PETITIONER:
SHRIJEE SALES CORPORATION & ANOTHER
Vs.
RESPONDENT:
UNION OF INDIA
DATE OF JUDGMENT: 20/12/1996
BENCH:
N.P. SINGH, SUJATA V. MANOHAR
ACT
HEADNOTE
JUDGMENT
JUDGMENT
Ahmadi,CJI.
The present appeal impugns the judgment of the High Court of Delhi dated 16.3.1983 which dismissed the writ petition filed by the appellants challenging the Notification dated 16.10.1980 issued by the Government of India, Ministry of Finance, Department of Revenue, being Notification No. 205/T-No.355/141/80-Cus I. (hereinafter referred to as "Notification No.205"). This Notification was issued in supersession of an earlier Notification dated 15.3.1979 being Notification No.66 Cus. dated 15.3.1979 G.S.R. (hereinafter referred to as "Notification No.66"). By the first Notification No.66, the Government gave exemption to imports of polyvinyl chloride resins (PVC) falling within Chapter 39 of the First Schedule to the Customs Tariff Act, 1975 from the duty of customs leviable thereon specified in the first schedule. The relevant part of the Notification No.66 is as under:
"In exercise of the powers
conferred by Subsection (1) of
Section 25 of the Customs Act, 1962
(52 of 1962), and in supersession
of the Notification of Government
of India in the Ministry of
Finance, Department of Revenue,
No.145-Customs, dated the 27th.
July, 1980, the Central Government,
being satisfied that it is
necessary in the public interest so
to do, hereby exempts polyvinyl
chloride resins, falling within
Chapter 39 of the First Schedule to
the Customs Tariff Act, 1975 (51 of
1975), when imported into India,
from the whole of the duty of
customs leviable thereon which is
specified in the said First
Schedule.
The Notification shall be in force
upto and inclusive of the 31st
March, 1981."
The case of the appellant is that on the faith of the solemn assurance given by the Government. of India that no duty of customs would be leviable on the importation of PVC resins upto 31.3.1981, they entered into an arrangement for the import of PVC resin as an actual user with the U.P. Export Corporation, Kanpur and opened Letters of Credit against the foreign suppliers on 2.10.1980 and the goods arrived at the Bombay Port on 8.11.1980. However, the impugned Notification withdrawing the exemption from payment of customs duty was withdrawn on 16.10.1980. The relevant part of impugned Notification is as under:-
"In exercise of the powers
conferred by sub section (1) of
Section 25 of the Customs Act, 1962
(52 of 1962) and in supersession of
the Notification of the Government
of India in the Ministry of
Finance, Department of Revenue, .66
Customs, dated 15th March, 1979,
the Central Government being
satisfied that it is necessary in
the public interest so to do,
hereby exempts polyvinyl chloride
resins, falling within Chapter 39
of the First Schedule to the
Customs Tariff Act, 1975 (51 of
1975), when imported into India,
from so much of the duty of Customs
leviable thereon which is specified
in the said First Schedule as is in
excess of forty per cent ad
valorem.
(K. Chandramouli)
Under Secretary to the Govt. of
India."
The appellants alleged that they imported the PVC resin on the assurance that there would be no customs duty imposed upon it and that but for this exemption, they would not have imported the PVC resin as that would have been uneconomical. They, therefore, contend that the Government should be estopped from withdrawing the benefit of Notification No.66.
The impugned judgment of the High Court is quite brief. It relies entirely on a Full Bench decision of the same High Court in the case of Bombay Conductors And Electricals Ltd. And Another v. Government of India And Others 1986 (23) E.L.T. 87 (Delhi). The primary focus of the judgment in the case of Bombay Conductors (supra) was that imposition of taxes and withdrawal thereof are legislative functions and since there can be no estoppel against the legislature, the withdrawal Notification was not hit by the principles of estoppel. The impugned judgment, however, does not dispute that the doctrine of promissory estoppel can be attracted against the State. However, after an analysis of various previous judgments of this Court on the question of promissory estoppel against public authorities, the judgment concludes that the question of promissory estoppel cannot be invoked when the public interest requires otherwise. The following part of the judgment in Bombay Conductors can be quoted with profit to identify the reasoning of the High Court as to why the impugned Notification could not be quashed, be it a legislative function or an executive one.
