Case Law Details

Case Name : Prince Spintex Pvt. Ltd. Vs Union of India (Gujarat High Court)
Appeal Number : R/Special Civil Application No. 20756 of 2018
Date of Judgement/Order : 03/02/2020
Related Assessment Year :
Courts : All High Courts (5408) Gujarat High Court (514)

Prince Spintex Pvt. Ltd. Vs Union of India (Gujarat High Court)

Chapter 5 of the Foreign Trade Policy, 2015-2020 makes provision for the EPCG Scheme, which is an incentive scheme. The incentive given is that the importer holding a valid authorisation for capital goods covered under the EPCG Scheme would be exempted from payment of customs duty and additional duty under section 3 of the Customs Tariff Act, and correspondingly, the importer would be obliged to fulfill export obligation to the extent provided in the Scheme. Since exemption from payment of customs duty and additional duty can only be granted under section 25 of the Customs Act, to give effect to the promise held out in Foreign Trade Policy 2015-2020, Notification No.16/2015-Customs dated 1st April, 2015 came to be issued exempting import of goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy, from the whole of the customs duty leviable under the First Schedule to the Customs Tariff Act and the whole of the additional duty leviable under section 3 of the Customs Tariff Act. Accordingly, when the authorisation under the EPCG Scheme was issued in favour of the petitioner, and when the exporter issued commercial invoice in favour of the petitioner on 16.5.2017, the petitioner had reason to believe that it would not be required to discharge any liability in respect of customs duty leviable under the First Schedule to the Customs Tariff Act or any additional duty under section 3 of the said Act, inasmuch as, a promise was held out to the petitioner that it will not be liable to pay any additional duty under section 3 of the Customs Tariff Act on the import of such capital goods subject to fulfilling the export obligation. Thus, Notification No. 26/2015- Cus dated 29th June, 2017, to the extent it limited the exemption from payment of additional duty under section 3 of the Customs Tariff Act to subsections (1), (3) and (5) thereof, is repugnant to the policy declared by the Central Government under Chapter 5 of the Foreign Trade Policy 2015-2020.

In the facts of the present case, import of capital goods under a valid authorisation under the EPCG Scheme was wholly exempt from payment of any additional duty under section 3 of the Customs Tariff Act. The intention of the Central Government while framing the EPCG Scheme was to permit export at zero customs duty. Accordingly, by Notification No.16/2015-Cus dated 1st April, 2015, goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy were inter alia exempted from the whole of the additional duty leviable under section 3 of the Customs Tariff Act. However, when the GST regime came into force, while section 3 of the Customs Tariff Act came to be amended by inserting sub-sections (7) and (9) providing for levy of integrated tax and goods and service compensation cess, in the corresponding amendment made in Notification No. 16/2015-Cus vide Notification No. 26/2017-Cus dated 29th June, 2017, sub-section (7) and sub-section (9) of section 3 were left out. However, within a short time thereafter, vide notification dated 13th October, 2017, Notification No.16/2015- Cus came to be further amended and the imports under EPCG Scheme were exempted from additional duty under sub­section (7) and sub-section (9) of the Customs Tariff Act. It is therefore, apparent that it was on account of inadvertence or oversight that while amending notification No. 16/2015-Cus dated 1st April, 2015 by Notification No. 26/2017-Cus, the words, figures and brackets “sub-section (7) and sub-section (9)” were not inserted and that it was always the intention of the Central Government to exempt imports of capital goods under the EPCG Scheme from payment of additional duty under section 3 of the Customs Tariff Act. Notification No. 79/2017 dated 13th October, 2017, therefore, has to be read as clarificatory or curative in nature, inasmuch as, otherwise it would leave as whole class of importers who had imported capital goods, uncovered during the period 1.7.2017 to 13.10.2017, allowing the department to levy additional duty under sub-sections (7) and (9) of the Customs Tariff Act on such imports, despite the fact that the Foreign Trade Policy 20 15-2020 envisages imports under the EPCG Scheme at zero customs duty. Under the circumstances, the action of the respondents in levying integrated tax and compensation cess on the import of capital goods by the petitioner under a valid authorisation under the EPCG Scheme, not being in consonance with the Foreign Trade Policy 2015-2020 cannot be sustained. For the same reasons, Trade Notice 11/2018 dated 30.6.2017, to the extent it is stated therein that under Chapter 5 importers would need to pay IGST, is also rendered unsustainable. Consequently, subject to fulfilment of the conditions contained in the Foreign Trade Policy, 2015-2020 and the exemption Notification No. 16/2015-Cus dated 1st April 2015 as amended from time to time, the petitioner would continue to enjoy exemption from payment of additional duty under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act even during the period 1.7.2017 to 13.10.2017 and is, therefore, entitled to refund of the additional duty paid by it under sub-sections (7) and (9) of section 3 of the Customs Tariff Act.

FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT

1. By this petition under article 226 of the Constitution of India, the petitioner has challenged Notification No. 26/2017- Customs dated 29.6.2017 to the extent it amends Notification No. 16/2015-Customs dated 1.4.2015. The petitioner further challenges Trade Notice No. 11/2018 dated 30.6.2017 issued by the second respondent Director General of Foreign Trade to the extent it is stated therein under Chapter 5 that importers would need to pay integrated goods and services tax (IGST). The petitioner has also challenged the order-in-original dated 9.2018 with consequential relief and seeks refund of Rs.2,38,82,204/- (sic. Rs.2,38,83,203/-) with interest at the rate of 24% thereon.

2. The first petitioner (hereinafter referred to as “the petitioner”) is engaged in the business of manufacturing of cotton yarn by way of spinning process. The finished goods are being supplied by the petitioner within India and are also exported outside India. In exercise of powers conferred under section 5 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government has notified Foreign Trade Policy 2015-20 vide notification No. 1/2015-20 which came into effect from 1.4.2015. The Export Promotion Capital Goods (EPCG) Scheme is covered under Chapter 5 of the Foreign Trade Policy. Under paragraph 5.01 of the EPCG Scheme, import of capital goods for pre-production, production and post production is allowed at zero customs duty subject to specified conditions.

2.1 In pursuance to Chapter 5 of the Foreign Trade Policy, 2015-20, Notification No. 16/2015-Customs dated 1st April, 2015 came to be issued under section 25(1) of the Customs Act, 1962 whereby the Central Government has e

2.2 It is the case of the petitioner that pursuant to the above referred exemption, the petitioner entered into a contract with one M/s. Itema, Italy (hereinafter referred to as “the exporter”) for importing fourteen units of capital goods, namely, Automatic Cone Winder Machines which fall under heading 84454090 of the Customs Tariff Act and covered under the exemption Notification No. 16/2015-Cus. The exporter has sent proforma invoice dated 9.1.2017 whereby the terms of payment were fixed as 100% by means of an irrevocable letter of credit payable at sight against the presentation of shipping bills. The Automatic Cone Winder Machines used for spinning process fall under heading 84454090 of the Customs Tariff Act and are subject to 5% basic customs duty and additional duty of customs leviable under section 3 of the Customs Tariff Act on their import into India.

2.3 The petitioner, therefore, applied for EPCG authorisation to claim exemption of customs duty and additional customs duty under Notification No. 16/2015-Cus with respect to such goods. The Directorate General of Foreign Trade (DGFT) granted EPCG authorisation dated 31.3.2017 to the petitioner, whereby it got entitlement to save duty value of Rs.2,95,74,408/- against import of capital goods in view of Foreign Trade Policy 2015-20 read with Notification No. 16/2015-Cus. Since the petitioner holds EPCG authorisation, it was not required to pay any customs duty, including additional duty of customs on import of such goods into India in view of the above Notification No. 16/2015-Cus. The exporter M/s. Itema had issued commercial invoice dated 16.5.2017 to the petitioner with respect to the above referred proforma invoice.

2.4 With effect from 1.7.2017, the Goods and Services Tax laws came into force. The Central Goods and Services Tax Act, 2017 (hereinafter referred to as “the CGST Act”) and the Gujarat Goods and Services Tax Act, 2017 (hereinafter referred to as “the GGST Act”) have replaced the Value Added Tax laws, Excise laws, Service Tax, Entry Tax and other indirect taxes. On intra-State supply of goods and/or services, Central Goods and Services Tax is payable and on inter-State supply of goods and/or services, Integrated Goods and Services Tax (hereinafter referred to as “IGST”) is payable under the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as “the IGST Act”).

2.5 In terms of section 7(2) of the IGST Act, import of goods is deemed to be inter-State supply of goods. Under sub-section (1) of section 5 the IGST Act, IGST is payable on import of goods into India. Accordingly, section 3 of the Customs Tariff Act was also amended with effect from 1.7.2017 and IGST became payable under sub-section (7) of section 3 of the Customs Tariff Act on import of goods into India. Simultaneously, Notification No. 16/2015-Cus dated 1.4.2015 also came to be amended with effect from 1.7.2017 by Notification No. 26/2017-Cus dated 29.6.2017, whereby in the opening paragraph in clause (ii) for the words and figures “under section 3”, the words, figures and brackets “under sub­sections (1), (3) and (5) of section 3” came to be substituted. The second respondent – DGFT issued a Trade Notice bearing No. 11/2018 dated 30.6.2017 wherein it was stated that the importers would need to pay IGST and take input tax credit as applicable under the GST rules. Due to such amendment in Notification No. 16/2015-Cus with effect from 1.7.2017, IGST payable under sub-section (7) of section 3 of the Customs Tariff Act was left out from exemption.

