WP(C)/17/2009 of M/S Godrej Consumer Products Ltd and Anr Vs Union Of India And Ors. on 15 October 2010

1. Theunionoflndia,Its Notice to be served through:The Secretary,Ministry of Finance,Department of Revenue,North Block, New Delhi.

The Commissioner of Central Excise,Siliguri Commissionerate,C.R, Buildings, Hakimpara, Haren Mukher].ee Road,Siliguri (West Bengal).

The Deputy Commissioner of Central Excise,Gangtok Division,Notice to be served through:The Superintendent of Central Excise,Rangpo Range, C,R. Buildings,Hakimpara, Haren Mukheriee Road,Siliguri (West Bengal).

4. State of sikkimNotice to be served through:The Secretary,Department of Commerce and Industries,Government of Sikkim,Annexe I Building,Near Power Department,Gangtok, Sikkim.

...Respondents,

•+ife----.---.-

: Mr. Sudesh Joshi and Ms. ManitaPradhan, AdvocatesPradhan, Advocates For the respondents : Mr. A. Moulik, Sr. Advocate withMs. K. D. Bhutia, Advocate forrespondents No. 1, 2 and 3.Ms. K. D. Bhutia, Advocate forrespondents No. 1, 2 and 3.

Mr, Karma Thinlay Namgyal,Government Advocate and Mr. S.K. Chettri, Assistant GovernmentAdvocate for respondent No.4.Government Advocate and Mr. S.K. Chettri, Assistant GovernmentAdvocate for respondent No.4.

M/s Promising Exports Limited,Cresent Tower-229, J.C. Bose Road, 2nd Floor Suit 2A,Kolkata-700020.

Having its industrial unit at Manpur,Khatiyan No. 25, Khasra No. 334 & 335,South Sikkim-737132.

Shri Sushil Kumar Ha[wai,Son of Shri Shyam Sundar Halwai,R/o 37 VIP Road, Natural Height,Block-8, Room No. 2C,Kolkata-52

Director, M/s Promising Exports Ltd.,

...Petitioners

Versus

The union of India,It's Notice to be served through:The Secretary,Ministry of Finance,Department of Revenue,North Block, New Delhi.

The Commissioner of Central Excise,Si]igurjcom`missionerate,C.R. Buildings, )-..al ..

Hakimpara, Haren Mukherjee Road,Siliguri (West Bengal).

The Deputy Commissioner of Central Excise,Gangtok Division,It's Notice to be served through:The Superintendent of Central Excise,Rangpo Range, C.R. Buildings,Hakimpara, Haren Mukherjee Road,Siliguri (West Bengal).

4. State of sikkimIt's Notice to be served through:The Secretary, Department of Commerce and Industries,Government of Sikkim, Annexe I Building,Near Power Department,Gangtok, Sikkim.

For the petitioners : Mr. A.K. upadhyaya, Sr. Advocatewith Mr. Ashim Chettri, and Ms.Binita Chhetri, Advocateswith Mr. Ashim Chettri, and Ms.Binita Chhetri, Advocates Forthe respondents : Mr. A. Moulik, Sr. Advocate withMs. K.D. Bhutia, Advocate forrespondents No. 1, 2 and 3,Ms. K.D. Bhutia, Advocate forrespondents No. 1, 2 and 3, Mr. Karma Thjnlay Namgyal,Government Advocate and Mr. S.K. Chettri, Assistant GovernmentAdvocate for respondent No.4.

Godrej Consumer Products Ltd.,A Company incorporated under the provisions ofthe Companies Act, 1956A Company incorporated under the provisions ofthe Companies Act, 1956

and having its registered office atPirojshanagar, Eastern Express Highway,Vikhroli, Mumbai-400 079 and factory at Mamring, Dist. Namchi, South Sikkim-737132, Forthe petitioners : Mr. Sudesh Joshi and Ms. ManitaPradhan, AdvocatesPradhan, AdvocatesFor the respondents: Mr. A. Moulik, Sr. Advocate with

: Mr. A. Moulik, Sr. Advocate withMs. K.D, Bhutia, Advocate forrespondents No. 1, 2 and 3.Ms. K.D, Bhutia, Advocate forrespondents No. 1, 2 and 3.

Mr. Karma Thinlay Namgyal,Government Advocate and Mr.S.K. Chettri, AssistantGovernment Advocate forrespondent No.4.

7. Writ Petition (C) No. 22 of 2009

M/s JNRT Commercial Pvt. Ltd.,A Private Limited Company incorporatedunder the Registration of Companies Act, 1956Having its registered office at 9/12 Lal Bazar Street, 1St Floor, Merchantile Building, Block-AKolkata, W.B.-700001.

Mr. Rajen Sharma,S/o Manorath Sharma,Poudyal Niwas, Sichey,Gangtok (Share Holder & Director ofJNRT Commercial Pvt. Ltd.)

„.Petitioners

VersusThe Union of India,Its Notice to be served through:The Secretary,Ministry of Finance,Department of Revenue,North Block, New Delhi.

idr-...-....

The Commissioner of Central Excise,Siliguri Commissionerate,C.R. Buildings,Hakimpara, Haren Mukher].ee Road,Siliguri (West Bengal).

The Deputy Commissioner of Central Excise,Gangtok Division,Notice to be served through:The Superintendent of Central Excise,Rangpo Range, C.R. Bu'ildings,Hakimpara, Haren Mukheriee Road,Siliguri (West Bengal).

4. State of sikkimNotice to be served through:The Secretary,Department of Commerce and Industries,Government of Sikkim,Annexe I Building,Near Power Department,Gangtok, Sikkim....Respondents,Forthe petitioners : Mr. Zangpo Sherpa and Mr. PemTshering Lepcha, AdvocatesForthe respondents : Mr. A. Moulik, Sr. Advocate withMs. K.D. Bhutia, Advocate forrespondents No. 1, 2 and 3.Mr. Karma Thinlay Namgyal,Government Advocate and Mr.S. K. Chettri, AssistantGovern ment Advocate forrespondents No.4.

M/s Epitome Petrochemical Pvt, Ltd,,A Private Limited Company incorporatedUnder the Registration of Companies Act, 1956A Private Limited Company incorporatedUnder the Registration of Companies Act, 1956

Having its registered office at

16, Ganesh Chandra Avenue,

Kolkata, W.B.-700013.

Mr. Rajen Sharma,S/o Manorath Sharma,Poudyal Niwas, Sichey,Gangtok (Share Holder & Director ofJNRT Commercial Pvt. Ltd.)

Versus

The Union of India,Its Notice to be served through:The Secretary,Ministry of Finance, Department of Revenue,North Block, New Delhi.

The Commissioner of Central Excise,Siliguri Commissionerate, C,R, Buildings, Hakimpara, Haren Mukher].ee Road,Siliguri (West Bengal).

The Deputy Commissioner of Central Excise,Gangtok Division, Notice to be served through:The Superintendent of Central Excise,Rangpo Range, C.R. Buildings, Hakimpara, Haren Mukherjee Road, Siliguri (West Bengal).

4. State of sikkim

Notice to be served through:

The Secretary,

Department of Commerce and Industries,

Government of Sikkim,

Annexe I Building,

Near Power Department,Gangtok, Sikkjm.

Forthe petitioners : Mr. Zangpo Sherpa and Mr. PemTshering Lepcha, AdvocatesTshering Lepcha, Advocates Forthe respondents : Mr. A. Moulik, Sr. Advocate with Ms. K.D. Bhutia, Advocate forrespondents No. 1, 2 and 3.respondents No. 1, 2 and 3.

Mr. Karma Thinlay Namgyal,Government Advocate and Mr.S. K. Chettri, AssistantGovernment Advocate forrespondent No.4.Government Advocate and Mr.S. K. Chettri, AssistantGovernment Advocate forrespondent No.4.

Writ Petition (C} No. 37 of 2010

Sikkim Agro Chem Pvt. Ltd.A Company incorporated under theProvisions of the Registration ofCompanies Act, Sikkim 1961And having its registered office andFactory at Majitar, East Sikkim.A Company incorporated under theProvisions of the Registration ofCompanies Act, Sikkim 1961And having its registered office andFactory at Majitar, East Sikkim.

Shri Sandip Ki]Ia,S/o Shyam Sundar Killa,Director of Sikkim Agro Chem Pvt. Ltd.,Residing at Majitar, East Sikkim.S/o Shyam Sundar Killa,Director of Sikkim Agro Chem Pvt. Ltd.,Residing at Majitar, East Sikkim.

Versus

The Union of India,Its Notice to be served through:The Secretary,Ministry of Finance,Department of Revenue,North Block, New Delhi.

2. The commissioner of central Excise,Siliguri Commissionerate,

C.R. Buildings,Hakimpara, Haren Mukherjee Road,Siliguri (West Bengal).

The Deputy Commissioner of Central Excise,Gangtok Division,Notice to be served through:The Superintendent of Central Excise,Rangpo Range, C.R. Buildings,Hakimpara, Haren Mukherjee Road,Siliguri (West Bengal).Gangtok Division,Notice to be served through:The Superintendent of Central Excise,Rangpo Range, C.R. Buildings,Hakimpara, Haren Mukherjee Road,Siliguri (West Bengal).

4. State of sikkimNotice to be served through:The Secretary,Department of Commerce and Industries,Government of Sikkim,Annexe I Building,Near Power Department,Gangtok, Sikkim,Notice to be served through:The Secretary,Department of Commerce and Industries,Government of Sikkim,Annexe I Building,Near Power Department,Gangtok, Sikkim,

Forthe petitioners : Mr. Sudesh Joshi and Ms. ManitaPradhan, AdvocatesPradhan, Advocates Forthe respondents : Mr. A. Moulik, Sr. Advocate with Ms. K.D. Bhutia, Advocate forrespondents No. 1, 2 and 3.respondents No. 1, 2 and 3.

Mr. Karma Thinlay Namgyal,Government Advocate and Mr.S. K. Chettri, Assista ntGovern ment Advocate forrespondent No.4.Government Advocate and Mr.S. K. Chettri, Assista ntGovern ment Advocate forrespondent No.4.

2Ei?

\

JUDGMENT

Dinakaran, CJ

The common issue that arises in this batch of writ petitions is -

Whether the respondent-State (herein called theRevenue) is justified by issuing NotificationNo.23/2008-Central Excise dated 27.03,2008and Notification No.37/2008-Central Excisedated 10.06.2008 jn withdrawing the exemptiongranted in the payment of duty for utilizationtowards the CENVAT credit/casli conferred uponthe petitioners/assessees by Notification No.71/2003-Centrtal Excise dated 09.09.2003,namely, General Exemption No. 518 and OfficeMemorandum dated 01.04.2007 in File No.10(3)/2007-DBA-II/NER, both issued by theGovernment of India exercising the powersconferred under Section 5A of the Central ExciseAct, 1944?

1.2In this regard, it is apt to refer to Section 5A of theCentral Excise Act, 1944, which empowers the CentralGovernment to grant exemption from duty of excise, which readsas hereunder:

``5A. Power to grant exemption from duty ofexcise. -(1) If the Central Government is satisfied thatit is necessary in the public interest so to do, it may, bynotification in the CIficial Gazette, exempt generallyeither absolutely or subject to such conditions (to befulfilled before or after removal) as may be specified inthe notification, excisable goods of any specifieddescription from the whole or any part of the duty ofexcise leviable thereon:

Provided that, unless specifically provided in suchnotification, no exemption therein shall apply toexcisable goods which are produced or manufactured -

(i) in a free trade zone or a special economic zone andbrought to any other place in India; or

(ii) by a hundred per cent, export-oriented undertakingand brought to any other place in India.

