstances is read in context the subsequent notifications dated 27-3-2008 and 10-6-2008 do not indicate any intention to the contrary, that is contrary to the object, intent and purpose of the Original Notification. Thus by operation of law, namely, provisions of Section 38A of the Act, more particularly Clauses (b) and (c) of the said section read together, it is not possible to uphold the action of the Respondents in issuing subsequent Notifications dated 27-3-2008 and 10-6-2008.

32. Thus when one considers the entire scheme as a whole it is more than abundantly clear that there is hardly any scope for misuse of the scheme. Furthermore, the period of the scheme is a self limiting one and only those manufacturers who have complied with the requirements of the Original Notification are entitled to the benefit. The said manufacturers therefore cannot be called upon to make payment of duty and seek a smaller amount of refund under the scheme considering the purpose of granting exemption. One of the purposes that is apparently discernible is to ensure that during gestation period a new industrial unit is able to recoup the capital outlay involved in setting up a new industrial unit so as to ensure that the new unit does not face cash crunch during the initial period and circulating capital is available to such new unit.

115. It appears that the doctrine of promissory estoppel 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.

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

Page No. 21

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 initiation of the action in accordance with law against the industry concerned, if there is manipulation or abuse of the policy. Even if it is considered that some units had misused or had abused the policy, the same can hardly be said to be a valid ground for withdrawing the benefit conferred upon the bona fide industrial units. Further, there is no satisfactory material demonstrated for such purpose. Even if such contention is considered for the sake of examination, it can hardly be termed as overwhelming public interest on the part of the Central Government to prejudice the rights of the new entrepreneurs who have altered their position by establishing industries based on such incentive. Further, as observed by the Apex Court in the above referred judgment in the case of Power Corporation Ltd. and Anr. (supra), such ground cannot be uphold as sustained.”

11. The reference is also made to paragraphs No. 21, 22 & 28 of the

decision of the High Court of Sikkim in Unicorn Industries –vs- Union of India,

reported in 2013 (289) E.L.T. 117 (Sikkim), wherein it was observed as under:

“21. The power reserved by the Government namely, the Government reserves the right to modify any part of the policy in public interest, therefore, may, in general, be correct and work out only where such superior or larger public interest warrants to do so. When such a contention arises, the Court is under obligation to examine as to whether such an exercise is within the scope and extent of power available under Section 5A of the Act. While examining so, 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 cannot be disregarded. Therefore, in exercise of such power under Section 5A of the Act, the authority cannot be permitted to take recourse to the principles applicable for determining whether duty is correctly levied or not.

22. From any angle, once power under Section 5A of the Act has been exercised and exemption granted, a larger/superior public interest has to be shown for curtailing/modifying/ withdrawing an exemption already granted and in such eventuality, the onus shall be on the Revenue and the same cannot be discharged by merely referring to the contention that the petitioners/assessees are claiming the exemption on bogus ground, in surmise.

28. In a case where the State invited new industries by offering concessional power tariff and thereafter withdrew the same on the ground that there was power theft on a large scale the Apex Court in case of U.P. Power Corporation Limited (supra), after detailed analysis of the law on the subject, struck down the action of the State by invoking principle of promissory estoppel and in the process stated:

“20. In this 21st century, when there is global economy, the question of faith is very important. Government offers certain benefits to attract the entrepreneurs and the entrepreneurs act on those beneficial offers. Thereafter, the Government withdraws those benefits. This will seriously affect the credibility of the Government and would show the shortsightedness of the governance. Therefore, in order to keep the faith of the people, the Government or its instrumentality should abide by their commitments. In this context, the action taken by the appellant-Corporation in revoking the benefits given to the entrepreneurs in the hill areas will sadly reflect their credibility and people will not take the word of the Government. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith.”

12. It is argued that in view of the above decisions and the decisions of the

Apex Court referred to therein, the view taken by the learned Single Judge is

sound and proper and does not call for any interference.

Page No. 22

13. Per contra, Mr. R Dubey, the Standing Counsel for the appellant and

the counsel for the respondents in the writ petitions strenuously submitted that

the modified notifications are issued because of the instances of misuse of the

concessions. A thorough inquiry was held by the Directorate General of

Central Excise Intelligence (DGCEI), the Ministry of Finance also devoted its

attention to the problem of misuse.

14. The counsel has referred to the findings of the inquiry and the report,

which is produced in support of the affidavit before the learned Single Judge.

