A government notifications which is issued in the light of public interest can not be struck by the doctrine of promissory estoppel

Rida Farid Bazmi | Symbiosis Law School, Hyderabad | 6th July 2020

Union of India and Another v M/s V V F Limited and Another (2020 SCC Online SC 378)

Facts:  

In pursuance of the economic achievement the Union Government have introduced incentive schemes for setting up of new industrial units in particular to the backward area of North – Eastern States and the areas affected by 2001 earthquake in Gujrat. As per one of the many modifications that issued (Original notification) under the Central Excise Act, 1944 it was stated that there shall be an exemption from excise duty levied on manufactured goods for a period ranging from five to ten years from the date of commencement of the commercial production.  In the midst of the exemption period pendency, the Union Government issued an amending notification where the criteria for exemption was revised retrospectively. 

As per the amending notifications the amount of the exemption which was applicable to an eligible taxpayer unit was decreased just to that fraction of the excise duty contributing to the value addition made by such units.   Subsequently, after a statistical analysis of the production pattern even the value addition was predetermined which led the aggrieved eligible taxpayer units to approach the High Courts and challenge the amending notification which was further challenged in Supreme Court by a way of Special Leave Petition.

Issues: 

The three primary issues before the Hon’ble Supreme Court were:

1. Whether the amending notifications were clarificatory in nature.
2. Whether the amending notifications can be applied retrospectively and 
3. Whether the amending notifications can be struck by the doctrine of promissory estoppel.

Judgement:

In terms of the issue raised the Hon’ble Supreme Court held that the amendment notifications are clarificatory in nature as it expounds and inter alia clarified the refund mechanism. 

Further, it was also observed by the Hon’ble Supreme Court that as the amendment notifications are clarificatory and explanatory in nature therefore they shall be applied retrospectively. Subsequently, the Hon’ble Supreme Court revisited the earlier judgments that were held against the government actions in view of doctrine of promissory esstoppel and held that the original notification was issued in the public interest with a commendable objective of sincere industrialisation of the affected area of Gujrat and backward area of North – Eastern States therefore the amendment notifications can not be struck by the doctrine of promissory estoppel.