Exp/anafi.on : In this proviso, "free trade zone", "specialeconomic zone" and "hundred per cent export-orientedundertaking" shall have the same meanings as inExp/anal/.on 2 to sub-section (1) of section 3.

(1A) For the removal of doul)ts, it is herebydeclared that where an exemption under sub-section (1) in respect: of any excisable goods fromthe whole of the duty of excise leviable thereonhas been granted absolutely, the manufacturer ofsuch excisab]e goods shall not pay the duty ofexcise on such goods.

(2) If the Central Government is satisfied that it isnecessary in the public so to do, it may, by special orderin each case, exempt from payment of duty of excise,under circumstances of an exceptional nature to bestated in such order, any excisable goods on which dutyof excise is leviable.

(2A) The Central Government may, if it considers itnecessary or expedient so to do for the purpose ofclarifying the scope or applicat)ility of any notificationissued under sub-section (1) or order issued under sub-section (2) insert an explanation in such notification ororder, as the case may be, by notification in the OfficialGazette at any time within one year of issue thenotification under sub-section (1) or order under sub-section (2), and every such explanation shall have effectas if it had always been the part of the first suchnotification or order, as the case may be.

exemption under sub-section (1) or sub-sectionin respect of any excisable goods from any part ofduty of excise leviable thereon (the duty of exciseleviable thereon being hereinafter referred to as thestatutory duty) may be granted by providing for the levyof a duty on such goods at a rate expressed in a form ormethod different from the form or method in which thestatutory duty is leviable and any exemption granted inrelation to any excisable goods in the manner providedin this sub-section shall have effect subject to thecondition that the duty of excise chargeable on suchgoods shall in no case exceed the statutory duty.

Exp/anal/.on: "Form or method", in relation to a rate ofduty of excise means the basis, namely, valuation,weight, number, length, area, volume or other measurewitll reference to which the duty is leviable.

\E#`-`-.-..--...

(4) Every notification issued under sub-rule (1), andevery order made under sub-rule (2) of rule 8 of theCentral Excise Rules, 1944, ancl in force immediatelybefore the commencement of the Customs and CentralExcise Laws (Amendment) Act, 1987 shall be deemed tohave been issued or made under the provisions of thissection and shall continue to have the same force andeffect after such commencement until it is amended,varied, rescinded or superseded under the provisions ofthis section.

(5) Every notification issued under sub-section (1) [orsub-section (2A) shall, - (a) unless otherwise provided, come into force on thedate of its issue by the Central Government forpublication in the Cfficial Gazette; (b) also be published and offered for sale on the date ofits issue by the Directorate of Publicity and PublicRelations, Customs and Central Excise, New Delhi, underthe Central Board of Excise and Customs constitutedunder the Central Boards of Revenue Act, 1963 (54 of1963).

(6) Notwithstanding anything contained in sub-section(5), where a notification comes into force on a date laterthan the date of its issue, the same shall be publishedand offered for sale by the said Directorate of Publicityand Public Relations on a date on or before the date onwhich the said notification comes into force."

(emphasis supplied)

2.1 In view of the core issue raised in the above batch ofwrit petitions, suffice it to consider the submissions made by boththe sides, namely, the petitioners/assessees. and therespondents/revenue on the question of law, referred to above,instead of referring to the facts of the individual cases.

2.2.1 By notification dated 09.09.2003 as well as the OfficeMemorandum dated 01.04.2007, referred to above, the petitioners/assessees were granted certain exemptions from theCentral Excise Duty and the same reads as hereunder: - 2.2.2

``9th September, 2003

Notification No. 71/2003 -Central Excise In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944(1 of 1944), read with sub-section (3) of section 3 of theAdditional Duties of Excise (Goods of SpecialImportance) Act, 1957 (58 of 1957) and sub-section (3)of section 3 of the Additional Duties of Excise (Textilesand Textile Articles) Act, 1978 (40 of 1978), the CentralGovernment, being satisfied that it is necessary in thepublic interest so to do, hereby exempts the goodsspecified in the First Schedule and the Second Scheduleto the Central Excise Tariff Act, 1985 (5 of 1986), otherthan goods specified in Annexure I appended hereto,and cleared from a unit located in the Industrial GrowthCentre or Industrial Infrastructure Development Centreor Export Promotion Industrial Park or Industrial Estateor Industrial Area or Commercial Estate or Scheme Area,as the case may be, in the State of Sikkim, specified inAnnexure - 11 appended hereto, from so much of theduty of excise or additional duty of excise, as the casemay be, leviable thereon under any of the said Acts as isequivalent to the amount of duty paid by themanufacturer of the said goods, other than the amountof duty paid by utilization of CENVAT credit under theCENVAT Credit Rules, 2002.

2. In cases where all the goods produced by amanufacturer are eligible for exemption under thisnotification, the exemption contained in this notificationshall be available subject to the condition that, themanufacturer first utilizes whole of the CENVAT creditavailable to him on the last day of the month underconsideration, for payment of duty on goods clearedduring such month and pays only the balance amount incash.

3. The exemption contained in this notification shallbe given effect to in the following manner, namely:-

(a) The manufacturer shall submit a statement of theduty paid, other than the amount of duty paid byutilization of CENVAT credit under the CENVATCredit Rules, 2002, to the Deputy Commissionerof Central Excise or Assistant Commissioner ofCentral Excise, as the case may be, by the 7thday of the next month in which the duty hasbeen paid.duty paid, other than the amount of duty paid byutilization of CENVAT credit under the CENVATCredit Rules, 2002, to the Deputy Commissionerof Central Excise or Assistant Commissioner ofCentral Excise, as the case may be, by the 7thday of the next month in which the duty hasbeen paid.

(b) The Deputy Commissioner of Central Excise orAssistant Commissioner of Central Excise, as thecase may be, shall, after such verification, asmay be deemed necessary, refund the amountof duty paid, other than the amount of dutypaid by utilization of CENVAT credit under theCENVAT Credit Rules, 2002, during the monthunder consideration to the manufacturer by the15th day of the next month:

Provided trlat in cases where the exemptioncontained in this notification is not applicable tosome of the goods produced by a manufacturer,such refund shall not exceed the amount of dutypaid less the amount of the CENVAT Creditavailed of, in respect of the duty paid on theinputs used in or in relation to the manufactureof goods cleared under this notification.

(c) If there is likely to be any delay in theverification, the Deputy Commissioner of CentralExcise or the Assistant Commissioner of CentralExcise, as the case may be, shall refund theamount on provisional basis by the 15th day ofthe next month to the month underconsideration, and thereafter may adjust theamount of refund by such amount as may benecessary in the subsequent refunds admissibleto the manufacturer.

4. Notwithstanding anything contained in paragraph 2,- (a) the manufacturer at his own option, may takecredit of the amount of duty paid during themonth under consideration, other than by way ofutilisation of CENVAT credit under the CENVATCredit Rules, 2002, in his account current,maintained in terms of Part V of the ExciseManual of Supplementary Instruction issued bythe Central Board of Excise and Customs. Suchamount credited in the accoiint current may beutilised by the manufacturer for payment of dutyin the manner specified under rule 8 of theCentral Excise Rules, 2002, in subsequentmonths, and such payment shall be deemed tobe paid in cash:

Provided that where the exemption contained inthis notification is not applicable to some of thegoods produced by a manufacturer, the amountof such credit shall not exceed the amount ofduty paid less the amount of the CENVAT Creditavailed of, in respect of the duty paid on theinputs used in or in relation to the manufactureof goods cleared under this notification.

(b) the credit of duty paid during the month underconsideration, other than by way of utilisation ofconsideration, other than by way of utilisation of ±8±.--.``.--.`-.

CENVAT credit under the CENVAT Credit Rules,::c°o2JnFacyurE:n::k;79hyeth7ethmd:?ufoafcttuhr:r+nonh[:following the month under consideration.

(c) a manufacturer who intends to avail of the optionunder clause (a), shall exercise his option inwriting for availing of such option before effectingthe first clearance in any financial year and suchoption shall be effective from the date of exerciseof the option and shall not be withdrawn duringthe remaining part of the financial year:

Provided that, for the financial year 2003-2004, amanufacturer can exercise his option on or beforethe30th day of September, 2003.

(d) the manufacturer shall submit a statement of theduty paid, other than by way of utilisation ofCENVAT credit under the CENVAT Credit Rules,2002, along with the refund amount which he hastaken credit and the calculation particulars ofsuch credit taken, to the Deputy Commissioner ofCentral Excise or the Assistant Commissioner ofCentral Excise, as the case may be, by the 7thday of the next month to the month underconsideration.

(e) the Deputy commissioner of central Excise or theAssistant Commissioner of Central Excise, as thecase may be, shall, after such verification, asmay be deemed necessary, determine theamount correctly refundable to the manufacturerand intimate the same to the manufacturer bythe 15th day of the next month to the monthunder consideration. In case the credit taken bythe manufacturer is in excess of the amountdetermined, the manufacturer shall, within fivedays from the receipt of the said intimation,reverse the said excess credit from the saidaccount current maintained by him. In case, thecredit taken by the manufacturer is less than theamount of refund determined, the manufacturershall be eligible to take credit of the balanceamount.

(i) in case the manufacturer fails to comply with theprovisions of clauses (a) to (e), he shall forfeitthe option, to take credit of the amount of dutyduring the month under consideration, otherthan by way of utilisation of CENVAT credit underthe CENVAT Credit Rules, 2002, in his accountcurrent on his own, as provided for in clauses (a)and (c).provisions of clauses (a) to (e), he shall forfeitthe option, to take credit of the amount of dutyduring the month under consideration, otherthan by way of utilisation of CENVAT credit underthe CENVAT Credit Rules, 2002, in his accountcurrent on his own, as provided for in clauses (a)and (c).

(g) the amount of the credit availed irregularly oravailed of in excess of the amount determinedcorrectly refundable under clause (e) and notavailed of in excess of the amount determinedcorrectly refundable under clause (e) and not i,,ife±---`...

reversed by the manufacturer within the periodspecified in that clause, shall be recoverable as ifit is a recovery of duty of excise erroneouslyrefunded. In case such irregular or excess creditis utilised for payment of excise duty onclearances of excisable goods, the said goodsshall be considered to have been cleared withoutpayment of duty to the extent of utilisation ofsuch irregular or excess credit.

Exp/anal/.on.-For the purposes of this notification,duty paid, by utilisation of the amount credited inthe account current, shall be taken as payment ofduty by way other than utilisation of CENVATcredit under the CENVAT Credit Rules, 2002.

5. The exemption contained in this notificationshall apply only to the following kinds of unitsnamely:-

(i) new industrial units which havecommenced commercial production on or afterthe 23rd day of December, 2002, but not laterthan the 31st day of March, 2007;

(ii) Industrial units existing before the 23rdday of December, 2002, but which haveundertaken substantial expansion by way of:nwcer::ys_ef,j:;::::::.::P::I?ftebrythne°t2!erdssdatyhaonfDecember, 2002, but have commencedcommercial production from such expandedcapacity, not later than the 31st day of March,2007.

6. The exemption contained in thisnotification shall apply to any of the saidunits for a period not exceeding I:en yearsfrom the date of publication of thisnotification in the Offlclal Gazette or fromthe date of commencement of commercialproduction, whicriever is later.

ANNEXuRE-I

1. Tobacco and Tobacco products includingCigarettes/ Cigars/ Gutkha ;

2. Branded Aerated beverages;

3. Pollution causing paper and paper products."

2.2.3

"North East Industrial and Investment PromotionPolicy, 2007

File No,lo (3)/2007-DEIA-II/NERGovernment of IndiaMinistry of Commerce and IndustryDepartment of Industrial Policy and Promotion****

New Delhi, Dated the lst April 2007.