"... In M.P. Sugar Mills it was
recognised that where the
Government owes a duty to the
public to act differently,
promissory estoppel cannot be
invoked to prevent the Government
from doing so. The Government
cannot be prevented from acting in
the discharge of its duty under the
law (AIR 1979 SC 621 at 646).
42. One thing is clear from the
authorities. There is not a single
case which has gone to the length
of saying that estoppel can be
pleaded even against public
interest. The present is a case
essentially of "public interest".
All the authorities uniformly hold
that against "public interest" the
plea of estoppel will not avail a
party. Otherwise the Government
will not be able to assert its
power and will be a helpless
spectator even if public interest
requires it to act differently. It
would amount to surrender by the
Government of its legislative
powers which have to be used for
the public good. This is why
Section 25 confers a statutory
power on the Central Government to
act in public interest and to grant
exemption or rescind it.
43. Estoppel cannot be invoked
where the result will be to compel
the Government to continue the
exemption which a competent
enactment has validly authorised
the executive to withdraw in the
public interest at any time. In
public interest exemption can be
granted. In public interest
exemption can be rescinded. In
other words, the rights of
individuals are subordinated to
take paramount interest of the
public good. Section 25 underlines
the importance of the common good.
"Public interest" dominates the
economic scene. If in public
interest the Central Government
finds that it is necessary to
protect its own industry by putting
up a tariff wall it will be futile
to say that it cannot do so because
it is bound by its promise to
continue the exemption up to a
particular time. The traders may
feel incensed at the behaviour of
the executive at its imposition,
exemption, reimposition and re-
exemption of taxes and levies. But
when to exempt and when to impose
duty is left to the executive by
the legislature. It will depend on
the economic climate. New times
require new measures. In a world of
growing inter-dependence the first
thing every country wants is
protection for its domestic
industry.
44. Governed by the market forces
and the laws of supply and demand,
if the Government finds that it
must withdraw the exemption
notification at once it can do so.
What actuated the Government to
take the step of exemption and
reimposition was enlightened self-
interest, such self-interest as
would subserve the common good. The
imposition and exemption of customs
duty are the chief vehicles of the
Government to protect a domestic
market and to steady the level of
prices. The tariffs are its chosen
instruments to shield domestic
production from foreign
competition."
The same impugned Notification No.205 came to be challenged in another set of appeals decided by this Court in Kasinka Trading & Anr. etc. v. Union of India & Anr. JT 1994 (7) S.C. 362. The Notification was upheld by a Division Bench of this Court comprising of M.N. Venkatachaliah, CJI and A.S. Anand, J. It is, however, contended before us that the judgment in Kasinka Trading is not correct.
It is not necessary for us to go into a historical analysis of the case law relating to promissory estoppel against the Government. Suffice it to say that the principle of promissory estoppel is applicable against the Government but in case there is a supervening public equity, the Government would be allowed to change its stand; it would then be able to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. However, the Court must satisfy itself that such a public interest exists. The law on this aspect has been emphatically laid down in the case of M/s. Motilal Padampat Sugar Mills Co. (P.) Ltd. v. State of Uttar Pradesh & Others [1979] 2 S.C.R. 641. The portion relevant for our purpose is extracted below :-
"It is only if the Court is
satisfied, on proper and adequate
material placed by the Government,
the overriding public interest
requires that the Government should
not be held bound by the promise
but should be free to act
unfettered by it, that the Court
would refuse to enforce the promise
against the Government. The Court
would not act on the mere ipse
dixit of the Government, for it is
the Court, which has to decide and
not the Government whether the
Government should be held exempt
from liability. This is the essence
of the rule of law. The burden
would be upon the Government to
show that the public interest in
the Government acting otherwise
than in accordance with the promise
is so overwhelming that it would be
inequitable to hold the Government
bound by the promise and the Court
would insist on a highly rigorous
standard of proof in the discharge
of this burden. But even where
there is no such overriding public
interest, it may still be competent
to the Government to resile from
the promise "on giving reasonable
notice which need not be a formal
notice, giving the promise a
reasonable opportunity of resuming
his position" provided of course it
is possible for the promisee to
restore status quo ante. If
however, the promisee cannot resume
his position, the promise would
become final and irrevocable. Vide
Emmanuel Ayodeji Ajayi v. Briscoe,
[1964] 3 All. E.R. 556."
