Sri Chakra Tyres Ltd. vs Union of India and Another

The matter arises under Central Excise and Salt Act. The facts are not in dispute. The petitioner is a public limited company. It was incorporated

on 2-6-1982. Its main object is to manufacture tyres and tubes for automobiles and other rubber products. Some tax concession is being extended

by the Central Government to new industries since commencement of production with a view to promote industrial growth in this country. It is the

case of the respondents since 1976 some tax concession was being issued as regards rubber industry such as Notification Nos. 198/76; 142/78;

268/82; 88/84 and 159/85. In this case, I am concerned with Notification Nos. 268/82, 88/84 and 159/85. At once, it may be pointed out that

the petitioner relies on Notification No. 268/82 undergoing slight change in No. 88/84, which was rescinded under Notification No. 159/85 on 15-

7-1985. It is the latest Notification No. 159/85 that is sought to be quashed in this proceeding.

The part of Notification No. 268/82 as germane for this case if reproduced below :-

NOTIFICATION

No. 268/82 - CENTRAL EXCISES

DATE 13-11-1982

GSR. 693 (E). In the exercise of the powers conferred by Sub-rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government here

by exempts tyres (excluding tubes and flaps) falling under item No. 16 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944),

from so much of the duty of excise leviable thereon u/s 3 of the said Act a is in excess of the amount calculated at the rate of seventy-five per cent

of the rate of duty leviable on such tyres under the said First Schedule, read with any notification issued under sub-rule (1) of rule 8 of the said

rules and in force for the time being :

Provided that such tyres are manufactured in a factory which is a new industrial undertaking licensed u/s 11 of the Industries (Development and

Regulation) Act, 1951 (65 of 1951), and from which the clearances of tyres are effected for the first time during the period commencing on the 1st

day of April, 1976, and ending with the 31st day of March 1984 :

Provided further that the exemption contained in this notification shall not apply to clearances of tyres effected after the expiry of a period of seven

years from the date of the first clearance of tyres from any factory.

Provided also that the exemption contained in this notification shall apply to first clearance of tyres for home consumption during any financial year

only upto a total quantity not exceeding seventy-five per cent of the initial annual licensed capacity of tyres as certified by the Development Officer

of the Directorate General of Technical Development :

Provided also that the exemption contained in this notification shall not apply to such of the clearances of tyres as are in excess of the clearances of

tyres in respect of which the aggregate of the amount of exemption under this notification and the amount of exemption, if any, availed in respect of

clearances of tyres, under all or any of the notifications of the Government of India in the Department of Revenue and Banking No. 198/76-CE.,

dated the 16th June, 1976, or the Ministry of Finance (Department of Revenue), No. 142/78-CE., dated the 14th July, 1978, or in the Ministry of

Finance (Department of Revenue) No. 107/81-CE., dated the 24th April 1981, equals fifty per cent of the sum total of the value of the capital

investment made on plant and machinery in the said factory for the manufacture of tyres prior to the date of the first clearance of tyres as certified

by the Development Officer of the Directorate General of Technical Development.

Explanation I : For the purposes of computing the period of seven years from the date of the first clearance, the period commencing on the first day

of April, 1980 and ending with the 23rd day of April, 1981 shall not be take into account.

The petitioner''s contention is that this concession is for a certain period to wit for a period of 7 years since the date of the first clearance of tyres

from any factory. It is common ground that other conditions envisaged under the said notification are satisfied by the petitioner. The petitioner is a

factory in which tyres are manufactured; it is a new industrial undertaking licensed u/s 11 of the Industries (Development and Regulation) Act,

