IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No.589 of 2008 Reserved on : December 11, 2008 Decided on : December 18, 2008 M/s Gillete India Ltd. & another …Petitioners. Versus Union of India and others …Respondents. Coram The Hon’ble Mr. R.B. Misra, Judge. The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 Yes. For the Petitioners : Mr. L. Nageswara Rao, Senior Advocate, with Mr. K.D. Sood, Mr. Sanjeev Sood, Mr. Kavin Gulati and Ms Ruby Singh Ahuja. For the Respondents : Mr. Sandeep Sharma, Assistant Solicitor General of India, with Mr. Janesh Mahajan & Mr. M.A. Khan, Central Government Counsel. Per Surjit Singh, Judge Petitioners are manufacturer of men’s grooming products, like double edged blades, razors, shaving systems, pre and post shaving preparations, portable power, i.e. batteries and oral care products, such as tooth-brushes. They have been manufacturing the aforesaid products since the year 1993, at Bhiwadi, District Alwar of Rajasthan State. On and with effect from 1st March, 2003, definition of “manufacture”, appearing in Section 2(f)(iii) of Central Excise Act, 1944, was amended, by virtue of Section 135 of Finance Act, 2003 (Act No.32 of 2003), read with clause (127) of Whether reporters of the local papers may be allowed to see the judgment? …2… Finance Bill, 2003 (8 of 2003). The amended definition read as follows: “2(f) “manufacture” includes any process,- (i) xxx xxx xxx (ii) xxx xxx xxx (iii) which, in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labelling or re-labelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the products marketable to the consumer, and the word “manufacture” shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account;” Razors and razor blades, etc., which the petitioners have been manufacturing in Rajasthan since 1993, are among the items specified in Third Schedule, per Serial No.64. On 10th June, 2003, Central Government issued a notification No.50 of 2003, copy Annexure P-1, exempting the goods, specified in the First and the Second Schedules of the Central Excise Tariff Act, 1985, cleared from a unit located in Uttrakhand and Himachal Pradesh, from the whole of duty of excise or additional duties of excise, if such a unit had commenced commercial production on or after 7th day of January, 2003, but not later than the 31st day of March, 2007. It may be noticed that razors and razor-blades (including razor blade blanks in strips) are included in Second Schedule of Central Excise Tariff Act, …3… 1985. Lateron, vide notification dated 2nd August, 2006, Annexure P-4, the outer date for the commencement of commercial production was extended upto 31st March, 2010. The notification exempted the items, specified in the First and the Second Schedules of the Central Excise Tariff Act, 1985, for a period of ten years, from the date of the publication of the notification or the date of commencement of commercial production, whichever is later. Petitioners set up a unit at Baddi in Himachal Pradesh for the packing of razors and razor blades, etc., and their first consignment was cleared on 10th March, 2007. Petitioners started getting the benefit of exemption, allowed vide notification Annexure P-1. On 18th January, 2008, another notification, Annexure P-11, was issued, whereby exemption contained in Annexure P-1 was taken away, in respect of the goods, which had been subjected to only one or more of the following processes, namely, preservation during storage, cleaning operations, packing or re-packing of such goods in a unit container or labelling or re-labelling of containers, sorting, declaration or alteration of retail sale price and have not been subjected to any other process or processes amounting to manufacture in the State of Uttrakhand or Himachal Pradesh. 2. Soon after the issuance of notification, Annexure P-11, notice Annexure P-12, was issued to the petitioners’ unit at Baddi, calling upon it to get itself registered, under Rule 9 of the Central Excise Rules, 2002, for the purpose of payment of excise duty, in respect of the items packed, repacked, …4… labelled or re-labelled at their unit. Petitioners made representation Annexure P-13, claiming that notification Annexure P-11 did not affect their status as exemptee from payment of excise duty, by virtue of their having commenced commercial production of their items prior to the issuance of notification Annexure P-11, which had prospective operation, and it also did not affect the right, which had accrued to them, under notification Annexure P-1. Probably, there was no response from the respondents and, therefore, the petitioners filed the present writ petition, under Article 226 of the Constitution