Supreme Court in the case of Union of India Versus M/s Unicorn Industries

Case Covered:

Union of India

Versus

M/s Unicorn Industries

Facts of the Case:

The question of law that arises for consideration in these appeals is, ‘as to whether, by invoking the doctrine of promissory estoppel, can the Union of India be estopped from withdrawing the exemption from payment of Excise Duty in respect of certain products, which exemption is granted by an earlier notification; when the Union of India finds that such a withdrawal is necessary for the public interest.

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Since the factual position, as well as the question of law arising in the present three appeals, are common, they are heard together and disposed of by this common judgment. The appellant, Union of India, in the 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 for 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 utilization 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 to exemption. Clause 1 of the said Annexure reads thus:

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“1. Tobacco and Tobacco products including Cigarettes/ Cigars/ Gutkha”

Observations of the Hon’ble Court:

The Appellate Bench of the High Court observed that some of the notifications providing modalities for exemption was 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 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 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.

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The decision of the Court:

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. In that view of the matter, we find that the appeals deserve to be allowed.

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Civil Appeal arising out of S.L.P.(C) No. 36926 of 2012:

The appeal is allowed. The judgment and order passed by the High Court of Sikkim dated 11.05.2012 is quashed and set aside.

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No order as to costs.

Civil Appeal Nos. 2345 of 2017 and 2346 of 2017:

The appeals are allowed. The judgments and orders passed by the Appellate Bench of the Gauhati High Court dated 20.04.2016 and 25.05.2016 are quashed and set aside. The Order passed by the learned Single Judge dated 10.12.2010 dismissing the writ petitions is upheld.

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