1951. From the petitioner''s factory clearances of tyres were effected for the first time on 25-1-1984, i.e. during the period commencing on the 1st

of April, 1976 and ending with the 31st day of March, 1984. Thus, the petitioner claims that is entitled to have the concession for a period of 7

years with effect from 25-1-1984, under the doctrine of promissory estoppel. This concession is referred to in the prospectus and indeed, it is

averred, ''in view of this excise duty concession extended by the notification duly issued under R8(1) of the Excise rules, the petitioner applied for

an industrial licence for setting up an undertaking for the manufacture of tyres and tubes for two wheelers and three wheelers''. On the strength of

the said industrial licence and relying upon the notification which assured the petitioner of the excise duty concession, the petitioner made a public

issue of capital on 15-7-1983 through a prospectus dated 6-6-1983. In the said prospectus, excise duty concession to which the petitioner was

entitled under Notification No. 268/82 was also set out as the incentive and concession available to the company. Through in the counter, the

petitioner was put to strict proof of these averments, the learned counsel for the respondents never challenged these statements. Even otherwise,

the petitioner''s typed set contains documents to support the above circumstances relied on by the petitioner; further in the course of arguments, the

prospectus was produced before me.

As a matter of fact, the principal controversy is whether the concession is time bound, i.e., whether it is available for seven years since the date

of first clearance as claimed by the petitioner, or ''whether the said period has nothing to do with the life or period of currently of the exemption

notification i.e. the period during which an exemption notification would be in force'' as urged by the respondents. On my careful consideration, I

am persuaded to hold in petitioner''s favour. Here follow my reasons. In the first place, let me find out the objective behind such concession for a

stated period. It is undoubtedly an incentive to start new industries and to advance industrial growth in our country. It would indisputably indicate

the concession is time bound and that it is irrevocable during the said period. Though the time-bound clause is stated negatively, it positively

stipulates that such concession is limited to a period of seven years since the commencement of first clearance, and will not be available thereafter.

The fact that the concession was admittedly extended till 15-7-1985 shows that the period from 1-7-1976 to 31-3-1984 bears no impact on the

time bound stipulation. Besides the following expression ""for the first time"" in the first proviso, second proviso and Explanation I to Notification No.

268/82 unambiguously says that the concession is available since the first clearance of tyres during 1-7-1976 to 31-3-1984. In the first proviso

there is no outer-limit prescribed. In other words, it will look as though the concession is for unlimited period. To avoid such an inference or

situation, an outer limit is stipulated in the second proviso. If this period of seven years referred to has nothing to do with the life or period of

currency of exemption notification, or as stated in the counter it related only to the period from 1-7-1976 to 31-3-1984, there is no need to refer

to the clearance of tyres for the first time from 1-4-1976 to 31-3-1984, nor is there any necessity to indicate in the second proviso that such

exemption shall not apply to clearance of tyres effected after the expiry of a period of seven years from the date of first clearance of tyres from any

factory. In other words, the plain meaning of the Notification undoubtedly points out that the exemption is for a period certain, to wit, seven years

from the date of first clearance of tyres from any factory. The manner in which Explanation I is couched, is a clear pointer to the fact that the

concession was stipulated for a period of seven years from the date of first clearance. It may be useful to notice that according to Explanation I,

while computing the period of 7 years from the date of first clearance, the period from 1-4-1980 to 23-4-1981 should not be taken into account.

Hence I am to reiterate that the concession is available for seven years since the date of first clearance as claimed by the petitioner.

The next important question is whether the respondents are entitled to rescind such concession even during the said period of seven years.

Immediately I hasten to hold that the Government has power to rescind any concession that was extended to a party, save in cases where the

promissory estoppel intercepts in favour of the party to whom the concession was given. To may advantage, I have the latest pronouncement of

the Supreme Court in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., . At the outset, it is pertinent to notice that this judgment

was rendered under the Central Excises and Salt Act, 1944. Even this case arises under the said Act. The facts in that case are, the respondents

before the Supreme Court are manufacturers of cigarettes. A representation was made by the Central Board of Excise and Customs, which was

approved and accepted by the Central Government that the cost of corrugated fibre board containers would not be includible in the value of

cigarettes for the purpose of assessment to excise duty. Such respondents acted upon this representation and continued the use of corrugated

fiberboard container for packing the cartons/outers of cigarettes and did not recover from the wholesale dealers the amount of excise duty

attributable to the cost of such corrugated fibreboard containers during the period May 24, 1976 to November 2, 1982. Such representation was

made on 24-5-1976, while it was withdrawn on 2-11-1982. On the facts, the Supreme Court observed.