It is reported that there are about 587 units enjoying the facility of exemption

in J&K, Northeast, Sikkim and Kutcch and a sum of Rs. 2,427 crores has been

doled out as complete exemption of excise duty to these units. The material

portion of the report referred to by the counsel for the State are extracted

hereunder for convenient reference:

“3.1. Misuse of Exemption Scheme:

DGCL have booked large number of cases of misuse of exemption scheme by units in J&K, North-East etc. Some of the industry associations, namely, All India Zinc Manufacturers Association, Federation of Southern India Manufacturers scale evasion by units in these areas, which have adversely affected units in other parts of the country. Analysis of cases booked by DGCEL and as per representations of the Associations following types of misuse have been noticed:

i) Reporting of bogus production, issue of bogus sales invoices by the manufactures in these areas and availment of CENVAT Credit by buyers in another part of the country without receipt of goods;

ii) Overvaluation of goods and availing excess credit by the buyer;

iii) Reporting of bogus production by units in these areas, whereas actual production takes place at other unit of same manufacturer in another part of the country;

iv) Purchase of inputs on non-duty paid invoice (invoices issued by traders), even though goods are duty paid. The duty paid invoices are sold in the market to other manufacturers for availing CENVAT Credit on such invoices without receipt of goods.

The DGCEL has booked involving duty evasion of Rs.178 Crores for above types of cases.

3.2 Problem of Zinc Oxide manufacturers:

The All India Zinc Oxide manufacturers Association has represented an interesting problem. They manufacture zinc oxide and zinc dross is their main input. As per a Supreme Court judgment, the zinc dross is not an excisable product. Therefore, the zinc oxide manufacturers in other part of the country are required to pay almost full duty in cash as no CENVAT Credit is available to them on the zinc dross. But units manufacturing zinc oxide in J&K even though they pay same amount of duty, get refund of full duty and also recover the duty amount from customers and this results in making the produce of other units totally uncompetitive. This is explained with the following data:

Cost of Zinc dross - Rs.160 per kg

Value addition to make Zinc Oxide – Rs.13 per kg

Page No. 23

Excise duty – Rs. 27 per kg

Hence, a manufacturer in J&K is able to get excise duty exemption of Rs.27 per kg, as against value addition of Rs.13 per kg and their product becomes cheaper by Rs.27/- per kg and this has badly hit the units in other parts of the country.

3.3. Evidences of trend of misuse across the industry:

As discussed above, the units in these areas prefer to pay maximum amount in cash, as it is available as refund to them in the next month. Further, whenever they show bogus production and bogus sale, they also show bogus purchases by getting purchase invoices of traders. Further, even if their purchases are genuine, they may like to purchase against non-excise duty paid invoices as it reduces their cost of purchase. By adopting all such modus-operandi, the units in these areas avail less CENVAT Credit and pay maximum amount in cash.

3.4 From the above analysis, it is very clear that almost all the industry sectors in these areas are paying maximum duty through PLA and difference with all India ration is quite alarming. The above analysis coupled with the details of cases booked by DGCEL and representation of industry associations further prove that there appears to be a general tendency to bring raw materials on non-duty paid invoices or to show bogus production or bogus purchase to maximize payment of duty in cash. In fact, when other units in the country avails CENVAT Credit of say 68% of total duty (32% in PLA), there cannot be any plausible reasons to avail credit to say 24% (76% in PLA) by units in these areas. This analysis clearly brings out a fact that misuse of excise duty concessions is rampant and it is across the industry.

4.1. It can be argued that above discussed misuses are on account of administrative failure to tackle evasion. However, when the trend of evasion is seen across the industry, such misuse cannot be handled with any amount of enforcement and the only available option is to think of modifying the scheme itself. Moreover, investigation of such cases is very time consuming as each purchase and sale transaction along with transport records, which involve a large number of parties at different part of the country, is required to be investigated.”

15. It is argued that specific instances of misuse were detected and cases

have been booked. The Personal Ledger Account (PLA) referred to in the

report is as follows:

Description of Goods Total duty paid in 2006-07 by units in specified areas

PLA (cash) % to total

duty

All India % of PLA to total

duty PLA CENVAT

Credit Total

1. Iron and Steel 488 230 718 68 27

2. Copper 224 8 232 96 14

3. Aluminium Rods/Wires 50 18 68 74 33

4. Tyres 118 73 191 62 39

5. Cosmetics 170 33 203 84 53

6. Misc. Chemicals 266 28 294 90 31

7. Soap Detergent 117 73 190 64 47

8. Article of plastic 48 12 60 80 22

9. DG sets 15 24 39 39 29

10. Medicines 132 27 159 83 26

Page No. 24

Total of 10 products groups 1628 526 2154 76 32

Total of 440 Units paying more than 50% duty in PLA

2108 673 2781 76 32

(All India Non-POL items)

Total of 587 Units in these areas

2427

16. The percentage of excise duty paid in the exempted areas is highest

when compared to similar industries in the area where there is no exemption

as per the PLA (supra). The difference in percentage is shown so high that

sometimes it is three times higher the duty is paid in the areas where

exemption is granted. Such a collection of revenue was found to be on

account of the reasons that bogus production, overvaluation, procurement of

raw material without invoice etc. Keeping in view of the recommendations

found in the report, the Cabinet found that grant of indiscriminate exemption

will lead to misuse. In order to prevent such malpractice, the formula of value

addition has been introduced in granting partial concessions to the industries,

which enjoy exemptions under Section 5A of the Act of 1944.

