UNION OF INDIA & ANOTHER ETC. ETC. versus M/S V.V.F LIMITED & ANOTHER ETC. ETC. on 22 April 2020

[2020] 7 S.C.R. 695

UNION OF INDIA & ANOTHER ETC. ETC.

v.

M/S V.V.F LIMITED & ANOTHER ETC. ETC.(Civil Appeal Nos. 2256-2263 of 2020)

APRIL 22, 2020

[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]

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 settingup new industries in the earthquake affected district of Kutch –Excise duty exemption was granted by way of refund of the dutypaid in cash/PLA – Respondents set up new units in Kutch – Bysubsequent notification, the incentive of refund of excise duty waslimited to the extent of the value addition – Challenged byrespondents – Quashed by High Court on the ground of breach ofdoctrine of promissory estoppel – In other allied matters, similarnotifications/industrial policies allowing refund of excise duty onvalue addition basis were quashed by High Courts of Sikkim andGuwahati – On appeal, held: Doctrine of promissory estoppel cannotbe invoked in the abstract – Courts are bound to consider all aspectsincluding the objective to be achieved and the public good at large– The doctrine must yield when the equity so demands – Object ofsubsequent notifications/industrial policies was to prevent taxevasion by unscrupulous manufacturers – They are clarificatory innature since they declared the refund of excise duty paid genuinelyon actual manufacturing of goods and not on the goodsmanufactured only on paper without undertaking anymanufacturing activities of such goods – Subsequent notifications/industrial policies were issued in public interest and do not takeaway any vested rights conferred under the earlier notifications/industrial policies – Thus, are not hit by the doctrine of promissoryestoppel – 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/ SubordinateLegislation/ Declaratory Statutes/ Clarificatory Orders – Operationof – Discussed.

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AInterpretation 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 beinvoked in the abstract and the courts are bound to consider allBaspects including the objective to be achieved and the publicgood at large. While considering the applicability of the doctrine,the courts have to do equity and the fundamental principles ofequity must forever be present to the mind of the court, whileconsidering the applicability of the doctrine. The doctrine mustCyield when the equity so demands if it can be shown having regardto the facts and circumstances of the case that it would beinequitable to hold the Government or the public authority to itspromise, assurance or representation. [Para 11.1]

Kasinka Trading v. Union of India (1995) 1 SCC 274:D[1994] 4 Suppl. SCR 448; Shrijee Sales Corporationv. Union of India (1997) 3 SCC 398 : [1996] 10 Suppl.SCR 888 ; STO v. Shree Durga Oil Mills (1998) 1 SCC572 : [1997] 6 Suppl. SCR 488; State of Rajasthan v.Mahaveer Oil Industries (1999) 4 SCC 357 : [1999] 2SCR 798 ; Shree Sidhbali Steels Ltd. v. State of U.P.E(2011) 3 SCC 193 : [2011] 3 SCR 134 – relied on.

1.2 The respective notifications/industrial policiesimpugned before the High Courts can be said to be clarificatoryin nature and it can be defined as an Act to remove doubts. Itcannot be said that by the subsequent notifications/industrialFpolicies the benefits which were accrued/granted under the earliernotifications were sought to be taken away. It also cannot be saidthat by the subsequent notifications/industrial policies, the rightswhich have been accrued under the earlier notifications had beentaken away. The main objective of the earlier respectivenotifications/industrial policies was to encourage theGentrepreneurs to put new industries in the area so as to generateemployment and for that an incentive was offered to get back byway of refund the excise duty paid either in cash or PLA, namely,the amount of duty paid by the manufacturer of goods other thanthe amount of duty paid by utilization paid by CENVAT credit.H

The same was subject to conditions that it will be applied to thenew industrial units, i.e. the units which are set up on and afterthe publication of the said notification in the Official Gazette, i.e.not later than 31.07.2003. The notification was modified from timeto time. However, during the operation of the earlier notifications,it was noticed that the provision of granting refund of cash paidportion of duty and eligibility of credit the entire amount of dutyto the buyers of such excisable goods had prompted certainunscrupulous manufacturers to indulge in different types of taxevasion tactics. It was revealed on analysis of cases booked bythe Excise Department and even the representations receivedfrom the Industry Association about misuse of exemptionsgranted by the Government, which was meant to be availableonly for genuine manufacturers. Therefore, the Government cameout with the impugned notifications/industrial policies that therefund of excise duty shall be provided on actual and calculatedon the basis of actual value addition. On a fair reading of theearlier notifications/industrial policies, it is clear that the objectof granting the refund was to refund the excise duty paid ongenuine manufacturing activities. The intention would not havebeen that irrespective of actual manufacturing/manufacturingactivities and even if the goods are not actually manufactured,but are manufactured on paper, there shall be refund of exciseduty which are manufactured on paper. Therefore, it can be saidthat the object of the subsequent notifications/industrial policieswas the prevention of tax evasion. It can be said that by thesubsequent notifications/industrial policies, they only rationalizesthe quantum of exemption and proposing rate of refund on thetotal duty payable on the genuine manufactured goods. At thetime when the earlier notifications were issued, the Governmentdid not visualize that such a modus operandi would be followedby the unscrupulous manufacturers who indulge in different typesof tax evasion tactics. It is only by experience and on analysis ofcases detected the Excise Department the Government came toknow about such tax evasion tactics being followed by theunscrupulous manufacturers which prompted the Government tocome out with the subsequent notifications which was to clarifythe refund mechanism so as to provide that excise duty refundwould be allowed only to the extent of duty payable on actual AB

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Avalue addition made by the manufacturer undertakingmanufacturing activities in the concerned areas. The entiregenesis of the policy manifesting the intention of the Governmentto grant excise duty exemption/refund of excise duty paid was toprovide such exemption only to actual value addition made in therespective areas. As it was found that there was misuse of exciseBduty exemption it was considered expedient in the public interestand with a laudable object of having genuine industrialization inbackward areas or the concerned areas, the subsequentnotifications/industrial policies have been issued by theGovernment. The earlier notifications were issued under SectionC5A of the Central Excise Act and even the subsequentnotifications which were issued in public interest and in theinterest of Revenue were also issued under Section 5A of theCentral Excise Act, which can not be said to be bad in law, arbitraryand/or hit by the doctrine of promissory estoppel. [Paras 14, 14.1]D1.3 The subsequent notifications/industrial policies do nottake away any vested right conferred under the earliernotifications/industrial policies. Under the subsequentnotifications/industrial policies, the persons who establish the newundertakings shall be continue to get the refund of the exciseduty. However, it is clarified by the subsequent notifications thatEthe refund of the excise duty shall be on the actual excise dutypaid on actual value addition made by the manufacturersundertaking manufacturing activities. Therefore, it cannot be saidthat subsequent notifications/industrial policies are hit by thedoctrine of promissory estoppel. The respective High CourtsFhave committed grave error in holding that the subsequentnotifications/industrial policies impugned before the respectiveHigh Courts were hit by the doctrine of promissory estoppel. Asthe subsequent notifications/industrial policies are “to explain”the earlier notifications/industrial policies, it would be withoutobject unless construed retrospectively. The subsequentGnotifications impugned before the respective High Courts as suchprovide the manner and method of calculating the amount ofrefund of excise duty paid on actual manufacturing of goods. Thesubsequent notifications therefore are clarificatory in nature, sinceit declares the refund of excise duty paid genuinely and paid on H

actual manufacturing of goods and not on the duty paid on thegoods manufactured only on paper and without undertaking anymanufacturing 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 respectiveHigh Courts are clarificatory in nature and are issued in publicinterest and in the interest of the Revenue and they seek toachieve the original object and purpose of giving incentive/exemption while inviting the persons to make investment onestablishing the new undertakings and they do not take away anyvested rights conferred under the earlier notifications/industrialpolicies and therefore cannot be said to be hit by the doctrine ofpromissory estoppel, the same is to be applied retrospectivelyand they cannot be said to be irrational and/or arbitrary. Underthe circumstances, the respective High Courts committed a graveerror in quashing and setting aside the subsequent notifications/industrial policies impugned before the respective High Courtson the ground that they are hit by the doctrine of promissoryestoppel and that they are retrospective and not retro-active.The impugned Judgments and Orders passed by the respectiveHigh Courts, which are impugned in the present appeals, quashingand setting aside the subsequent notifications/industrial policiesimpugned in the respective writ petitions before the respectiveHigh Courts, are hereby quashed and set aside. Consequently,the original writ petitions filed by the respective original writpetitioners before the respective High Courts challenging therespective subsequent notifications/industrial policies standdismissed, the challenge to the respective subsequentnotifications/industrial policies impugned before the respectiveHigh Courts FAIL. However, the present judgment shall not affectthe amount of excise duty already refunded, meaning thereby,the cases in which the excise duty is already refunded prior tothe subsequent notifications/industrial policies impugned beforethe respective High Court, they are not to be reopened. However,the pending refund applications shall be decided as per thesubsequent notifications/industrial policies which were impugnedbefore the respective High Courts and shall be decided inaccordance with the law and on merits and as per the subsequent AB