2.6 It is the case of the petitioner that though sub-section (7) of section 3 of the Customs Tariff Act is excluded from exemption of additional customs duty granted under Notification No. 16/2015, in the present case, the petitioner had already opened 100% irrevocable letter of credit before such restriction came to be imposed vide Notification No. 26/2017- Cus and the goods were imported during the validity period of an irrevocable letter of credit. Further, on the basis of the exemption granted under Notification No. 16/2015-Cus, the petitioner expanded its business and thus, vested rights had also accrued in favour of the petitioner before Notification No. 26/2017 came into force with effect from 1.7.2017.

2.7 On 3.8.2017, the petitioner filed Bill of Entry No. 2714414 dated 3.8.2017 to clear the goods for home consumption wherein it claimed exemption from basic customs duty and IGST on the basis of the EPCG authorisation issued to it by the DGFT. Though the fifth respondent – Deputy Commissioner of Customs allowed exemption from payment of basic customs duty on the basis of the EPCG authorisation, he did not allow the petitioner to clear the goods without payment of IGST of Rs. 2,38,83,203/- at the rate of 18% of the total value of Rs. 13,26,84,462/-.

2.8 It is the case of the petitioner that with effect from 1.7.2017, though the additional duty of customs payable on import of goods under sub-sections (1), (3) and (5) of section 3 of the Customs Tariff Act have been replaced by IGST payable under sub-section (7) of section 3 of the Customs Tariff Act, the fifth respondent did not allow the exemption of IGST to the EPCG authorisation holders due to limited amendment in Notification No. 16/2015-Cus dated 1.4.2015 by Notification No. 26/2017.

2.9 As the petitioner was not allowed to clear the capital goods without payment of IGST, it had no option but to pay Rs. 2,38,83,203/- as IGST and such amount was reflected by it as IGST credit in its electronic credit ledger. It is the case of the petitioner that it has not utilised any amount till date and it is shown as receivable in its books of account. Thus, the petitioner had made payment of IGST under protest to get its capital goods cleared for home consumption.

2.10 Subsequently, vide Notification No. 33/2015-20 dated 13.10.2017, certain amendments were made in Chapter 5 of Foreign Trade Policy 2015-20, whereby capital goods imported under the EPCG Scheme for physical exports also came to be exempted from the whole of the integrated tax and compensation cess leviable thereon under sub-section (7) and sub-section (9) respectively of section 3 of the Customs Tariff Act. Pursuant to the amendment in the Foreign Trade Policy 2015-20, the original Notification No. 16/2015-Cus came to be amended vide Notification No. 79/2017-Cus dated 13.10.2017 making corresponding amendments. Thus, with effect from 13.10.2017 EPCG authorisation holders were allowed to claim exemption from the whole of IGST payable under sub-section (7) of section 3 of the Customs Tariff Act on the import of goods. Thus, the importers who cleared the capital goods during the period 1.7.2017 to 12.10.2017 were not granted exemption from additional duty of customs though they were holding valid EPCG authorisation.

2.11 The petitioner filed a refund application dated 28.4.2018 before the Ahmedabad on 8.6.2018 and claimed that the import was planned under EPCG licence on the premise that no duty of customs whatsoever would be payable upon undertaking export obligation as stipulated in Foreign Trade Policy and sudden levy of huge amount of IGST resulted in blocking of huge working capital funds because in project financing this was not anticipated and hence, was not considered on project cost based on which project finance was tied up. Further vide Notification No. 79/2017 dated 13.10.2017, imports were again exempted from payment of all duties of customs including IGST for EPCG holder.

2.12 The fifth respondent issued a show cause notice dated 18.8.2018 proposing to reject the refund application of the petitioner. The petitioner filed its reply dated 6.9.2018 in the personal hearing granted to it on 7.9.2018 in pursuance to the said show cause notice. By the impugned order-in-original dated 29.9.2018, the fifth respondent rejected the refund application on the ground that on the date of filing bill of entry, that is, 3.8.2017, no notification granting exemption from payment of IGST was in force and, therefore, such IGST was chargeable on the said imported goods and it was correctly paid by the petitioner. Being aggrieved, the petitioner has filed the present petition seeking the reliefs noted hereinabove.

3. Mr. Mihir Joshi, Senior Advocate, learned counsel for the petitioner, submitted that there is no rationale for excluding sub-section (7) of section 3 of the Customs Tariff Act from the exemption granted under Notification No. 16/2015-Cus vide Notification No. 26/2017 when essentially in substance the levy is a levy of customs duty and is no different from levy of customs or additional duties of customs payable under section 3 of the Customs Tariff Act and hence, could not have been excluded on any rational parameters or justification. It was submitted that Notification No. 26/2017, to the extent it restricts the EPCG authorisation holders from claiming exemption of IGST on capital goods is unfair and arbitrary.

3.1 It was pointed out that the period between 1.7.2017 to 13.10.2017 is the only period during which exemption is not available from payment of IGST on the imported capital goods, to submit that if the import of goods had been delayed, the petitioner would have been entitled to exemption.

3.2 It was submitted that by virtue of Notification 16/2015-Cus, the respondents had held out that the additional duty leviable thereon under section 3 of the Customs Tariff Act is exempted, therefore, the principle of promissory estoppel would apply and the respondents cannot levy additional duty of customs under sub-sections (7) and (9) of section 3 of the Customs Tariff Act on the import of capital goods under an authorisation under the EPCG Scheme for the period between 1.7.2017 to 13.10.2017. In support of his submission, the learned counsel placed reliance upon the decision of this court in Shree Renuka Sugars Ltd. v. Union of India, 2018 (360) ELT 483, wherein the court held thus:-

“15. The crux of the issue is that the Government of India withdrew the exemption from payment of duty on export of sugar with the objective of controlling the domestic sugar prices. This had nothing to do with the exporters such as the petitioners. Raw sugar imported against advance authorization on the condition of reexport had no impact on domestic sugar price. Impounding export duty on such exports would not serve the purpose of controlling local sugar prices. Apparently since inadvertently the withdrawal of exemption also hit the exports of sugar against advance authorization, the Government of India on the representations made by the trade, quickly reintroduced the exemption limited to such class. Very clearly thus, the Government of India was correcting an inadvertent error or an unintentional withdrawal of the exemption. If that be so, the exemption notification dated 06.07.2016 must be viewed as clarificatory or curative in nature. Any other view would leave the said class of exporters uncovered for a period of about three weeks allowing the department to levy the export duty which is a wholly unintended consequence of the Government of India policy.

16. We have formed this opinion on the basis of precedence of the Supreme Court and this Court. In case of W.P.I.L. Ltd. v. Commr. of C. Ex., Meerut reported in 2005 (181) ELT 359 (S.C.), the Supreme Court considered a case where an exemption notification was withdrawn and a fresh notification was issued shortly thereafter exempting duty of excise on parts used in manufacturing of power driven pumps. The Court noted that there was a consistent policy of the Government of India to grant such exemption. The later notification did not grant exemption for the first time. It was held that such notification was merely clarificatory and hence would apply with retrospective effect.

17. Likewise in case of Ralson (India) Ltd. v. Commr. of C. , Chandigarh-I reported in 2015 (319) ELT 234 (S.C.), the facts before the Supreme Court were that the Government of India had issued exemption notification in case of compounded rubber. Such exemption was withdrawn by notification dated 01.03.1994 but was reintroduced by a notification dated 28.03.1994. The period between 01.03.1994 to 27.03.1994 was uncovered. The Supreme Court relying on the decision in case of W.P.I.L. Ltd. (supra) held that the later exemption notification would apply during the interregnum period also.

18. In case of Gujarat Paraffins Pvt. Ltd. v. Union of India, reported in 2012 (282) ELT 33 (Guj.) the Division Bench of this Court considered a case where the Government of India had taken corrective measure of reintroducing the exemption after a gap of about 16 months. The Court held that such exemption would have retrospective effect.”

3.3 Reliance was also placed upon the decision of the Supreme Court in the case of State of Bihar v. Suprabhat Steel Ltd., (1999) 1 SCC 31, wherein the court held thus:-

“7. Coming to the second question, namely the issuance of notification by the State Government in exercise of power under Section 7 of the Bihar Finance Act, it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits declared by the State Government in its own industrial incentive policy. But in exercise of such power it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the Incentive Policy itself. The Industrial Incentive policy is issued by the State Government after such Policy is approved by the Cabinet itself. The issuance of the notification under Section 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out the objectives and the policy decisions taken in the Industrial Policy itself. In this view of the matter, any notification issued by the Government Order in exercise of power under Section 7 of the Bihar Finance Act, if is found to be repugnant to the Industrial Policy declared in a government resolution, then the said notification must be held to be bad to that extent. In the case in hand, the notification issued by the State Government on 4-4-1994 has been examined by the High Court and has been found, rightly, to be contrary to the Industrial Incentive Policy, more particularly the Policy engrafted in Clause 10.4(i)(b). Consequently, the High Court was fully justified in striking down that part of the notification which is repugnant to sub-clause (b) of Clause 10.4(i) and we do not find any error committed by the High Court in striking down the said notification. We are not persuaded to accept the contention of Mr. Dwivedi that it would be open for the Government to issue a notification in exercise of power under Section 7 of the Bihar Finance Act, which may over-ride the incentive policy itself. In our considered opinion the expression “such conditions and restrictions as it may impose” in sub-section (3) of Section 7 of the Bihar Finance Act will not authorise the State Government to negate the incentives and benefits which any industrial unit would be otherwise entitled to under the general Policy Resolution itself. In this view of the matter, we see no illegality with the impugned judgment of the High Court in striking down a part of the notification dated 4-4-1994.”