OFFICE HEMORANDUM

Subject: North East Industrial and Investment Flromotion Policy(NEIIPP), 2007

The Government has approved a package of fiscal incentives and otherconcessions for the North East Region namely the `North Eastlndilstrial and Investment F.romotion Policy (NEIIPP), 2007',effective from 1.4.2007, which, inter-alia, envisages the following:

(i) Coverage:

The North East lndustnal Policy (NEIP), 1997 annouiiced on24.12.1997 covered the States of Arunachal Pradesh, Assam, Manipur,Meghalaya, Mizoram, Nagaland and Tripura. Under NEIIPP, 2007,Sikkim will also be included. Consequently, the `New Industrial Policyand other concessions for the State of Sikkim' announced vide O.M.No.14(2)/2002-SPS dated 23.12.2002 ancl the Schemes thereunderi.e. Central Capital Investment Subsidy Scheme, 2002, CentralInterest Subsidy Scheme, 2002 and Central Comprehensive InsuranceScheme, 2002, notlfied vide Notifications No. F.No.14(2)/2002-SPSdated the 24.12.2002 will be discontinued from 1.4.2007.

(ii) Duration:

All new units as well as existing units which go in for substantialexpansion, unless otherwise specified and which commencecommercial production within the 10 year period from the date ofnotification of NEIIPP, 2007 will be eligible for incentives for a period often years from I:he date of commencement of commercial production.

(iii) Netitrality Of location:

Incentives will be available to all industrial units, new as well asexisting units on their substantial expansion, located anywhere in theNorth Eastern Region. Consequently, the distinction between `thrust'ancl `non-thrust' industries made in NEIP, 1997 will be discontinuedfrom 1.4.2007.

(ij--.`

(iv) Substantial Expansion:

Incentives on substantial expansion will be given tounits effectina `an increase bv not less than 25°/o in thevalue of fixed-capital investment in plant and machineryfor the purpose of expansion of capacity/modernizationand diversification', as against an increase by 331/2 0/awhich was prescribed in NEIP, 1997.

(v) Excise Duty Exemption:

100% Excise Duty exemption will be continued, onfinished products made in the North Eastern Region.. aswas available under NEIP, 1997. However, in cases,where the CENVAT paid on the raw materials andintermediate products going into the production offinished products (other than the products which areotherwise exempt or subject to nil rate of duty) is higherthan the excise duties payable on the finished products,ways and means to refund such overflow of CENVATcreclit will be separately notified by the Ministry ofFinance.

(vi) Income Tax Exemption:

100% Income Tax exemption will continue underNEIIPP, 2007 as was available under NEIP, 1997.

(vii) Capital Investment Subsidy:

Capital Investment Subsidy will be enhanced from 15%of the investment in Dlant and machinerv to 30% andthe limit for automatic approval of subsidy at this ratewill be Rs.1.5 crores per unit, as against Rs.30 lakhs aswas available under NEIP, 1997. Such subsidy will beapplicable to units in the private sector, joint sector,cooperative sector as well as the units set up by theState Governments of the North Eastern Region. Forgrant of Capital Investment Subsidy higher than Rs.1.5crore but upto a maximum of Rs.30 crores, there will bean Empowered Committee Chaired by Secretary,Department of Industrial Policy & Promotion withSecretaries of Department of Development of NorthEastern Region (DONER), Expenditure, Representative ofPlanning Commission and Secretary of the concernedMinistries of the Government of India dealing with thesubject matter of that industry as its members as alsothe concerned Chief Secretary/Secretary (Industry) ofthe North Eastern State where the claiming unit is to belocated.

Proposals which are eligible for a subsidy higher thanRs.30 crores, will be placed by Department of IndustrialPolicy and Promotion before the Union Cabinet for itsconsideration and approval.

(viii ) Interest Subsidy:

Interest Subsidy will be made available @ 3% onworkina caDital loan under NEIIPP, 2007 as wasavailable under NEIP, 1997.

(ix) Comprehensive Insurance:

New industrial units as well as the existing units on theirsubstantial expansion wi,ll be eligible for reimbursementof 100°/a insurance premium.

(x} Negative List:

The following industries will not be eligible for benefitsunder NEIIPP, 2007:-

(i) All goods falling under Chapter 24 of the FirstSchedule to the Central Excise Tariff Act. 1985 (5 of1986) which pertains to tobacco and manufacturedtobacco substitutes.

(ii) Pan Masala as covered under chapter 21 of theFirst Schedule to the Central Excise Tariff Act. 1985 (5Of 1986).

(iii) Plastic carry bags of less than 20 microns asspecified bv Ministry of Environment and ForestsNotification No.S.O. ' 705(E) dated 02.09.1999 andS.O.698 (E) dated 17.6.2003.

(iv) Goods falling under Chapter 27 of the FirstSchedule to the Central Excise tariff Act,, 1985 (5 of1986) produced by petroleum oil or gas refineries.

(xi) Incentives for Service/other Sector Industries Incentives under NEIIPP, 2007 will be applicable to thefollowina service sector activities/industries : -

I. Service Sector:

(i) Hotels (not below Two star category), adventureand leisure si)orts includina roDewavs ;

(ii) Medical and health services in the nature ofnursinq homes with a minimum capacity of 25 beds andold-age homes ;

(iii) Vocational training institutes such as institutesfor hotel manaciement, caterinci and food crafts,entrepreneurship development, -nursing and para-medical, civil aviation related training, fashion, designand industrial training.

hi-``

A number of tax concessions under the existingDrovisions of Section 10A and 10AA of the Income TaxAct are already available to the IT sector. However, oneof the important impediments to the development ofSoftware Technology Parks or IT related SEZs in theNorth Eastern Region is the non-availability of trainedhuman resources in the North Eastern Region.Accordlngly, tax I)enefits as is availed under Section 80IC ot the Income Tax Act would be extended to ITrelated training centers and IT hardware units.

11. Incentives for Bio-technology industry:

The biotechnology industry will be eligible for benefitsunder NEIIPP, 2007 as aDDlicable to other industries.

Ill. Incent:Eves for Power Generating Industries:

Power Generating plants will continue to get incentivesas aoverned by the I)rovisions of Section 81A of theIncome tax Act. In addition, power generating plantsuDto 10 MW based on both conventional and non-conventional sources will also be eligil)le for capitalinvestment subsidy, interest subsidy and comprehensiveinsurance as applicable under NEIIPP, 2007.

(xij) Establishment of a monitoring mechanism forjmF)lementation of the NEIIPP, 2007:

In order to establish a monitoring mechanism forimDlementation of NEIIPP, 2007, a `Hicih LevelCommittee' / an `Advisory Committee' under theChairmanship of Secretary, Department of IndustrialPolicy and Promotion and comprising Secretaries of theMinistries/Departments of Revenue, Department ofDevelopment of North Eastern Region (DONER), Bankingand Insurance, Representative of Planning Commission,CMD, NEDFi as well as major stakeholders including theindustry associations of the North Eastern region wouldDe constltuted. In addlt[on, an `Oversignt Committee'will be constituted under the Chairmanship of the UnionCommerce and Industry Minister witn lnaustry Ministersof NE States as its members.

(xiii} Va.ue Addition

In order to ensure genuine industrial activities in theNorth Eastern Reaion, benefits under NEIIPP. 2007 willnot be admissible to goods in respect of which onlyDeriDheral activities like preservation during storage,cleaning operations, packing, re-packing, labelling or re-labelling, sorting, alteration of retail sale price etc. takeplace.

Ffe--.-.-.

(xiv) Transport Subsidy Scheme

The Transport Subsidy Scheme would continue beyond31.3.2007, on the same terms and conditions. However,an early evaluation of the scheme will be carried outwith a view to introducing necessary safeguards toprevent possible leakages and misuse.

(xv) Nodal agency

The North East Industrial Development FinanceCorporation (NEDFi) will continue to act as the nodalagency for disbursal of subsidies under NEIIPP, 2007.

2. The `New Industrial Policy and other concession in theNorth Eastern Region' announced vide O,M.No.EA/1/2/96-IPD, dated 24.12.1997 (NEIP, 1997) willcease to operate with effect from 1.4.2007. IndustrialUnits which have commenced commercial production onor before 31.3.2007 will continue to getbenefits/incentives under NEIP, 1997.

3. Government reserves the right to modify anypart of the Policy in public interest.

4. All concerned Ministries/Departments of theGovernment of India are requested to amend theirrespective Acts/mules/notifications etc. and issuenecessary instructions for giving effect to thesedecisions.

(N. .N Prasad)Joint Secretary to the Government of India"

3.1 Concededly, sub-section (1) of Section 5A of theCentral Excise Act, 1944 empowers the Central Government toissue notification to exempt generally either with or withoutconditions, excisable goods as may` be specified, from the wholeor any part of the duty of excise, provided the CentralGovernment is satisfied that it is necessary in the publicinterest to grant such exemption. The proviso, thereunder, laysdown an embargo in relation to goods produced or manufacturednfreetradezoneandstatesthatun,essspeffmptedby such notification, in lieu of the expressed words used in theproviso, no exemption therein shall apply to excisable goodswhich are produced or manufactured -

(i) in a free trade zone or a special economic zoneand brought to any other place in India; orand brought to any other place in India; or

(ii) by a hundred per cent, export-orientedundertaking and brought to any other place inIndia.undertaking and brought to any other place inIndia.

Exp/ana£/.on : In this proviso, "free trade zone","special economic zone" and "hundred per centexport-oriented undertaking" shall have the samemeanings as in Exp/anat/.on 2 to sub-section (1) ofsection 3.

3.2Further, statutory clarification h'as been made in sub-section (1A) of Section 5A of the Act, declaring that where anexemption under sub-section (1A) of Section 5A of the Act inrespect of any excisable goods from the whole of the duty ofexcise leviable thereon has been granted absolutely, themanufacturer of such excisable goods shall hot pay theduty of excise on such goods. The said sub-section (1A) ofSection 5A of the Act is legislatively intended for the removal ofdoubts. It is also relevant to know that sub-section (2) ofSection 5A of the Act empowers the Central Government ifsatisfied that it is necessary in the public interest so to do, byspecial order in each case, grant exemption from payment of duty of excise, under circumstances of an exceptional naturewhich may be stated specifically in such order, any excisablegoods on which duty of excise is leviable.

3.3 Sub-section {3) of Section 5A of the Act furtherprovides that an exemption under Sub-section (1) or sub-section(2) in respect of any excisable goods from any part of the duty ofexcise leviable thereon (the duty of excise leviable thereon beinghereinafter referred to as the statutory duty) may be granted byproviding for the levy of a duty on such goods at a rateexpressed in a form or method different from the form ormethod in which the statutory duty is leviable and any exemptiongranted in relation to any excisable goods in the mannerprovided in this sub-section shall have effect subject to thecondition that the duty of excise chargeable on such goods shallin no case exceed the statutory duty.

3.4 For the purpose of the common issue, referred toabove, there is no need to refer to any other sub-sections ofSection 5A of the Act.

3.5 However, suffice it to remember that there is nolimitation on the powers available under Section 5A of the Act.

E±-----------

Concededly, both the Notification dated 09.09.2003and Office Memorandum dated 01.04.2007 of the CentralGovernment came to be issued pursuant to the New IndustrialPolicy Resolution of the Central Government adopted by theUnion Cabinet vide Office Memorandum dated 23.12,2002 issuedby the Government of India, Ministry of Commerce and Industry(Department of Industrial Policy and Promotion), exercising thepower conferred under Article 73 of the Constitution of India, andpursuant to which, the Government of Sikkim also issued aNotification dated 17.02.2003 exercising its power under Article162 of the Constitution of India, which reads as hereunder:

"DEPAR"ENT OF COMMERCE AI`lD INDUSTRIES

GOVERNMENT 0F SIl{KIM

No.G.O./2/DI/2002-2003/901Dated: 17/02/03

NOTIFICATION

The Notification/Memorandum issued by Ministry ofCommerce and Industry, Department of Industrial Policy andPromotion, Govt. of India vide No.14(2)/2002-SPS, dated 23rdDecember 2002 approving a special package of incentives fordevelopment of Industries in the State of Sikkim, is herebyreproduced for general information of the public and theentrepreneurs as under:

No. 14(2)/2002-SPSGovernment of India,Ministry of Commerce and Industry,(Department of Industrial Policy and Promotion)New Delhi. Dated 23rd Dec. 2002.