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Anotifications/industrial policies impugned before the respectiveHigh Courts. [Paras 15, 16]

1.5 In Civil Appeals @ SLP © Nos. 14751/2013, 14752/2013 and 14753/2013, the challenge to notification Nos. 16/2008-CE and 33/2008-CE FAIL and the Excise authorities have in factallowed the refund of excise in line with the subsequent notificationNos. 16/2008-CE and 33/2008-CE which are now upheld by thisCourt. [Para 16.1]

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Union of India v. Godfrey Philips India Ltd. (1985) 4SCC 369 : [1985] 3 Suppl. SCR 123; Pournami OilMills 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) 7SCC 251: [1997] 3 Suppl. SCR 266; Dai Ichi KarkariaLtd. v. Union of India (2000) 4 SCC 57 : [2000] 2SCR 1254; Mahabir Vegetable Oils (P) Ltd. v. State ofHaryana (2006) 3 SCC 620: [2006] 2 SCR 1172; Stateof Punjab v. Nestle India (2004) 6 SCC 465 : [2004] 2Suppl. SCR 135; MRF Ltd. Kottayam v. AssistantCommissioner of Sales Tax (2006) 6 SCC 702 : [2006]3 Suppl. SCR 778; Southern Petrochemical IndustriesCo. Ltd. v. ETIO (2007) 5 SCC 447 : [2007] 6 SCR955 – held inapplicable.

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State Bank of India v. V. Ramakrishnan (2018) 17 SCC394 : [2018] 10 SCR 974 ; State of Bihar v. RameshPrasad 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. ElectricityBoard 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] 1SCR 947; Commissioner of Customs (Import) v. DilipKumar and Company (2018) 9 SCC 1 : [2018] 7 SCR1191 – relied on.

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Darshan Oils (P) Ltd. v. Union of India (1995) 1 SCC345 : [1994] 5 Suppl. SCR 278 ; Papu Sweets and H

UNION OF INDIA & ANOTHER v. M/S V.V.F LIMITED &ANOTHER

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Biscuits v. Commissioner of Trade Tax, U.P. (1998) 7SCC 228 : [1998] 2 Suppl. SCR 119 ; DG of ForeignTrade v. Kanak Exports (2016) 2 SCC 226 : [2015] 15SCR 287 – referred to.

Case Law Reference

A CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2256-2263 of 2020.

From the Judgment and Order dated 10.03.2010 of the High Courtof Gujarat at Ahmedabad in SCA Nos. 5909, 6300, 6298, 6299, 5907,8468, 6334 and 6562 of 2008.

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Civil Appeal Nos. 2264, 2265, 2266, 2267-2275, 2276, 2277, 2278,2279, 2280, 2281, 2282, 2283, 2284, 2285, 2286, 2287, 2288, 2289, 2290,2291, 2292, 2293, 2294, 2295, 2296, 2297, 2298, 2299, 2300, 2301, 2302,2303, 2304, 2305, 2306, 2307,2308, 2309, 2310, 2363, 2311, 2312, 2313,C2314, 2315, 2316, 2317, 2318, 2319, 2320, 2321, 2322, 2323, 2324, 2325,2326, 2327, 2328, 2329, 2330, 2331, 2332, 2333, 2334, 2335, 2364, 2336,2337, 2338, 2339, 2340, 2341, 2342, 2343, 2344, 2345, 2346, 2347, 2348,2349, 2350, 2351, 2352, 2353, 2354, 2355, 2356, 2357, 2358, 2359, 2360,2361, 2362 of 2020.

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Dhruv Aggarwal, Rafiq Dada, K.V. Vishwanathan, Dr. AshokSaraf, Balbir Singh, Tarun Gulati, Sr. Advs., Rupesh Kumar, Ms. NishaBagchi, Ms.Aruna Gupta, Dharmendra Gupta, B.K. Prasad, A.G. Garg,Rakesh Garg, Ms. Shweta Garg, Aman Raj Gandhi, Abhishek Sharma,Bindi Girish Dave, M.L. Lahoty, Paban K. Sharma, Anchit Sripat,EHimanshu Shekhar, Vishal Gupta, M/s. AP & J Chambers, MaheshAgarwal, Vipin Jain, Rishi Agrawala, Krishan Kumar, Abhinav Agrawal,E.C. Agrawala, Ms. Kavita Jha, Ms. Swati Agarwal, Anant Mann, PawanShree Agarwal, Kaushik Choudhary, Pawan Shree Agarwal, Ajay KumarRoy, Shantanu Tyagi, Ms. Nandita Chouhan, S.S. Shroff, M/s. LegalOptions, A.P. Mayee, A. Rajarajan, Ms. Deepanwita Priyanka, RahulFNarayan, Ms. Mala Narayan, Shashwat Goel, Parvinder Kaur Bhattal,Hitesh Kumar Sharma, Ms. Sawati Aggarwal, Sunil Murarka, KunalChatterji, Ms. Maitrayee Banerjee, Supratik Sarkar, Kshitij Vaibhav,Ms. Sheena Taqvi, Ms. Bina Gupta, Ms. Suvarna Dubey, RaghavendraSrivastava, Zangpo Sherpa, Ms. Sheetal Rajput, Rahat Bansal, V.K.GSidharthan, Shriram P. Pingle, Gangadeep Sharma, Kumar Visalaksh,Udit Jain, Praveen Kumar, Parthiv K. Goswami, Ishan Bisht, Ms. DikshaRai, Rana Ranjit Singh, Vivek Kumar Singh, Akanksha Singh, GauravJuneja, Mohit Oommen, Ms. Charanya Lakshmikumaran, AdityaBhattacharye, Mrs. Ishita Mathur, Ms. Apeksha Mehta, Ms. MonicaKasturi, R. Parthasarthy, Ajay Aggarwal, Ms. Mallika Joshi, Ishan Narain,HRajan Narain, Rakesh Sinha, Partha Sil, Kumar Visalaksh, Udit Jain, Mahfooz A. Nazki, Shekhar Prit Jha, Ms. Himani Mishra, RaghvendraKumar, Ms. Aruna Mathur, Shuvodeep Roy, Kabir Shankar Bose,Ms. Neelima Tripathi, Gunjan Singh, K.V. Mohan, Nikhil Singhvi, ObhirupGhosh, Ms. Sonia Dubey, Ramendra Lal Auddy, B. Krishna Prasad,M/s. Khaitan & Co., Vishal Gupta, M/s. Arputham Aruna & Co.M/s. K.J. John & Co., Satya Mitra, Ms. Hemantika Wahi, Gopal Singh,Advs. for the appearing parties.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Leave granted in all the Special Leave Petitions.

Civil Appeals @ SLP © Nos. 28194-28201 of 2010

2. As common question of law and facts arise in this group ofappeals and as such arise out of the impugned common judgment andorder dated 10.03.2010 passed by the High Court of Gujarat atAhmedabad in respective Special Civil Application Nos. 5909/2008,6300/2008, 6298/2008, 6299/2008, 5907/2008, 8468/2008, 6334/2008 and6562/2008, all these appeals are being decided and disposed of by thiscommon judgment and order.

2.1 Feeling aggrieved and dissatisfied with the impugned commonjudgment and order dated 10.03.2010 passed by the High Court of Gujaratat Ahmedabad in respective Special Civil Application Nos. 5909/2008,6300/2008, 6298/2008, 6299/2008, 5907/2008, 8468/2008, 6334/2008 and6562/2008, by which the Division Bench of the High Court has allowedthe aforesaid writ petitions preferred by the respondents herein – originalwrit petitioners and by which the High Court has held that the impugnedpolicy of withdrawal of the benefit/incentive to the original writ petitionersis retrospective and not retroactive and quashed and set aside theNotification 16/2008 dated 27.03.2008, on the ground that bar ofpromissory estoppel would operate, the Union of India has preferred thepresent appeals.