of India, seeking the following reliefs: “(i) Issue of writ of certiorari or a writ order or direction in the nature of certiorari quashing the communication dated 23.01.2008; (ii) Issue of writ of certiorari or a writ order or direction in the nature of certiorari quashing the Notification No.1 of 2008 dated 18.01.2008, insofar it denies the benefit of the Notification No.50 of 2003 to the Petitioner-Company: (iii) Issue a writ of mandamus or a writ order or direction in the nature of mandamus declaring that the Petitioner-Company is entitled to the benefits of the exemption Notification No.50 of 2003 and that Notification No.1 of 2008 is not applicable to units set up before 18.01.2008; (iv) Issue a writ of mandamus or a writ order or direction in the nature of mandamus directing the Respondents not to insist upon seeking a registration under the Central Excise Rules, 2002 and to deposit excise duty for a period of 10 year from 20.12.2006; and (v) Pass such other or further orders/directions as this Hon’ble Court may deem fit and proper in the facts and circumstances of this case. …5… (vi) Allow the cost of the petition.” 3. It is averred that by virtue of notification Annexure P-1, a right had accrued to the petitioners to continue to claim exemption from payment of excise duty, in respect of the razors, razor blades, etc. packed at its Baddi unit and this right could not have been taken away by issuance of notification Annexure P-11. It has been pleaded that clause (c) of Section 38-A of the Central Excise Act, 1944, specifically saves a right accrued, under a notification, from being taken away by a notification amending, repealing, superseding or rescinding an earlier notification, under which such a right accrued. It is also pleaded that by virtue of promissory estoppel, the respondents are not entitled to take away the benefit of exemption, to which the petitioners became entitled, under notification Annexure P-1, as acting on the promise held out, by means of the said notification, the petitioners had invested a huge amount of Rs.32.00 crores, approximately, and employed 385 persons to carry out the process of packing, repacking, labelling, etc. 4. Respondents filed reply, in which they admitted that the petitioners had set up a unit at Baddi for packing razors, razor blades, etc. and that the first consignment of their goods was cleared on 10th March, 2007 and benefit of exemption, under notification Annexure P-1, was given. It was conceded that, under notification Annexure P-1, exemption was available for all manufacturing activities, within the meaning of Section 2(f) of the Central Excise Act, 1944, …6… including packing or repacking of goods, but Lateron when it was realized that inclusion of process of packing and repacking in the definition of “manufacture” was not serving the purpose of industrialization of backward States, including the State of Himachal Pradesh, as no goods were being manufactured and produced in such States but only packing and labelling units had been set up to claim exemption, notification Annexure P- 11 was issued to withdraw the exemption, in respect of the goods, which were only being packed, repacked, labelled or re-labelled, etc., and not actually manufactured in such States. It was stated that the notification was prospective, it did not have retrospective effect and so exemptions already available, before the issuance of notification Annexure P-11, were not affected by the notification. It was stated that notification Annexure P-1 had been issued in public interest and when it was found that it was not serving any public interest, exemption, in respect of packing, repacking, labelling, re-labelling units, was withdrawn, again in the public interest, vide notification Annexure P-11. 5. Placing reliance upon judgment of the Hon’ble Supreme Court in Kasinka Trading versus Union of India, (1995) 1 SCC 274, it was pleaded that grant of exemption from duty amounted to suspending the operation of provision regarding levy of charge and duty and that the very fact that such an exemption amounted to suspension of the charging provision implied that the suspension was liable to be revoked. It was also pleaded by making reference to Sales Tax Officer …7… versus Shree Durga Oil Mills, 1998 (97) E.L.T. 202 (S.C.) that public interest is superior equity which can always over- ride individual equity or any consideration of private loss or gain. 6. We have heard Mr. L. Nageshwara Rao, learned Senior Advocate, appearing for the petitioners, and Mr. Sandeep Sharma, learned Assistant Solicitor General of India, on behalf of the respondents. 