OFFICE MEMORANDUM

Subject:New Industrial Policy and other concessions torthe state of Sikkim.

The Government of Sikkim has requested for a specialpackage for development of industries in the state on the lines for the North East Industrial Policy notified by the CentralGovernment vide Ministry of lndustry's OM No.EA/1/2/96-IPDdated 24th December 1997. DiscLlssions on Strategy and ActionPlan for Development of Industries and generation ofemployment in the State of Sikkim were held with the variousrelated Ministries on the issues inter alia, infrastructuredevelopment, financial concessions and easy market access.

2. Keeping in view the fact that the State of Sikkim lagsbehind in industrial development, a need has been felt forstructured interventionist strategies to accelerate industrialdevelopment of the State and boost investor confidence. Thenew initiatives would provide the required incentives as well asan enabling environment for industrial development, improveavailability of capital and increase market access to provide afillip to the private investment in the State.3. The matter has been carefully considered by theGovernment and it has been decided to provide the followingpackage of incentives for the State of Sikkim.

3.1 Fiscal Incentives to new Industrial Units andsubstantial expansion of existing units:

i) New industrial units and existing industrial units on theirsubstantial expansion as defined, set up in Growth Center,Industrial Infrastructure Development Centers (IIDCs) andother locations like Industrial Estates, Export Processing Zones,Food Parks, IT Parks, etc., as notified by the CentralGovernment are entitled to 100% (hundred percent) incometax and excise duty exemption for a period of 10 years from thedate of commencement of commercial production. ThrustSector Industries as mentioned in Annexure-II are entitled tosimilar concessions in the entire State of Sikkim without arearestrictions.

ii) All New industries in the notified location would beeligible for capital investment subsidy @ 15°/o of theirinvestment in plant & machinery, subject to a ceiling of Rs.30lakh. The existing units will be entitled to this subsidy onsubstantial expansion, as defined.

jii) An interest subsidy of 3% on the working capital loanwould be provided to all new industrial units in notifiedlocations for a period of 10 years after the commencement ofcommercial production. This benefit would also be extended toexisting units in notified locations on expansion, as defined, aswell as to Thrust Industries shown in Annexure-II.

iv) The insurance premium to the extent of hundredpercent on capital investment for a period of 10 years would beextended by the Central Government to all new units and toexisting units on their substantial expansion, as defined.

3.2 Development of Industrial Infrastructure:

(i) The funding pattern under the Growth Centre Schemecurrently envisaging a central assistance of Rs.10 crorefor each centre is raised to Rs.15 crore per centre.

(ii) The financing pattern of Integrated InfrastructureDevelopment Centers (IIDC) between Government of India andSIDBI will 'change from 2:3 to 4:1, and the G0I funds would bein the nature of a grant, so as to provide the requiredinfrastructu ral support.

3.3 The above concessions/subsidies shall be available to allnew units and to the existing industrial units on theirsubstantial expansion as defined, in the industrial areas notifiedby the Central Government ( Annexure-I) and Thrust Industries(Annexure-II) irrespective of location.

3.4 Ineligible Industries underthe policy:

Tobacco and tobacco products includingcigarettes/cigars/gutka, etc., Aerated branded beverages, andPollution causing paper and paper products 3.5 NodalAgency North Eastern Development Finance Corporation Limited(NEDFI} would be designated as the Nodal Agency for routingthe subsidies/incentives under various schemes notified underthis Policy.Explanation :

(i) The eligible areas for above concessions and thrustindustries are as identified in Annex-I & Annex- 11 respectively.(ii) The notification regarding definition of substantialexpansion of the existing units shall be issued separately.

4. Government reserves the right to modify any partof the policy in public interest.

5. The Ministry of Finance, Department of Revenue,Department of Development of North Eastern Region, etc. arerequested to amend Act/rules/notifications, etc. and issuenecessary instructions for gMng effect to these decisions.

( K.B.CHETTRI )Secretary Commerce and IndustriesGovt. of Sjkkim"

It is, therefore, clear that the source of issuing the

Office Memorandum dated 23.12.2002 of the CentralGovernment and the Notification dated 17.02.2003 of the StateGovernment are traceable to Articles 73 and 162 of theConstitution of India respectively, chalking out the New IndustrialPolicy of the respective Governments.

6.1 Similarly statutory sources of the Notification dated09.09.2003 and Office Memorandum dated 01.04.2007 aretraceable to Section 5A of the Central Excise Act, 1944, and theywere, concededly, made in the public interest to achieve theobjects which apparently reflects in the notifications issued bythe Central and State Governments dated 23.12.2002 and17.02.2003 respectively, invoking Articles 73 and 162 of the Constitution of India, namely,

(i) approving a special package for development ofindustries in the State of Sikkim;industries in the State of Sikkim;

(ii) to work out the strategy and action plan fordevelopment of industries in the State of Sikkim;development of industries in the State of Sikkim;

(iii) generation of employment in the State ofSikkr,in,Sikkr,in,

(iv) to improve infrastructural developments;

(v) to increase financial concessions; and

(vi) to open easy market access.

6.2 All the above objects are intended by the State ofSikkim realising the fact that the State lags behind in industrialdevelopment; and, therefore, needs structured interventioniststrategies to accelerate the industrial development of the Stateand to boost investor confidence. It is also the intention of theState that new initiative will provide the required incentives aswell as enabling environment for industrial development, improve availability of capital and increase market access to provide afillip to private investment in the State. The Fiscal incentivewhich proposes for new industrial units as well as substantialexpansion of existing units specifically provides for 100°/o incometax and excise duty exemption for a period of 10 years from thedate of commencement of the commercial production.

It is not in dispute that based on the above statutoryguarantee for the exemption of the excise duty referred toabove, the petitioners/assessees invested their money andstarted new units or expanded their existing units, 8.1 But, surprisingly, the respondents/revenue bynotifications dated 27.03.2008 and 10.06.2008, substituted theparagraphs 2, 3 and 4 of the earlier notification dated09.09.2003, which provide 100% income tax and excise dutyexemption. As a result of such modification the said 100%exemption of income tax and excise duty was reduced.

8.2.1 The notifications dated 27.03.2008 and 10,06.2008read as hereunder:•.--f` -`, ..

"GOVERNMENT OF INDIAMINISTRY OF FINANCE(DEPARTMENT OF REVENUE)

New Delhi, the 27'h March, 2008.

NOTIF:ICATION No. 23/2008-Central Excise G.S.R. (E).-In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944(1 of 1944), read with sub-section (3) of section 3 of theAdditional Duties of Excise (Goods of SpecialImportance) Act, 1957 (58 of 1957) and sub-section (3)of section 3 of the Additional Duties of Excise (Textileand Textile Articles) Act, 1978, (40 of 1978) the CentralGovernment, being satisfied that it is necessary in thepublic interest so to do, hereby makes the followingfurther amendments in the notification of theGovernment of India in the Ministry of Finance(Department of Revenue), No. 71/2003-Central Excise,dated the 9th September, 2003 which was published in;h[e7?:)Zed::e:ftLned;aof:extpt:0:8'enr:¥6oV3d:anmueTy¥rG.S.R.In the said notification,-

I. In the preamble, for the words and figures, ``tothe amount of duty paid by the manufacturer of the saidgoods other than the amoiint of duty paid by utilizationof CENVAT credit under the CENVAT Credit Rules, 2002",the words ``to the duty payable on value additionundertaken in the manufacture of the said goods by thesaid unit" shall be substituted;11. for paragraphs 2, 3 and 4 the following shall besubstituted, namely: - `2. The duty payable on value addition shall beequivalent to the amount calculated as a percentage ofthe total duty payable on the said excisable goods of thedescription specified in column (3) of the Table below(hereinafter referred to as the said Table) and famngwithin the Chapter of the said First Schedule as aregiven in the corresponding entry in column (2) of thesaid Table, at the rates specified in the correspondingentry in column (4) of the said Table:

TABLE

P

7.40Tyres, tubes and 41flaps8.72 or 73All goods399.74'All goods1510.76All goods3611.85E I ectric motors31a nd generators,electric generatingsets and partsthereof12.Any chapterGoods other than36:those mentionedabove Provided that where the duty payable onvalue addition exceeds the duty paid by themanufacturer on the said excisable goods, otherthan the amoLlnt paid by utilization of CENVATcredit during the month, tlie duty payable on valueaddition, shall be deemed to be equal to the dutyso paid other than by CENVAT credit.

2A In cases where all the goods produced by amanufacturer are eligible for exemption under thisnotification, the exemption contained in this notificationshall be subject to the condition that the manufacturerfirst utilizes whole of the CENVAT credit available to himon the last day of the month under consideration forpayment of duty on goods cleared during such monthand pays only the balance amount in cash.

28 The exemption contained in this notification shallbe given effect to in the following manner, namely:-

(a) the manufacturer shall submit a statement of thetotal duty paid and that paid by utilization of CENVATcredit, on each category of goods specified in the saidTable and cleared under this notification, to theAssistant Commissioner of Central Exclse or DepiityCommissioner of Central Excise, as the case may be, bythe 7th Of the next month in which the duty has beenpaid; (b) the Assistant Commissioner of Central Excise or theDeputy Commissioner of Central Excise, as the case maybe, after such verification as may be deemed necessary,shall refund the duty payable on value addition,::em#t::f:nct:t:rT;nt#:rLa5Sths:fe:Lf:edm:nntpha;:froraw?:g2t::one in which the statement as at clause (a) above hasbeen submitted.

2C Notwithstanding anything contained in sub-paragraph 28 above,- (a) the manufacturer at his own option, may takecredit of the amount calculated in the manner specified rff9- in paragraph 2 in his account current, maintained interms of the Excise Manual of SupplementaryInstructions issued by the Central Board of Excise andCustoms. Such amount credited in the account currentmay be utilized by the manufacturer for payment ofduty, in the manner specified under rule 8 of the CentralExcise Rules, 2004, in subsequent months, and suchpayment shall be deemed to be payment in cash; i;tmatnhuefac:eudr':r°:nthh?sr:fcuc::natmc°uur::nT:yb:et:aek;PhboYfthe month following the month under consideration;

(c) a manufacturer who intends to avail the optionunder clause (a) shall exercise his option in writing foravailing such option before effecting the first clearancein any financial year and such option shall be effectivefrom the date of exercise of the option and shall not bewithdrawn during the remaining part of the financialYear; (d) the manufacturershall submit a statement of thetotal duty payable as well as the duty paid by utilizationof CENVAT credit or otherwise and the credit taken asPer clause (a), on each category of goods manufactured`iand cleared under the notification and specified in thesaid Table, to the Assistant Commissioner Of CentralExcise or Deputy Commissioner of Central Excise, as thecase may be, by the 15th of the month in which thecredit has been so tat(en; (e) the Assistant commissioner of central Excise orthe Deputy Commissioner of Central Excise, as the casemay be, after such verification, as may be deemednecessary, shall determine the amount correctlyrefundable to the manufacturer and intimate to themanufacturer by the 15th day of the next month to themonth in which the statement under clause (d) has beensubmitted. In case the credit taken by the manufactureris in excess of the amount determined, the manufacturershall, within five days from the receipt of the intimation,reverse the said excess credit from the account currentmaintained by him. In case, the credit taken by themanufacturer is less than the amount of refunddetermined, the manufacturer shall be eligible to takecredit of the balance amount;

(f) in case the manufacturer fails to comply with theprovisions of clauses (a) to (e), he shall forfeit theoption, to take credit of the amount calculated in themanner specified in sub-paragraph 2 in his accountcurrent on his own, as provided for in clauses (a) to (c); (g) the amount of the credit availed irregularly oravailed of in excess of the amount determined correctlyrefundable under clause (e) and not reversed by themanufacturer within the period specified therein, shallbe recoverable as if it is a recovery of duty Of exciseerroneously refunded. In case such irregular or excess `:` :\`s .---. ``

credit is utilised for payment of excise dutyclearances of excisable goods, the said goods shallconsidered to have been cleared without paymentduty to the extent of utilisation of such irregularexcess credit.