3. The facts leading to the present appeals and the List of Dates& Events in nutshell are as under:

Kutch District in the State of Gujarat was struck by a devastatingearthquake on 26.01.2001 which destroyed the existing infrastructure inthat District, besides causing huge casualties. With a view to attractlarge scale investment and to generate new employment opportunities in A

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Athe District of Kutch, the Government of India announced an IncentiveScheme for setting up New Industries in the earthquake affected Districtof Kutch, by issuing Central Excise Exemption Notification No. 39/2001-CE dated 31.07.2001. The said notification granted exemption to goodscleared from a New Industrial Unit set up in the Kutch District of Gujaratprior to 31.07.2003 (which was subsequently extended to 31.12.2005)Bfrom so much of duty of excise as was equivalent to the amount of dutypaid in cash/Personal Ledger Account (PLA) on the finished goods.That the said incentive of refund of the duty paid in cash/PLA wasavailable for the period of 5 years from the date of commencement ofcommercial production. The object of the Incentive Scheme was to reviveCthe economy in Kutch District by attracting fresh large scale investmentsfrom entrepreneurs by setting up new industries in the said District so asto generate new employment which in turn would help Kutch Districtand its people to be brought back in the main stream with the Nation.The said notification operationalised the incentive scheme in the followingmanner:D

a)The eligible unit was required to produce a certificate from aHigh Powered Committee comprising of a ChiefCommissioner of Central Excise and the Chief Secretary tothe Government of Gujarat certifying that the unit was indeeda new industrial unit which had been set up on or after theEdate of the Exemption Notification but not later than 31.07.2003(this cut-off date was subsequently extended to 31.12.2005); b)The unit was to furnish a declaration regarding the value ofinvestment in plant and machinery installed in the factory ason the date of commercial production and also obtain aFcertificate to this effect from the Committee confirming theoriginal value of the investment;

c)The procedure for claiming refund, envisaged submission ofa statement of the total duty payments including duty paid byutilization of Cenvat Credit) to the jurisdictional Central ExciseGAuthority and verification of the above in a time bound mannerby such authority; d)The notification also provided for recovery of any excessrefund claimed/granted together with interest in case the valueof plant and machinery was wrongly declared, as also in someH

other eventualities which were added by various amendingnotifications; A

e)Where fresh investment in the plant and machinery was belowRs. 20 crores – the incentive available was for the firstclearances up to an aggregate value not exceeding twice thevalue of such investment from the date of commencement ofBcommercial production, in each year; and f)Where the investments were more than Rs.20 crores – theIncentive would be unlimited as there was no upper cap.

3.1 The original writ petitioners set up new industrial units in theKutch District. They made an investment in the plant and machinery ofmore than Rs.20 crores. According to them, almost the entire duty wasrequired to be paid in cash, the whole of which was refundable withoutany upper cap in terms of the notification No. 39/2001-CE dated31.07.2001.

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3.2 It appears that the then Government of Gujarat announced anIncentive Scheme, 2001 dated 09.11.2001 for the economic developmentof Kutch District. Under the said notification, Sales Tax exemption wasprovided. The Sales Tax exemption was available only to those industrieswhich were eligible for excise exemption under Notification No.39/2001-CE dated 31.07.2001.

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3.3 Various amendments were made to the original IncentiveScheme Notification No. 39/2001-CE dated 31.07.2001 betweenSeptember, 2001 to September, 2004, inter alia, to clarify certain mattersand also to extend the cut-off date for setting up new industrial unitsfrom 31.07.2003 to 31.12.2005. One another amendment was made witheffect from 06.08.2003 vide notification No. 65/2003-CE to provide thatPLA payments could be made to discharge duty liabilities on the finishedproducts only after exhausting the CENVAT Credit balances.

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3.4 According to the original writ petitioners, in view of the inventiveoffered under Notification No. 39/2001-CE, the respondents herein -original writ petitioners which had initially planned to expand theirmanufacturing activities at Maharashtra, decided to instead set up thenew units in the Kutch District. That was in the month of December,2005. According to the original writ petitioners, the said decision wastaken only because of the “incentive” promised by the Government torefund excise duty paid in the Kutch area. According to the original writ G

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Apetitioners, as a result of the decision to set up a new unit in KutchDistrict, the company had to additionally incur substantial costs towardsadditional freight, handling charges, storage charges etc., which workedout to approximately Rs.2,200/- PMT. In addition, the company sufferedsevere locational disadvantages.

B3.5 Original writ petitioners commenced commercial productionof split/crude fatty acid, etc. somewhere between the months ofNovember, 2004 to December, 2005. The primary raw materials formanufacture of these final products was palm kernel oil, crude palmkernel oil, other vegetable oils.

C3.6 The said Incentive Notification No. 39/2001-CE was amendedby another notification No. 16/2008-CE dated 27.03.2008 (impugnedbefore the High Court), which according to the writ petitioners wasrelating to a virtual withdrawal of the incentive scheme. The amendednotification provided that the benefit of refund would be granted withreference to the value addition, which was notionally fixed @ 34% forDthe commodity manufactured. Notification No. 16/2008-CE also providedfor determination of a special rate by the Commissioner, in a situationwhere the actual value addition was more than the deemed value additionas specified. According to the original writ petitioners, as a consequenceof the said amendment, the inventive available to them stood reducedEfrom the refund of the entire of the duty paid in cash/PLA to 34% of thetotal duty paid. The original writ petitioners challenged the subsequentnotification No. 16/2008-CE before the High Court of Gujarat by way ofthe aforesaid writ petitions. It was the case of the original writ petitionersthat the subsequent notification No. 16/2008-CE changed the entire basisof the incentive exemption and had the effect of substantially reducingFtheir entitlement of refund. It was also the case on behalf of the originalwrit petitioners that as a result of the said amendment which resulted intheir entitlement for refund being reduced from nearly 100% of the dutypaid to only 34% of such duty amount. According to the original writpetitioners, since the promised incentive was curtailed midway beforeGthe expiry of the five years period, the subsequent notification was inbreach of the principle of promissory estoppel.3.7 The aforesaid writ petitions were opposed by the revenue bysubmitting as under:

i)the Exemption Notification prompted certain unscrupulousHmanufacturers to indulge in different type of tax evasiontactics;

ii) the intention behind the Exemption Notification was toincentivise genuine manufacturers only to the extent of actualvalue addition made by them; A

iii) duty paid in cash by units set up in District of Kutch pursuantto the Exemption Notification was found to be inordinatelyhigh as compared to other similarly placed units in other partsBof India;

iv) the Central Government by the very same power by which itgrants exemption is empowered to withdraw the same;

v) the impugned notifications are only a modification to give effectCto the real intention of the Government and are not withdrawalof the benefit; and

vi) in light of the misuse of the exemption pleaded by UOI, publicinterest warrants such withdrawal.

3.8 Simultaneously, the manufacturing units also filedrepresentations to the Government for re-consideration. Pursuant to therepresentations, one another notification was issued by the CentralGovernment vide Notification No. 33/2008-CEdated 10.6.2008.Therefore, the original writ petitioners amended the writ petitionschallenging the subsequent notification dated 10.6.2008 also. It appearsthat thereafter the Central Government vide notification No. 51/2008dated 3.10.2008 revised the deemed value addition at 75% in respect ofthe products manufactured by the original writ petitioners without givingthem any option of applying for a special rate.

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3.9 The aforesaid writ petitions were heard by the Division Bench.The members of the Division Bench differed. One learned Judge allowedthe writ petitions and another learned Judge held that the writ petitionsdeserve to be dismissed. In view of the difference of opinion betweenthe two learned Judges of the Division Bench, the matter was referredto a third learned Judge. By the impugned judgment and order, the thirdlearned Judge has agreed with the view taken by the learned Judge whoallowed the writ petitions. Consequently, by the impugned judgment andorder, the writ petitions are allowed mainly on the ground of doctrine ofpromissory estoppel. Consequently, it is held by the High Court that theincentive as originally envisaged by notification No. 39/2001-CE wasrequired to be implemented and the differential amount was directed tobe refunded to the writ petitioners. Hence, the present appeals.

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ACivil Appeals @ SLP © Nos. 14751 of 2013,Civil Appeals @ SLP © Nos. 14752 of 2013 and Civil Appeals @ SLP © Nos. 14753 of 2013

4. All these appeals arise out of the common judgment and orderBpassed by the High Court of Gujarat at Ahmedabad dated 17.10.2012 inSpecial Civil Application Nos. 3582/2012, 3569/2012 and 3587/2012respectively, by which the High Court has dismissed the said petitions.

Before the High Court, respective original writ petitioners claimedfor refund of the excise duty in terms of the original notification No. 29Cof 2001. The Excise authorities, however, granted the exemption only interms of the amended notification Nos. 16/20098-CE and 36/2008-CE(which are subject matter of Civil Appeals @ SLP © Nos. 28194-28201of 2010). Before the High Court, initially, only the orders passed by theExcise authorities granting refund as per the subsequent notificationswere under challenge. However, subsequently, the original writ petitionersDalso challenged the subsequent notification Nos. 16/2008-CE and33/2008-CE. By the impugned Judgment and Order, the High Court hasrefused to entertain the petitions under Article 226 of the Constitutionand dismissed the same filed for refund of the excise duty in view of theprovisional Section 11B of the Central Excise Act. So far as the challengeEto the subsequent notification Nos. 16/2008-CE and 33/2008-CE isconcerned, the High Court has not entered into the merits in view of itsearlier decision which is the subject matter before this Court in the caseof Civil Appeals @ SLP © Nos. 28194-28201 of 2010. As, in the presentappeals, the question is with respect to the challenge to the subsequentnotifications which are also the subject-matter of this Court in the caseFof Civil Appeals @ SLP © Nos. 28194-28201 of 2010, all these appealsare also decided and disposed of together with this common judgmentand order.

