Doctrines/Principles – Doctrine of promissory estoppel – Applicability of, in fiscal matters – In CA Nos. 2256-2263 of 2010, notification was issued providing exemption/incentives for setting up new industries in the earthquake affected district of Kutch – Excise duty exemption was granted by way of refund of the duty paid in cash/PLA – Respondents set up new units in Kutch – By subsequent notification, the incentive of refund of excise duty was limited to the extent of the value addition – Challenged by respondents – Quashed by High Court on the ground of breach of doctrine of promissory estoppel – In other allied matters, similar notifications/industrial policies allowing refund of excise duty on value addition basis were quashed by High Courts of Sikkim and Guwahati – On appeal, held: Doctrine of promissory estoppel cannot be invoked in the abstract – Courts are bound to consider all aspects including the objective to be achieved and the public good at large – The doctrine must yield when the equity so demands – Object of subsequent notifications/industrial policies was to prevent tax evasion by unscrupulous manufacturers – They are clarificatory in nature since they declared the refund of excise duty paid genuinely on actual manufacturing of goods and not on the goods manufactured only on paper without undertaking any manufacturing activities of such goods – Subsequent notifications/industrial policies were issued in public interest and do not take away any vested rights conferred under the earlier notifications/industrial policies – Thus, are not hit by the doctrine of promissory estoppel – Respective High Courts erred in quashing them – Impugned judgments set aside – Excise Duty – Central Excise Act – ss.5A, 11B – Interpretation of Statutes – Cenvat Credit Rules, 2001. Interpretation of Statutes – Parliamentary Statute/ Subordinate Legislation/ Declaratory Statutes/ Clarificatory Orders – Operation of – Discussed.
Interpretation of Statutes – Fiscal Statutes – Interpretation of – Discussed – Excise Duty – Tax/Taxation.
Disposing of the matters, the Court
Held : 1.1 The doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the objective to be achieved and the public good at large. While considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must forever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation. [Para 11.1] Kasinka Trading v. Union of India (1995) 1 SCC 274: [1994] 4 Suppl. SCR 448; Shrijee Sales Corporation v. Union of India (1997) 3 SCC 398 : [1996] 10 Suppl. SCR 888 ; STO v. Shree Durga Oil Mills (1998) 1 SCC
572 : [1997] 6 Suppl. SCR 488; State of Rajasthan v. Mahaveer Oil Industries (1999) 4 SCC 357 : [1999] 2 SCR 798 ; Shree Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC 193 : [2011] 3 SCR 134 – relied on.
1.2 The respective notifications/industrial policies impugned before the High Courts can be said to be clarificatory in nature and it can be defined as an Act to remove doubts. It cannot be said that by the subsequent notifications/industrial policies the benefits which were accrued/granted under the earlier notifications were sought to be taken away. It also cannot be said that by the subsequent notifications/industrial policies, the rights which have been accrued under the earlier notifications had been taken away. The main objective of the earlier respective notifications/industrial policies was to encourage the entrepreneurs to put new industries in the area so as to generate employment and for that an incentive was offered to get back by way of refund the excise duty paid either in cash or PLA, namely, the amount of duty paid by the manufacturer of goods other than the amount of duty paid by utilization paid by CENVAT credit. The same was subject to conditions that it will be applied to the new industrial units, i.e. the units which are set up on and after the publication of the said notification in the Official Gazette, i.e. not later than 31.07.2003. The notification was modified from time to time. However, during the operation of the earlier notifications, it was noticed that the provision of granting refund of cash paid portion of duty and eligibility of credit the entire amount of duty to the buyers of such excisable goods had prompted certain unscrupulous manufacturers to indulge in different types of tax evasion tactics. It was revealed on analysis of cases booked by the Excise Department and even the representations received from the Industry Association about misuse of exemptions granted by the Government, which was meant to be available only for genuine manufacturers. Therefore, the Government came out with the impugned notifications/industrial policies that the refund of excise duty shall be provided on actual and calculated on the basis of actual value addition. On a fair reading of the earlier notifications/industrial policies, it is clear that the object of granting the refund was to refund the excise duty paid on genuine manufacturing activities. The intention would not have been that irrespective of actual manufacturing/manufacturing activities and even if the goods are not actually manufactured, but are manufactured on paper, there shall be refund of excise duty which are manufactured on paper. Therefore, it can be said that the object of the subsequent notifications/industrial policies was the prevention of tax evasion. It can be said that by the subsequent notifications/industrial policies, they only rationalizes the quantum of exemption and proposing rate of refund on the total duty payable on the genuine manufactured goods. At the time when the earlier notifications were issued, the Government did not visualize that such a modus operandi would be followed by the unscrupulous manufacturers who indulge in different types of tax evasion tactics. It is only by experience and on analysis of cases detected the Excise Department the Government came to know about such tax evasion tactics being followed by the unscrupulous manufacturers which prompted the Government to come out with the subsequent notifications which was to clarify the refund mechanism so as to provide that excise duty refund would be allowed only to the extent of duty payable on actual value addition made by the manufacturer undertaking manufacturing activities in the concerned areas. The entire genesis of the policy manifesting the intention of the Government to grant excise duty exemption/refund of excise duty paid was to provide such exemption only to actual value addition made in the respective areas. As it was found that there was misuse of excise duty exemption it was considered expedient in the public interest and with a laudable object of having genuine industrialization in backward areas or the concerned areas, the subsequent notifications/industrial policies have been issued by the Government. The earlier notifications were issued under Section 5A of the Central Excise Act and even the subsequent notifications which were issued in public interest and in the interest of Revenue were also issued under Section 5A of the Central Excise Act, which can not be said to be bad in law, arbitrary and/or hit by the doctrine of promissory estoppel. [Paras 14, 14.1]
