Case: UNION OF INDIA Vs. M/S UNICORN INDUSTRIES

The appellant, Union of India, in exercise of powers conferred by sub-section (1) of Section 5A of the Central Excise Act, 1944 (1 of 1994) (hereinafter referred to as the ?Central Excise Act?) 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), being satisfied that it is necessary in the public interest, by Notification No. 71 of 2003 dated 09.09.2003, exempted 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 to the said Notification, from the payment of duties under the said statutes. The notification provided that so much of the duty of excise or additional duty of excise, as the case may be, leviable thereon under any of the said Acts as was equivalent to the amount of duty paid by the manufacturer of the said goods, other than the amount of duty paid by utilisation of CENVAT credit under the CENVAT Credit Rules, 2002, was exempted. This exemption was available to the units located in 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, in the State of Sikkim, as specified in Annexure-II appended to the said notification. A procedure was also prescribed under the said notification for availing the benefit of exemption. Annexure-I thereto provides the list of the products which were not entitled for exemption. Clause 1 of the said Annexure readsTobacco and Tobacco products including Cigarettes/ Cigars/notifications were issued by the Union of India being Notification Nos. 32 of 1999-CE and 33 of 1999-CE dated 08.07.1999 insofar as the State of Assam is concerned.By Notification No. 21 of 2007-CE dated 25.04.2007, the earlier notifications issued by it were amended. The effect of the amendment was that the product ‘pan masala? falling under Chapter 21 of the First Schedule of the Central Excise Tariff Act, 1985, the goods falling under Chapter 24 of said First Schedule, i.e., tobacco and manufactured tobacco substitutes and plastic carry bags of less than 20 microns were included in the negative list and as such were no longer entitled for exemption from the excise duty. Being aggrieved by the said notification, the respondent, namely, Unicorn Industries in the Civil Appeal arising out of Special Leave Petition (C) No. 36926 of 2012, approached the High Court of Sikkim by way of Writ Petition (C) No. 22 of 2007. The High Court of Sikkim vide its judgment and order dated 11.05.2012 allowed the writ petition and held that the petitioner therein was entitled to exemption from payment of excise duty on the manufacture of pan masala from its unit situated in the State of Sikkim for a period of 10 years from the date of commencement of the commercial production, i.e., 27.06.2006.Similarly, the respondent in Civil Appeal No. 2346 of 2017, namely, M/s Dharampal Satyapal Ltd., which was a manufacturer of pan masala with tobacco and other tobacco products, approached the Gauhati High Court by way of a petition bearing No. PW(C) 749 of 2010. The said petition was with regard to withdrawal of exemption in respect of pan masala with tobacco. The Single Judge of the Gauhati High Court vide judgment and order dated 10.12.2010 found no substance in the petition and as such dismissed the petition. Being aggrieved thereby, the said respondent filed Writ Appeal No. 81 of 2011 before the Appellate Bench of Gauhati High Court. Vide the judgment and order dated 20.04.2016, the Appellate Bench of the High Court allowed the appeal; set aside the judgment and order passed by the Single Judge dated 10.12.2010 and quashed Notification No. 11 of 2007-CE dated 01.03.2007. It further directed the Investment Appraisal Committee to give an opportunity of hearing to the appellant before it (respondent herein) so that it can prove the amount it had actually invested in the specified items for availing the benefits under the earlier notifications and further directed that if the appellant proves that it had actually invested the amount, the respondent authorities shall refund to the appellant so much of the excise duty to which the appellant therein would be entitled as per the earlier notifications.The respondent in Civil Appeal No. 2345 of 2017, namely, M/s Dharampal Satyapal Ltd., had also filed another petition being Writ Petition (C) No. 749 of 2010 insofar as its product ‘pan masala without tobacco?, is concerned. The same was also dismissed by the learned Single Judge of the Gauhati High Court vide the common judgment and order dated 10.12.2010. It appears that the appeal arising from the said petition being Writ Appeal No. 223 of 2011 was separately heard by another Appellate Bench of the Gauhati High Court. However, noticing that the writ appeal arising out of the order of the Single Judge regarding the product of the appellant therein, i.e., ‘pan masala containing tobacco? was already allowed by the Appellate Bench of the High Court by Order dated 20.04.2016, the said writ appeal was also allowed, by the judgment and order dated 25.05.2016 thereby setting aside the Order passed by the learned Single Judge in Writ Petition (C) No. 749 of 2010 so also the Notification dated 25.04.2007. The respondent therein was directed to refund the excise duty component to the appellant as is admissible under the law.Being aggrieved by the aforesaid judgments and orders, one passed by the Sikkim High Court in the writ petition and the other two passed by the Gauhati High Court in the writ appeals, the Union of India is before this Court.