Civil Appeal Nos. ………………. of 2020 @ SLP (C) Nos.15481-15489 of 2011

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5. These Civil Appeals arise out of the impugned Judgment andOrder passed by the High Court of Sikkim at Gangtok dated 15.11.2010passed in Writ Petition Nos. 11/2008 and other allied writ petitions, bywhich the High Court has quashed and set aside the similar notificationsdated 27.03.2008 and 10.06.2008 allowing the refund of excise duty onH

value addition basis, on the ground that the same are against the principleof promissory estoppel. As the original notifications dated 09.09.2003 aswell as OM dated 01.04.2007 and the subsequent notificationsdated 27.03.2008 and 10.06.2008 are as such similar to the notificationNo. 16 of 2008 applicable to Kutch area of Gujarat, the present group ofCivil Appeals shall also be governed by this common Judgment and Order.

and other allied matters

Civil Appeal No. ………of 2020 @ SLP © No. 11878/2015

and other allied matters

6. All these appeals arise out of the impugned common Judgmentand Order passed by the High Court of Guwahati dated 20.11.2014 inWrit Appeal No. 243 of 2009 and other allied writ petitions, by which theHigh Court has quashed and set aside the subsequent notification dated27.03.2008 and the subsequent industrial policies of 2007 on the groundthat the same are hit by the doctrine of promissory estoppel. In some ofthe writ petitions, the High Court has disposed of the respective writpetitions following the common Judgment and Order dated 20.11.2014.The particulars of respective Civil Appeals are as under:

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[2020] 7 S.C.R.

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6.1 The relevant facts are as under:

The Government of India issued an industrial policy on 01.04.2007reiterating the terms and conditions of the earlier industrial policy dated24.12.1997 which provided the fiscal based incentive to new industrialEunits and their substantial expansion. As per this policy, 100% exciseduty exemption was provided on the products manufactured in the North-Eastern region. By the subsequent notifications/industrial policies whichwere impugned before the High Court, the refund of excise duty waslimited to the extent of the value addition. The High Court by the impugnedFcommon Judgment and Order has set aside the subsequent notifications/industrial policies which were similar to notification No. 16 of 2008applicable to Kutch area of Gujarat and subject matter of Civil Appeals@ SLP © Nos. 28194-28201 of 2010.

Civil Appeal No. ………of 2020 @ SLP © No. 10257/2018, GCivil Appeal No. ………of 2020 @ SLP © No. 10253/2018, Civil Appeal No. ………of 2020 @ SLP © No. 12148/2018and

7. Feeling aggrieved and dissatisfied with the impugned commonHjudgment and order passed by the High Court of Sikkim dated 21.11.2017

passed in Writ Petition Nos. 8/2017, 27/2017, 40/2015 and 41/2015respectively, by which the High Court has quashed and set aside thesubsequent notification No. 20 of 2008 dated 27.03.2008, notificationNo. 36 of 2008 dated 10.06.2008 and notification No. 38 of 2008 dated10.06.2008 on the ground that the same are hit by the doctrine ofpromissory estoppel, the Union of India has preferred the present Appeals.

7.1 In line with the Industrial Policy, 2007, notification No.20/2008 was issued whereby with respect to the new undertakingsestablished, the goods were exempted from so much of the duty of exciseleviable thereon as was to the equivalent to the amount of duty paid bythe manufacturer of goods other than the amount of duty paid by utilizationof CENVAT credit. In the year 2008, subsequent notifications impugnedbefore the High Court were issued, by which the refund was allowableon the duty payable on the goods manufactured on value addition basis,the same are set aside by the High Court by the impugned commonjudgment and order on the ground that the same are hit by the doctrineof promissory estoppel. As otherwise, the submissions are common andthe reasons on which the High Court has set aside the impugnedsubsequent notifications are similar to the facts in the case of Civil Appeals@ SLP © Nos. 28194-28201 of 2010, all these Appeals are also decidedand disposed of by this common judgment and order.

8. Learned counsel appearing on behalf of the Union of India hasvehemently submitted that the High Court has materially erred in quashingand setting aside the notification No. 16 of 2008 dated 27.03.2008 on theground that the same is retrospective and not retro-active and the sameis barred by the doctrine of promissory estoppel.

8.1 It is submitted as under:

That the High Court has not properly appreciated and/or consideredthe notification impugned before it and as such the High Court hasmisinterpreted and/or misread the notification No. 16 of 2008. It issubmitted that the High Court has erred in treating and/or consideringthe notification No. 16 of 2008 as withdrawal of exemption benefit and/or withdrawal of the incentive provided by notification dated 31.07.2001.It is vehemently submitted that as such the impugned notification No. 16of 2008 was clarificatory in nature and cannot be said to be withdrawalof exemption benefit and/or withdrawal of the incentive provided earlierby notification dated 31.07.2001; AB

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A8.2 The High Court ought to have appreciated that the power ofsuch a kind to grant exemption from levy and collection of duty includesin itself the power to rescind, modify or withdraw such exemption. It issubmitted that the liability to pay excise duty under the Central ExciseAct arises when a taxable event occurs. An exemption notification issuedunder Section 5A will not affect the suspending the collection of dutyBunder normal circumstance. It is submitted that in the present case theexemption was by conditions laid down in the notification and in publicinterest. Such an exemption of this very nature is susceptible of beingrevoked, annulled, modified or varied or subjected to exercise of statutorypower of State under the law itself as is obvious from the language ofCSection 5A; 8.3 The High Court has erred in not appreciating that theGovernment has validly issued the notifications. The provision of grantingof refund of cash paid portion of duty and eligibility of credit of entireamount of duty to the buyers of such excisable goods had promptedDcertain unscrupulous manufacturers to indulge in different type of taxevasion tactics. An analysis of cases booked by the Excise Departmentand the representations received from Industry Association had revealedmisuse of exemptions given by the Government which was meant to beavailable only for genuine manufacturers. It is submitted that the modusoperandi which was being followed by such unscrupulous manufacturersErevealed that such unscrupulous manufacturers were reporting of bogusproduction by mere issuance of sale invoice without actual production ofgoods and supply/clearance of excisable goods, which would result inavailment of CENVAT credit by buyers of such excisable goods in otherparts of the country without actual production being carried out and inFabsence of actual receipt of goods; reporting of bogus production bysuch units in these areas where actual production takes place elsewherein the country; over valuation of goods resulting in availment of excesscredit by buyers; goods were supplied by manufacturers, importers tothese units without issuance of sales invoice and these were backed bybogus sale invoices issued by traders who did not undertake actual supplyGof goods. The actual supplier of these goods issued bogus duty paidinvoices to other manufacturers who took credit based on such invoiceswithout receipt of goods. Having found such activities by suchunscrupulous manufacturers against the object and purpose of grant ofexemption/incentive, therefore, the Government came out with theHnotification no. 16 of 2008 which as such can be said to be clarificatory in nature. By no stretch of imagination it can be said to be a withdrawalof exemption granted earlier and consequently it cannot be said to be incontravention of doctrine of promissory estoppel;

8.4 That the High Court has not properly appreciated and/orconsidered the reasons for issuance of the subsequent notification. Thereason for issuance of the notification No. 16 of 2008 which as such canbe said to be clarificatory was that by adopting such modus operandi,the units in these areas were wanting to pay maximum amount of duty incash so that they became entitled to a claim of refund of entire amountof duty paid in cash. In order to verify this aspect, it is submitted that astudy was made by the Excise Department to find out the percentage ofduty paid in cash and from the CENVAT credit account by the unitsavailing this area based exemption. On receipt of these details, theywere compared with the duty payment details of the same industry groupsfor all the units across the country to find out whether the percentage ofduty paid by the units in cash in the specified areas is comparable withthe units in the rest of the country. An analysis of these details clearlyshowed that the industry sectors in the specified areas were paying avery high percentage of duty in cash i.e. through personal ledger account(PLA) in comparison to the all India payment of duty through PLA onsimilar goods. Thus there was misuse of excise duty exemption whichwas considered expedient in public interest and given by the CentralGovernment with a laudable object of having genuine industrialization ineither backward areas or areas such like Kutch, which suffered onaccount of Natural calamity. Misuse of excise duty exemption beingrampant and the effect of such manipulated acts were brought to thenotice of the Government. The policy and intention of the Governmentto provide excise duty exemption was in respect of genuinemanufacturing activities carried out in these areas. The entire genesis ofthe policy manifesting the intention of the Government to grant exciseduty exemption was to provide such exemption only to actual valueaddition made in these areas. It is in the background of these facts andwith a view to give effect to such a policy, the Government in exerciseof powers conferred under Section 5A of the Central Excise Act modifiedthe refund mechanism so as to provide that excise duty refund would beallowed only to the extent of duty payable on actual value addition madeby the manufacturers undertaking manufacturing activities in these areas.As a result of the notification impugned before the High Court, themanufacturers are required to pay duty on full value of the goods AB

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Amanufactured and cleared by them in the same manner as per existingscheme but refund would be granted only to the extent of duty paid onthe value addition made by them in these specified areas based on allIndia average of percentage of duty paid in cash and CENVAT credit; 8.5 The High Court has erred in not appreciating that the notificationBNo. 16 of 2008 was issued by the Government in public interest and inthe interest of revenue.

