Titan Industries Ltd vs The Joint Secretary To Government ...
2022 Latest Caselaw 467 UK

 IN THE HIGH COURT OF UTTARAKHAND
             AT NAINITAL

                        Writ Petition No. 1188 (MB) of 2005

Titan Industries Ltd.                                            .................Petitioner.

                            -Versus-
The Joint Secretary to Government of India
and others.                               .........Respondents.

Present:
Shri P.R. Mullick, learned counsel for the petitioner.
Shri Pradeep Joshi, Standing Counsel for the State / respondent no. 4
Shri Shobhit Saharia, learned counsel for the respondent no. 1
Shri Vipul Sharma, learned counsel for respondent no. 5.
Shri H.M. Bhatia, learned counsel for the respondents no. 2, 3 and 6.


                        Date of hearing and order: 02.03.2022
Coram:
Sri Sanjaya Kumar Mishra, ACJ.
Sri Ramesh Chandra Khulbe, J.

Upon hearing the learned counsel for the parties, the Court made following order (Per Sri Sanjaya Kumar Mishra, ACJ)

1. Petitioner has approached this Court seeking following reliefs:

"i. To issue a writ or order in the nature of Certiorari quashing the directions of the respondent no. 6 give vide letters dated 28.09.2005 and 03.10.2005 in so far as they deny the benefit of exemption to the petitioner's existing unit and directing the petitioner to deposit Central Excise duty as applicable with interest w.e.f. 19.05.2005 (Anneure No. IX & X).

ii. To issue a writ or order in the nature of Mandamus, directing the respondent no. 2 to reinstate Khasra Nos. 148D, 176B, 173B & 176A in village Chandrabani Khalsa, Mohobewala industrial area, Dehradun in Annexure II to

the Notification 50/2003 CE dated 10.06.2003 with retrospective effect.

iii. To issue any other writ or direction, which this Hon'ble Court may deem fit and proper in the circumstances of the present case."

2. This writ petition was earlier disposed of along with a batch writ petitions by this Court vide order dated 19.12.2006 whereby the High Court was pleased to constitute a high powered committee and empowered it with judicial powers. Against the said order the Union of India, after obtaining special leave to appeal, preferred a batch of civil appeals before the Hon'ble Supreme Court, which was registered as Civil Appeal No. 1015 of 2007 and other connected matters. The batch of appeals was taken up for hearing by the Hon'ble Supreme Court and the Hon'ble Supreme Court vide order dated 15.01.2020 was pleased to dispose of the appeals and remanded the present petition for proper adjudication. We find it appropriate to quote paragraphs no. 7 to 10 of the aforesaid judgment:

"7. The writ petitioner was entitled for seeking exemption under the Central Excise Act, 1944 by virtue of having an industry located in certain Khasra No. The writ petitioner's unit was mentioned in Annexure 2 which is a list of industry entitled to exemption. The writ petitioner's unit was shifted to Annexure 3 which is a list of industry which became disentitlted to exemption. According to the writ petitioner this was an inadvertent error. The petitioner, therefore, approached the High Court by way of Writ Petition praying for correction of the error and including their unit at Annexure 2 so as to get benefit of exemption.

8. According to Shri K. Radhakrishanan, learned Senior Counsel appearing for the Revenue this was a conscious decision to disentitle the writ petitioner from exemption.

9. The High Court disposed of this matter along with other matters by constituting a Committee and investing the Committee with Judicial powers, which it was not authorized to do. We have set aside the impugned order of the High Court in another batch civil appeals by order passed hereinabove. That order is in respect of writ petitions which have become infructuous in view of the introduction of GST. However, it is not disputed by the Revenue that the issues raised in the present writ petition would survive.

10. We accordingly direct that the present matter be remanded to the High Court for proper adjudication in accordance with law. All questions are left open. The parties are at liberty to file additional affidavits."