Exp/anal;`on.-For the purposes of this paragraph, dutypaid by utilisation of the amount credited in the accountcurrent, shall be taken as payment of duty by way otherthan utilisation of CENVAT credit under the CENVATCredit Rules, 2004.

3. (1) Notwithstanding anything contained inparagraph 2, the manufacturer shall have the option notto avail the rates specified in the said Table and apply tothe Commissioner of Central Excise or the Commissionerof Customs and Central Excise, as the case may be,having jurisdiction over the manufacturing unit of themanufacturer for fixation of a special rate representingthe actual value addition in respect of any goodsmanufactured and cleared under this notification, if themanufacturer finds that four-fifths of the ratio of actualvalue addition in the production or manufacture of thesaid goods to the value of the said goods, is more thanthe rate specified in the said Table expressed as apercentage. For the said purpose, the manufacturermay, within sixty days from the beginning of a financialyear, make an application in writing to theCommissioner of Central Excise or the Commissioner ofCustoms and Central Excise, as the case may be, fordetermination of such special rate, stating all relevantfacts including the proportion in which the materials orcomponents are used in the production or manufactureOf goods:

Provided that the Commissioner of Central Exciseor the Commissioner of Customs and Central Excisemay, if he is satisfied that the manufacturer wasprevented by sufficient cause from making theapplication within the aforesaid time, allow suchmanufacturer to make the application within a furtherperiod of thirty days:

Provided further that the manufacturer supportshis claim for a special rate with a certificate from hisstatutory auditor containing an estimate of valueaddition in the case of goods for which a claim is made,based on the audited balance sheet of the unit, for thepreceding financial year;

(2) On receipt of the application referred to in sub-paragraph (1), the Commissioner of Central Excise orCommissioner of Customs and Central Excise, as thecase may be, after making or causing to be made suchinquiry as he deems fit, shall fix the special rate within aperiod of six months of such application;

(3) Where the manufacturer desires that he may begranted refund provisionally till the time the special rate •.... `-i+ ._ ..--

is fixed, he may, while making the application, apply tothe Commissioner of Central Excise or the Commissionerof Customs and Central Excise, as the case may be, inwriting for grant Of provisional refund at the ratespecified in column (4) of the said Table for the goods ofdescription specified in column (3) of the said Table andfalling in Chapter of the First Schedule of the CentralExcise Tariff Act, 1985 (5 of 1986) as in correspondingentry in column (2) of the said Table, and on finalizationof the special rate, necessary adjustments be made inthe subsequent refunds admissible to the manufacturerin the month following the fixation of such special rate.

(4) Where the Central Government considers itnecessary so to do, it may- (a) revoke the special rate or amount of refund asdetermined under sub-paragraph (2) by theCommissioner of Central Excise or the Commissioner ofCustoms and Central Excise, as the case may be, or (b) direct the Commissioner of Central Excise or theCommissioner of Customs and Central Excise, as thecase may be, to withdraw the rate so fixed.

Exp/Gnat/on: For the purpose of this paragraph, theactual value addition in respect of said goods shall becalculated on the basis of the financial records of thepreceding financial year, taking into account thefollowing,

(i) Sale value of the said goods excluding exciseduty, Value Added Tax and other indirect taxes, if any,paid on the goods;

(ii) Less: Cost of raw materials and packingmaterial consumed in the said goods;

(iii) Less: Cost of fuel consumed if eligible for inputcredit under CENVAT Credit Rules, 2004;

(iv) Plus: Value of said goods available as inventoryin the unit but not cleared, at the end of the financialyear;

(v) Less: Value of said goods available asinventory in the unit but not cleared, at the end of thefinancial year preceding that under consideration.Special rate would be the ratio of actual value additionin the production or manufacture of the said goods tothe sale value of the said goods excluding excise duty,Value Added Tax and other indirect taxes, if any, paid onthe goods.

(5) The manufacturer shall be entitled to refund atthe special rate fixed under sub-paragraph (2) in respectOf all clearances of excisable goods manufactured andcleared under this notification with effect from the dateon which the application referred to at sub-paragraph iirfe--...-- 8.2.3

(1) was filed with the Commissioner of Central Excise orCommissioner of Central Excise and Customs, as thecase may be.

(6) Where a special rate is fixed under sub-paragraph (2), the refund payable in a month shall beequivalent to the amoilnt calculatecl as a percentage ofthe total duty payable on such excisable goods, at therate so fixed :

Provided that the refund shall not exceed theamount of duty paid on such goods, other than byutilization of CENVAT credit.'

2. This notification shall come into force with effectfrom the lst day of April, 2008.

[F.No. 334/1/2008-TRU](S.Bajaj)Under Secretary to the Government of India E£::s:e_,::teedp;,t#c5pea:ten::i:,f,a2,893Nwo:s7pL,bz.os3:_dc:nn:rha:

fEa):e¥:t:fd[ntdi:'5#ras°ergi:#[:rYjd2onou3mbaenrdG.:;:.7aLs7tamended vide notification no.21/2007-Central Excise,3at8e(dE),2:tahteAdptn;I:29t97APE#,b2Sohoe7i„VldenumberG.s.R.

"GOVERNMENT OF INDIAMINISTRY OF FINANCE(DEPARTMENT OF REVENUE)

New Delhi, the 10`h June, 2008.

NOTIFICATION No.37/ 2008-Ceritral Excise In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944(1 of 1944), read with sub-section (3) of section 3 of theAdditional Duties of Excise (Goods of SpecialImportance) Act, 1957 (58 of 1957) and sub-section (3)of section 3 of the Additional Duties of Excise (Textileand Textile Ar[icles) Act, 1978 (40 of 1978), the CentralGovernment, being satisfied that it is necessary in thepublic interest so to do, hereby makes the followingfurther amendments in the notification of theGovernment of India in the Ministry of Finance(Department of Revenue), No. 71/2003-Central Excise,dated the 9th September, 2003 which was published inthe Gazette of India, Extraordinary, Part 11, Section 3,Sub-section (i) vide number G.S.R. 717 (E), dated the9th September, 2003 namely:- the Gazette of India, Extraordinary, Part 11, Section 3, &-..-..

In the said notification,-

(i) in paragraph 2,-

(a) after the words, brackets and figure ``correspondingentry in column (2) of the said Table,", the words,brackets and figure "when manufacl:ured starting frominputs specified in the corresponding entry in column (5)of the said Table in the same factory," shall be inserted; (b) for the Table, the following Table shall besubstituted, namely:- TABLE

(ii) In paragraph3, -

(a) for sub-paragraph (1),the following shall besubstituted, namely:- " (1) Notwithstanding anything contained in paragraph2, the manufacturer shall have the option not to availthe rates specified in the said Table and apply to theCommissioner of Central Excise or the Commissioner ofCustoms and Central Excise, as the case may be, havingjurisdiction over the manufacturing unit of themanufacturer for fixation of a special rate representingthe actual value addition in respect of any goodsmanufactured and cleared under this notification, if themanufacturer finds that the actual value addition in the •.`.\.-...

production or manufacture of the said goods is at least115 per cent of the rate specified in the said Table andfor the said purpose, the manufacturer may make anapplication in writing to the Commissioner of CentralExcise or the Commissioner of Customs and CentralExcise, as the case may be, not later than the 30th dayof September in a financial year for determination ofsuch special rate, stating all relevant facts including theproportion in which the material or components are usedin the production or manufacture of goods:

Provided that the Commissioner of Central Exciseor the Commissioner of Customs and Central Excise, asthe case may be, may, if he is satisfied that themanufacturer was prevented by sufficient cause frommaking the application within the aforesaid time, allowsuch manufacturer to make the application within afurther period of thirty days:

Provided further that the manufacturer supportshis claim for a special rate with a certificate from hisstatutory Auditor containing a calculation of valueaddition in the case of goods for which a claim is made,based on the audited balance sheet Of the unit for thepreceding financial year:

Provided also that a manufacturer thatcommences commercial production on or after the lstday of April, 2008 may file an application in writing tothe Commissioner of Central Excise or the Commissioner:iec:;:°t::::da€:::::!Faxtc:S:6tafa::retchaasnetTeay3obt€'dfa°;of September of the financial year subsequent to theyear in which it commences production.

(1A) Nothing contained in sub-paragraph (1)shall apply to a unit manufacturing goods falling underSerial Nos. 12, 13, 14 or 15 of the Table."

(b) in sub-paragraph (2), for the words "sixmonths", the words "three months" shall be substituted;

(c) for sub-paragraph (5), the following sub-paragraph shall be sut)stituted, namely:- "(5). The manufacturer shall be entitled to refund atthe special rate fixed under sub-paragraph (2) in respectof all clearances of excisable goods manufactured andcleared under this notification with effect from the lstday of April of the year in which the application referredto at sub-paragraph (1) was filed with the Commissionerof Central Excise or Commissioner of Central Excise andCustoms, as the case may be:

Provided that in cases where the application;er:::r::::e'n]3#b-dpaayraogfra]::e(,£2ohoag,at'hr:a:yanb:feanctfj'reedrshall be entitled to refund at the special rate fixed undersub-paragraph (2) in respect of all clearances of.-_` ` _---. `

excisable goods manufactured and cleared under thisnotification with effect from the lst day of ADril, 20C=

(d) after sub-paragraph (5), the following shall beinserted, namely:-

"(5A) A manu`facturer who commences commercialproduction on or after the lst day of April, 2008, shall beentitled to refund at the special rate fixed uncler sub-paragraph (2) against his first application in respect ofall clearances of excisable goods manufactured andcleared under this notification with effect from the dateof commencement of such commercial production andthe difference between the refund payable at suchspecial rate and the actual refund paid to him from thedate of commencement of commercial production till thedate of fixation of special rate, shall be refunded tohim.,,

(iii) after paragraph 3, the following shall be inserted,namely:- ``4. (1)In case the total amount of refund paid orpayable to a manufacturer in respect of goods clearedfrom a unit during a financial year is less than the totalduty paid by him on the said goods, other than theamount paid by utilization of CENVAT credit, for theyear, the differential amount, if any, shall be refundedto him subject to the condition that the total refundmade to him during the year, including the aforesaiddifferential amount, does not exceed the total dutypayable on value addition whether at the rate specifiedin the Table or at the special rate fixed under paragraph3.

(2) The Assistant commissioner of central Excise orthe Deputy Commissioner of Central Excise, as the casemay be, shall refund the differential amount, if any, tothe manufacturer not later than the 15th day of May inthe subsequent financial year. ``

[F. No. 334/1/2008-TRU]

(Unmesh Wagh)

Under Secretary to the Government Of India.

E:::s:e_,::teedp:Lnec,gt3,s:3::ffabt::,n2gg3Z::2guo3,;Sheen:r:ithe Gazette of India, Extraordinary, Part 11, Section 3,Su-section (i) vide number G.S.R. 717 (E), dated the 9thSeptember, 2003 and was last amended vide notificationno. 23/2008-Central Excise, dated the 27th March, 2008vide number G.S.R. 228(E), dated the 27th March,2008."