8.6 Learned counsel appearing on behalf of the Union of Indiahas made further submissions while assailing the impugned judgmentand order passed by the High Court as follows:

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8.6.1 That the Central Government has the power to provide forexemption from duty on goods either wholly or partly with or withoutcondition as may be called for in public interest. The guiding factor forexercise of power is public interest. When the exemption notificationwas issued under Section 5A of the Central Excise Act, it was implicit inDit that it could be rescinded or modified at any time if the public interestso demands;

8.6.2 The amendment notification is non-discriminatory and treatall industries at par. It only rationalizes the quantum of exemption byproposing rate of refund on the total duty payable. In the field of taxation,Ethe Court shall be the slow to interfere with fiscal policy, more particularlywhen the same is issued with respect to exemption/incentive on fulfillmentof certain conditions and when the same is in the public interest and inthe interest of revenue. Reliance is placed upon the decision of thisCourt in the case of R.K. Garg v. Union of India (1981) 4 SCC 675;that the basic principle of original notification is not altered. The CentralFGovernment has only streamlined the provisions of the notification relatingto refund of duty paid through other than CENVAT utilization; 8.6.3 Prior to issuance of notification dated 31.07.2001,representations were received from State Government as well asrepresentations of the people and Trade and Industry that tax holidaysGbe provided to areas affected by earthquake. The Governmentconsidering the representations issued exemption notification dated31.07.2001 subject to conditions, the intention behind the exemptionscheme was to attract immediate fresh investment by incentivizing settingup of new industrial units so as to generate employment. The exemptionsare subject to periodic review to weed out those which have outlivedH

their utility, to meet the objectives of the Government, to curb misuseand revenue consideration. It is submitted that it was a part of reviewexercise and in background of reports of misuse that the amendmentnotification dated 27.3.2008 was issued; 8.6.4 The doctrine of promissory estoppel cannot be invokedagainst exercise of powers under the statute; 8.6.5 The bar of promissory estoppel is not applicable in fiscalmatters; 8.6.6 The Court has to look into the notification with a presumptionof validity, and not examining the matter with microscopic view to weighthe sufficiency of the material available; 8.6.7 The doctrine of promissory estoppel sought to be invoked inthe present case is not available. The doctrine of promissory estoppelwill not be applicable if the change in stand of the Government is madeon account of public policy and in the public interest; 8.6.8 There are limitations while invoking the doctrine of promissoryestoppel. If the statute has permitted the power on withdrawal to thesame authority, it may result into allowing the doctrine to operate incontravention to the statute; 8.6.9 The Word ‘Promissory Estoppel” means that a party isprevented by his own acts from claiming a right to detriment of the otherparty who was entitled to rely on such conduct and has acted accordingly; 8.6.10 In respect of the exemptions that have been made by theGovernment, the doctrine of promissory estoppel will not be applicable ifthe change in the stand of the Government is made on account of publicpolicy.

8.7 Heavy reliance is placed upon the decisions of this Court on“Promissory Estoppel” in the cases of Kasinka Trading v. Union ofIndia (1995) 1 SCC 274, Darshan Oils (P) Ltd. v. Union of India(1995) 1 SCC 345, Shrijee Sales Corporation v. Union of India (1997)3 SCC 398, STO v. Shree Durga Oil Mills (1998) 1 SCC 572, PapuSweets and Biscuits v. Commissioner of Trade Tax, U.P. (1998) 7SCC 228, State of Rajasthan v. Mahaveer Oil Industries (1999) 4SCC 357, Shree Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC 193,DG of Foreign Trade v. Kanak Exports (2016) 2 SCC 226 andCommissioner of Customs v. Dilip Kumar & Co. (2018) 9 SCC 1.

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A8.8 It is further submitted by the learned counsel appearing onbehalf of the Union of India that the High Court has not properlyappreciated the fact that by notification No. 16 of 2008, as such, there isno material change in the earlier policy and, therefore, as such theamendment in the notification No. 39/2001 dated 31.07.2001 videNotification No. 16/2008 cannot be said to be withdrawal of benefitBalready promised earlier. Therefore it cannot be said that the subsequentnotification is hit by the principle of promissory estoppel, as held by theHigh Court.

8.9 Making the above submissions, it is vehemently submitted thatthe High Court has erred in concluding that the bar of promissory estoppelCwould operate against the Union of India by withdrawal of the exemptionbenefits and that the policy of withdrawal of benefit/incentive isretrospective and not retro-active.

9. Learned Senior Advocates/Counsel appearing on behalf of therespective respondents-original writ petitioners before the High Court,Dwhile supporting the impugned common judgment and order passed bythe High Court have vehemently submitted that in the facts andcircumstances of the case, the High Court has rightly set aside theimpugned notification no. 16 of 2008 dated 27.03.2008 on the groundthat the withdrawal of exemption is retrospective and not retro-activeEand also on the ground that the same is hit by the doctrine of promissoryestoppel.

9.1 Learned Senior Advocates/Counsel appearing on behalf ofthe respective respondents-original writ petitioners have made thefollowing submissions:F

9.1.1 A massive earthquake struck the Kutch district, in the Stateof Gujarat on 26.01.2001 destroying virtually the entire industrialinfrastructure in the said district. With a view to revive the industry andto offer employment opportunities, the Ministry of Finance, Governmentof India announced incentives for setting up new industries in theGearthquake affected district of Kutch by issuing Central Excise ExemptionNotification No. 39/2001-CE dated 31.07.200. The Notification grantedexemption for a period of five years from the date of commencement ofcommercial production, to goods cleared from a new industrial units setup in the Kutch District of Gujarat from so much of duty of excise aswas equivalent to the amount of duty paid in cash/PLA i.e. the duty paidHon the goods other than the amount of duty paid by utilization of CENVAT

Credit under the Cenvat Credit Rules, 2001. The incentive offered bythe notification was the refund of the total amount of Central ExciseDuty paid in cash/PLA; 9.1.2 Respective original writ petitioners based on the promiseheld out by the Government of India to refund the Central Excise Dutypaid in cash/PLA for a period of five years from the commencement ofcommercial production by new industrial units set up in Kutch. Theyinvested a very huge amount only in view of the promise held out by theGovernment of India; 9.1.3 Explanatory Memorandum to the notification as also thePress Release issued by the Press Information Bureau record, thatMinistry of Finance had notified a scheme of exemption for the Districtof Kutch, in the State of Gujarat for a period of five years from the dateof commencement of commercial production. The then State Governmenton 09.11.2001 also announced a Sales Tax incentive scheme, wherein itnoted that the economic activity in the Kutch district has come to astandstill on account of the devastating earthquake and that newemployment opportunities could be created if new investments take place.Taking note of the Excise Duty exemption for the new industriesannounced by the Government of India, the State Government alsointroduced a Sales Tax incentive scheme which would be available toonly those industries which were eligible for the Excise incentive; 9.1.4 Respondents-original writ petitioners were extended thebenefit of exemption promised by the Government of India from26.12.2005 till 31.03.2008 by way of the refund of the entire duty paid incash/PLA.

It is submitted that therefore the impugned amendment bynotification No. 16 of 2008 violated the doctrine of promissory estoppel.

9.2 The following submissions have been made on theviolation of Doctrine of Promissory Estoppel:

9.2.1 Notification No. 16/2008 dated 27.03.2008, amendedNotification No. 39/2001-CE by providing that the benefit of refund wouldbe granted with reference to the value addition undertaken bymanufacturing units in Kutch district. Value addition of 34% was notionallyfixed by Notification 16/2008-CE for the commodities manufactured bythe respondents. The said notification also provided for determination ofspecial rate by the Commissioner of Central Excise in a situation where AB

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Athe actual value addition was more than the deemed value addition of34%. As a consequence of the said amendment the incentive was reducedfrom refund of the entire of the duty paid in cash/PLA to 34% of thetotal duty paid, in so far as the respondents are concerned. Thus therespondents suffered a loss to the extent of 66% of the duty paid, whichit was hitherto entitled to as refund;B

9.2.2 From 03.09.2008 the notional value addition of the productsmanufactured by the respondent was capped at 75%. The respondentshence suffered detriment to the extent of 25% of the duty paid, which itcould not seek as refund; C9.2.3 The amendment made to Notification 39/2001 by theNotification No. 16/2008 and amendments thereto had the effect ofreneging upon the promise made by the Central Government to grantincentive by way of refund of the duty paid in cash/PLA for a period offive years starting from the date of commencement of commercialproduction. It is settled law laid down by this Court that the GovernmentDis bound to implement its promise, if a person has irrevocably altered hisposition acting on an unequivocal promise held out by the Government,save and except in a situation where the withdrawal of the incentive isjustified on grounds of supervening public interest.