3. After remand, the matter is taken up for disposal. The facts of the case are as follows:

"i. On 07.01.2003, office memorandum was issued by the Government of India, Ministry of Commerce & Industry, Department of Industrial Policy and Promotion by which fiscal incentives were declared for the States of Uttaranchal (now Uttarakhand) and Himachal Pradesh.

ii. On 10.06.2003, the Central Excise Notification No. 50/ 2003 CE was issued.

iii. On 15.10.2003, the petitioner substantially expanded its installed capacity by 1 million watches from existing

capacity of 2 million watches with total capacity aggregating to 3 million watches.

iv. On 28.06.2004, Income Tax Notification No. 177 / 2004 was issued.

v. On 22.12.2004, Office memorandum recognizing exemption claim of the petitioner was issued.

vi. On 04.03.2005/ 18.08.2005/ 08.09.2005, petitioner exchanged correspondences with the respondent no. 6 in respect to proposed activity to be carried on Khasra No. 148 B & 149B.

vii. On 19.05.2005, the Central Excise Notification No. 27/2005 was issued.

viii. On 02.07.2005/15.07.2005, Industries Department represented before respondent no. 1 for correction of anomaly created by Notification 27/2005.

ix. On 28.09.2005/ 03.10.2005, petitioner was directed by respondent no. 6 to deposit Central Excise Duty as applicable with interest w.e.f. 19.05.2005.

x. On 17.10.2005, petitioner intimated respondent no. 4 and 6 that petitioner is putting up a new unit at Khasra No. 148B and 149B.

4. Learned counsel for the petitioner would argue that once the Khasra Nos. 148D, 176B, 173B and 176A have been included in Annexure no. 2 (2003 Notification), then it was not proper, and also illegal on the part of the respondents, to exclude the three plots bearing Khasra Nos. 176B, 173B and 176A from the ambit of Annexure No. 2 and to add it in Annexure no. 3 to the 2005 Notification thereby denying the exemption and Tax Holiday to

the petitioner on the following grounds: (i) Since these Khasra nos. were included in Annexure No. 2 - 2003 Notification, the petitioner had invested the huge money and increased its production capacity substantially which is upto 50%. They have legitimate expectation to continue with the increased production with tax exemption for the entire period that was notified in the original notification. (ii). The action of the respondent is hit by principle of promissory estoppel, as petitioner being motivated by the incentives given by the Central Government, has invested funds in industrial activity and has substantially increased its production capacity. (iii) It is contended by learned counsel for the petitioner that an anomalous situation leading to confusion has been created by allowing four plots in the list of exempted Khasras and then taking out three plots from it. The entire industrial unit is standing on one single piece of land consisting of Khasra nos. 148D, 176B, 173B and 176A, so the position is that now, for one part of the unit, petitioner is entitled to get benefit but for other part of the unit, petitioner is not entitled to get benefit.

5. On the contrary, Shri Shobhit Saharia, learned counsel for the Central Excise would argue that in this case, the principle of legitimate expectation and promissory estoppel would not be applicable. In a similar matter, the Coordinate Bench in the case of M/s Sant Steel and Alloys Ltd. Vs. Government of India and others in WPMS No. 628 of 2005 vide order dated 21.12.2010 has held that even if on the basis of mistake committed by the State Government the Notification dated 10.06.2003 had been made by the Central Government, the writ Court cannot rectify the said mistake. If a mandamus, this Court held, is issued to incorporate those two Khasra numbers in the Notification dated 10.06.2003, the same would tantamount to expansion of the policy, which the

Court cannot do. The effect of such direction would be doing something which the Court is not competent to do. In the circumstance, this Court observed it was constrained to hold that although, it appears to us that Khasra Nos. 60 (Ka) and 61 were not incorporated in Annexure No. II to the Notification dated 10.06.2003 for the blunder on the part of the State in furnishing appropriate information to the Union of India, but we are incompetent to incorporate the same in the said notification, particularly, in view of the fact that the when the said mistake was pointed out, the Central Government agreed to give advantage to new industrial units situated on the said Khasra nos. by incorporating Annexure No. III to the Notification dated 10.06.2003 by the amendment effected on 19.05.2005. The Division Bench dismissed the petition.