3.4 Reliance was also placed upon the decision of the Supreme Court in State of Jharkhand v. Tata Cummins Ltd., (2006) 4 SCC 57, wherein it was held thus:-

“16. Before analysing the above policy read with the notifications, it is important to bear in mind the connotation of the word “tax”. A tax is a payment for raising general revenue. It is a burden. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the Industrial Policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the Industrial Policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute.”

3.5 Reference was made to the decision of the Supreme Court in the case of W.P.I.L. Ltd. v. Commissioner of Central Excise, Meerut, UP, 2005 (181) ELT 359 (SC) (2005) 3 SCC 73, wherein the court held thus:-

“14. In our opinion, therefore, the authorities were in error in upholding the demand and in directing the appellant to pay excise duty.

15. The learned counsel for the appellant is also right in relying upon a decision of this Court in Collector of Central Excise, Shillong v. Wood Craft Products Ltd., (1995) 3 SCC 454. In that case, this Court held that a clarifica tory notification would take effect retrospectively. Such a notification merely clarifies the position and makes explicit what was implicit. Clarificatory notifications have been issued to end the dispute between the parties.

16. In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory premises, it could not be said that while issuing Notification No. 46/94 of March 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory Notification No. 95/94 on April 25, 1994. It was not a new notification granting exemption for the first time in respect of parts of power driven pumps to be used in the factory for manufacture of pumps but clarified the position and made the position explicit which was implicit.”

3.6 Reliance was also placed upon the decision of the Supreme Court in the case of Ralson (India) Ltd. v. Commissioner of Central Excise, Chandigarh-1, 2015 (319) ELT 234 (S.C.) (2015) 14 SCC 679, wherein the court held thus:

“8. We may point out here that the issue has not come up before this Court for the first time. In the case of W.P.I.L. Ltd. v. Commissioner of Central Excise, Meerut, U.P. , 2005 (181) E.L.T. 359 (S.C.), this Court was concerned with almost identical fact situation, albeit in relation to the product known as ‘Part of Power Driven Pumps’. The power driven-pumps also were similarly exempted which exemption was available to manufacturers since 1978. In the Notification No. 69/94- C.E., dated 1-3-94 whereby exemption qua 389 earlier notifications was rescinded, the notification in respect of the part of power-driven pumps was also included as rescinded. Thereafter, the same item was again exempted by Notification No. 95/94-C.E. issued on 25-4-1994. In this manner, insofar as parts of power driven pumps are concerned, there was no exemption in respect thereof for the period from 1-3-94 to 24-4 -1994.

9. The assessee in the aforesaid case took the same plea by arguing that since the decision of the exemption vide Notification dated 1-3-94 was an inadvertent error and the Government realizing this mistake had reintroduced the exemption it will be treated as only corrective and clarificatory in nature. This contention was accepted by this Court in the aforesaid judgment holding that even during the period from 1-3-94 to 24-4-94, the manufacturers of part of power driven pumps shall continue to get the exemption. The relevant part of the said judgment which squarely applies to the present case as well is reproduced below in paras 16-17.

“16. In view of the consistent policy of the Government of exempting parts of power driven pumps utilized by the factory within the factory premises, it could not be said that while issuing Notification No. 46/94 of March 1, 1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory Notification No. 95/94 on April 25, 1994. It was not a new notification granting exemption for the first time in respect of parts of power driven pumps to be used in the factory for manufacture of pumps but clarified the position and made the position explicit which was implicit.”

17. For the foregoing reasons, in our opinion, the appeals deserve to be allowed and are allowed accordingly. Deposit, if any, made by the appellant in pursuance of the order passed by the authorities below will be refunded to it. In the facts and circumstances of the case, however, there shall be no order as to costs.”

10. As we find that the compounded rubber was also rescinded by the same Notification dated 1-3-94 and reintroduced in the same manner vide another Notification issued on 28-3-1994, ratio of W.P.I.L. Ltd. Case shall squarely apply to the present case as well. As a result, only on this ground, these appeals are allowed and the demand raised against the appellants is quashed.”

3.7 It was submitted that if Notification No. 26/2017-Cus has to be read independently as imposing a restriction, the notification falls foul of promissory estoppel held out to the petitioner. It was submitted that representation is made in the Foreign Trade Policy that the petitioner is entitled to exemption; and the notification to operationalise such representation would be subject to promissory estoppel. It was submitted that it is also possible to construe the deletion and addition as interpreted by this court in the case of Shree Renuka Sugars Ltd. v. Union of India (supra).

3.8 Reliance was placed upon the decision of the Supreme Court in MRF Ltd. Kotta yam v. Assistant Commissioner (Assessment) Sales Tax and others, (2006) 8 SCC 702, wherein the court held thus:-

“36. In Kasinka Trading case, (1995) 1 SCC 274, the notification in question was a customs exemption notification for a fixed period. The judgments in Pournami Oils Mills’s case, 1986 Supp SCC 728 and Shri Bakul Oil Industries’s case, (1987) 1 SCC 31, were distinguished in the said case on the ground that the notifications in those cases were incentive notifications. It was observed in para 27:

“Again in Bakul Oil Industries (supra) it was the incentive to set up industries in a conforming area that the exemption had been granted and the Court held that the Government could withdraw an exemption granted by it earlier only if such withdrawal could be made without offending the rule of promissory estoppel and without depriving an industry entitled to claim exemption for the entire specified period for which exemption had been promised to it at the time of giving incentive. Both these cases therefore cannot advance the case of the appellant and are distinguishable on facts because the exemption notification under Section 25 of the Act which was issued in this case did not hold out any incentive for setting up of any industry to use PVC resins and on the other hand had been issued in exercise of the statutory powers, in public interest and subsequently withdrawn in exercise of the same powers again in public interest. In our opinion, no justifiable prejudice was caused to the appellants in the absence of any unequivocal promise by the Government not to act and review its policy even if the necessity warranted and the “public interest” so demanded. Thus, in the facts and circumstances of these cases, the appellants cannot invoke the doctrine of promissory estoppel to question the withdrawal notification issued under Section 25 of the said Act.”

[Emphasis supplied]

37. The decision in Kasinka Trading (supra) has been distinguished in the later decision by this Court in State of Punjab v. Nestle India Ltd., 2004 (6) SCC 465, on the ground of the inherent nature of an exemption notification issued under Section 25 of the Customs Act. Even in respect of a notification under Section 25 of the Customs Act this Court has taken the view that the withdrawal even of such a notification must not be “arbitrary” or “unreasonable” (see Dai- Ichi Karkaria Ltd. v. Union of India, 2000 (4) SCC 57).

38. The principle underlying legitimate expectation which is based on Article 14 and the rule of fairness has been re-stated by this Court in Bannari Amman Sugars Vs. Commercial Tax Officer, 2005 (1) SCC 625. It was observed in paras 8 & 9:

“8. A person may have a ‘legitimate expectation’ of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that ‘legitimate expectation’ gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightway from the administrative authorities as no crystallized right as such is involved. The protection of such legitimate expectation does not require the fulfillment of the expectation where an overriding public interest requires otherwise. In other words, where a person’s legitimate expectation is not fulfilled by taking a particular decision then the decision maker should justify the denial of such expectation by showing some overriding public interest. (See Union of India v. Hindustan Development Corporation, AIR 1994 SC 988).

9. While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Article 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Article 14 is fairness in action by the State, and non- arbitrariness in essence and substance is the heart beat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualized than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness.”

[Emphasis supplied]

39. MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibility certificate. The exemption order had also been passed. It is not open to or permissible for the State Government to seek to deprive MRF of the benefit of tax exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by the MRF in the form of industrial development in the State, contribution to labour and employment and also a huge benefit to the State exchequer in the form of the State’s share, i.e. 40% of the Central Excise duty paid on compound rubber of Rs. 177 crores within the State of Kerala. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and, therefore, the same is violative of Article 14 of the Constitution of India. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. This Court in E.P. Royappa v. State of Tamil Nadu, 1974 (4) SCC 3, observed that where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14 . Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of “justice and fair play”. The attempt to take away the said benefit of exemption with effect from 15.1.1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event the State Government has no power to make a retrospective amendment to SRO 1729/93 affecting rights already accrued to MRF thereunder. “

3.9 It was, accordingly, urged that the petition deserves to be allowed in terms of the reliefs as prayed for in the petition.

