Industrial Policies can’t Hit by Doctrine of Promissory Estoppel, says SC [Read Judgment]

The Supreme Court of India held that the industrial policies or notifications cannot be hit by the doctrine of promissory estoppel.

The court was of the view that industrial policies or notifications are issued in the 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 an investment on establishing the new undertakings and they do not take away any vested rights conferred under the earlier notifications/industrial policies.

Kutch District in the State of Gujarat was struck by an earthquake which destroyed the infrastructure in that District consequently, the Government of India announced an Incentive Scheme for setting up New Industries in the earthquake area, by issuing Central Excise Exemption Notification, which granted an exemption to goods cleared from a New Industrial Unit set up from so much of duty of excise as was equivalent to the amount of duty paid in cash/Personal Ledger Account (PLA) on the finished goods. The incentive of refund of the duty paid in cash/PLA was available for the period of 5 years from the date of commencement of commercial production.

The respondents made an investment in the plant and machinery of more than Rs. 20 crores. According to them, almost the entire duty was required to be paid in cash, the whole of which was refundable without any upper cap in terms of the notification. The notification was amended, which provided that the benefit of refund would be granted with reference to the value addition, which was notionally fixed @ 34% for the commodity manufactured.

On an appeal in the High court it was held that the subsequent notifications/industrial policies impugned before the respective High Courts were hit by the doctrine of promissory estoppel.

The three-judge bench of Justice Arun Mishra, Justice M. R. Shah and Justice B.R. Gavai dismissed the order of the High court and held, “notifications or industrial policies before the respective High Courts are clarificatory in nature and are issued in the 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 an 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.”