Two propositions follow from the above analysis :
(1) The determination of
applicability of promissory
estoppel against public
authority/Government hinges upon
balance of equity or ’public
interest’.
(2) It is the Court which has to
determine whether the Government
should be held exempt from the
liability of the "promise" or
"representation".
In the present case, the first Notification exempting the customs duty on PVC itself recites "....Central Government being satisfied that it is necessary in public interest to do so....". In the Notification issued later which gave rise to the present cause of action, the same recitation is present.
In Kasinka, the Court has actually gone into this aspect. In para 19, the Court says :
"PVC resins, it is not disputed, is
manufactured in India and is also
imported from abroad. In the
counter to the Writ Petition filed
by the Union of India in the High
Court, the justification for the
issuance of the exemption
Notification No.66/79 in the
"public interest" was spelt out by
the respondents. It was stated that
it was 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, that the
Cabinet had decided to issue the
exemption Notification No.66 of
1979 under Section 25(1) of the
Act. Subsequently, when it was
found and realised that the
international prices of the product
were falling and consequently the
import prices had become lower than
the exfactory prices of the
indigenous material, the material
was examined by the Government of
India and it was decided in "public
interest" to withdraw the exemption
Notification. Thus, the Union of
India has disclosed the
circumstances under which the
exemption was initially granted as
well as the change of circumstances
which warranted the withdrawal of
the exemption notification. 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. From the
material on the record it is
apparent that the exemption
Notification issued under Section
25(1) of the Act, in "public
interest", was designed to off set
the excess price which the local
entrepreneurs were required to pay
for importing PVC resin at a time
when the difference between the
indigenous product and the imported
product was substantial. No
importer could be expected to
import PVC resins after paying duty
and incur losses. The exemption
Notification, was therefore, issued
with a view to set off those losses
to the extent possible. The
Notification was not issued as a
potential source of extra profit
for the importer. Again, at the
time when the Notification was
withdrawn by the Government there
was no scope for any loss to be
suffered by the importers as was
clearly saved in the counter filed
by the Union of India and which
contention has remained unrebutted.
From the counter filed by the Union
of India in the High Court it is
abundantly clear that the necessity
for the continuation of the
exemption, in view of the changed
circumstances, was no longer
necessary."
It can be seen that the High Court in the case of Bombay Conductors had also noticed a similar public interest in withdrawing the Notification of exemption. The appellants in the present case have not disclosed any facts which could show the existence of better equity in their favour. All that they have alleged is that they would not have imported the PVC resin without the exemption as that would have been imported the PVC resin without the exemption as that would have been "unviable" & "uneconomical" and further that many persons took full advantage of the exemption; moreover, the exemption accorded preferential treatment to some persons, but not to the appellants. The facts of the economic situation explained in the judgment of Kasinka have not been controverted. Nor is it alleged by the appellants that public interest did not call for supersession of the Notification, No.66.
The next question is whether the fact that the Notification No.66 mentioned the period during which it was to remain in force, would make any difference to the situation. In other words, could it be said that an exemption notified without specifying the period within which the exemption would remain in force, would be withdrawn in public interest but not the one in which a period has been so specified? Once public interest is accepted as the superior equity which can override individual equity, the principle should be applicable even in cases where a period has been indicated. The Government is competent to resile from a promise even if there is no manifest public interest involved, provided, of course, no one is put in any adverse situation which cannot be rectified. To adopt the line of reasoning in Emmanuel Ayodeji Ajayi v. Briscoe (1964) 3 All.E.R, 556 quoted in M.P. Sugar Mills (supra) even where there is no such overriding public interest, it may still be within the competence of the Government to resile from the promise on giving reasonable notice which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position provided, of course, it is possible for the promisee to restore the status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable.
However, in the present case, there is a supervening public interest and hence it should not be mandatory for the Government to give a notice before withdrawing the exemption.
In our opinion, the judgment in Kasinka Trading is based on a correct analysis of facts and law. We see no reason to differ from the judgment. The present appeal is accordingly dismissed. Parties shall bear their own costs.