4. Opposing the petition, Mr. Parth Bhatt, learned senior standing counsel for the respondent No.1, invited the attention of the court to the Foreign Trade Policy, 20 15-2020 and more particularly, to Chapter 5 thereof, which makes provision for Export Promotion Capital Goods (EPCG) Scheme. Reference was made to para 5.01 of Chapter 5 of the Foreign Trade Policy, which makes provision for the EPCG Scheme, to submit that prior to the commencement of the GST regime, para 5.01(a) allowed import of capital goods for pre-production, production and post production at zero customs duty. Alternatively, the authorisation holder could also procure capital goods from indigenous sources in accordance with paragraph 5.07 of the Foreign Trade Policy. It was pointed out that the duty exemption scheme under the EPCG Scheme is made applicable by issuing a corresponding notification, accordingly, the provisions of the EPCG Scheme were implemented vide Customs Notification No. 16/2015-Cus dated 1st April, 2015. It was submitted that after the commencement of the GST regime, Notification No. 16/2015 came to be amended vide Notification No. 26/2015-Cus dated 29.6.2017 by substituting the words and figure “under section 3” with the words and figures and brackets “under sub-sections (1), (3) and (5) of section 3” in the opening paragraph. It was pointed out that while making the aforesaid amendment, sub-sections (7) and (9) of section 3 of the Customs Tariff Act were not included. It was submitted that similarly, in paragraph 2 of the said notification in condition (6) for the words and figure “under section 3”, the words and figures and brackets “under sub-sections (1), (3) and (5) of sub-section 3” came to be substituted; however, sub-sections (7) and (9) of section 3 were not included, which indicates that there was no intention to grant exemption from payment of IGST on import of capital goods.

4.1 It was submitted that to comply with the provisions of Notification No. 26/2015-Cus dated 29.6.2017, the DGFT issued Trade Notice No. 11/2018 dated 30.6.2017 which stipulated that “Importers would need to pay IGST and take input tax credit under the GST rules.” It was submitted that, therefore, when the petitioner filed Bill of Entry on 3.8.2017, exemption from payment of IGST was not granted.

4.2 Reference was made to Notification No. 33/2015-2020 dated 13.10.2017 issued in exercise of powers conferred by section 5 of the Foreign Trade (Development and Regulation) Act, 1992 read with paragraph 1.02 of the Foreign Trade Policy 2015-2020, as amended from time to time, the relevant portion whereof is extracted hereunder:-

“2. Para 5.01 (a) is amended to read as under:

“5.01 (a) EPCG Scheme allows import of capital goods for pre-production, production and post-production at Zero customs duty. Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable thereon under the sub-section (7) and sub-section (9) respectively, of section 3 of the Customs Act, 1975 (51 of 1975) as may be provided in the notification issued under Department of Revenue. Alternatively, the Authorisation holder may also procure Capital Goods from indigenous sources in accordance with provisions of paragraph 5.07 of FTP. “

4.3 It was submitted that thus, subsequently exemption from IGST has been provided; however, during the period when the petitioner imported the capital goods, such imports were not exempted from payment of IGST and hence, the refund application made by the petitioner has rightly been rejected.

4.4 It was emphatically argued that there cannot be any promissory estoppel against an exemption. It was submitted that the exemption granted was not by way of an incentive, but was a facility given to the petitioner and that on introduction of a new law, namely, the Goods and Services Tax Acts, such exemption came to be withdrawn. It was contended that it cannot be said that the exemption has been unreasonably withdrawn. Moreover, by virtue of trade notice dated 30.6.2017, there is no withdrawal of benefit, inasmuch as IGST is refunded in the form of input tax credit.

4.5 Reliance was placed upon the decision of the Supreme Court in Kasinka Trading v. Union of India, (1995) 1 SCC 274, wherein the court held thus:-

“26. So far as the second batch of cases is concerned the facts of CA Nos. 4333-34 of 1983 need be noticed. These two appeals have been filed against the judgment and order dated 3-3-1983 of the High Court of Delhi. The appellants in these two appeals are engaged in the manufacture of aluminium conductors and aluminium conductors steel reinforced which are supplied to the various State Electricity Boards. Aluminium ingots and rods are the basic raw materials used in the production of such conductors. In order to meet the domestic requirements, it became necessary to import the aluminium ingots and aluminium rods. The Central Government therefore issued Notification No. 79-Cus. dated 18-4-1980 exempting aluminium wire rods and aluminium ingots from the whole of customs duty as well as the additional duty leviable on it. The notification contained the clause that the notification shall remain in force till 30-9-1980. Simultaneously, another Notification No. 80-Cus. was issued by the Central Government exempting the above items from the whole of auxiliary duty as well. The appellants claim that on the basis of the promise and assurance contained in the two exemption notifications, they commenced negotiations with the manufacturer and suppliers of the above items for the purchase of these items from abroad. In the meantime, the Central Government issued another Notification No. 174-Cus. dated 29-8-1980, with drawing the earlier Notification No. 79-Cus. dated 18-4-1980 and on the same date i.e. 29-8-1 980, yet, another notification was issued levying auxiliary duty @ 12 1/2 percent ad valorem. Barely ten days after the rescindment of the earlier notification, the Central Government issued another Notification No. 186-Cus. dated 9-9-1980 once again exempting wire rods and aluminium ingots from the whole of duty of customs. This notification was to remain operative till 31-3-1981 and it has remained in force right through. The grievance of the appellants is that the withdrawal of the exemption notification on 29- 8-1980 was not at all justified and support for this argument is sought from the fact that within 10 days of the withdrawal notification, the Government had itself once again issued a notification on 9-9-1 980, reviving the exemption of customs duty. Learned counsel submitted that during the period of 10 days, the importers whose goods arrived in India, were made liable to pay both the customs duty as well as the auxiliary duty, while those whose goods arrived either after 9-9-1980 or before 29-8- 1980 were not required to pay the same.

27. Indeed, the submission on the fact situation is not controvertible but in the absence of any material placed before the High Court or even in this appeal to establish that the notification dated 29-8-1980 was issued for any oblique or extraneous consideration and was not “in public interest”, it is not possible to find fault with that notification for the reasons we have already given while dealing with the first batch of cases. The appellants, who are in business, have to be prepared for tides in the business. In Pournami Oil Mills, 1986 Supp SCC 728, it was the incentive to set up new industry in the State with a view to boost the industrialisation that exemption had been granted and it was in that fact situation that the doctrine of promissory estoppel was held available to the appellant therein. Again in Bakul Oil Industries, (1987) 1 SCC 31, it was the incentive to set up industries in a conforming area that the exemption had been granted and the Court held that the Government could withdraw an exemption granted by it earlier only if such withdrawal could be made without offending the rule of promissory estoppel and without depriving an industry entitled to claim exemption for the entire specified period for which exemption had been promised to it at the time of giving incentive. Both these cases therefore cannot advance the case of the appellant and are distinguishable on facts because the exemption notification under Section 25 of the Act which was issued in this case did not hold out any incentive for setting up of any industry to use PVC resins and on the other hand had been issued in exercise of the statutory powers, in public interest and subsequently withdrawn in exercise of the same powers again in public interest. In our opinion, no justifiable prejudice was caused to the appellants in the absence of any unequivocal promise by the Government not to act and review its policy even if the necessity warranted and the “public interest” so demanded. Thus, in the facts and circumstances of these cases, the appellants cannot invoke the doctrine of promissory estoppel to question the withdrawal notification issued under Section 25 of the Act.”

4.6 It was submitted that under the EPCG Scheme no incentive is given to the petitioner which it can hold against the Government and that the notification granting exemption was issued in exercise of powers under section 25 of the Customs Act, therefore, the doctrine of promissory estoppel would not be attracted in the present case.

4.7 Reliance was also placed upon the decision of the Supreme Court in the case of Director General of Foreign Trade v. Kanak Exports and another, (2016) 2 SCC 226, wherein the court held thus:-

“106. We may suitably refer to the judgment of this Court in Kasinka Trading v. Union of India, (1995) 1 SCC 274. In that case, the Government of India had issued Notification under Section 25(1) of the Customs Act, 1961 in “public interest” granting exemption from whole of the customs duty on import of PVC resin. This notification was to remain in force till 31-3-1981. However, even before the said date, by another Notification dated 16-10- 1980, the full exemption from customs duty was withdrawn and it was reduced to the exemption from customs duty as is in excess of 40% ad valorem. The importer had contended that relying on the exemption Notification dated 15-3 -1979, it had placed orders for the import of PVC resins on the understanding that the commodity was totally exempt from customs duty, the Government must be held bound by the representations contained in the Notification dated 15-3-1979 and the Government was estopped on the basis of promissory estoppel to go back on its promise. The Government justified the withdrawal of exemption on the ground that the Government had issued Notification dated 15-3-1979 with a view to equalising sale prices of the indigenous and the imported material and to make the commodity available to the consumer at a uniform price, keeping in view the trends in the supply of the material. Subsequently, it was realised that the international prices of the product were falling and consequently, the import prices had become lower than the ex-factory prices of the indigenous material. Hence, it was decided in “public interest” to withdraw the exemption notification. This Court held that: (Kasinka Trading case, (1995) 1 SCC 274, SCC 286)

“19. .. . the reasons given by the Union of India justifying withdrawal of the exemption notification, in our opinion, are not irrelevant to the exercise of the power in ‘public interest’, nor are the same shown to be insufficient to support the exercise of that power.”

107. The Court also observed the power to grant exemption from payment of duty flows from the provisions of Section 25(1) of the Customs Act. The power to exempt includes the power to modify or withdraw the same. Such an exemption by its very nature is susceptible of being revoked or modified or subjected to other conditions. The supersession or revocation of an exemption notification in the public interest is an exercise of the statutory power of the State under the law itself as is obvious from the language of Section 25 of the Act, but also from the General Clauses Act under which the authority has the power to issue a notification has the undoubted power to rescind or modify the notification in a like manner. The Court also examined the case of the appellant-petitioners that relying upon the Notification dated 15-3-1979, they had acted and the Government could not be permitted to go back on its assurance otherwise they would be put to huge loss. The Court dealt with this contention in the following words:

“22. .. The courts have to balance the equities between the parties and indeed the courts would bind the Government by its promise “to prevent manifest injustice or fraud”.