Reasoning: 12. The issue raised in these appeals is no more res integra. This Court in a catena of decisions has considered the issue with regard to inapplicability of the doctrine of promissory estoppel, when the larger public interest demands so.It could thus be seen that, it is more than well settled that the exemption granted, even when the notification granting exemption prescribes a particular period till which it is available, can be withdrawn by the State, if it is found that such a withdrawal is in the public interest. In such a case, the larger public interest would outweigh the individual interest, if any. In such a case, even the doctrine of promissory estoppel would not come to the rescue of the persons claiming exemptions and compel the State not to resile from its promise, if the act of the State is found to be in public interest to do so.A judicial notice can be taken of the fact that by various scientific studies on betel quid and substitutes, tobacco and their substitutes, i.e., pan masala with tobacco and without tobacco, these products have been found to be one of the main causes for oral cancer.It could thus be seen that, by a scientific research conducted by Experts in the field, it has been found that the consumption of pan masala with tobacco as well as pan masala sans tobacco is hazardous to health. It has further been found that, the percentage of teenagers consuming the hazardous product was very high and as such exposing a large chunk of young population of this Country to the risk of oral cancer. Taking into consideration this aspect, if the State has decided to withdraw the exemption granted for manufacture of such products, we fail to understand as to how it can be said to be not in the public interest.The Sikkim High Court has observed that the appellant herein has been unable to establish any overriding public interest, which would make the doctrine of promissory estoppel inapplicable. It has further observed that, the pan masala has not been declared as hazardous to health by any notification or order of the Government of India or the State Government. It found that, no material or scientific report had been placed on record to demonstrate that the pan masala is a health hazard. We find that the reasoning arrived at by the Sikkim High Court is totally erroneous.Insofar as the Gauhati High Court is concerned, the learned Single Judge by an elaborate reasoning had found that the notifications impugned before it was in the public interest and further observed that in view of the overriding public interest, the doctrine of promissory estoppel could not be invoked. Not only that, but the learned Single Judge in the judgment has specifically observedregard to the background that had preceded the Policy 2007 and the curtailment of the benefits of exemption earlier granted by the Policy 1997 through various instruments of law in the form of Section 154 of the Finance Act 2003 read with Schedule 9 thereto as well as the notifications under Section 5A of the Central Excise Act and other related legislations it would be in defiance of logic to conclude that all these notwithstanding, with the specific intention of excluding the industries engaged in the manufacture of goods under Chapter 24 and pan masala under Chapter 21 of the First Schedule to the Tariff Act, 1985, these would still continue to avail the benefits/incentives under the Policy 1997 only because the units concerned had commenced commercial production on and from 31/3/2007.The learned Single Judge has also specifically observed in his judgment that the vires of Section 154 of the Finance Act, 2003 vide which the exemption granted to the manufacturers of cigarette was rescinded with retrospective effect, has been upheld by this Court in the case of R.C. Tobacco (P) Ltd. and Another Vs. Union of India and Another, reported in 2005(7)SCC 725. We are surprised at the approach of the Appellate Bench of the Gauhati High Court. It is pertinent to note that the contention of the learned A.S.G. appearing on behalf of the Union of India to the following effect have been specifically recorded by the Judges of the Appellate Bench of the High Court in paragraph 14 of the judgment, which readsthe legality of the withdrawal of the benefit granted to the tobacco manufacturing units such as the appellant under the 1997 Industrial Policy by Section 154 of the Finance Act, 2003 was already upheld the Apex Court in R. C. Tobacco (P) Ltd. vs. Union of India, (2005)7 SCC 725  .The Appellate Bench of the High Court observed that some of the notifications providing modalities for exemption were issued subsequent to the enactment of Section 154 of the Finance Act, 2003 and, therefore, Section 154 of the Finance Act, 2003 has no relevance in the said case. However, the Appellate Bench does not find it necessary to even make a reference to the judgment of this Court which was relied on by the learned Single Judge while dismissing the writ petitions and which is specifically put in service by the Union of India. We are unable to appreciate as to how the Appellate Bench of the Gauhati High Court finds that withdrawal of exemption in respect of ‘pan masala with tobacco? is not in the public interest. The legislative policy as reflected in Section 154 of the Finance Act was to withdraw the exemption granted to the manufacturers of cigarettes as well as pan masala with tobacco and that too with retrospective effect. Apart from the fact that, it is a common knowledge that tobacco is highly hazardous, the legislative intent was also unambiguous. In these circumstances, the finding of the High Court that the withdrawal of exemption for tobacco products was not in the public interest, to say the least is shocking. We find that the approach of the Appellate Bench of the High Court was totally unsustainable.As already discussed hereinabove, we have no hesitation to hold that the withdrawal of the exemption to the pan masala with tobacco and pan masala sans tobacco is in the larger public interest. As such, the doctrine of promissory estoppel could not have been invoked in the present matter. The State could not be compelled to continue the exemption, though it was satisfied that it was not in the public interest to do so. The larger public interest would outweigh an individual loss, if any.