7. Learned counsel for the petitioners raised the following points: (i) With a view to claiming exemption, under Notification Annexure P-1, petitioners set up a unit at Baddi in Himachal Pradesh by spending a huge amount of Rs.32.00 crores and employing 385 persons to run the unit and commenced commercial production before the issuance of Notification Annexure P-11, dated 18th January, 2008 and, thus, a right accrued to them to claim and continue to claim exemption, with respect to the whole of excise duty on the goods packed, re-packed, labelled or re-labelled by them at Baddi, for a period of ten years, as mentioned in Annexure P-1. This right is not affected by notification Annexure P-11, by virtue of the provision of clause (c) of Section 38-A of the Central Excise Act, 1944. (ii) Respondents are estopped to withdraw the exemption granted vide notification Annexure P-1 from the units, which commenced commercial production before the issuance of Notification Annexure P-11, …8… dated 18th January, 2008, on account of doctrine of Promissory Estoppel. (iii) Contemplated action of respondents to withdraw the exemption from the date of issue of notification Annexure P-11, dated 18th January, 2008, is arbitrary and, hence, violative of Article 14 of the Constitution of India. The action of the respondents also violates the constitutional right guaranteed, under Article 301 of the Constitution of India. 8. We proceed to deal with the aforesaid points, raised on behalf of the petitioners, in the seriatim, they have been mentioned, hereinabove. Point (i): 9. It was submitted that clause (c) of Section 38-A of the Central Excise Act, 1944, saves the right which accrued to the petitioners, under notification Annexure P-1, from being taken away by Notification Annexure P-11. Section 38-A (c) of the Central Excise Act, 1944, reads as follows: “38-A. Effect of amendments, etc., of rules, notifications or orders.- Where any rule, notification or order made or issued under this Act or any notification or order issued under such rule, is amended, repealed, superseded or rescinded, then, unless a different intention appears, such amendment, repeal, supersession or rescinding shall not___ (a) xxx xxx xxx (b) xxx xxx xxx (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended, repealed, superseded or rescinded;” …9… It was submitted that the right that had accrued to the petitioners, by virtue of notification Annexure P-1, was to avail exemption of whole of excise duty, for a period of ten years, in respect of the goods, packing, repacking or labelling or re- labelling of which had commenced on commercial basis, prior to the issuance of notification dated 18th January, 2008, Annexure P-11. It was submitted that Annexure P-11 was to affect those industrial units, which had not commenced packing, repacking, labelling, re-labelling, etc., of their goods on commercial basis, prior to 18th January, 2008, the date of issue of notification Annexure P-11. 10. Learned Assistant Solicitor General of India, while countering the aforesaid submission, though conceded that the operation of notification Annexure P-11 was prospective and not retrospective, urged that the right that had accrued to the petitioners, within the meaning of clause (c) of Section 38- A of the Central Excise Act, 1944, was exemption from payment of excise duty, in respect of the goods packed, repacked, labelled, re-labelled, etc., in the unit at Baddi upto 18th January, 2008, and that prospectiveness of notification Annexure P-11 was in that context. 11. For determining as to what right, if any, had accrued to the petitioners, before the issue of notification, Annexure P-11, it is essential to refer to the contents of notification Annexure P-1, because it is under this notification that the right is claimed to have accrued. The same is reproduced below: …10… “10th June, 2003 Notification No.50/2003 – 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 the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957) and sub-section (3) of section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), other than the goods specified in Annexure-I appended hereto, and cleared from a unit located in the Industrial Growth Centre or Industrial Infrastructure Development Centre or Export Promotion Industrial Park or Industrial Estate or Industrial Area or Commercial Estate or Scheme Area, as the case may be, specified in Annexure-II appended hereto, from the whole of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts. Provided that the exemption contained in this notification shall apply subject to the following conditions, namely:, (i) The manufacturer who intends to avail of the exemption under this notification shall exercise his