It would be most inequitable to allow the Excise Authorities to assess excise duty on the basis that the value of the cigarettes manufactured by the

respondents should include the cost of corrugated fibreboard containers when it was clearly represented by the Central Board of Excise and

Customs in response to the submission made by the Cigarette Manufacturers'' Association - and this representation was approved and accepted

by the Central Government - that the cost of corrugated fibreboard containers would not be includible in the value of the cigarettes for the purpose

of assessment of excise duty. Of course, this representation could operate to create promissory estoppel only if it was within the competence of the

Central Board of Excise and Customs and the Central Government to make good such representation and the exclusion of the cost of corrugated

fibre-board containers from the value of the cigarettes was not contrary to law. We think that the Central Government had power under Rule 8

sub-rule (1) of the Rules to issue a notification excluding the cost of corrugated fibreboard containers from the value of the cigarettes and thereby

exempting the cigarettes from that part of the excise duty which would be attributable to the cost of corrugated fibre board container. So also the

Central Board of Excise and Customs had power under Rule 8 sub-rule (2) to make a special order in the case of each of the respondents granting

the same exemption, because it could legitimately be said that, having regard to the representation made by the Cigarette Manufactures''

Association, there were circumstances of an exceptional nature which required the exercise of the power under sub-rule (2) of Rule 8. The Central

Government and the Central Board of Excise and Customs were therefore clearly bound by promissory estoppel to exclude the cost of corrugated

fibreboard containers from the value of the goods for the purpose of assessment of excise duty for the period May 24, 1976 to November 2,

1982.

In that case, the Supreme Court expressed the view that what has been laid down in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar

Pradesh and Others, represents the correct law in regard to the doctrine of promissory estoppel, while it expressed its disagreement with the

observations that Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, subject to reservation that there can be no promissory

estoppel against the Legislature in the exercise of its legislative functions, nor can the Government or public authority be debarred promissory

estoppel from enforcing a statutory prohibition. The facts in this case stand in a better footing. In the cited case, there was no time bound covenant,

but when the concession was declared on 24-5-1976, it was revoked on 2-11-1982. The Supreme Court held that during that period, the

respondents before them are entitled to claim promissory estoppel with reference to the concession declared on 24-5-1976 by the Central Board

of Excise and Customs. Again, in the cited case, the Central Board of Excise and Customs by their letter dated 24-5-1976 intimated to the

Cigarette Manufacturers'' Association to the latter''s written representation dated 19-5-1976 that ''instructions have been issued to the Collector of

Central Excise that the cost of corrugated fibreboard containers in question does not form part of the value of cigarettes for the purposes of excise

duty''. It was therefore contended that such letter cannot be brought within the terms of rule 8(2) which postulates the making of a special order by

the Central Board of Excise and Customs in each case exempting from payment of duty any excisable goods. In other words, it was by their letter,

the Central Board of Excise and Customs spelt out the concession; yet the Supreme Court held that such representation by the Central Board of

Excise and Customs was accepted by the Central Government and that therefore, it would fall under rule 8(2). It may be at once useful to re-

produce rule 8 of the Central Excise Rules, 1944 which deals with the power to authorities exemption from duty in special cases.

Rule 8. Power to authorise exemption from duty in special cases :-

(1) The Central Government may, from time to time, by notification in the Official Gazette, exempt (subject to such conditions as may be specified

in the notification) any excisable goods from the whole or any part of duty leviable on such goods.

(2) The Central Board of Excise and Customs may by, special order in each case exempt from the payment of duty, under circumstances of an

exceptional nature, any excisable goods.