9.2.4 On the applicability of Principle of Promissory Estoppel, theErespondents rely upon the decisions of this Court in the cases of Unionof India v. Godfrey Philips India Ltd. (1985) 4 SCC 369, PournamiOil Mills v. State of Kerala 1986 (Supp) SCC 728, Shri Bakul OilIndustries v. State of Gujarat (1987) 1 SCC 31, Pawan Alloys &Casting Pvt. Ltd. v. U.P. Electricity Board (1997) 7 SCC 251, DaiFIchi Karkaria Ltd. v. Union of India (2000) 4 SCC 57, MahabirVegetable Oils (P) Ltd. v. State of Haryana (2006) 3 SCC 620, Stateof Punjab v. Nestle India (2004) 6 SCC 465, MRF Ltd. Kottayam v.Assistant Commissioner of Sales Tax (2006) 6 SCC 702, SouthernPetrochemical Industries Co. Ltd. v. ETIO (2007) 5 SCC 447; G9.2.5 It is submitted therefore that the High Court has correctlyapplied the settled Doctrine of Promissory Estoppel by examining whetherthe facts and the circumstances leading to the curtailment of incentivewere indeed in public interest or not so as to justify a midway withdrawalof the incentive; 9.3 That in fact the incentive promised under the original notificationHNo. 39/2001 was not dependent upon the extent of value addition. It is submitted that this concept was introduced only by the impugnednotification No. 16 of 2008; 9.4 Exemption was granted by way of refund to the duty paid incash/PLA. The payment from PLA is not necessarily duty on valueaddition. The proposition that the payment from PLA represents suchvalue addition may hold good only if the inputs used in the manufactureof final products are duty paid and the rates of duty on inputs and finalproducts are the same;

9.5 The amendments to notification No. 16/2008 dated 27.03.2008,notification Nos. 33/2008 dated 10.06.2008 and 51/2008 dated 03.10.2008clearly show that the Government itself has jettisoned the concept ofvalue addition, introduced with effect from 27.03.2008, in as much asfor finished goods whose starting raw material was a natural product/mineral, and therefore subject to NIL input stage duty, the refund inrespect of final products using such inputs was fixed at an arbitrary rateof 75% of the duty paid, without option of a special rate, irrespective ofthe supposed value addition; 9.6 Mere misuse of the exemption notification by some of themanufacturers cannot justify the withdrawal of incentive since there isan adequate machinery available with the Revenue under the CentralExcise Act and under the notification itself, to curb, deduct, as well aspunish the offenders for any such misuse, otherwise the Revenue wouldsuffer adverse consequences for no fault of theirs. It is submitted thatthe notification itself specifically provides for recovery of refunds alongwith interest if such refunds were wrongly claimed/granted. It is submittedthat therefore the so-called object and purpose for issuing the impugnednotification is irrational and arbitrary and as such cannot be a ground towithdraw the earlier exemption notification.

FINDINGS:

10. By the impugned Judgment and Order, the High Court has setaside the subsequent notification No. 16 of 2008 dated 27.03.2008 mainlyon the ground that the same is retrospective and not retro-active in natureand the same is hit by the Doctrine of Promissory Estoppel. It is thecase on behalf of the Union of India that the subsequent notification isas such in continuation of the earlier notification and the same isclarificatory and therefore can be made applicable retrospectively. It isalso the case on behalf of the Union of India that the subsequentnotification/amendment in the original notification did not in any way AB

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Aalter the basis of the original first notification of 2001. It is also the caseon behalf of the Union of India that the subsequent notification of 2008has been issued in the public interest and has been issued in exercise ofthe powers conferred under Section 5A of the Central Excise Act.Therefore, the questions which are posed for consideration of this Courtare whether in the facts and circumstances of the case the subsequentBnotification which has been quashed and set aside by the High Courtbeing notification No. 16 of 2008 dated 27.03.2008 can be said to beclarificatory in nature and can it be said that it takes away the vestedright conferred pursuant to the earlier notification of 2001 and whetherthe same can be made applicable retrospectively and whether the sameChas been issued in the public interest and whether the same is hit by theDoctrine of Promissory Estoppel?

11. While considering the aforesaid questions and beforeconsidering the nature of the subsequent notification of 2008, fewdecisions of this Court on retrospectivity/clarificatory/applicability ofDpromissory estoppel in the fiscal statute are required to be referred to,which are as under:

11.1 In the case of Kasinka Trading (supra), in paragraphs 12,20 and 23, it is observed and held as follows:

“12. It has been settled by this Court that the doctrine ofEpromissory estoppel is applicable against the Government alsoparticularly where it is necessary to prevent fraud or manifestinjustice. The doctrine, however, cannot be pressed into aid tocompel the Government or the public authority “to carry out arepresentation or promise which is contrary to law or which wasFoutside the authority or power of the officer of the Governmentor of the public authority to make”. There is preponderance ofjudicial opinion that to invoke the doctrine of promissory estoppelclear, sound and positive foundation must be laid in the petitionitself by the party invoking the doctrine and that bald expressions,without any supporting material, to the effect that the doctrine isGattracted because the party invoking the doctrine has altered itsposition relying on the assurance of the Government would not besufficient to press into aid the doctrine. In our opinion, the doctrineof promissory estoppel cannot be invoked in the abstract and thecourts are bound to consider all aspects including the results soughtHto be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to doequity and the fundamental principles of equity must for ever bepresent to the mind of the court, while considering the applicabilityof the doctrine. The doctrine must yield when the equity sodemands if it can be shown having regard to the facts andcircumstances of the case that it would be inequitable to hold theGovernment or the public authority to its promise, assurance orrepresentation.

20. The facts of the appeals before us are not analogous tothe facts in Indo-Afghan Agencies [(1968) 2 SCR 366 : AIR1968 SC 718] or M.P. Sugar Mills [(1979) 2 SCC 409 : 1979SCC (Tax) 144 : (1979) 2 SCR 641] . In the first case the petitionertherein had acted upon the unequivocal promises held out to it andexported goods on the specific assurance given to it and it was inthat fact situation that it was held that Textile Commissioner whohad enunciated the scheme was bound by the assurance thereofand obliged to carry out the promise made thereunder. As alreadynoticed, in the present batch of cases neither the notification is ofan executive character nor does it represent a scheme designedto achieve a particular purpose. It was a notification issued inpublic interest and again withdrawn in public interest. So far asthe second case (M.P. Sugar Mills case [(1979) 2 SCC 409 :1979 SCC (Tax) 144 : (1979) 2 SCR 641] ) is concerned the factswere totally different. In the correspondence exchanged betweenthe State and the petitioners therein it was held out to the petitionersthat the industry would be exempted from sales tax for a particularnumber of initial years but when the State sought to levy the salestax it was held by this Court that it was precluded from doing sobecause of the categorical representation made by it to thepetitioners through letters in writing, who had relied upon the sameand set up the industry.

23. The appellants appear to be under the impression thateven if, in the altered market conditions the continuance of theexemption may not have been justified, yet, Government was boundto continue it to give extra profit to them. That certainly was notthe object with which the notification had been issued. Thewithdrawal of exemption “in public interest” is a matter of policyand the courts would not bind the Government to its policy decisions AB

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Afor all times to come, irrespective of the satisfaction of theGovernment that a change in the policy was necessary in the“public interest”. The courts, do not interfere with the fiscal policywhere the Government acts in “public interest” and neither anyfraud or lack of bona fides is alleged much less established. TheGovernment has to be left free to determine the priorities in theBmatter of utilisation of finances and to act in the public interestwhile issuing or modifying or withdrawing an exemption notificationunder Section 25(1) of the Act.”

Thus, it can be seen that this Court has specifically and clearlyheld that the doctrine of promissory estoppel cannot be invoked in theCabstract and the courts are bound to consider all aspects including theobjective to be achieved and the public good at large. It has been heldthat while considering the applicability of the doctrine, the courts have todo equity and the fundamental principles of equity must forever be presentto the mind of the court, while considering the applicability of the doctrine.DIt is further held that the doctrine must yield when the equity so demandsif it can be shown having regard to the facts and circumstances of thecase that it would be inequitable to hold the Government or the publicauthority to its promise, assurance or representation. It is further heldthat an exemption notification does not make items which are subject tolevy of customs duty etc. as items not leviable to such duty. It onlyEsuspends the levy and collection of customs duty, etc., wholly or partiallyand subject to such conditions as may be laid down in the notification bythe Government in “public interest”. Such an exemption by its very natureis susceptible of being revoked or modified or subjected to otherconditions. The supersession or revocation of an exemption notification Fin the “public interest” is an exercise of the statutory power of the Stateunder the law itself. It has been further held that under the GeneralClauses Act an authority which has the power to issue a notification hasthe undoubted power to rescind or modify the notification in a like manner.It has been observed that the withdrawal of exemption “in public interest”

is a matter of policy and the courts would not bind the Government to itsGpolicy decisions for all times to come, irrespective of the satisfaction ofthe Government that a change in the policy was necessary in the “publicinterest”. It has been held that where the Government acts in “publicinterest” and neither any fraud or lack of bonafides is alleged, much lessestablished, it would not be appropriate for the court to interfere with theHsame.