option in writing before effecting the first clearance and such option shall be effective from the date of exercise of the option and shall not be withdrawn during the remaining part of the financial year; (ii) The manufacturer shall, while exercising the option under condition (i), inform in writing to the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, with a copy to the Superintendent of Central Excise giving the following particulars, namely:, (a) name and address of the manufacturer; (b) location/locations of factory/factories; (c) description of inputs used in manufacture of specified goods; (d) description of the specified goods produced; …11… (e) date on which option under this notification has been exercised; (iii) The manufacturer may, for the current financial year, submit his option in writing on or before the 30th day of November, 2003. 2. The exemption contained in this notification shall apply only to the following kinds of units, namely:- (i) new industrial units which have commenced commercial production on or after the 7th day of January, 2003, but not later than the 31st day of March, 2007 (substituted as 31st day of March, 2010, vide notification dated 2nd August, 2006, Annexure P-4); (ii) industrial units existing before the 7th day of January, 2003, but which have undertaken substantial expansion by way of increase in installed capacity by not less than twenty five per cent on or after the 7th day of January, 2003, but have commenced commercial production from such expanded capacity, not later than the 31st day of March, 2007 (substituted as 31st day of March, 2010, vide notification dated 2nd August, 2006, Annexure P-4). 3. The exemption contained in this notification shall apply to any of the said units for a period not exceeding ten years from the date of publication of this notification in the Official Gazette or from the date of commencement of commercial production, whichever is later.” Now, according to this notification, Annexure P-1, exemption was granted, in respect of goods cleared from a new industrial unit, which commenced production on or after 7th day of January, 2003, but not later than 31st day of March, 2007, and the exemption was to remain effective for a period of ten years, from the date of the publication of notification Annexure P-1 or from the date of commencement of commercial production, whichever was later. …12… 12. In the present case, admittedly, the first clearance of goods from petitioners’ industrial unit at Baddi took place on 10th March, 2007. That means, under the notification, Annexure P-1, exemption was to have indisputably continued upto 9th March, 2017, had the notification Annexure P-11 not been issued. 13. According to the petitioners, the right which had accrued to them and which is saved by clause (c) of Section 38-A of the Central Excise Act, 1944, is the right to enjoy exemption of excise duty, in respect of the goods packed and labelled by them, for the entire period of ten years, commencing from 10th March, 2007. But, according to the respondents, the right that had accrued to the petitioners and which is saved by the aforesaid provision of Central Excise Act, 1944, is exemption from payment of duty, in respect of the goods packed and labelled and cleared upto the date of issue of notification Annexure P-11, i.e. 18th January, 2008. 14. No direct authority was cited by either side, with regard to the interpretation of the provision of clause (c) of Section 38-A of the Central Excise Act, 1944. However, certain authorities were cited on behalf of the petitioners, to the effect that when some exemptions from payment of tax, by way of incentive for industrialization of any particular area, are granted, under an order, and a person complying with the requirement of the order granting such exemption, becomes eligible for such exemption, a right accrues to him to avail the exemption, in terms of that order and any modification, …13… change, supersession or cancellation of such an order, by a subsequent order, will not affect his right and such subsequent notification affects those units, which do not become entitled to exemption, prior to the date of issue of such subsequent notification. The citations are: Union of India and others versus Asian Food Industries, (2006) 13 SCC 542, and MRF Ltd. versus Assistant Commissioner and others, (2006) 8 SCC 702. 15. In Asian Food Industries’ case (supra), it was held that by reason of a policy, a vested or accrued right cannot be taken away. Such a right, therefore, cannot a fortiori be taken away by an amendment. 