Central Excise Act 1944

Public Interest versus Promissory Estoppel – Chalk another one up on the board for Public Interest

In its recent decision in Union of India & Anr. v. M/s. V.V.F. Limited & Anr.,[1] the Hon’ble Supreme Court held that government notifications which are issued in public interest are not hit by the doctrine of promissory estoppel.

Facts

The Gujarat Notifications

Post the devastating earthquake that struck the District of Kutch (in the State of Gujarat) in 2001, the Government of India issued a notification (“2001 Notification”) inter alia exempting those goods from excise duty which were manufactured in a new industrial unit (set up in the District of Kutch) for the purpose of sale. These new industrial units could claim a refund (in the manner stipulated in the 2001 Notification) of the excise duty paid on the goods manufactured by them. Further, July 31, 2003 was decided as the cut-off date for setting up of new industrial units in the District of Kutch with manufacturers allowed to claim excise refunds for a period of five years from the date of commencement of the commercial production of goods. The 2001 Notification was amended from time to time to inter alia extend the cut-off date for setting up new industrial units, from July 31, 2003 to December 31, 2005

Pursuant to two subsequent amendments to the 2001 Notification in 2008 (“2008 Notifications”), the benefit of refund granted under the 2001 Notification was restricted/ limited to the ‘value addition’ to the goods made by the new industrial units. Consequently, the new industrial units could now only claim a refund of 34% of the total duty paid by them, as opposed to the entire amount under the earlier notifications. The 2008 Notifications were challenged by way of several writ petitions before the Hon’ble Gujarat High Court and were quashed and set aside inter alia on the ground that the bar of promissory estoppel would operate.
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