11.2 In the case of Shrijee Sales Corporation (supra), it isobserved and held that the principle of promissory estoppel may beapplicable against the Government. But the determination of applicabilityof promissory estoppel against public authority/Government hinges uponbalance of equity or “public interest”. In case there is a superveningpublic interest, the Government would be allowed to change its stand; itwould then be able to withdraw from representation made by it whichinduced persons to take certain steps which may have gone adverse tothe interest of such persons on account of such withdrawal. Once publicinterest is accepted as the superior equity which can override individualequity, the aforesaid principle should be applicable even in cases wherea period has been indicated for operation of the promise.

11.3 In the case of Shree Durga Oil Mills (supra), it has beenheld that when the withdrawal of exemption is in public interest, thepublic interest must override any consideration of private loss or gain.In the said case, the change in policy and withdrawal of the exemptionon the ground of severe resource crunch have been found to be a validground and to be in public interest.

11.4 In the case of Mahaveer Oil Industries (supra), afterconsidering the decision of this Court in the case of Kasinka Trading(supra), a similar view has been taken and it has been observed thatpublic interest requires that the State be held bound by the promise heldout by it in such a situation. But this does not preclude the State fromwithdrawing the benefit prospectively even during the period of theScheme, if public interest so requires. Even in a case where a party hasacted on the promise, if there is any supervening public interest whichrequires that the benefit be withdrawn or the scheme be modified, thatsupervening public interest would prevail over any promissory estoppel.

11.5 In the case of Shree Sidhbali Steels Ltd. (supra), inparagraphs 32 and 33, it has been observed and held as follows:

“32. The doctrine of promissory estoppel is by now wellrecognised and well defined by a catena of decisions of this Court.Where the Government makes a promise knowing or intendingthat it would be acted on by the promisee and, in fact, the promisee,acting in reliance on it, alters his position, the Government wouldbe held bound by the promise and the promise would be enforceableagainst the Government at the instance of the promiseenotwithstanding that there is no consideration for the promise and AB

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Athe promise is not recorded in the form of a formal contract asrequired by Article 229 of the Constitution. The rule of promissoryestoppel being an equitable doctrine has to be moulded to suit theparticular situation. It is not a hard-and-fast rule but an elasticone, the objective of which is to do justice between the partiesand to extend an equitable treatment to them. This doctrine is aBprinciple evolved by equity, to avoid injustice and though commonlynamed promissory estoppel, it is neither in the realm of contractnor in the realm of estoppel. For application of the doctrine ofpromissory estoppel the promisee must establish that he sufferedin detriment or altered his position by reliance on the promise.

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33. Normally, the doctrine of promissory estoppel is beingapplied against the Government and defence based on executivenecessity would not be accepted by the court. However, if it canbe shown by the Government that having regard to the facts asthey have subsequently transpired, it would be inequitable to holdDthe Government to the promise made by it, the court would notraise an equity in favour of the promisee and enforce the promiseagainst the Government. Where public interest warrants, theprinciples of promissory estoppel cannot be invoked. TheGovernment can change the policy in public interest. However, itis well settled that taking cue from this doctrine, the authorityEcannot be compelled to do something which is not allowed by lawor prohibited by law. There is no promissory estoppel against thesettled proposition of law. Doctrine of promissory estoppel cannotbe invoked for enforcement of a promise made contrary to law,because none can be compelled to act against the statute. Thus,Fthe Government or public authority cannot be compelled to makea provision which is contrary to law.”

Thus, as held by this Court, when the public interest warrants, theprinciples of promissory estoppel cannot be invoked.

It is further held that the rule of promissory estoppel being anGequitable doctrine has to be moulded to suit the particular situation. It isnot a hard-and-fast rule but an elastic one, the objective of which is to doJustice between the parties and to extend an equitable treatment to them.

12. Now, so far as the decisions relied upon by the learned counselappearing on behalf of the respective original writ petitioners-respondentsH

herein are concerned, once it is held that the subsequent notifications/industrial policies impugned before the respective High Court areclarificatory in nature and it does not take away any vested rightsconferred under the earlier notifications/industrial policies, none of thedecisions relied upon shall be applicable to the facts of the case on hand.

CASE LAW ON RETROSPECTIVITY/CLARIFICATORY

13. In the case of State Bank of India v. V. Ramakrishnan(2018) 17 SCC 394, it is observed and held that the presumption againstretrospective operation is not applicable to declaratory statutes. Formodern purposes a declaratory Act may be defined as an Act to removedoubts existing as to the common law, or the meaning or effect of anystatute. Such Acts are usually held to be retrospective.

13.1 In the case of State of Bihar v. Ramesh Prasad Verma(2017) 5 SCC 665, it is observed and held that any legislation or instrumenthaving force of law, if clarificatory, declaratory or explanatory in natureand purport, will have retrospective operation especially in the absenceof any indication to the contrary as to retrospectivity either in parent Actor Rules or notifications involved.

13.2 In the case of Union of India v. Martin Lottery AgenciesLtd. (2009) 12 SCC 209, it is observed and held that whether a subordinatelegislation or a parliamentary statute would be held to be clarificatory ordeclaratory would depend upon the nature thereof as also the object itseeks to achieve.

13.3 In the case of T.N. Electricity Board v. Status Spg. MillsLtd. (2008) 7 SCC 353 it is observed and held that a clarificatory ordercan be given retrospective effect as it can throw light on substantiveprovision by principle of contemporanea expositio.

13.4 In the case of Zile Singh v. State of Haryana (2004) 8SCC 1, it is observed that the presumption against retrospective operationis not applicable to declaratory statutes. In determining, therefore, thenature of the Act, regard must be had to the substance rather than to theform. If a new Act is “to explain” an earlier Act, it would be withoutobject unless construed retrospectively. An explanatory Act is generallypassed to supply an obvious omission or to clear up doubts as to themeaning of the previous Act. It is well settled that if a statute is curativeor merely declaratory of the previous law retrospective operation isgenerally intended. An amending Act may be purely declaratory to clear A

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A clarificatory amendment of this nature will have retrospective effect.

CASE LAW ON “INTERPRETATION OF FISCALSTATUTES”

13.5. In the case of R. K. Garg v. Union of India (1981) 4 SCCB675, this Court observed and held as follows:

“8. xxxxxx xxx

The Court must always remember that “legislation is directed topractical problems, that the economic mechanism is highly sensitiveand complex, that many problems are singular and contingent,that laws are not abstract propositions and do not relate to abstractunits and are not to be measured by abstract symmetry”; “thatexact wisdom and nice adaption of remedy are not always possible”and that “judgment is largely a prophecy based on meagre anduninterpreted experience”. Every legislation particularly ineconomic matters is essentially empiric and it is based onexperimentation or what one may call trial and error method andtherefore it cannot provide for all possible situations or anticipateall possible abuses. There may be crudities and inequities incomplicated experimental economic legislation but on that accountalone it cannot be struck down as invalid. The courts cannot, aspointed out by the United States Supreme Court in Secretary ofAgriculture v. Central Roig Refining Company [94 L Ed 381 :338 US 604 (1950)] be converted into tribunals for relief fromsuch crudities and inequities. There may even be possibilities ofabuse, but that too cannot of itself be a ground for invalidating thelegislation, because it is not possible for any legislature to anticipateas if by some divine prescience, distortions and abuses of itslegislation which may be made by those subject to its provisionsand to provide against such distortions and abuses. Indeed,howsoever great may be the care bestowed on its framing, it isdifficult to conceive of a legislation which is not capable of beingabused by perverted human ingenuity. The Court must thereforeadjudge the constitutionality of such legislation by the generalityof its provisions and not by its crudities or inequities or by thepossibilities of abuse of any of its provisions. If any crudities,inequities or possibilities of abuse come to light, the legislaturecan always step in and enact suitable amendatory legislation. That C

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is the essence of pragmatic approach which must guide and inspirethe legislature in dealing with complex economic issues.”

13.6 In the of Commissioner of Customs (Import) v. DilipKumar and Company (2018) 9 SCC 1, after considering variousdecisions on the Interpretation of Fiscal Statutes, it is ultimately concludedthat every taxing statute including, charging, computation and exemptionclauses, at the threshold stage should be interpreted strictly. Further,though in case of ambiguity in charging provisions, the benefit necessarilygoes in favour of the assessee, but for an exemption notification orexemption clause the benefit of ambiguity must be strictly interpreted infavour of the Revenue/State.

It is further observed and held that a person claiming exemption,therefore, has to establish that his case squarely falls within the exemptionnotification, and while doing so, a notification should be construed againstthe assessee in case of ambiguity. A person who claims exemption hasto establish his case.

14. Applying the law laid down by this Court in the aforesaiddecisions to the subsequent notifications/industrial policies which werethe subject-matter before the High Court and for the reasons statedhereinbelow, we are of the opinion that the respective notifications/industrial policies impugned before the High Courts can be said to beclarificatory in nature and it can be defined as an Act to remove doubts.It cannot be said that by the subsequent notifications/industrial policiesthe benefits which were accrued/granted under the earlier notificationswere sought to be taken away. It also cannot be said that by the subsequentnotifications/industrial policies, the rights which have been accrued underthe earlier notifications had been taken away.