5rfe-

8.3 Hence, the petitioners/assessees have challenged thesaid notifications dated 27.03.2008 and 10.06.2008 in the abovebatch of writ petitions.

Heard Mr. A. K. Upapdhyaya, learned Senior Counsel,Mr. Paresh M. Dave and Mr. Sudesh Joshi, learned Counselappearing for the petitioners/assessees and Mr. A. Moulik,learned Senior Counsel appearing for the respondents/revenue.

10-On behalf of the petitioners/assesseees, it iscontended that the impugned notifications modifying theexemption of excise duty is -

(i) withoutjurisdiction;

(ii) contrary to the spirit and object of the NewIndustrial Policy of the Central and the StateGovernment;Industrial Policy of the Central and the StateGovernment;

(iii) arbitrary and unreasonable;

(iv) exceeds the power conferred under Section 5A ofthe Act; andthe Act; and

(v) opposed to the principles of promissory estoppel.

11.1Per contra, Mr. A. Moulik, learned Senior Counselappearing for the respondents/revenue contends that -

(i) by impugned notifications dated 27.03.2008 and10.06.2008, the respondents/revenue have not proposed towithdraw any exemption but proposed only to ensure thatthe exemption benefit reaches the actual manufacturers sothat there shall not be any misuse or abuse of suchexemption;

(ii) both the notifications dated 27.03.2008 and10.06.2008 are made in the public interest invoking Section5A of the Central Excise Act, 1944, read with sub-section(3) of Section 3 of the Additional Duties of Excise (Goods ofSpecial Importance) Act, 1957 and sub-section (3) ofSection 3 of the Additional Duties of Excise (Textile andTextile Articles) Act, 1978;

(iii) in the name of value addition, the manufacturerare claiming the duty exemption on bogus production and,therefore, the Revenue is well within its jurisdiction toinvoke the power reserved by them in their respectivenotifications dated 09.09.2003 and 01.04.2007 to modifythe exemption of duties provided under the respectivenotifications, in order to prevent loss of revenue to theState exchequer.

fS]SL.-_..

11.2 Elaborating the above contentions, Mr. A. Moulik,learned Senior Counsel appearing for the respondents/revenueexplained that the following modus operandi is adopted by thebogus, fictitious manufacturers raising false claims for the dutyexemption as hereunder: - "i) Reporting of bogus production by mere issuanceof sale invoices without actual production of goods andsupply/ clearance of excisable goods. This would resultin availment of cenvat credit by buyers of such excisablegoods in other parts Of the country without actualproduction being carried out and in absence of actualreceipt of goods.ii) Reporting of bogus production by such units inthese areas where actual production takes placeelsewhere in the country.iii) Over valuation of goods resulting in availment ofexcess of credit by biiyer.

iv) Goods are supplied by manufacturers, importersto these units without issuance of sales invoice andthese are backed by bogus sale invoices issued bytraders who do not undertake actual supply of goods.The actual supplier of these goods issue bogus duty paidinvoices to other manufacturers who take credit basedon such invoices without receipt of goods."

12. I have given careful consideration to all thesubmissions made on behalf of the petitioners/assessees and therespondents/revenue.

13. In the light of the above rival contentions, the issuethat arises for consideration in the above batch of writ petitions,as stated earlier, reads as hereunder:

Wliether the respondent-State (hereincalled the Revenue) is justified by issuingNot:ification No.23/2008-Central Excise

i.`-,i..--....

dated 27.03. 2008 and NotificationNo. 37/ 2008-Central Excise dated10.06.2008 in withdrawing the exemptiongranted in the payment of duty forutilization towards the CENVAT credit/cashconferred upon the petitioners/assesseesby Notification No. 71/2003-Centrtal Excisedated 09.09. 2003, namely, GeneralExemption No. 518 and OfficeMemorandum dated 01.04.2007 in File No.10(3)/2007-DBA-II/NER, both issued bythe Government of India exercising thepowers conferred under Section 5A of theCentral Excise Act, 1944?

14. The settled law is that fiscal statues should be strictlyconstrued. But it does not rule out the application of theprinciple of reasonable construction to give effect to the purposeor intention of any particular provision, as apparent from thescheme of the Act, or with the assistance of external aids, as arepermissible under law. In order to apply the principle ofreasonable construction to give effect to the purpose or intentionof the provision, as apparent from the scheme of t:he Act, theCourt must ensure to harmonize different provisions in the sameAct and prefer an interpretation which would lead to harmonizedconstruction rather than to lead to inconsistency; because, thecardinal principle is that the statute should be interpreted in sucha way as to avoid absurdity and to have harmonious effect. TheCourt, therefore, must construe the relevant provisions to makeit workable, unless it is impossible to do so, rather than make it meaningless. Any attempt contrary to that effect will defeat thevery purpose of the enactment as well as the intention of thelegislature. Therefore, every attempt must always be made toreconcile the relevant provisions as to advance the remedy bythe statute and not to deny the remedy provided under thestatute; otherwise the very purpose or the intention of thestatutory provision would manifestly be defeated. (Vide:Judgment dated 29,08.2006 passed by the Division Bench ofMadras High Court in 7lt}e Comm/sst.oner of Customs vrs. M/s i.I.Karle & Co. & Another).

``10.1. It is a settled law that the principle that fiscalstatutes should be strictly construed does not rule oL-the application of the principles of reasonat)leconstruction to Give effect to the purpose or intention ofany particular provision as apparent from the scheme ofthe Act, with the assistance of such external aids, as arepermissible under law [SHREE SAJJAN MILLS LTD. v.COMMISSIONER OF INCOME-TAX, M.P. BHOPAL, (1986TAX LAW REPORTER 48 at p.58)].

10.2. In order to apply the princip!es of reasonableconstruction to give effect to the purpose or intention ofthe provision, as apparent from the scheme of the Act,the Court must endeavour to harmonise differentprovisions in the same Act and prefer an Interpretationwhich would lead to a harmonise construction ratherthan to lead to inconsistency. The cardinal principle isthat the statute should be interpreted in such a way asto avoid absurdity and to have harmonious effect.

10.3. The Court must constriie the relevant provisions tomake it workable, unless it is impossible to do so, ratherthan make it meaningless.

10.4. An attempt must always be made to reconcile therelevant provisions as to advance the remedy by thestatute, but not to deny the remedy provided under thestatute, otherwise, the very purpose or the intention ofthe statutory provision would manifestly be defeated."

fft----.-.

le in law that the Court15. It is also a well-settled princirovision or a stipulatedcannot read anything into a statutory. A statue is an edict ofcondition which is plain and unambiguouI:T:hete: in a statute is thethe legislature. The language empobject of interpretingemanative factor of legislative intent.a statute is to ascertain the intentione legislature enactingit. The intention of the legislature is primarily to be gatheredIfrom the language used, which means that attention should bepaid to what has been said as also to what has not been said.

16. In the instant cases, both the Cabinets of the Centraland the State Governments had taken an Industrial PolicyResolution (IPR) decision by exercising the powers conferredunder Articles 73 and 162 of the Constitution of Indiarespectively for industrial development and economicdevelopment of the country. The respective Governments havingthus taken a policy decision, namely, the IPR to achieve theobjects, referred to above, by notifications dated 23.12.2002 and17.02.2003 and pursuant to that Policy, conferred certainbenefits, namely, the exemption of duty invoking the statutorypower under Section 5A of the Central Excise Act, 1944. Suchpolicy decision as well as exercise of powers conferred upon therespective Governments in order to achieve their objects ought •¢ul ..._.

to be given due effect to. This is evident, particularly, in thecontext of sub-section 2 of Section 5A of the Central Excise Act,1944, which reads as hereunder:

"(2) If the Central Government is satisfied that it isnecessary in the public so to do, it may, by special orderin each case, exempt from payment of duty of excise,under circumstances of an exceptional nature to bestated in such order, any excisable goods on which dutyof excise is leviable."

17.1 Similarly, a harmonious reading of both thenotification dated 09.09.2003 and Office Memorandum dated01.04.2007 makes it clear that even though, by notificationdated 09.09.2003, such duty exemption are made available onlyto new industries way out to that date but not from 01.04.2007,the notification issued on 01,04.2007 reaffirms the same dutyexemption benefits in view of paragraph xv(2) of the notification,which reads as hereunder:

"2. The `New Industrial Policy and other concession inthe North Eastern Region' announced vide O.M.No.EA/1/2/96-IPD, dated 24.12.1997 (NEIP, 1997) willcease to operate with effect from 1.4.2007. IndustrialUnits which have commenced commercial production onor before 31.3.2007 will continue to getbenefits/incentives under NEIP, 1997."

17.2 Therefore, it is necessary that the benefits conferredvide notification dated 09.09.2003 are extended and benefitsconferred under Office Memorandum dated 01.04.2007 are givensimilar effect as that of notification dated 09.09.2003 and thesame shall be curtailed in the manner which is not known to law.

•'`-:i I -.......

18.1 Then, the next question arises, whether theGovernment is empowered, invoking the right to reserve, tomodify the provisions under notification dated 09.09.2003 andOffice Memorandum dated 01.04.2007 as contended by Mr. A.Moulik, learned Senior Counsel appearing for the respondents/revenue.

18.2 There is no doubt that the exemption of duty wasprovided to the petitioners/assessees by the notification dated09.09.2003 pursuant to the policy, the IPR, of the respectiveGovernments in order to achieve, as per the policy decision ofthe Government, new industrial policy and for the economicdevelopment of the country, invoking the power conferred underArticles 73 and 162 of the Constitution of India and pursuant towhich they exercised statutory powers conferred under Section5A of the Act, in the public interest.

18.3 Once it is established that the respective Governmentsare giving the impugned duty exemption in public interest, thesame cannot, at any stretch, be withdrawn unless there is alarger public interest involved. Such an attempt to withdrawthe exemption, relying on which, the petitioners have acted upon•,-` `\ _-_..

the New Industrial Policy, would not only be illogical but alsoirrational.

18.4 No doubt, the power to grant includes the power tocancel or modify but the same should be based on reasons andnot arbitrarily.

18.5 It is true that the Government has the right to modifyany part of the policy in public interest as per clause 4 of thenotification dated 17.02.2003 exercising the power of the Stateunder Article 162 of the Constitution of India, which reads ashereunder:

``4. Government reserves the right to modify anypart of the policy in public interes-_.

18.6 Similarly as per clause 3 of the Office Memorandumdated 01.04.2007 of the Central Government exercising thepower of the Central Government under Article 73 of theConstitution of India, the Government reserves its right to modifyany part of the policy in public interest, which reads ashereunder:

"3. Government reserves the right to modify anypart of the Policy in public interes-i.

•.-€i \....-

But it cannot be ignored that the said policy of the respectiveGovernments were given effect to by statutory notification underSection 5A of the Central Excise Act, 1944.