16. In MRF’s case (supra), it was held that the settled position in law is that where a right has already accrued, for instance, the right to exemption of tax for a fixed period and the conditions for that exemption have been fulfilled, then the withdrawal of the exemption, during that fixed period cannot affect the already accrued right. 17. In the instant case, Section 38-A of the Central Excise Act, 1944, saves the right accrued to the petitioners, under notification Annexure P-1. The right saved, by virtue of this provision, is not only the exemption availed upto the date of the issuance of the amending notification Annexure P-11, but exemption for the entire period of ten years, specified in Annexure P-1, in view of the law laid down by the apex Court in MRF’s case (supra). …14… 18. Learned counsel representing the respondents argued that the provision of Section 38-A of the Central Excise Act, 1944, is not absolute and that it is subject to a different intention appearing in the amending, repealing, superseding or rescinding notification. 19. We have carefully gone through Annexure P-11. We do not find anything in the aforesaid notification indicative that the intention of the authorities issuing the notification is to take away or in any other manner affect the right accrued to an entrepreneur, under the unamended notification Annexure P-1. Point (ii) 20. It was submitted that exemption granted to the petitioners cannot be taken away, not only on account of the provision of clause (c) of Section 38-A of the Central Excise Act, 1944, but also independent of the said provision. It was urged that the respondents are estopped from withdrawing the exemption, on account of their having promised, vide notification Annexure P-1, to the entrepreneurs that they would be entitled to tax exemption for ten years and acting on that promise the petitioners having set up their industrial units at Baddi, by spending a huge amount of Rs.32.00 crores and employing about 400 persons in the unit and thereby putting themselves in a position, to come out of which, at this stage, without incurring huge losses, is next to impossible. 21. Countering the aforesaid argument, learned Assistant Solicitor General of India, urged that doctrine of …15… Promissory Estoppel is not available against the State, especially in fiscal matters and the State may withdraw any concession given to the public at any point of time. In support of this argument, he placed reliance upon Kasinka Trading versus Union of India, (1995) 1 SCC 274. 22. Learned counsel representing the petitioners submitted that the precedent {Kasinka Trading case (supra)}, relied upon on behalf of the respondents is not an authority, on the point that doctrine of Promissory Estoppel is not available against the State. He cited a number of judgments, in which not only that it has been held that principle of Promissory Estoppel can be invoked against the State even in fiscal matters, but also that Kasinka Trading case does not lay down absolute rule that doctrine of Promissory Estoppel cannot be pressed into service against the State. He submitted that only exception to the enforcement of Promissory Estoppel against the State is that the promise made by the State should not have been against the statute, under which it purports to have been made or it is in the public interest that the doctrine should not be pressed into service. Judgments relied upon in this behalf are: M/s Motilal Padampat Sugar Mills Co. Ltd. versus State of Uttar Pradesh and others, (1979) 2 SCC 408; MRF Ltd., Kottayam versus Asstt. Commissioner (Assessment) Sales Tax and others, (2006) 8 SCC 702; Shrijee Sales Corporation and another versus Union of India, (1997) 3 SCC 398; U.P. Power Corporation and another versus …16… Sant Steels & Alloys (P) Ltd. and others (2008) 2 SCC 777; Pawan Alloys and Casting (P) Ltd., Meerut versus U.P. State Electricity Board and others (1997) 7 SCC 251; State of Punjab versus Nestle India Ltd. and another, (2004) 6 SCC 465;Pournami Oil Mills and others versus State of Kerala and another, 1986 (Supp) SCC 728. 23. In M/s Motila Padampat Sugar Mills case (supra), it was held that equity of Promissory Estoppel applies to Government or State in whichever capacity it acts and that the Government may not be bound by Promissory Estoppel, in case it shows that equity lies in its favour and for making such a claim the State must bring relevant facts and the circumstances on record and prove them, for which burden lies heavy on the Government. 24. In MRF’s case (supra), not only that it was held that Kasinka Trading case (relied upon by the respondents) did not disturb the settled position in law that where a right has already accrued, for instance, the right to exemption of tax for a fixed period