17. Mr. Dubey, Standing Counsel, Central Excise Department, submitted

that the doctrine of promissory estoppel invoked by the opponents is

untenable. There have been instances of gross misuse. In a superior public

interest, in order to avoid dishonest loss caused to the public revenue, the

modified notifications have been brought into force with a sincere object of

helping the industrialist on the one hand and also to protect the revenue of

the State on the other. Hence, argued that the modified notifications in the

context of the report of the Directorate General of Central Excise Intelligence

(DGCEI) cannot be assailed as done arbitrarily and without public interest.

18. On stern consideration of the rival submissions made at the Bar, it

becomes very essential for this Court to determine whether there is prompting

of public interest involved in the modified notifications.

19. The State does not dispute the Industrial Policies of 1997 and 2007 and

also the grant of concession pursuant to the said notifications. However, the

dispute revolves round the justification for issuing the modified notifications, in

question. It is to be seen whether any superior public interest is evident, which

prompted the Government to issue the modified notifications. The counsel for

the State mainly relies upon the report of the Directorate General of Central

Page No. 25

Excise Intelligence (DGCEI) and the Annexure-A, as extracted (supra), which

gives the details of malfeasance and misfeasance committed by some of the

industries, in question, in J&K, Northeast and Sikkim. The instances of misuse

noticed in the inquiry are hardly consists of about 41 cases and most of the

cases, as per Annexure-A, are still under adjudication, it is not finally decided

whether the industries concerned in the Northeastern region are guilty of any

misuse. The argument that because of the misuse, the concession had to be

withdrawn does not appear to be tenable, on deeper scrutiny of the

materials placed before the Court. It is not as if that the State and the

Department does not have any mechanism or machinery for detecting

malpractice of bogus production by diligent periodical inspection.

20. Where the goods do not carry MRP, with reference to the marginal cost

and the prevalent market price of similar goods in comparison to the market

price of similar goods, the malpractice of over valuation can be detected at

the time of refund.

21. With regard to the allegation of importing of goods from the sister units

from some other area to the exempted area, the same could also be easily

detected because, under the VAT Act, the transit permits have to be taken if

false transit permit has been taken for transfer of consignment from one unit to

the sister unit in the exempted area, in such cases, it could be easily detected

as a case of malpractice. That apart, the transit of goods is well regulated

under the VAT Act, and the transit passes, documents of title of goods

consigned have to be taken and that at every check post, there would be a

check. It is not that easy for an industrialist to flout the law and import the

goods for the purpose of evading Central Excise duty as alleged.

22. The scheme of the policy and the notifications insist that there should be

payment of the excise duty and thereafter, they should apply for refund. The

Department, at the time of refund, can very well thoroughly scrutinize all these

aspects regarding misuse and malpractice alleged. Therefore, the allegation

that for the instances of malpractice stated above, there has to be a partial

withdrawal of concessions, does not appear to be justifiable ground. The

observations made by the Gujarat High Court in this regard, as extracted

above, also take a similar opinion and we do not see any good reason to

differ with that opinion.

23. With regard to the application of the doctrine of promissory estoppel,

which is almost a well settled principle of law, in view of the decision of the

Page No. 26

Apex Court, the State has failed to show any prejudice to the superior public

interest and that there is also no contra legislation in this regard. The

respondents and the petitioners have all set up industries allured by the

promise of tax concessions and made substantially investments. The setting up

of an industry and commencement of production requires a thorough

compliance of formalities and check up by every Department. The industries,

in question, have complied with all the requirements of law and have set up

industries and all of them have started production. The allegation of misuse, if

really a genuine ground, it would have come to the notice of the Department

much earlier before the declaration of the second Industrial Policy in the year

2007, the modified notifications are brought into force within a short span of

time. If really there is any infringement or misuse or malpractice, the State

would have given serious attention and would not have issued the second

Industrial Policy of 2007 in haste. Within a span of a year after the issuance of

notification of Industrial Policy of 2007, the change in the stand to withdraw

the concessions does not appear to be sound and proper and the grounds

made out are so feeble and fragile which do not offer a concrete objective

material for this Court to believe that really superior public interest prompted

the issuance of modified notifications.

24. For the reasons and discussions made above, we find no reason to

interfere with the order of learned Single Judge. Accordingly the appeals are

dismissed and the writ petitions are allowed. All the industries set up pursuant

to the policy of 1997 and 2007 shall continue to enjoy the benefits of full

exemption as per the policy and the notifications.

25. The writ appeals, writ petitions and the connected miscellaneous cases

are accordingly disposed of.

JUDge CHIeF JUSTICe (aCTINg)

Paul

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