Summary
The Supreme Court upheld later area-based excise notifications restricting refunds to duty attributable to actual value addition. It treated them as clarificatory measures protecting genuine manufacturing incentives against misuse, retrospectively applicable and not barred by promissory estoppel. Refunds paid before the later notifications were protected from reopening, while pending applications had to follow the upheld notifications. The manufacturers’ three separate refund appeals were dismissed.
Issues
- Whether the later value-addition refund mechanism withdrew vested incentives or clarified the original scheme.
- Whether promissory estoppel prevented the changes.
- Whether the later notifications operated retrospectively and how existing refunds were affected.
Held
- Promissory estoppel can operate against Government but is an equitable doctrine requiring a clear factual foundation. Its application depends on the balance of equity and public interest; supervening public interest may justify a change even during a stated incentive period, and the doctrine cannot compel action contrary to law. (¶¶ 11.1, 11.2, 11.3, 11.4, 11.5)
- Whether a measure is clarificatory depends on its substance and purpose. Explanatory or declaratory amendments ordinarily operate retrospectively where no contrary indication appears. Exemption claimants must establish coverage, and ambiguity in an exemption is construed in favour of the Revenue. (¶¶ 13, 13.1, 13.2, 13.3, 13.4, 13.5, 13.6)
- The original area-based incentives sought genuine manufacturing and value addition. The Government identified misuse involving paper production, production elsewhere, overvaluation and unsupported invoices. The later mechanism rationalised refunds consistently with the original purpose rather than removing vested rights. The Court upheld the notifications as clarificatory, issued in public and revenue interests, and not irrational or barred by promissory estoppel. (¶¶ 14, 14.1, 14.2, 14.3, 15)
- The upheld notifications apply retrospectively, but cases where duty had already been refunded before the later notifications were not to be reopened. Pending refund applications must be decided on merits under those notifications and the applicable law. (¶¶ 14.3, 15, 16)
- The three manufacturers’ appeals from the Gujarat High Court’s separate refund decisions failed because the authorities had granted refunds consistently with the later notifications now upheld. (¶¶ 4, 16.1)
Result
Union’s appeals allowed; judgments invalidating the later notifications and policies set aside and corresponding writ challenges dismissed. Earlier paid refunds protected as specified; pending claims governed by the upheld notifications. Appeals arising from SLP(C) Nos.14751–14753/2013 dismissed. No costs.