1.3 The subsequent notifications/industrial policies do not take away any vested right conferred under the earlier notifications/industrial policies. Under the subsequent notifications/industrial policies, the persons who establish the new undertakings shall be continue to get the refund of the excise duty. However, it is clarified by the subsequent notifications that the refund of the excise duty shall be on the actual excise duty paid on actual value addition made by the manufacturers undertaking manufacturing activities. Therefore, it cannot be said that subsequent notifications/industrial policies are hit by the doctrine of promissory estoppel. The respective High Courts have committed grave error in holding that the subsequent notifications/industrial policies impugned before the respective High Courts were hit by the doctrine of promissory estoppel. As the subsequent notifications/industrial policies are “to explain” the earlier notifications/industrial policies, it would be without object unless construed retrospectively. The subsequent notifications impugned before the respective High Courts as such provide the manner and method of calculating the amount of refund of excise duty paid on actual manufacturing of goods. The subsequent notifications therefore are clarificatory in nature, since it declares the refund of excise duty paid genuinely and paid on actual manufacturing of goods and not on the duty paid on the goods manufactured only on paper and without undertaking any manufacturing activities of such goods.[Paras 14.2, 14.3]
1.4 Once it is held that the subsequent notifications/industrial policies which were impugned before the respective High Courts are clarificatory in nature and are issued in public interest and in the interest of the Revenue and they seek to achieve the original object and purpose of giving incentive/exemption while inviting the persons to make investment on establishing the new undertakings and they do not take away any vested rights conferred under the earlier notifications/industrial policies and therefore cannot be said to be hit by the doctrine of promissory estoppel, the same is to be applied retrospectively and they cannot be said to be irrational and/or arbitrary. Under the circumstances, the respective High Courts committed a grave error in quashing and setting aside the subsequent notifications/industrial policies impugned before the respective High Courts on the ground that they are hit by the doctrine of promissory estoppel and that they are retrospective and not retro-active. The impugned Judgments and Orders passed by the respective High Courts, which are impugned in the present appeals, quashing and setting aside the subsequent notifications/industrial policies impugned in the respective writ petitions before the respective High Courts, are hereby quashed and set aside. Consequently, the original writ petitions filed by the respective original writ petitioners before the respective High Courts challenging the respective subsequent notifications/industrial policies stand dismissed, the challenge to the respective subsequent notifications/industrial policies impugned before the respective High Courts FAIL. However, the present judgment shall not affect the amount of excise duty already refunded, meaning thereby, the cases in which the excise duty is already refunded prior to the subsequent notifications/industrial policies impugned before the respective High Court, they are not to be reopened. However, the pending refund applications shall be decided as per the subsequent notifications/industrial policies which were impugned before the respective High Courts and shall be decided in accordance with the law and on merits and as per the subsequent notifications/industrial policies impugned before the respective High Courts. [Paras 15, 16]
1.5 In Civil Appeals @ SLP © Nos. 14751/2013, 14752/2013 and 14753/2013, the challenge to notification Nos. 16/2008CE and 33/2008-CE FAIL and the Excise authorities have in fact allowed the refund of excise in line with the subsequent notification Nos. 16/2008-CE and 33/2008-CE which are now upheld by this Court. [Para 16.1]
Union of India v. Godfrey Philips India Ltd. (1985) 4 SCC 369 : [1985] 3 Suppl. SCR 123; Pournami Oil Mills v. State of Kerala 1986 (Supp) SCC 728 : [1987] SCR 654 ; Shri Bakul Oil Industries v. State of Gujarat (1987) 1 SCC 31 : [1987] 1 SCR 185 ; Pawan Alloys & Casting Pvt. Ltd. v. U.P. Electricity Board (1997) 7 SCC 251: [1997] 3 Suppl. SCR 266; Dai Ichi Karkaria Ltd. v. Union of India (2000) 4 SCC 57 : [2000] 2 SCR 1254; Mahabir Vegetable Oils (P) Ltd. v. State of Haryana (2006) 3 SCC 620: [2006] 2 SCR 1172; State of Punjab v. Nestle India (2004) 6 SCC 465 : [2004] 2 Suppl. SCR 135; MRF Ltd. Kottayam v. Assistant Commissioner of Sales Tax (2006) 6 SCC 702 : [2006]
3 Suppl. SCR 778; Southern Petrochemical Industries Co. Ltd. v. ETIO (2007) 5 SCC 447 : [2007] 6 SCR
955 – held inapplicable.
State Bank of India v. V. Ramakrishnan (2018) 17 SCC
394 : [2018] 10 SCR 974 ; State of Bihar v. Ramesh Prasad Verma (2017) 5 SCC 665 : [2017] 2 SCR 342; Union of India v. Martin Lottery Agencies Ltd. (2009)
12 SCC 209 : [2009] 7 SCR 946 ; T.N. Electricity Board v. Status Spg. Mills Ltd. (2008) 7 SCC 353 : [2008] 9 SCR 870 ; Zile Singh v. State of Haryana (2004) 8 SCC 1 : [2004] 5 Suppl. SCR 272 ; R. K. Garg v. Union of India (1981) 4 SCC 675 : [1982] 1 SCR 947; Commissioner of Customs (Import) v. Dilip Kumar and Company (2018) 9 SCC 1 : [2018] 7 SCR 1191 – relied on.
Darshan Oils (P) Ltd. v. Union of India (1995) 1 SCC
345 : [1994] 5 Suppl. SCR 278 ; Papu Sweets and Biscuits v. Commissioner of Trade Tax, U.P. (1998) 7 SCC 228 : [1998] 2 Suppl. SCR 119 ; DG of Foreign Trade v. Kanak Exports (2016) 2 SCC 226 : [2015] 15 SCR 287 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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