19.1 Clause 3 of the notification dated 09.09.2003, issuedunder Section 5A of the Act, as referred to above, provides themanner in which the exemption of duty should be worked outand given. clause 4(c) of the said notification specifically statesthat a manufacturer who intends to avail of the option under sub-clause (a), shall exercise his option in writing for availing of suchoption before effecting the first clearance in any financial yearand such option shall be effective from the date of exercise of theoption and shall not be withdrawn during the remaining part ofthe financial year. If the manufacturer fails to comply with theprovisions mentioned in sub-clauses (a) to (e) of clause 4, heshall forfeit the option, to take credit of the amount of dutyduring the month under consideration, other than by way ofutilisation of CENVAT credit under the CENVAT Credit Rules,2004, in the account current on his own, as provided for in sub-clauses (a) and (c). Clause 5, which was inserted by notificationdated 09.07.2004, expressly makes it clear that the exemptioncontained in the notification dated 09.09.2003 shall apply only tothe following kinds of units, namely:- .i -..-'}fty __

(i) new industrial units which havecommenced commercial production on orafter the 23rd day of December, 2002, butnot later tlian tlie 31st day of March, 2007;commenced commercial production on orafter the 23rd day of December, 2002, butnot later tlian tlie 31st day of March, 2007;

(ii) industrial units existing before the 23rd dayof Decerhber, 2002, but which haveundertaken substantial expansion by way ofincrease in installed capacity by not lessthan twenty-five per cent on or after the23rd day of December, 2002, but havecommenced commercial production fromsuch expanded capacity, not laiter than the31st day of March, 2007.of Decerhber, 2002, but which haveundertaken substantial expansion by way ofincrease in installed capacity by not lessthan twenty-five per cent on or after the23rd day of December, 2002, but havecommenced commercial production fromsuch expanded capacity, not laiter than the31st day of March, 2007.

19.2 Section 5A of the Act itself provides for vesting ofpowers in the Central Government to issue a notification toexempt from whole or any part of duty of excise leviable onspecified excisable goods. Hence, the concept of the CentralGovernment foregoing certain amount of revenue is inherent inthe provision and the contention that a loss occurs to the CentralGovernment by virtue of operation of an exemption notificationand hence, the same is required to be modified, or varied orrescinded cannot be countenanced.

20. It is a settled law that an authority exercisingdelegated legislation cannot read in the provision grantingpowers of delegated legislation something more than whatsuch provision in fact provides. Ih other words, a delegateof powers of delegated legislation cannot exercise sucli a-----.

powers, even by attempting to read ihteht, in excess ofthe powers granted by the provisions. Therefore, therespondents having granted exemption as a New Industrial Policyof the State in the public interest so to do are not entitled tocurtail such exemption in purported exercise of power underSection 5A of the Act itself by trying to read into an ob].ect, whichactually did not exceed, when such was not the object of thelegislature itself. Unless there are materials to substantiate therearises a superior public interest or larger public interest.

21. The power reserved by the Government namely, theGovernment reserves the right to modify any part of the policy inpublic interest, therefore, may, in general, be correct and workout only where sucll superior or larger public interestwarrants to do so. When such a contention arises, the Court isunder obligation to examine as to whether such an exercise iswithin the scope and extent of power available under Section 5Aof the Act. While examining so, the fact that the power underSection 5A of the Act is essentially a power to grant exemption inrelation to duty of excise which is otherwise leviable under otherprovisions of ,the Act cannot be disregarded. Therefore, inexercise of such power under Section 5A of the Act, the authority ; ....:`--`., ___._

-fu`

cannot be permitted to take recourse to the principles applicablefor determining whether duty is correctly levied or not.

22. From any angle, once power under Section 5A of theAct has been exercised and exemption granted, a larger/superiorpublic interest has to be shown for curtailing/modifying/withdrawing an exemption already granted and in sucheventuality, the onus shall be on the Revenue and the samecannot be discharged by merely referring to the contention thatthe petitioners/assessees are claiming the exemption on bogusground, in surmise.

23.1 The Office Memorandum dated 01.04.2007,presumably in view of clause 5 of the notification dated09,09.2003, states that Industrial Units which have commencedcommercial production on or before 31.03.2007 will continue toget benefits/incentives under the `New Industrial Policy and otherconcessions for the State of Sikkim', and they alone are entitledfor exemption. The Government came with another OfficeMemorandum dated 01.04,2007 (in File No.10(3)/2007-DBA-II/NER) wherein it has specifically provided that Excise DutyExemption will be continued as hereunder: - ``100% Excise Duty exemption will becontinued,onfinished#adeinthe *

North Eastern Region, as was avai]ab]eunder NEIP, 1997. However, in cases,where the CENVAT paid on the rawmaterials and intermediate products goinginto the production of finished products(other than tlie products which areotherwise exempt or subject to nit rate ofduty) in higher than the excise dutiespayable on the finished products, ways andmeans refund such overflow of CENVATcredit will be separately notiried by theMinistry of Finance."

23.2 The Office Memorandum dated 01.04.2007 alsoprovides a clarification with reference to the, Value Addition inorder to ensure genuine industrial activities, which reads ashereunder: - ``In order to ensul.e genuine industrialactivities in the North Eastern Region,benefits under NEIIPP, 2007 will not beadmissible to goods in respect of whichonly peripheral activities like preservationduring storage, cleaning operations,packing, re-packing, labelling or re-labelling, sorting, alteration of retail saleprice etc. take place."

23.3 Paragraph 2 of the Office Memorandum dated01.04.2007 makes it clear that exemption granted in earlierOffice Memorandum dated 24.12,1997 will cease to operate witheffect from 01.04.2007. The Industrial Units which started on orbefore 31.03.2007 will continue to get the benefits and incentives ife-.-.-...

under the North East Industrial Policy (NEIP), 1997. The samereads as hereunder: - "2. The `New Industrial Policy and otherconcession in the North Eastern Region'announced vide O.M. No.EA/1/2/96-IPD, dated24.12.1997 (NEIP,1997) will cease to operatewith effect from 1.4.2007. Industrial Units whichhave commenced commercial production on orbefore 31.3.2007 will continue to getbenefits/incentives under NEIP, 1997."

23.4 0f course, by Office Memorandum dated 01.04.2007,also the Government reserves the right to modify any part of thePolicy in public interest and the same is subject to the test oflarger/superior public interest as discussed above.

24, In a similar situation before the Division Bench of theMadras High Court as to the withdrawal of the deferral andwaiver of sales tax in Writ Petition No. 13697 and 13698 of 2002- The India Cements ttd. vs. The Assistant Commissioner (CT) &Ors. by order dated 22.12.2006 to which I am a party, hasobserved as hereunder:

"16.1. The power of taxation can be used not merelyfor raising the reveniie, but also to regulate theeconomy, to promote the industrialisation and toencourage the investment for expansion ordiversification of the existing industries and to developnew industries.

16.2. Our country is emerging as a major power withthe goal aiming:

(i) to maintain a sustained growth in productivity;(ii) to enhance gainful employment; ife---__.-..-

(iii) to achieve optimal utilization of human resources;

(iv) to attain intemational competitiveness; and

(v) to transform India into a major partner and player in the global arena.

16.3. In the process of meeting the challenges thatcome across the globalization of economy, industry,trade and commerce, the Government have comeforward with liberalization schemes such as, grantingcertain exemptions in respect Of tax payable on theturnover of the sale of goods produced and sold by thenew or expanded or diversified industrial units, ofcourse, subject to the directions, qualifications and theterms and conditions prescribed in the scheme, eligibilitycertificate and the consequential agreements, with aview to boost the industrialisation by

(i) deregulating Indian Industry,

(ii) allowing the industry freedom and flexibility inresponding to market forces, and

(iii) providing a policy regime that facilitates and fostersgrowth of Indian Industry.

16.4. The power to maintain economic unity includes thepower to grant exemptions or to reduce the rate ofinterest or defer or waive the sales tax as a special casefor achieving the industrial development and to providecertain tax incentives which is also intended to attain theeconomic equality in the growth and development. Theeconomic development of the State to bring it intoequality with all other States and thereby develop theeconomic unity of India is one of the majorcommitments or the goals of the constitutionalaspirations of this land."

``19.1. It is a settled law that fiscal laws must be strictlyconstrued and the words must say what they mean andnothing should be presumed or implied. It is also a tritethat the principle that fiscal statutes should be strictlyconstrued does not rule out the application of theprinciple of reasonable construction to give effect to thepurpose or intention of any particular provision asapparent from the scheme Of the Act, with theassistance of such external aids, as are permissibleunder law [SHREE SAJJAN MILLS LTD. v.COMMISSIONER OF INCOME TAX, M.P. BHOPAL, 1986TAX L.AW REPORTER 48].

19.2. In order to apply the principle of reasonableconstruction to give effect to the purpose or intention ofthe provision, as apparent from the scheme of the Act,the Court must endeavour to harmonise the source ofthe Schemes as well as the regulatory procedure,because the statute shoilld be interpreted in such a wayto avoid absurdity and oracular interpretation and tohave harmonious construction to advance the implementation of the schemes and to make themworkable, unless it is impossible to do so, rather thanmaking it meaningless.

19.3. This leads us to refer back the intention behind theSales Tax Deferral/Waiver Scheme. The powerconferred on the State to notify the Schemes, either fordeferral or waiver, is nothing but a concession or afreedom from an statutory obligation which an exempteeis otherwise liable to discharge. It is a privilege granted,not available to all others. Therefore, an exemption,thus granted under statutory provisions of a fiscalstatute is held to be a concession granted, so that thebeneficiaries of such concession are required to pay thetax after the deferral period in case of deferral of salestax or required not to pay tax during the waiver periodin the case of waiver of sales tax, which they areotherwise liable to pay under the statute. Hence, therecipients of such concession have no legallyenforceable right against the Government to grant aconcession except to enjoy the benefits of theconcession during the period of its grant. This right toenjoy is a defeasible one as it may be taken away insimpliciter or on the ground of violation of the conditionsprescribed under the respective schemes, in exercise ofthe very power under which the exemption was granted.Either for declaring or for withdrawing such exemption inthe case of deferral or waiver, the cardinal principle isthat the same must be exercised in the public interestand not otherwise [vide: State of Rajasthan v.I.K.Udaipur Udyog Ltd. (2004) 7 SCC 673]."

25. With the above rules of interpretation and in the lightof the objects expressed in the respective notifications, theGovernment undoubtedly, in public interest, exempted exciseduty, by notification dated 09.09.2003 and Office Memorandumdated 01.04.2007 -

(i) to improve productivity of the state;

(ii) to encourage economy, sustainable growth inthe productivity;

(iii) to achieve the optimal utilization so that theeconomy, trade, commerce and the standard of living in theState of Sikkim would grow and improve in all spheres;

(iv) the State would qualify to compete with all otherStates of Indian democracy and so that this country, inturn, would compete globally.

26.1 A very identical issue under Section 5A of the CentralExcise Act, 1944 also came for the consideration before theGujarat High Court in Special Civil Application No. 6299 of 2008,Sal Steel Limited and Anr. vs. Union of India & Ors., where amajority of 2 out of 3 Hon'ble Judges by their independent andseparate Orders dated 28.10.2009 and 10.03.2010, held ashereunder:

"22. The contention that the power to modify/vary/ revoke anotification already issued is inherent in the power underSection 5A of the Act to issiie a notification may in general becorrect, but when such an exercise is challenged, like in thepresent case, it becomes necessary to examine as to whethersuch an exercise is within the scope and extent of poweravailable under Section 5A Of the Act. The authority has to bealive to the fact that the power under Section 5A Of the Act isessentially a power to grant exemption in relation to duty ofexcise which is otherwise leviable under other provisions of theAct. Therefore, in exercise of such power under Section 5A ofthe Act the authority cannot be permitted to take recourse tothe principles applicable for determining whether duty iscorrectly levied or not. Once the authority has come to theconclusion that an exemption is required to be granted frompayment of duty of excise, the only caveat being that it is inpublic interest, the authority cannot thereafter refer to loss ofrevenue as larger public interest for withdrawing suchexemption, when the notification originally issued has fixed atime frame for the exemption. To put it differently, once power under Section 5A of the Act has been exercised and exemptiongranted, a larger / superior public interest has to be shown forcurtailing / modifying / withdrawing an exemption alreadygranted. The onus shall be on the respondent authority in thisregard and the same cannot be discharged by merely referringto a perceived loss of revenue on comparison with similar unitsin other areas which are not entitled to exemption. If non-comparables are compared it would not yield correct result.Therefore, the attempt on part of the respondent authority torefer to certain pan India figures and percentages thereof tocompare with the figures and percenfages thereof from newindustrial units in the District Of Kutch cannot be permitted. It isnot possible to even ascertain as to whether the other units,not located in the District of Kutch, were put up within thesame period; and even if so put up, were put up in an areaaffected by a devastating earthquake. Itie object and purposeof issuing Original Notification was in relation to a region,namely, District Kutch, wliich was almost razed to ground bythe earthquake in January 2001, and the package for economicand social revival thereof cannot be treated at par withindustries set up in other areas of India and, therefore, theassimilation of percentile figures of two incomparable regionswould give a misleading pictLire. The entire exercise of issuingsubsequent notifications on 27.03.2008 and 10.06.2008 is thuswithout any basis, iLe. the basis adopted has no nexus with theobject, intent and purpose which formed the basis for issuingOriginal Notification in 2001.