The Court also quoted with approval the following observations from Malhotra & Sons v. Union of India, AIR 1976 J&K 41:

‘22. .. ‘16. .,. The courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its governmental, public or sovereign capacity.’

108. The above decision in Kasinka Trading case. (1995) 1 SCC 274, was followed by this Court in Shrijee Sales Corpn. v. Union of India, (1997) 3 SCC 398, where also the same notifications were considered. In that case also, the appellant-petitioners had alleged that they would not have imported PVC resin without the exemption as that would have been unviable and uneconomical and further that many persons took full advantage of the exemption. The Court held that the facts of the economic situation explained in the judgment rendered in Kasinka Trading case, (supra) were not contravened nor was it alleged that public interest did not call for supersession of the exemption notification. The Court also examined the question whether the fact that the Notification dated 15- 3-1979 mentioned the period during which it was to remain in force would make any difference to the situation. The Court then held that :

“7. …. Once public interest is accepted as the superior equity which can override individual equity, the principles should be applicable even in cases where a period has been indicated.”

(emphasis supplied)

109. Therefore, it cannot be denied that the Government has a right to amend, modify or even rescind a particular scheme. It is well settled that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call trial and error method and therefore, its validity cannot be tested on any rigid prior considerations or on the application of any straitjacket formula. In Balco Employees’ Union v. Union of India, (2002) 2 SCC 333, the Supreme Court held that laws, including executive action relating to economic activities should viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. that the legislature should be allowed some play in the joints because it has to deal with complex problems which do not admit of solution through any doctrine or straitjacket formula and this particularly true in case of legislation dealing with economic matters, where having regard to the nature of the problems greater latitude require to be allowed to the legislature. The question, however, is as to whether it can be done retrospectively, thereby taking away some right that had accrued in favour of another person?”

4.8 The decision of this court in Prashanti Medical Services and Research Foundation v. Union of India rendered on 14.9.2017 in Special Civil Application No. 7558 of 2017 was relied upon, wherein it has been held thus:-

“8. In plain terms, thus, this provision discontinued the deduction available under section 35AC from the assessment year commencing on or after 01.04.2018. In other words, any expenditure incurred after 01.04.2017 would no longer be eligible for deduction under the said section. The fact that the parliament had the competence to enact the said provision has nowhere been disputed before us. It is not even the stand of the petitioner that the parliament which granted the deduction could not have withdrawn it. In plain terms, a deduction is in the nature of waiver to a limited extent from payment of tax. In absence of such a deduction, the assessee incurring such expenditure would have to account for the full amount to tax. In order to encourage donations for or direct expenditure in certain approved projects or schemes meant for promoting social and economic welfare or the uplift of the public, the said provision was introduced by the legislature. If at a later point of time, the Union legislature in its wisdom was of the opinion that such benefit should no longer be granted, it is always open for the parliament to withdraw the deduction by framing necessary legislation. This provision in the strict sense of the term is to have prospective effect. It may have effect on projects and schemes which are in pipeline and in that sense may affect the pending or existing projects. Nevertheless, the withdrawal of the deduction is from a prospective date. In that view of the matter, it is possible that some of the institutions, projects or schemes may be adversely affected and the legislation may act somewhat harshly. However, this cannot be a ground for annulling the statutory provision.

9. The courts always recognize a greater degree of latitude while examining the laws concerning economic matters. Even otherwise the wisdom of the parliament for framing a law would not be subject matter of judicial review. The Constitution of India while undoubtedly authorizes the constitutional courts to test the validity of a legislation including one framed by the Union or the State legislature, the courts have however recognized that the law framed by the Parliament or State legislature can be declared unconstitutional only on the grounds that the same is opposed to the fundamental rights contained in part III of the Constitution or is opposed to any other provision in the Constitution. Particularly when it comes to the laws pertaining to the economic matters, the courts recognize greater degree of latitude in the legislature. These principles have been highlighted in the constitutional bench judgement of the Supreme Court in case of R.K. Garg (supra) in which it was observed as under:

“7. Now while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the courts as rules of guidance in discharge of its constitutional function of judicial review. The first rule is that there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles. This rule is based on the assumption, judicially recognised and accepted, that the legislature understands and correctly appreciates the needs of its own people, its laws are directed to problems made manifest by experience and its discrimination are based on adequate grounds. The presumption of constitutionality is indeed so strong that in order to sustain it, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation.

8. Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. …. … The court must remember that “legislation is directed to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry” that exact wisdom and nice adoption of remedy are not always possible and that “judgment is largely a prophecy based on meagre and uninterpreted experience”. Every legislation particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations or anticipate all possible abuses. There, may be crudities and inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. The courts cannot, as pointed out by the United States Supreme Court in Secretary of Agriculture v. Central Roig Refining Company be converted into tribunals for relief from such crudities and inequities. There may even be possibilities of abuse, but that too cannot of itself be a ground for invalidating the legislation, because it is not possible for any legislature to anticipate as if by some divine prescience, distortions and abuses of its legislation which may be made by those subject to its provisions and to provide against such distortions and abuses. Indeed, howsoever great may be the care bestowed on its framing, it is difficult to conceive of a legislation which is not capable of being abused by perverted human ingenuity. The Court must therefore adjudge the constitutionality of such legislation by the generality of its provisions and not by its crudities or inequities or by the possibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspire the legislature in dealing with complex economic issues.”

10. In case of Kasinka Trading (supra), the Union Government had granted exemption under a notification dated 15.03.1979 on customs duty on import of resin which is a raw material used for manufacturing of PVC. The notification provided that the same shall be in force upto and inclusive of 31.03.1 981. However, before expiry of the said time mentioned in the notification, the Government issued another notification on 16.10.1980 withdrawing the exemption and providing that in public interest it was necessary that the import of resin could invite duty at the rate of 4% ad valorem. This was done with a view to equalising the sale prices of indigenous and imported materials. The notification was challenged by the importers interalia on the ground that it breached the principle of promissory estoppel. Rejecting the challenge, the Supreme Court observed that the doctrine of promissory estoppel is part of the administrative law and is applicable against the Government also to prevent fraud and injustice and such doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the public authority to its promise, assurance or representation. It was observed that an exemption notification does not make the items which are subject to levy of customs duty as not leviable. It only suspends the levy and collection of customs duty wholly or partly as the case may be. Under section 25 of the Customs Act, if the Government had the power to grant exemption it also had the power to withdraw the same.

11. In case of Kothari Industrial Corporation (supra), the court held that the Government had the power to determine what should be the policy for grant or refusal of concessional power to different units. In case of Kanak Exports (supra), the court observed that an incentive scheme promulgated by the Government is in the nature of concession or incentive which is a privilege of the Government and it is for the Government to take such a decision as to grant or not.

12. As noted, Section 35AC recognizes the deduction in case of expenditure by an assessee by way of payment to the approved institutions carrying out eligible project or the scheme or payment made directly on such eligible project or scheme. As per Explanation clause (b), eligible project or scheme would be a project or scheme for promoting the social and economic welfare or the uplift of public as the Central Government may notify. The deduction was therefore not confined to the healthcare service which the petitioner is dispensing and would cover range of projects and schemes for promoting social and economic welfare or the uplift of the public as may be notified. In plain terms, sub-section (7) of section 35AC provided for a terminal point for granting such After 01.04.2017 the legislature desired to withdraw such deduction. Any expenditure after such date would no longer be an eligible deduction. The provision applies prospectively. The Union legislature was competent to introduce such amendment. We do not find merits in the petition.”

4.9 It was contended that, therefore, even if based upon an exemption notification, a party has changed its position; it cannot hold the Government to the promise. It was submitted that in any case, though the petitioner is not exempted from payment of IGST, the amount paid towards IGST is given back by way of input tax credit. It was, accordingly, urged that the petition being devoid of any merit or substance deserves to be dismissed.

5. In rejoinder, Mr. Kuntal Parikh, learned advocate for the petitioner, invited the attention of the court to the objective of the Export Promotion Capital Goods Scheme which reads thus:

“The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services to enhance India’s export competitiveness.”

 5.1 It was submitted that the objective shows that it was an incentive scheme. It was submitted that the zero customs duty is the incentive and there is a corresponding obligation cast upon the importer. It was submitted that Notification No. 16/2015-Cus though issued in exercise of powers under section 25 of the Customs Act is not a statutory exemption in strict sense, inasmuch as, it has been issued to give effect to the EPCG Scheme and has its roots in the Foreign Trade Policy. It was submitted that such exemption has been granted to promote exports.

5.2 Reference was made to Notification No. 16/2015-Cus dated 1st April, 2015 which has been issued in exercise of powers under section 25 of the Customs Act, to point out that by virtue of the notification, the Central Government has exempted the goods specified in Table-1 annexed thereto from:

(i) The whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and

(ii) The whole of the additional duty leviable under section 3 of the Customs Tariff Act, when specifically imported by the importer.

5.3 It was pointed out that the exemption under the notification is subject to the conditions enumerated thereunder. It was submitted that the additional customs duty is levied under section 3 of the Customs Tariff Act and, therefore, import of goods is permitted at zero customs duty under the said notification.