6. However, we find that present case and earlier decided case of M/s Sant Steel (supra) are distinguishable in view of the fact that Khasra Nos. 148D, 176B, 173B & 176A belonging to the petitioner were included in the exempted list mentioned in Notification No 50 / 2003. It is also apparent from the record that as per communication issued to M/s Titan Industries Ltd., Mohabewala Industrial Area, Dehradun dated 22.12.2004 they are entitled to get concession. It is appropriate to take note of paragraph 7 (i) of the said communication, which reads as under:

"7(i). M/s Titan Industries Ltd., Mohabewala Industrial Area, Dehradun is situated at Khasra No. 148 D, 176 B, 173 B & 176 A in village Chandrabani Khalsha, Tehsil Dehradun [Certificate of Tehsildar, Dehradun & Letter of Joint Director, (Industries), Directorate of Industries, Uttaranchal] & are covered at Sl. No. (4)(A)2 in the category of "Existing Industrial Estates" in Annexure-II appended to the said notification. In this

regard, letter of Joint Director (Industries), Directorate of Industries, Uttaranchal, Dehradun issued under C. No. 2143/U.NI./2004-05 dated 07.10.2004 [ANNEXURE-

9(b)], wherein he has certified that the unit of the party is situated in "Declared Industrial Unit as it was sparingly used. In respect of transfer of Dynamic Test Equipment they have submitted a stock transfer memo no. MS1/45 dated 21.11.2003 (ANNEXURE-16).

Further, the party has not intimated the date of installation of the Dynamic Testing Equipment, nor have they produced any documentary evidences regarding date of receipt of the same till 26.10.2004. They were asked by the Superintendent (Preventive), Central Excise, Dehradun vide C. No. II(8)PREV/TITAN-25%/63/03 dated 26.10.2004 (ANNEXURE-17) to intimate date of installation of Dynamic Testing Equipment along with documentary evidences. The party vide their letter dated 27.10.2004 (ANNEXURE-18) have submitted that said machine i.e. Dynamic Test Equipment was forwarded by their Hosur factory under Stock Transfer Memo no. 01/45 dated 21.11.2003 (ANNEXURE-16) and the same has been in warded by them on 01.12.2003. They have produced a transporter's consignment note dated 21.11.2003 (ANNEXURE-19) of Ashoka Transport Corporation, Hosur Bangalore alongwith their letter dated 27.10.2004 (ANNEXURE-18). The party have further intimated vide their letter dated 28.10.2004 (ANNEXURE-20) that they had installed one Dynamic Testing Equipment transferred from their Housur unit on 01.12.2003. This fact has also been verified by the Superintendent, Customs & Central Excise, Range-Dehradun and he has submitted a detailed report vide his letter C. No. TITAN/EXEMPT,NOTIFI./R-

DDN/03/2839 dated 06.12.2004 (ANNEXURE-21) that aforesaid Dynamic Test Equipment was inwarded in their Factory's register on 01.12.2003 at Sl. No. 1330 (ANNEXURE-22). Since the party had not installed Dynamic Test Equipment from 15.10.2003 to 01.12.2003, hence claim of the party that they have expanded their installed capacity from 2000000 watches per annum to 3000000 watches per annum is not correct for the period from 15.10.2003 to 01.12.2003. Show Cause Notices for the period from 15.10.2003 to 01.12.2003 have already been issued to the party.

As per the Statement (ANNEXURE-11) of Chartered Engineer, installed capacity of the unit of the party has been increased from 2000000 watches per annum to 3000000 watches per annum after having installed machineries namely Semi Auto PPE Line (01 No.), W/R Testing Machines (02 Nos.), Dynamic Test Equipment (01 No.) & Manual Assembly in the various stage of production namely Casing, Water Resistance, RT & Strapping respectively. Since Dynamic Testing Equipment was installed in the unit of the party on 01.12.2004 after having transferred from their unit situated at Housur, hence party's contention that they have expanded their installed capacity after having undertaken substantial expansion of their unit is correct after the date of installation of Dynamic Test Equipment i.e. 01.12.2003.

Thus, on the basis of aforesaid observations, it is apparent that they have completed their expansion under Notification No. 50/2003-CE dated 10.06.2003 read with judgment of Appellate Tribunal in the case of M/s Travancore Titanium Product Vs. CC [2002(148)ELT640(T)] and started their commercial

production after having undertaken substantial expansion of their unit only on 01.12.2003, making them eligible to avail the benefit of Notification No. 50/2003-CE dated 10.06.2003 [condition recorded at aforesaid para 6(c)] w.e.f. 02.12.2003."