The instant case undoubtedly falls under sub-rule (1) of Rule 8, because the Notification was admittedly issued under sub-rule (1) of Rule 8 as

unambiguously stated in the Notification. In this case, on the strength of the said Notification No. 268/82, the petitioner not only applied for an

industrial licence for setting up an undertaking for the manufacture of tyres an tubes for two wheelers and three wheelers, but also made a public

issue of capital indicating in the prospectus about the excise duty concession. In order words, had it been made clear that these concessions are

not time bound, it might be, the petitioner would not have ventured in applying for an industrial licence for setting up an undertaking for the

manufacture of tyres and tubes for two wheelers and three wheelers. I have already extracted a part of paragraph No. 6 in the affidavit of the

petitioner and also to the fact that the petitioner was only put to strict proof of these averments. The facts in this case project a stronger case than

the above cited case to invoked the application of promissory estoppel. There is also the authoritative pronouncement by the Supreme Court that

the rule of promissory estoppel was applicable against the Government as well.

To the same effect is the decision of a Full bench of Bombay High Court reported in Tapti Oil Industries V. State of Maharashtra 1984 (2)

ECC 307. Nevertheless, the learned counsel for the respondents invited my attention to Bombay Conductors Ltd. v. Government of India 1986

ELT 87, a Full Bench judgment of the Delhi High Court and Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, . I must

immediately point out that the Full Bench of the Delhi High Court did not have the benefit of the Supreme Court decision in Union of India (UOI)

and Others Vs. Godfrey Philips India Ltd., . I have already referred to the fact that the Supreme Court in Union of India (UOI) and Others Vs.

Godfrey Philips India Ltd., expressed disagreement to the extent the said decision came into conflict with the statement of the law in Motilal

Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, . Therefore, I am bound to follow the dictum laid down in Union of India

(UOI) and Others Vs. Godfrey Philips India Ltd., .

In view of the principle settled down by the Supreme Court in Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., , it is too

difficult to accept the respondents'' contention put in a very general way that in tax matters, there can be no estoppel - be it promissory estoppel

and that repository of power in the Government implies that there can be no promissory estoppel.

The further contention advanced by the learned counsel for the respondents that no promise was given by the respondents to the petitioner, is

equally untenable for the simple reason that the exemption was issued under sub-rule (1) of Rule 8 of the Rules.

The only other argument survives to be considered is whether the petitioner is debarred from claiming promissory estoppel because of its

conduct in not having challenged the subsequent Notification, viz., 88/84. According to the learned counsel for the respondents, the said

Notification reduced to some extent certain benefit that was available under the former notification No. 268/82 and that as the petitioner did not

challenge, there is acquiescence on the part of the petitioner; such acquiescence will disable it from claiming the equitable doctrine of promissory

estoppel. For two reasons, I am unable to agree. In the first place, I have already pointed out that under Notification No. 268/82, a concession

was extended to the petitioner for a period of seven years since the date of first clearance. Even if there is any slight reduction in such benefit, that

will not take away the right inhered in the petitioner under the doctrine of promissory estoppel. Secondly, the petitioner has stated in paragraph

No. 9 of the affidavit filed in support of this petition that :-

Under this notification (88/84) the petitioner became entitled to claim excise duty exemption not merely to the extent of 50% of the value of the

plant and machinery installed upto - 25-1-1984 but also on additional 30% of the value of the plant and machinery installed after that date and

upto 31-3-1984.

In other others, as rightly pointed out by the learned counsel for the petitioner, it was an additional advantage made available to the petitioner under

Notification No. 88/84. The respondents in paragraph No. 9 of their counter purport to counter the above averments of the petitioner. All that is

stated is :-

To the points raised in para 9 of the writ affidavit is concerned, Notification No. 88/84 was issued on 6-8-1984, by the Central Government in

exercise of the powers conferred on it under Rule 8(1) of the Central Excise Rules. Therefore the contention of the petitioners that on 6-4-1984,

another order of exemption was issued, is not correct.

There is no denial that an additional benefit was made available to the petitioner under Notification No. 88/84. At any rate, it is obvious from

Notification No. 88/84, an additional benefit was conferred on the petitioner. Thus, the plea of acquiescence put forward by the petitioner cannot

be sustained.

In the result, the petitioner succeeds, Rule nisi issued is made absolute. However, I make no order as to costs.