5.4 Reference was made to paragraph 6 of Notification No. 16/2015-Cus which reads thus:

“6. that if the importer does not claim exemption from the additional duty leviable under section 3 of the Customs Tariff Act, 1975, the additional duty so paid by him shall not be taken for computation of the net duty saved for the purpose of fixation of export obligation provided the Cenvat credit of additional duty paid has not been taken;”

5.5 It was submitted that IGST is also an additional duty of customs and the exemption from duty under section 3 of the Customs Tariff Act continues under the Foreign Trade Policy. Therefore, if additional duty leviable under section 3 of the Customs Tariff Act is not claimed and cenvat credit is not taken then the corresponding export obligation is reduced. It was submitted that the benefit of input tax credit was available under Notification No.16/2015-Cus and continues after the issuance of the new notification amending the earlier notification.

5.6 It was, accordingly, urged that serial No.1 of Notification 79/2017-Cus dated 13th October, 2017 inserting clause (iii) in Notification 16/2015 viz. the whole of the integrated tax and goods and services tax compensation cess leviable thereon under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act; has to be read as being effective from 1.7.2017. It was, accordingly, urged that the petition deserves to be allowed.

6. From the facts and contentions noted hereinabove, it emerges that the refund claim of the petitioner has been rejected on the ground that Notification No. 33/2015-2020 dated 13.10.2017 of the Ministry of Commerce and Notification 79/2017-Cus dated 13.10.2017 of the Ministry of Finance under which such imported goods were exempted from payment of IGST, came into force only on 13.10.2017, but the petitioner had filed the bill of entry on 3.8.2017. As there was no notification exempting import of such goods from payment of IGST, it has been held that IGST was chargeable on the capital goods imported by the petitioner under the EPCG Scheme.

7. For the purpose of examining the validity of the petitioner’s claim for exemption from payment of IGST in respect of capital goods imported by it on the strength of the authorisation held by it under the EPCG Scheme prior to the issuance of Notification No.79/2017-Cus exempting import of such goods from payment of IGST, it may be necessary to refer to the relevant provisions of the Foreign Trade Policy and the notifications issued in this regard from time to time.

8. In the exercise of powers under section 5 of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government has notified the Foreign Trade Policy 2015-20 vide Notification No. 1/2015-20 which came into effect from 1st April 2015. Chapter 5 of the Foreign Trade Policy bears the heading “Export Promotion Capital Goods (EPCG) Scheme”. Paragraph 5.00 thereof, provides the objective of the scheme and reads thus:

“The objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services to enhance India’s export competitiveness. “

9. Para 5.01 of Chapter 5 which is relevant for the present purpose reads thus:-

“5.01 EPCG Scheme.

(a) EPCG Scheme allows import of capital goods for pre-production, production and post production at Zero customs duty. Alternatively, the Authorisation holder may also procure Capital Goods from indigenous sources in accordance with provision of paragraph 5.07 of FTP. Capital goods for the purpose of the EPCG Scheme shall include:

(i) Capital Goods as defined in Chapter 9 including in CKD/SKD condition thereof;

(ii) Computer software systems;

(iii) Spares, moulds, dies, jigs, fixtures, tools & refractories for initial lining and spare refractories; and

(iv) catalysts for initial charge plus one subsequent

(b) Import of capital goods for Project Imports notified by Central Board of Excise and Customs is also permitted under EPCG Scheme.

(c) Import under EPCG Scheme shall be subject to an export obligation equivalent to 6 times of duty saved on capital goods, to be fulfilled in 6 years reckoned from date of issue of Authorisation.

(d) Authorisation shall be valid for import for 18 months from the date of issue of Authorisation. Revalidation of EPCG Authorisation shall not be permitted. “

10. Thus, the objective of the EPCG Scheme is to facilitate import of capital goods for producing quality goods and services to enhance India’s export competitiveness. Towards that end, authorisations are issued to importers permitting them to import capital goods at zero customs duty. An authorisation is valid for import for eighteen months from the date of issue of authorisation, and under the authorisation the importer is allowed to import capital goods at zero customs duty. The scheme also casts an obligation on the importer who imports capital goods under the Scheme at zero customs duty to fulfill export obligation at six times of the duty saved. Thus, while granting exemption from payment of customs duty, a corresponding obligation has been cast on the importer to fulfill export obligation as provided under the EPCG scheme. Thus, exemption from payment of customs duty under the EPCG Scheme is not an exemption simpliciter, but is an exemption with a corresponding obligation on the authorisation holder to export goods equivalent to six times the duty saved on import of such capital goods.

11. To give effect to the above policy of permitting import of capital goods at zero customs duty, the Central Government, in exercise of powers under section 25 of the Customs Act, issued Notification 16/2015-Cus dated 1st April 2015 exempting the goods specified in the table annexed thereto from:

(i) The whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975, and

(ii) The whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act, when specifically claimed by the importer.

12. The exemption under the said notification is available subject to the conditions stipulated thereunder. Condition (i) thereof provides that the goods imported should be covered by a valid authorisation issued under the Export Promotion Capital Goods Scheme in terms of Chapter 5 of the Foreign Trade Policy permitting import of goods at zero customs duty.

13. Thus, on conjoint reading of the Chapter 5 of the Foreign Trade Policy and Notification No. 16/2015-Cus dated 1st April, 2015, it is evident that though the notification is a statutory notification issued in exercise of powers under section 25 of the Customs Act, it is not an exemption notification simpliciter, but an exemption notification issued to give effect to the EPCG Scheme floated under the Foreign Trade Policy which is an incentive scheme. Thus, in the opinion of this court, Notification No. 16/2015-Cus dated 1st April, 2015 and the amending notifications cannot be equated with statutory notifications ordinarily issued under section 25 of the Customs Act, granting exemption from payment of customs duty.

14. Considering the nature of the EPCG Scheme, it is evident that it is an incentive scheme whereby a promise has been held out that the importer would be charged zero customs duty on the goods imported by it, provided it exports goods equivalent to six times the duty saved on capital goods. The petitioner applied for and was issued an authorisation on 3.2017, and hence, was not required to pay any customs duty as well as additional duty of customs on such import in view of Notification 16/2015 dated 1st April, 2015. Commercial invoice was issued by the exporter on 16.5.2017. However, before the actual import of the goods, the Goods and Services Acts came into force.

15. At this juncture reference may be made to the provisions of sub-section (2) of section 7 of the IGST Act, which reads thus:

7. Inter-State supply. – (1) xxx

(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.”

Thus, under section 7(2) of the IGST Act, import of goods is deemed to be inter-state supply of goods.

16. Sub-section (1) of section 5 of the IGST Act, which is relevant for the present purpose, reads as under:-

“5. Levy and collection.- (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:

Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 (51 of 1975) on the value as determined under the said Act at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962 (52 of 1962).

17. Section 3 of the Customs Tariff Act came to be amended with effect from 1.7.2017 and integrated tax became payable under sub-section (7) of section 3 of the said Act and compensation cess came to be payable under sub-section (9) of section 3 of the said Act.

18. Sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act, read thus:

“(7) Any article which is imported into India shall, in addition, be liable to integrated tax at such rate, not exceeding forty per cent, as is leviable under section 5 of the Integrated Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (8) or sub-section (8A) as the case may be.”

“(9) Any article which is imported into India shall, in addition, be liable to the goods and services tax compensation cess at such rate, as is leviable under section 8 of the Goods and Services Tax (Compensation to States) Cess, 2017 on a like article on its supply in India, on the value of the imported article as determined under sub-section (10) or sub-section (10A) as the case may be.”

19. Vide Notification No. 26/2017-Customs dated 29th June, 2017 issued in exercise of powers under section 25 of the Customs Act, vide serial No.82, Notification 16/2015-Customs dated 1st April 2015 came to be amended with effect from 1.7.2017, which to the extent the same is relevant for the present purpose, reads thus:

“In the said notification;

(a) In the opening paragraph, in clause (ii) for the words and figure “under section 3” the words and figures and brackets “under sub-sections (1), (3) and (5) of section 3” shall be substituted;

(b) In paragraph 2,-

(i) in condition (6), for the words and figure “under section 3”, the words and figures and brackets “under sub-sections (1), (3) and (5) of section 3” shall be substituted.”

20. Thus, while Notification No. 16/2015-Cus dated 1st April 2015 exempted the imported goods covered by a valid authorisation issued under the EPCG Scheme from the whole of the additional duty leviable under section 3 of the Customs Tariff  Act, by virtue of its amendment vide Notification No. 26/2017-Cus, the exemption from additional duty came to be limited to the additional duty under sub-sections (1), (3) and (5) of section 3 of the Customs Tariff Act.

21. Vide Trade Notice 11/2018 dated 30.6.2017 issued by the DGFT, under Chapter 5 of the Foreign Trade Policy it was stated that importers would need to pay IGST and take input tax credit as applicable under GST rules.

22. Since vide Notification No. 26/2017, the words and figures “sub-sections (1), (3) and (5) of section 3” of the Customs Tariff Act were inserted, the petitioner was not granted the benefit of exemption from payment of IGST, despite the fact that it was an additional duty introduced by way of sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act. The petitioner therefore paid the IGST.