7. Thus, it is apparent from the record that case is distinguishable from the earlier case, in view of the fact that three Khasra nos. in respect whereof prayer has been made in this case were in fact included in Annexure No. II to grant of tax benefits.

8. Thereafter, the subsequent notification came, which excluded three Khasra Nos. included in Annexure II - 2003 Notification. In the meantime, as per the notification dated 28.06.2004, the Income Tax Department of the Government of India has extended the tax holidays benefit under Section 80IC (2)

(a) of the Income Tax Act, 1961 to these particular Khasra Nos. After the publication of 2005 Notification, the Income Tax Department had also published another Notification dated 26.04.2006, though which is not a part of the writ petition but copy whereof is supplied today in the Court, whereby the Income Tax Department had not changed the tax holiday benefit extended to the aforesaid khasra numbers meaning thereby tax holiday benefit remained unaltered and untouched for the aforesaid four Khasra Nos.

9. Basing on such facts, the learned counsel for the petitioner would rely upon reported case of Gillette India Ltd. vs. Union of India 2009(235) ELT 5 HP wherein the Hon'ble High Court of Himachal Pradesh has held that equity of promissory estoppel applies to the Government or the 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 circumstances on record and prove them. The Hon'ble High Court of Himachal Pradesh has quoted the case of MRF Ltd. Vs. Assistant Commissioner and others (2006) 8 SCC 702, wherein it has been held by Hon'ble Supreme Court that where a right has already accrued, for instance, the right to exemption of tax for a fixed period and the conditions for that exemptions have been fulfilled then the withdrawal of exemption during that fixed period cannot affect the already accrued right. It was also held that in those cases, the principle of promissory estoppel does not apply if it is shown that there is overriding public interest. In that case the overriding public interest would prevail. In Shrijee Sales Corporation Vs. Union of India, (1997) (89) E.L.T. 452 (SC) it was held by Hon'ble Supreme Court that it is only in superior public interest that the Government may withdraw the representation or promise held out by it, even though someone having acted upon the representation or promise has adversely affected himself. It was also held that the Court has to be satisfied about the existence of such superior public interest, when not enforcing principle of promissory estoppel against the Government or the State on the plea of superior public interest.

10. In this case, no rationale has been put forth by any of the respondents for including the four Khasras in the exemption list at annexure II and later on, for withdrawing 03 Khasra out of the 04 in another list - Annexure III vide 2005 Notification. There is no pleading of any superior public interest by the respondents. They have not also established the same. In fact, the learned counsel appearing for all the respondents never raised the question of superior public interest. So, this Court is of the opinion that principle of promissory estoppel is applicable to the present case and the State shall be stopped from taking away the

benefits that were given to the petitioner by insertion of the four Khasras referred to above by including three of them in another Annexure 3 - 2005 Notification.

11. This matter can also be viewed from another angle. Section 38A of the Central Excise Act, 1944 provides for an exception, the relevant provision is quoted below:-

"38-A. Effect of amendment, 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, appeal, 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;"

12. In this case, an order has been made, under the Central Excise Act, unless a different intention appears, such amendment shall not affect any right, privilege, obligation or liability accrued or incurred under any rule notification or order so amended repealed or superseded or rescinded. Therefore, the subsequent notification, which superseded the earlier notification, in fact, took away the benefit granted to the petitioner by operation of law shall have no effect. By virtue of subsequent notification, the concession granted under Central Excise Act as well as Income Tax holidays scheme, cannot be taken away. In that view of the

matter, we are inclined to allow the writ petition. Hence, the writ petition is allowed.

13. Since Mr. Shobhit Saharia, learned counsel has raised strong objection regarding the exact nature of prayer made in this case, we modulate the prayer of the petitioner and direct that benefits that were given to the petitioner as per Annexure 2 of the notification 50/2003 shall continue to be given to the petitioner for past, present and future transactions.

14. Urgent certified copy of this order be supplied to the learned counsel for the parties, as per Rules.

(Ramesh Chandra Khulbe, J.) (Sanjaya Kumar Mishra) Acting Chief Justice.

SKS