Govt can withdraw anytime, before time "incentive / exemption" on establishing new Industries - in larger public good: SC

The SC on April 22, 2020 {Union of India & Another v. M/s V.V.F Limited & Another} held that the notifications/industrial policies which were impugned before the respective High Courts are clarificatory in nature and are issued in public interest and in the interest of the Revenue and they seek to achieve the original object and purpose of giving incentive/exemption while inviting the persons to make investment on establishing the new undertakings and they do not take away any vested rights conferred under the earlier notifications/industrial policies and therefore cannot be said to be hit by the doctrine of promissory estoppel, the same is to be applied retrospectively and they cannot be said to be irrational and/or arbitrary. 

It was held that the subsequent notifications/industrial policies do not take away any vested right conferred under the earlier notifications/industrial policies. It was held that under the subsequent notifications/industrial policies, the persons who establish the new undertakings shall be continue to get the refund of the excise duty. However, it was held that it is clarified by the subsequent notifications that the refund of the excise duty shall be on the actual excise duty paid on actual value addition made by the manufacturers undertaking manufacturing activities. Therefore, it was observed that it cannot be said that subsequent notifications/industrial policies are hit by the doctrine of promissory estoppel. It was held that the respective High Courts have committed grave error in holding that the subsequent notifications/industrial policies impugned before the respective High Courts were hit by the doctrine of promissory estoppel.

It was further held by the SC Bench, comprising of Justice Arun Mishra, Justice M. R. Shah & Justice B. R. Gavai, that the respective notifications/industrial policies impugned before the High Courts can be said to be clarificatory in nature and it can be defined as an Act to remove doubts. It was held that it cannot be said that by the subsequent notifications/industrial policies the benefits which were accrued/granted under the earlier notifications were sought to be taken away. It was held that it also cannot be said that by the subsequent notifications/industrial policies, the rights which have been accrued under the earlier notifications had been taken away. 

It was held that the subsequent notifications therefore are clarificatory in nature, since it declares the refund of excise duty paid genuinely and paid on actual manufacturing of goods and not on the duty paid on the goods manufactured only on paper and without undertaking any manufacturing activities of such goods.

It was held that the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the objective to be achieved and the public good at large. It has been held that while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must forever be present to the mind of the court, while considering the applicability of the doctrine. It is further held that the doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation.

It was observed that the withdrawal of exemption “in public interest” is a matter of policy and the courts would not bind the Government to its policy decisions for all times to come, irrespective of the satisfaction of the Government that a change in the policy was necessary in the “public interest”. It has been held that where the Government acts in “public interest” and neither any fraud or lack of bonafides is alleged, much less established, it would not be appropriate for the court to interfere with the same.

It was held that as the purpose of the original notifications/incentive schemes was being frustrated by unscrupulous manufacturers who had indulged in different types of tax evasion tactics, the subsequent notifications/industrial policies have been issued allowing refund of excise duty only to the extent of duty payable on the actual value addition made by the manufacturers undertaking manufacturing activities in these areas which is absolutely in consonance with the incentive scheme and the intention of the Government to provide the excise duty exemption only in respect of genuine manufacturing activities carried out in these areas.

In one of the bunch of appeals before the SC, the facts were - as per the govt. policy, 100% excise duty exemption was provided on the products manufactured in the North-Eastern region. By the subsequent notifications/industrial policies which were impugned before the High Court, the refund of excise duty was limited to the extent of the value addition. Which govt. notification was struck down by the HC. Giving rise to appeals before the SC.

The questions which were posed for consideration in present case before the SC were whether in the facts and circumstances of the case the subsequent notification which has been quashed and set aside by the High Court being notification No. 16 of 2008 dated 27.03.2008 can be said to be clarificatory in nature and can it be said that it takes away the vested right conferred pursuant to the earlier notification of 2001 and whether the same can be made applicable retrospectively and whether the same has been issued in the public interest and whether the same is hit by the Doctrine of Promissory Estoppel?

Answering the questions, it was held by the SC that under the circumstances, the respective High Courts have committed a grave error in quashing and setting aside the subsequent notifications/industrial policies impugned before the respective High Courts on the ground that they are hit by the doctrine of promissory estoppel and that they are retrospective and not retroactive.

Consequently, all the appeals were ALLOWED by the SC. The impugned Judgments and Orders passed by the respective High Courts were quashed and set aside by the SC. Resultantly, the original writ petitions filed by the respective original writ petitioners before the respective High Courts challenging the respective subsequent notifications/industrial policies stand dismissed.