23. Subsequently, vide Notification No. 33/2015-2020, dated 13th October, 2017, issued in exercise of powers conferred by section 5 of Foreign Trade (Development and Regulation) Act, 1992, read with paragraph 1.02 of the Foreign Trade Policy, 2015-20, as amended from time to time, the Central Government made amendments in the Foreign Trade Policy 2015-2020. Para 2 of the said notification, to the extent the same is relevant for the present purpose, reads thus:

“2. Para 5.01 (a) is amended to read as under:

“5.01 (a) EPCG Scheme allows import of capital goods for pre-production, production and post-production at Zero customs duty. Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable thereon under the sub-section (7) and sub-section (9) respectively, of section 3 of the Customs Act, 1975 (51 of 1975) as may be provided in the notification issued under Department of Revenue. Alternatively, the Authorisation holder may also procure Capital Goods from indigenous sources in accordance with provisions of paragraph 5.07 of FTP.

24. In terms of the original para 5.01 (a) of the Foreign Trade Policy, EPCG Scheme allowed import of capital goods for pre­-production, production and post production at zero customs Thus, by virtue of the above notification, the words “Capital goods imported under EPCG scheme for physical exports are also exempt from whole of the Integrated Tax and Compensation Cess leviable under sub-section (7) and sub­section (9) respectively, of section 3 of the Customs Act, 1975 as may be provided in the notification issued under Department of Revenue.” came to be inserted in para 5.01.

25. Correspondingly, vide Notification No. 79/2017- Customs, dated 13th October, 2017, Notification No.16/2015-Cus dated 1st April, 2015, came to be amended, whereby, in the opening paragraph, after clause (ii), the following came to be inserted:

“(iii) the whole of integrated tax and the goods and services tax compensation cess leviable thereon under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act.:

Provided that the exemption from integrated tax and the goods and services tax compensation cess shall be available up to the 31st March, 2018.”

26. Thus, with effect from 13th October, 2017, import of capital goods covered by a valid authorisation under the EPCG Scheme was exempted from payment of integrated tax under sub-section (7) of section 3 of the Customs Tariff Act and goods and services tax compensation cess under sub-section (9) of section 3 of the said Act. Therefore, it is only for the short period from 1st July, 2017, when the IGST Act came into force till 13th October, 2017, when the above notification came to be issued, that there was no express provision exempting import of goods under the EPCG Scheme from payment of integrated tax.

27. Thus, import of capital goods under the EPCG Scheme was totally exempt from payment of customs duty and additional duty, except for the short period between the coming into force of the IGST Act till the amendment in the Foreign Trade Policy 2015-20 vide Notification No. 33/2015- 2020 dated 13th October, 2017 issued in exercise of powers conferred by section 5 of Foreign Trade (Development and Regulation) Act, 1992 read with paragraph 1.02 of the Foreign Trade Policy, 2015-20, and corresponding amendment in Notification No.16/2015-Cus dated 1st April, 2015. The intention of Central Government is, therefore, clear that total exemption from payment of additional duty was to be granted under the EPCG Scheme. This was also the promise held out to the petitioner and similarly situated persons when they were granted the authorisation under the EPCG Scheme. At the time when the authorisation was granted, by virtue of Notification 16/2015-Cus dated 1st April, 2015, there was total exemption from payment of additional duty under section 3 of the Customs Tariff Act. However, subsequently, upon the coming into force of the GST regime, while section 3 of the Customs Tariff Act came to be amended by inserting sub­sections (7) and (9) therein imposing additional customs duty in the nature of integrated tax and goods and services compensation cess respectively, and though Notification No. 16/2015-Cus dated 1st April, 2015 came to amended by substituting the words and figure “section 3 of the Customs Tariff Act” with the words and figures and brackets ”sub­sections (1), (3) and (5) of section 3 of the Customs Tariff Act” , the words, figures and brackets “sub-sections (7) and (9) of section 3 of the Tariff Act”, were not included.

28. The question that arises for consideration is, whether it was permissible for the respondents to levy additional duty under section 3 of the Customs Tariff Act by way of integrated tax and goods and services compensation cess on the import of capital goods by the petitioner under the authorisation issued to it under the EPCG Scheme.

29. On behalf of the petitioner, it has been contended that the respondents are barred by the principle of estoppel from recovering any duty under section 3 of the Customs Tariff Act in view of the promise held out to it under the EPCG Scheme that it would be liable to pay zero customs duty; whereas according to the respondents, the power to grant exemption from payment of duty flows from the provisions of section 25(1) of the Customs Act. The power to exempt includes the power to modify or withdraw the same. Such an exemption by its very nature is susceptible to being revoked or modified or subjected to other conditions.

30. In this regard, reference may be made to the decision of the Supreme Court in State of Bihar v. Suprabhat Steel Ltd. (supra), wherein, in the context of issuance of notification by the State Government in exercise of powers under section 7 of the Bihar Finance Act, the Supreme Court held that it is true that issuance of such notifications entitles the industrial units to avail of the incentives and benefits granted by the State Government in its own industrial incentive policy. But in exercise of such power, it would not be permissible for the State Government to deny any benefit which is otherwise available to an industrial unit under the incentive policy itself. The court observed that the industrial incentive policy is issued by the State Government after such policy is approved by the Cabinet itself. The issuance of the notification under section 7 of the Bihar Finance Act is by the State Government in the Finance Department which notification is issued to carry out the objectives and the policy decisions taken in the industrial policy itself. In this view of the matter, any notification issued by Government in exercise of powers under section 7 of the Bihar Finance Act, if is found to be repugnant to the industrial policy declared in a Government resolution, then the said notification must be held to be bad to that extent. The court repelled the contention that it would be open for the Government to issue a notification in exercise of power under section 7 of the Bihar Finance Act, which may override the incentive policy itself. The court was of the opinion that, the expression “such conditions and restrictions as it may impose” in sub-section (3) of section 7 of the Bihar Finance Act will not authorise the State Government to negate the incentives and benefits which any industrial unit would be otherwise entitled to under the general policy resolution itself.

31. Examining the facts of the present case in the light of the principles enunciated in the above decision, as discussed hereinabove, Chapter 5 of the Foreign Trade Policy, 2015-2020 makes provision for the EPCG Scheme, which is an incentive scheme. The incentive given is that the importer holding a valid authorisation for capital goods covered under the EPCG Scheme would be exempted from payment of customs duty and additional duty under section 3 of the Customs Tariff Act, and correspondingly, the importer would be obliged to fulfill export obligation to the extent provided in the Scheme. Since exemption from payment of customs duty and additional duty can only be granted under section 25 of the Customs Act, to give effect to the promise held out in Foreign Trade Policy 2015-2020, Notification No. 16/2015-Customs dated 1st April, 2015 came to be issued exempting import of goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy, from the whole of the customs duty leviable under the First Schedule to the Customs Tariff Act and the whole of the additional duty leviable under section 3 of the Customs Tariff Act. Accordingly, when the authorisation under the EPCG Scheme was issued in favour of the petitioner, and when the exporter issued commercial invoice in favour of the petitioner on 16.5.2017, the petitioner had reason to believe that it would not be required to discharge any liability in respect of customs duty leviable under the First Schedule to the Customs Tariff Act or any additional duty under section 3 of the said Act, inasmuch as, a promise was held out to the petitioner that it will not be liable to pay any additional duty under section 3 of the Customs Tariff Act on the import of such capital goods subject to fulfilling the export obligation. Thus, Notification No. 26/2015- Cus dated 29th June, 2017, to the extent it limited the exemption from payment of additional duty under section 3 of the Customs Tariff Act to subsections (1), (3) and (5) thereof, is repugnant to the policy declared by the Central Government under Chapter 5 of the Foreign Trade Policy 2015-2020.

32. In MRF Ltd. Kottayam v. Additional Commissioner (Assessment) Sales Tax (supra), the Supreme Court was dealing with a case wherein MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibility certificate. The exemption order had also been passed. The court held that it was not open to or permissible for the State Government to seek to deprive MRF of the benefit of exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by MRF in the form of industrial development in the State. The court held that the impugned action on the part of the State Government was highly unfair, unreasonable, arbitrary, and, therefore, was violative of article 14 of the Constitution of India.

33. In State of Jharkhand v. Tata Cummins Ltd., (supra) the Supreme Court held that a tax is a payment for raising general revenue. It is a burden. It is based on the principle of ability or capacity to pay. It is a manifestation of the taxing power of the State. An exemption from payment of tax under an enactment is an exemption from the tax liability. Therefore, every such exemption notification has to be read strictly. However, when an assessee is promised with a tax exemption for setting up an industry in the backward area as a term of the industrial policy, we have to read the implementing notifications in the context of the industrial policy. In such a case, the exemption notifications have to be read liberally keeping in mind the objects envisaged by the industrial policy and not in a strict sense as in the case of exemptions from tax liability under the taxing statute.

34. In the facts of the present case, as discussed hereinabove, though the exemption notification has been issued under section 25 of the Customs Act, it has been issued for the purpose of implementing the EPCG Scheme which holds out a promise that import of capital goods under the scheme would be exempt from payment of additional duty under section 3 of the Customs Tariff Act. Therefore, the notification has to be read in the context of the EPCG policy keeping in mind the object envisaged by the policy and not in the strict sense as in the case of a general exemption under section 25 of the Customs Act.