14.1 The main objective of the earlier respective notifications/industrial policies was to encourage the entrepreneurs to put newindustries in the area so as to generate employment and for that anincentive was offered to get back by way of refund the excise duty paideither in cash or PLA, namely, the amount of duty paid by themanufacturer of goods other than the amount of duty paid by utilizationpaid by CENVAT credit. The same was subject to conditions that it willbe applied to the new industrial units, i.e. the units which are set up onand after the publication of the said notification in the Official Gazette,i.e. not later than 31.07.2003. The notification was modified from timeto time. However, during the operation of the earlier notifications, it was AB

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Anoticed that the provision of granting refund of cash paid portion of dutyand eligibility of credit the entire amount of duty to the buyers of suchexcisable goods had prompted certain unscrupulous manufacturers toindulge in different types of tax evasion tactics. It was revealed on analysisof cases booked by the Excise Department and even the representationsreceived from the Industry Association about misuse of exemptionsBgranted by the Government, which was meant to be available only forgenuine manufacturers. It was noticed as under:

i)Reporting of bogus production by mere issuance of saleinvoices without actual production of goods and supply/clearance of excisable goods. This would result in availmentCof CENVAT credit by buyers of such excisable goods in otherparts of the country without actual production being carriedout and in absence of actual receipt of goods.

ii)Reporting of bogus production by such units in these areaswhere actual production takes place elsewhere in the country.D

iii) Over valuation of goods resulting in availment of excess creditby buyers.

iv) Goods are supplied by manufacturers, importers to these unitswithout issuance of sales invoice and these are backed byEbogus sale invoices issued by traders who do not undertakeactual supply of goods. The actual supplier of these goodsissue bogus duty paid invoices to other manufacturers whotake credit based on such invoices without receipt of goods.

Therefore, the Government came out with the impugnedFnotifications/industrial policies that the refund of excise duty shall beprovided on actual and calculated on the basis of actual value addition.On a fair reading of the earlier notifications/industrial policies, it is clearthat the object of granting the refund was to refund the excise duty paidon genuine manufacturing activities. The intention would not have beenthat irrespective of actual manufacturing/manufacturing activities andGeven if the goods are not actually manufactured, but are manufacturedon paper, there shall be refund of excise duty which are manufacturedon paper. Therefore, it can be said that the object of the subsequentnotifications/industrial policies was the prevention of tax evasion. It canbe said that by the subsequent notifications/industrial policies, they onlyrationalizes the quantum of exemption and proposing rate of refund onHthe total duty payable on the genuine manufactured goods. At the time when the earlier notifications were issued, the Government did notvisualize that such a modus operandi would be followed by theunscrupulous manufacturers who indulge in different types of tax evasiontactics. It is only by experience and on analysis of cases detected theExcise Department the Government came to know about such taxevasion tactics being followed by the unscrupulous manufacturers whichprompted the Government to come out with the subsequent notificationswhich, as observed hereinabove, was to clarify the refund mechanismso as to provide that excise duty refund would be allowed only to theextent of duty payable on actual value addition made by the manufacturerundertaking manufacturing activities in the concerned areas. The entiregenesis of the policy manifesting the intention of the Government togrant excise duty exemption/refund of excise duty paid was to providesuch exemption only to actual value addition made in the respectiveareas. As it was found that there was misuse of excise duty exemptionit was considered expedient in the public interest and with a laudableobject of having genuine industrialization in backward areas or theconcerned areas, the subsequent notifications/industrial policies have beenissued by the Government. Therefore, the subsequent notifications/industrial policies impugned before the respective High Courts were inthe public interest and even issued after thorough analysis of the casesof tax evasion and even after receipt of the reports. The earliernotifications were issued under Section 5A of the Central Excise Actand even the subsequent notifications which were issued in public interestand in the interest of Revenue were also issued under Section 5A of theCentral Excise Act, which can not be said to be bad in law, arbitraryand/or hit by the doctrine of promissory estoppel.

14.2 The purpose of the original scheme was not to give benefitof refund of the excise duty paid on the goods manufactured only onpaper or in fact not manufactured at all. As the purpose of the originalnotifications/incentive schemes was being frustrated by such unscrupulousmanufacturers who had indulged in different types of tax evasion tactics,the subsequent notifications/industrial policies have been issued allowingrefund of excise duty only to the extent of duty payable on the actualvalue addition made by the manufacturers undertaking manufacturingactivities in these areas which is absolutely in consonance with theincentive scheme and the intention of the Government to provide theexcise duty exemption only in respect of genuine manufacturing activitiescarried out in these areas.

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A14.3 As observed hereinabove, the subsequent notifications/industrial policies do not take away any vested right conferred under theearlier notifications/industrial policies. Under the subsequent notifications/industrial policies, the persons who establish the new undertakings shallbe continue to get the refund of the excise duty. However, it is clarifiedby the subsequent notifications that the refund of the excise duty shallBbe on the actual excise duty paid on actual value addition made by themanufacturers undertaking manufacturing activities. Therefore, it cannotbe said that subsequent notifications/industrial policies are hit by thedoctrine of promissory estoppel. The respective High Courts havecommitted grave error in holding that the subsequent notifications/Cindustrial policies impugned before the respective High Courts were hitby the doctrine of promissory estoppel. As observed and held hereinabove,the subsequent notifications/industrial policies which were impugnedbefore the respective High Court can be said to be clarificatory in natureand the same have been issued in the larger public interest and in theinterest of the Revenue, the same can be made applicable retrospectively,Dotherwise the object and purpose and the intention of the Government toprovide excise duty exemption only in respect of genuine manufacturingactivities carried out in the concerned areas shall be frustrated. As thesubsequent notifications/industrial policies are “to explain” the earliernotifications/industrial policies, it would be without object unless construedEretrospectively. The subsequent notifications impugned before therespective High Courts as such provide the manner and method ofcalculating the amount of refund of excise duty paid on actualmanufacturing of goods. The notifications impugned before the respectiveHigh Courts can be said to be providing mode on determination of therefund of excise duty to achieve the object and purpose of providingFincentive/exemption. As observed hereinabove, they do not take awayany vested right conferred under the earlier notifications. The subsequentnotifications therefore are clarificatory in nature, since it declares therefund of excise duty paid genuinely and paid on actual manufacturingof goods and not on the duty paid on the goods manufactured only onpaper and without undertaking any manufacturing activities of such goods.G

15. In view of the above and for the reasons stated above andonce it is held that the subsequent notifications/industrial policies whichwere impugned before the respective High Courts are clarificatory innature and are issued in public interest and in the interest of the Revenueand they seek to achieve the original object and purpose of giving incentive/Hexemption while inviting the persons to make investment on establishing the new undertakings and they do not take away any vested rightsconferred under the earlier notifications/industrial policies and thereforecannot be said to be hit by the doctrine of promissory estoppel, the sameis to be applied retrospectively and they cannot be said to be irrationaland/or arbitrary.

16 Under the circumstances, the respective High Courts havecommitted a grave error in quashing and setting aside the subsequentnotifications/industrial policies impugned before the respective HighCourts on the ground that they are hit by the doctrine of promissoryestoppel and that they are retrospective and not retro-active.Consequently, all these appeals are ALLOWED. The impugnedJudgments and Orders passed by the respective High Courts, which areimpugned in the present appeals, quashing and setting aside the subsequentnotifications/industrial policies impugned in the respective writ petitionsbefore the respective High Courts, are hereby quashed and set aside.Consequently, the original writ petitions filed by the respective originalwrit petitioners before the respective High Courts challenging therespective subsequent notifications/industrial policies stand dismissed andfor the reasons stated hereinabove, the challenge to the respectivesubsequent notifications/industrial policies impugned before the respectiveHigh Courts FAIL. However, it is CLARIFIED that the presentjudgment shall not affect the amount of excise duty already refunded,meaning thereby, the cases in which the excise duty is already refundedprior to the subsequent notifications/industrial policies impugned beforethe respective High Court, they are not to be reopened. However, it isfurther CLARIFIED that the pending refund applications shall bedecided as per the subsequent notifications/industrial policies which wereimpugned before the respective High Courts and they shall be decidedin accordance with the law and on merits and as per the subsequentnotifications/industrial policies impugned before the respective HighCourts. All these appeals stand disposed of accordingly. NO COSTS.

16.1 Now, so far as the Civil Appeals @ SLP © Nos. 14751/2013,14752/2013 and 14753/2013 are concerned, the challenge to notificationNos. 16/2008-CE and 33/2008-CE FAIL and the Excise authorities havein fact allowed the refund of excise in line with the subsequent notificationNos. 16/2008-CE and 33/2008-CE High which are now upheld by thisCourt, the present appeals deserve to be dismissed and are accordinglydismissed. NO COSTS.

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