23. Section 38A of the Act is in relation to effect ofamendments, etc., of Rules, Notifications or Orders. The saidprovision reads as under:

[38A. Effect of amendments, etc., of rules,notifications or orders. -- Where any rule, notificationor order made or issued under this Act or anynotification or order issued under such rule, is amended,repealed, superseded or resclnded, then, unless adifferent intention appears, such amendment, repeal,supersession or rescinding shall not-- (a) revive anything not in force or existing at the time atwhich the amendment, repeal, supersession orrescinding takes effect, or (b) affect the previous operation of any rule, notificationor order so amended, repealed, siiperseded or rescindedor anything duly done or suffered tliereunder; or

(c) affect any right, privilege, obligation or liabilityacquired, accorded or incurred under any rule,notification or order so amended, repealed, supersededor rescinded; or (d) affect any penalty forfeiture or punishment incurredjn respect of any offence committed under on inviolation of any rule, notification or order so amended,repealed, superseded or rescinded; or . . .`. ``` .--- (e) affect any investigation, legal proceeding or remedyin respect of any such right, privilege, obligation,liability, penalty forfeiture or punishment as aforesaid.

and any such investigation, legal proceeding or remedymay be instituted, continued or enforced and any suchpenalty, forfeiture or punishment may be imposed as ifthe rule, notification or order, as the case may be, hadnot been amended, repealed, superseded or rescinded."

24. under Section 38A of the Act it is provided that where anyRule, Notification, etc. made or issued under this Act isamended, repealed, superseded or rescinded, then, unless adifferent intention appears, such amendment, repeal,supersession or rescission then five clauses (a) to (e) are setout to lay down that what is provided in each of the fiveclauses, which are alternative to each other, sliaH not takeplace. Clause-(b) stipulates that an amendment, etc. shall notaffect the previoils operation of any Rule, Notification, etc. soamended, etc. or anything duly done or suffered thereunder.Therefore, an amendment of a notification shall not, not onlynot affect the previous operation of the notification, but shallalso not affect anything duly done or suffered under thenotification, Similarly, clause-(c) provides for a situation wherean amendment, etc. shall not affect any right, privilege,obligation or liability acquired, accrued or incurred under anyRule, Notification, etc. so amended, etc. which means thatwhere under a notification any right or privilege has beenacquired or has accrued, the same shall not be affected by theamendment, etc. of the notification, and correspondingly anobligation or liability incurred under the notification shall haveto be discharged even after the amendment, etc. Clauses-(d)and (e) similarly provide for permitting continuation ofleviability of any penalty, etc. and continuation of anyinvestigation, legal proceedirlg or remedy, etc.

25. Thus, the scheme which emerges on a plain reading ofSection 38A of the Act is that even in a case where a Rule,Notification, etc. is amended, etc., unless the amending Rule,Notification, etc. specifically denotes a contrary intention,everything that has taken place under the Rule, Notification,etc. prior to amendment shall continue to its logical end. Thisprovision is not only a saving orovision, but is a provision whichcorrespondingly obligates both the person who was abeneficiary under tlie existirig Rule, Notification, etc. and theauthority under the existing Rule, Notification, etc. to continueto comply with tlie requirements of the Rule, Notification, etc.as it existed even after amendment once the parties have dulydone anything or suffered under the existing Rule, Notification,etc. An assessee, wlio is required to act in a particular manneras specified by the Rule, Notification, etc. as existing before theamendment, ls obliged ln law to act accordingly, andcorrespondingly the authority is equawy obliged in law to act asif the amendment had not taken place, such act on part of theauthority being not only in relation to collection of revenue andother attendant provisions like penalty, etc., but also in relationto the entitlements of an assessee. This provision, namely,Section 38A of the Act incorporates in the statute the principle of a completed contract between the parties, whereunder theparties are obliged to fulfill their respective part of theconcluded contract, and in case of failure, the Court may stepin and direct the defaulting party to specifically perform his partof the promise. To put it differently, one may say that theprinciple of promissory estoppel, as normally understood, hasbeen incorporated in the statute.

27. In view of various decisions of the Apex Court cited byboth the sides a consensus emerges that the approach of theCourt in the matter of invoking the principle of promissoryestoppel depends on facts of each case. The general principle isthat once a representation has been made by one party and theother party acts on that representation and makes investmentsand thereafter the other party resiles, such act cannot bestated to be fair and reasonable. This principle is applicableeven in a case where one of the parties, namely, the partymaking a representation may be the State. It is also stated thatpromissory estoppel cannot be invoked against legislation. Thisis only partly correct. A distinction has to be made between thedelegated legislation and the primary legislation. So far as theprimary legislation is concerned, no estoppel can be appliedagainst an Act. However, in case of delegated legislation it isnot so. The general principle will come into play and if a subjectis able to establish having acted on the promise made, puthimself in a detrimental position, the other party is obliged inlaw to make good the promise, even if the promise is by way ofa delegated legislation. The State cannot be heard to complainthat the promise has resulted in financial loss. If the nature ofpromise is such where in exercise of delegated legislation theState has consciously agreed to forego certain revenue theState cannot resile from the said position only on the ground ofloss to the exchequer. Of course, it is equally well settled thatno person can be permitted to misuse the concession or benefitand invoke promissory estoppel. If one party abuses theconcession it is always open to the other party to revoke suchconcession. But for this there has to be cogent material in theform of direct evidence pointing out misuse of the concession.When public interest is pleaded the same cannot be generaland vague for the purpose of either modifying or revoking anexemption already granted. Supervening public interest isalways a good ground for modifying or withdrawing anexemption. But once again such supervening public interest hasto be established by direct cogent evidence in this regard, andnot on basis of general and vague apprehensions.

28. In a case where the State invited new industries byoffering concessional power tariff and thereafter withdrew thesame on the ground that there was power theft on a large scalethe Apex Court in case of U.P. Power Corporation Limited(supra), after detailed arlalysls of the law on the subject, struckdown the action of the State by invoking principle of promissoryestoppel and in the process stated:

``20. In this 21± century, when there is global economy,thequesfuonoffarth,svayELerit

offers certain benefits to attract the entrepreneurs andthe entreDreneurs act on those beneficia€ -I-`-IThereafter, the Government witlidraws those benefits,This wiii seriously affect the credibility of theGovernment and would show the shortsightedness of thegovernance. Therefore, in order to keep the faith of thepeople, the Government or its instrLimentality snoulaabide by their commitments. In this context, the actiontaken by the appellant-Corporation in revoking thebenefits given to the entrepreneurs in the hill areas willsadly reflect their credibility and people will not take theword of the Government. That will shake the faith of thepeople in the governance. Therefore, in order to keepthe faith and maintain good governance it is necessarythat whatever representation is made by theGovernment or its instrumentality which induces theother party to act, the Government should not bepermitted to withdraw from that. This is a matter offaith.,,,, 26.2 Accordingly, Full Bench of the Gujarat High Court inSal Steel Limited & Anr. Vs. Union of India & Ors. hctd thatwithdrawal of exemption without any basis, whatsoever, as in theinstant case, is arbitrary, unreasonable, illogical and irrationaland contrary to the doctrine of promissory estoppel.

27. The Government having granted such benefits ofexemption of excise duty, basically invoking the powers traceableunder Articles 73 and 162 of the Constitution of India by whichrespective Governments took policy decisions and consequentlytracing the statutory power under Section 5A of the CentralExcise Act, 1944, the same cannot be restricted by way ofexecutive orders and by way of these impugned notifications Trfe..-...

fr

dated 27.03.2008 and 10.06.2008, unless a greater publicinterest required so.

28.1 It is true as pointed out by Mr. A. Moulik, learnedSenior Counsel appearing for the respondents/revenue, thebogus manufacturers should not be permitted to avail theexemption which is intended to the real manufacturers;otherwise not only the above object of the notification of therespective Governments will be defeated, but it will also end inthe loss of revenue o'f the State.

28.2 Undoubtedly, only genuine and bona fidemanufacturers are entitled for exemption of excise duty and notbogus or fictitious manufacturers. The power of the revenueundoubtedly is still available to deny the exemption of exciseduty conferred under the notification dated 09.09,2003 andOffice Memorandum dated 01.04.2007, by way of individualproceedings which always could be initiated by the revenueagainst the faulty, bogus claimants or manufacturers ascontended by Mr. Moulik, learned Senior Counsel or otherwisethe very public interest enshrined in the New Industrial Policy ofthe Central and the State Governments, exercising the powersunder Articles 73 and 162 of the Constitution of India, of course

wit:hout compromising the loss of revenue. Therefore, therevenue is always well within the power to deny the dutyexemption in appropriate cases where the norms, terms andconditions required for such duty exemption cannot be satisfied.But, to deny the benefits statutorily conferred upon thepetitioners/ assessees in the public interest, pursuant to the NewIndustrial Policy of the Central and State Governments, reducingthe percentage of such statutory concessions, suffers fromelements of arbitrariness and unreasonableness, which, in turn,are relatively illogical and irrational.

29.1 It is true that tax and equity are strangers. Equitycannot be relied on even by the revenue to tax an amount whichis not taxable under the statue, and therefore, tax cannot belevied on the basis of the equity. Nor tax can be evaded placingreliance on the equity. [Vide: Kabt./ Mohan vs. CJ7-(1999) 1 SCC430].

29.2 As discussed in detail by the Full Bench of the GujaratH.igh Court .in Sal Steel Limited & Anr. Vs. Union of India & Ors. .inparagraph 27 of the Order dated 28.10.2009 of Justice D. A.Mehta, referred to above, GiL±-.-..--.

(i) if a subject is able to establish having acted onthe promise made, put himself in a detrimental position, theother party is obliged in law to make good the promise,even if the promise is by way of a delegated legislation; andthe State cannot be heard to complain that the promise hasresulted in financial loss;

(ii) of course, it is equally well settled that no personcan be permitted to misuse the concession or benefit andinvoke promissory estoppel. If one party abuses theconcession, it is always open to the other party to revokesuch concession; and

(iii) if there is no cogent reasons in the form of directevidence pointing out misuse of the concession.

30 The above view is also fortified by the decision of the ApexCourt .in U.P. Power Corpn. Ltd. and Anr. Vs. Sant Steels & AIIoys/Pj [tid. & Ors, reported in AIR 2008 SC 693.

31. For the above reasons, the impugned proceedingsdated 27.03.2008 and 10.06.2008 are quashed but however,without prejudice to the rights of the Revenue to deny duty Jfr, rsr/pin exemptions in appropriate cases, based on material facts andcogent reasons, of course, after following due process of law.

In the result, the writ petitions are allowed with the aboveobservations and the petitioners/assessees are entitled toworkout their refund, in the manner known to law. No costs, (P.D. DINAKARAN)CllIEF JUSTICE15.11.2010

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