Page 109 - ELT_15th May 2020_VOL 372_Part 4th

2020 ] UNION OF INDIA v. V.V.F. LTD. 499
3.2 It appears that the then Government of Gujarat announced an In-
centive Scheme, 2001, dated 9-11-2001 for the economic development of Kutch
District. Under the said notification, Sales Tax exemption was provided. The
Sales Tax exemption was available only to those industries which were eligible
for excise exemption under Notification No. 39/2001-C.E., dated 31-7-2001.
3.3 Various amendments were made to the original Incentive Scheme
Notification No. 39/2001-C.E., dated 31-7-2001 between September, 2001 to Sep-
tember, 2004, inter alia, to clarify certain matters and also to extend the cut-off
date for setting up new industrial units from 31-7-2003 to 31-12-2005. One anoth-
er amendment was made with effect from 6-8-2003 vide Notification No.
65/2003-C.E. to provide that PLA payments could be made to discharge duty
liabilities on the finished products only after exhausting the Cenvat credit bal-
ances.
3.4 According to the original writ petitioners, in view of the inventive
offered under Notification No. 39/2001-C.E., the respondents herein-original
writ petitioners which had initially planned to expand their manufacturing activ-
ities at Maharashtra, decided to instead set up the new units in the Kutch Dis-
trict. That was in the month of December, 2005. According to the original writ
petitioners, the said decision was taken only because of the “incentive” promised
by the Government to refund excise duty paid in the Kutch area. According to
the original writ petitioners, as a result of the decision to set up a new unit in
Kutch District, the company had to additionally incur substantial costs towards
additional freight, handling charges, storage charges etc., which worked out to
approximately Rs. 2,200/- PMT. In addition, the company suffered severe loca-
tional disadvantages.
3.5 Original writ petitioners commenced commercial production of
split/crude fatty acid, etc. somewhere between the months of November, 2004 to
December, 2005. The primary raw materials for manufacture of these final prod-
ucts was palm kernel oil, crude palm kernel oil, other vegetable oils.
3.6 The said Incentive Notification No. 39/2001-C.E. was amended by
another Notification No. 16/2008-C.E., dated 27-3-2008 (impugned before the
High Court), which according to the writ petitioners was relating to a virtual
withdrawal of the incentive scheme. The amended notification provided that the
benefit of refund would be granted with reference to the value addition, which
was notionally fixed @ 34% for the commodity manufactured. Notification No.
16/2008-C.E. also provided for determination of a special rate by the Commis-
sioner, in a situation where the actual value addition was more than the deemed
value addition as specified. According to the original writ petitioners, as a conse-
quence of the said amendment, the inventive available to them stood reduced
from the refund of the entire of the duty paid in cash/PLA to 34% of the total
duty paid. The original writ petitioners challenged the subsequent Notification
No. 16/2008-C.E. before the High Court of Gujarat by way of the aforesaid writ
petitions. It was the case of the original writ petitioners that the subsequent Noti-
fication No. 16/2008-C.E. changed the entire basis of the incentive exemption
and had the effect of substantially reducing their entitlement of refund. It was
also the case on behalf of the original writ petitioners that as a result of the said
amendment which resulted in their entitlement for refund being reduced from
nearly 100% of the duty paid to only 34% of such duty amount. According to the
original writ petitioners, since the promised incentive was curtailed midway be-
fore the expiry of the five years period, the subsequent notification was in breach
of the principle of promissory estoppel.
EXCISE LAW TIMES  15th May 2020  109