35. In P.I.L. Ltd. v. Commissioner of Central Excise, Meerut. UP., (supra), the Supreme Court was dealing with a case where exemption in respect of power-driven pumps was also available to the manufacturers since 1978. In Notification No. 64/94-CE dated 1.3.1994 whereby exemption qua 389 earlier notifications was rescinded, the notification in respect of the part of power-driven pumps was also included as rescinded. Thereafter, the same item was again exempted by Notification No. 95/94-CE issued on 25.4.1994. In this manner, insofar as parts of power-driven pumps are concerned, there was no exemption in respect thereof for the period from 1.3.1994 to 24.4.1994. The assessee in that case took the same plea by arguing that since the decision of the exemption vide Notification dated 1.3.1994 was an inadvertent error and the Government realising this mistake had reintroduced the exemption it will be treated as only corrective and clarificatory in nature. This contention was accepted by the court in the aforesaid judgment holding that even during the period from 1.3.1994 to 24.4.1994, the manufacturers of parts of power-driven pumps shall continue to get the exemption. The court held thus:

“16. In view of the consistent policy of the Government of exempting parts of power-driven pumps utilised by the factory within the factory premises, it could not be said that while issuing Notification No. 46/94 of 1.3.1994, the exemption in respect of said item which was operative was either withdrawn or revoked. The action was taken only with a view to rescinding several notifications and by issuing a composite notification. The policy remained as it was and in view of demand being made by the Department, a representation was made by the industries and on being satisfied, the Central Government issued a clarificatory Notification No. 95/94 on 25-4-1994. It was not a new notification granting exemption for the first time in respect of parts of power-driven pumps to be used in the factory for manufacture of pumps but clarified the position and made the position explicit which was implicit.”

36. In Ralson (India) Ltd. v. CCE, (supra), the Supreme Court reiterated the principles laid down in the above decision.

37. In Shree Renuka Sugars Ltd. v. Union of India, (supra), this court was dealing with a case where the Government of India withdrew the exemption from payment of duty on export of sugar with the objective of controlling the domestic sugar prices, which had nothing to do with exporters like the petitioners therein. Raw sugar imported against advance authorisation on the condition of re-export had no impact on domestic sugar price. Imposing export duty on such exports did not serve the purpose for controlling local sugar prices. Apparently, since inadvertently the withdrawal of exemption also hit the exports of sugar against advance authorisation, the Government of India on the representations made by the trade, quickly reintroduced the exemption limited to such class. The court was of the view that it was very clear that the Government of India was correcting an inadvertent error or an unintentional withdrawal of the exemption; and if that be so, the exemption notification dated 6.7.2016 must be viewed as clarificatory or curative in nature; and that any other view would leave the said class of exporters uncovered for a period of about three weeks allowing the department to levy the export duty which was a wholly unintended consequence of the Government of India policy. The court formed such opinion on the basis of the precedents of the Supreme Court in WPIL Ltd. v. CCE, (supra) and Ralson (India) Ltd. v. CCE. The court accordingly, allowed the writ petition and declared that the notification dated 6.7.2016 with all its terms and conditions would apply for the period 16.6.2016 to 6.7.2016 also and granted consequential relief.

38. In the facts of the present case, import of capital goods under a valid authorisation under the EPCG Scheme was wholly exempt from payment of any additional duty under section 3 of the Customs Tariff Act. The intention of the Central Government while framing the EPCG Scheme was to permit export at zero customs duty. Accordingly, by Notification No. 16/2015-Cus dated 1st April, 2015, goods covered by a valid authorisation issued under the EPCG Scheme in terms of Chapter 5 of the Foreign Trade Policy were inter alia exempted from the whole of the additional duty leviable under section 3 of the Customs Tariff Act. However, when the GST regime came into force, while section 3 of the Customs Tariff Act came to be amended by inserting sub-sections (7) and (9) providing for levy of integrated tax and goods and service compensation cess, in the corresponding amendment made in Notification No.16/2015-Cus vide Notification No. 26/2017-Cus dated 29th June, 2017, sub-section (7) and sub-section (9) of section 3 were left out. However, within a short time thereafter, vide notification dated 13th October, 2017, Notification No.16/2015- Cus came to be further amended and the imports under EPCG Scheme were exempted from additional duty under sub­section (7) and sub-section (9) of the Customs Tariff Act. It is therefore, apparent that it was on account of inadvertence or oversight that while amending notification No. 16/2015-Cus dated 1st April, 2015 by Notification No. 26/2017-Cus, the words, figures and brackets “sub-section (7) and sub-section (9)” were not inserted and that it was always the intention of the Central Government to exempt imports of capital goods under the EPCG Scheme from payment of additional duty under section 3 of the Customs Tariff Act. Notification No. 79/2017 dated 13th October, 2017, therefore, has to be read as clarificatory or curative in nature, inasmuch as, otherwise it would leave as whole class of importers who had imported capital goods, uncovered during the period 1.7.2017 to 13.10.2017, allowing the department to levy additional duty under sub-sections (7) and (9) of the Customs Tariff Act on such imports, despite the fact that the Foreign Trade Policy 20 15-2020 envisages imports under the EPCG Scheme at zero customs duty. Under the circumstances, the action of the respondents in levying integrated tax and compensation cess on the import of capital goods by the petitioner under a valid authorisation under the EPCG Scheme, not being in consonance with the Foreign Trade Policy 2015-2020 cannot be sustained. For the same reasons,Trade Notice 11/2018 dated 30.6.2017, to the extent it is stated therein that under Chapter 5 importers would need to pay  IGST, is also rendered unsustainable. Consequently, subject to fulfilment of the conditions contained in the Foreign Trade Policy, 2015-2020 and the exemption Notification No. 16/2015-Cus dated 1st April 2015 as amended from time to time, the petitioner would continue to enjoy exemption from payment of additional duty under sub-section (7) and sub-section (9) of section 3 of the Customs Tariff Act even during the period 1.7.2017 to 13.10.2017 and is, therefore, entitled to refund of the additional duty paid by it under sub-sections (7) and (9) of section 3 of the Customs Tariff Act.

39. Insofar as the decision of the Supreme Court in Kasinka Trading v. Union of India, (supra) is concerned, the grievance of the appellants was that the withdrawal of the exemption notification on 29.8.1980 was not at all justified and support for this argument was sought from the fact that within ten days of the withdrawal notification, the Government had itself once again issued a notification on 9.9.1980, reviving the exemption of customs duty. The learned counsel had submitted that during the period of ten days, the importers whose goods arrived in India were made liable to pay both the customs duty as well as the auxiliary duty, while those whose goods arrived either after 9.9.1980 or before 29.8.1980 were not required to pay the same. The Supreme Court observed that in the absence of any material placed before the High Court or even in the appeal to establish that the notification dated 29.8.1980 was issued for any oblique or extraneous consideration and was not “in public interest”, it was not possible to find fault with that notification for the reasons recorded therein. The court held that the appellants, who were in business, have to be prepared for tides in the business. The court observed that in Pournami Oil Mills, 1986 Supp. SCC 728, it was the incentive to set up new industry in the State with a view to boost the industrialisation that exemption had been granted and it was in that fact situation that the doctrine of promissory estoppel was held available to the appellant therein. Again in Bakul Oil Industries, (1987) 1 SCC 31, it was the incentive to set up industries in a conforming area that the exemption had been granted and the court held that the Government could withdraw an exemption granted by it earlier only if such withdrawal could be made without offending the rule of promissory estoppel and without depriving an industry entitled to claim exemption for the entire specified period for which exemption had been promised to it at the time of giving incentive. The court held that both these cases, therefore, cannot advance the case of the appellants and are distinguishable on facts because the exemption notification under section 25 of the Act which was issued in that case did not hold out any incentive for setting up of any industry to use PVC resins and on the other hand, had been issued in exercise of the statutory powers, in public interest and subsequently withdrawn in exercise of the same powers again in public interest. The court was of the opinion that no justifiable prejudice was caused to the appellant in the absence of any unequivocal promise by the Government not to act and review its policy even if the necessity warranted and the “public interest” so demanded. The court held that in the facts and circumstances of those cases, the appellants could not invoke the doctrine of promissory estoppel to question the withdrawal notification issued under section 25 of the said Act.

40. In the facts of the present case, as discussed hereinabove, exemption Notification No. 16/2015–Cus dated 1st April, 2015 was issued in exercise of powers under section 25 of the Customs Act, for the purpose of implementing the incentive scheme for import of capital goods under the EPCG The above decision, therefore, does not further the case of the respondents.

41. In Director General of Foreign Trade v. Kanak Exports (supra), on which reliance has been placed by the learned senior standing counsel for the respondent, the Supreme Court followed its earlier decision in the case of Kasinka Trading v. Union of India, (supra), which as discussed hereinabove does not support the case of the respondents.

42. In the light of the above discussion, the petition succeeds and is, accordingly, allowed. It is held that the amendment of Notification No. 16/2015-Cus vide Serial No.1 of Notification No. 79/2017 dated 13th October, 2017, would also apply to imports made during the period 1.7.2017 to 13.10.2017. Trade Notice 11/2018 dated 30.6.2017 to the extent it is stated therein that under Chapter 5 importers would need to pay IGST is hereby quashed and set aside. The impugned order-in original dated 29.9.2018 is hereby quashed and set aside and it is held that the petitioner is entitled to refund of the amount of Rs.2,38,83,203/- paid by it towards IGST with interest at the statutory rate. Rule is made absolute accordingly, with no order as to costs.

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