Full Judgment Text
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PETITIONER:
DAI-ICHI KARNATAKA LTD.
Vs.
RESPONDENT:
UNION OF INDIA & ORS.
DATE OF JUDGMENT: 11/04/2000
BENCH:
R.C.Lahoti, S.R.Babu
JUDGMENT:
RAJENDRA BABU, J. :
By Notification No. 210/82 dated September 10, 1982
(as amended by Public Notice dated September 20, 1983)
issued under Section 25(i) of the Customs Act the Government
of India exempted from payment of customs duty and
additional duty of customs on all raw materials and
components imported for the manufacture of goods to be
supplied to various organisations such as I.D.A. that is,
the International Development Association, International
Bank for Reconstruction and Development (I.B.R.D.) or
bilateral or multilateral aided projects. The said
notification stated that it would be in force till September
10, 1987. By Notification No. 513/86 dated December 30,
1986 issued under Section 25(i) of the Customs Act the
Central Government exempted raw materials and components
required for the manufacture of the goods to be supplied to
the O.N.G.C. or G.A.I.L. from so much of that portion of
the duty of customs leviable thereon which is specified in
the First Schedule to the Customs Tariff Act, 1975 as is in
excess of the amount calculated at the rate of 25% ad
valorem and whole of the additional duty leviable thereon
under Section 3 of the Customs Tariff Act, 1975 subject to
certain conditions. By another Notification No. 516/86 of
the same date the Central Government exempted goods imported
in connection with off-shore oil exploration or exploitation
from the whole of the duty of customs leviable thereon under
the First Schedule to the Customs Tariff Act, 1975 and the
additional duty leviable thereon under Section 3 of the
Customs Tariff Act, 1975 subject to certain conditions. By
another Notification No. 517/86 dated December 30, 1986 it
was notified that Notification No. 210/82 dated September
10, 1982 stood amended by omitting the words "or Oil and
Natural Gas Commission or Oil India Limited or Gas Authority
of India Limited". As a result thereof the appellant who is
manufacturer and supplier of certain goods to O.N.G.C. in
connection with oil exploration viz. Flow Improver under
the trade name "Daitrolite" became liable to pay duty to the
extent of 25% for the period between December 30, 1986 and
September 10, 1987. Though several contentions had been
raised in the High Court in challenging the action of the
respondents, in the appeal before us what is urged is only
one contention which is as follows: That Notification No.
210/82 dated September 10, 1982 and the extended
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Notification thereto to apply to O.N.G.C. was issued to
encourage manufacture of goods indigenously for effecting
supplies to essential Indian enterprises as a part of the
scheme which was Project Based and the exemption under the
said Notification was a part of Project Based exemption
scheme. Public interest did not demand the variation during
the period the exemption was in force by Notification No.
210/82. In the writ petition before the High Court the
contention raised by the appellant is that the fact that
many persons, including the petitioners have undertaken
importation of materials on the basis that no duty was
leviable or payable on the imported material and that there
have been no new events nor any supervening circumstances
which could form a basis for or justify the withdrawal of
the benefit contained in the exemption Notification No.
210/82 as amended in 1983 after being satisfied that public
interest required that there should be no duty of customs
nor additional duty of customs in respect of raw materials
and components imported for supplies therefrom to O.N.G.C.
for a fixed and definite period up to September 10, 1987;
that the policy of the first respondent is to indigenise
production as is the policy of O.N.G.C. to indigenise;
that the appellant had secured orders for supply of goods
against global tenders where foreign suppliers also
participated and in the teeth of international competition
the company had been awarded the contracts by O.N.G.C.;
that pursuant to the exemption that has been granted the
company had invested since 1983 a large amount of money in
respect of its plant for manufacture of goods to be supplied
to O.N.G.C.; that public interest which prompted the first
respondent to issue the exemption notification No. 210/82
remains unaltered and no new supervening circumstances have
justified reversal of the said policy and, in fact, such a
reversal to encourage foreign manufacturers at the cost of
Indian manufacturers is per se contrary to public interest
drain on foreign exchange. The High Court took the view
that this Court had laid down in Kasinka Trading & Anr. v.
Union of India & Anr., 1995 (1) SCC 274, that the power to
exempt flows from Section 25 of the Customs Act; that just
as the notification issued granting exemption is in public
interest, by another notification it can also be modified or
withdrawn in public interest, irrespective of whether
exemption is project based or specific goods related. The
High Court having held that Notification No. 210/82 had
been issued in public interest and modified again in public
interest, dismissed the petition. Hence this appeal.
Inasmuch as the contention raised on behalf of the appellant
had not been specifically dealt with by the respondents in
the writ petition in the High Court, this Court permitted
the respondents to file counter affidavit. Accordingly, a
counter affidavit was filed on February 9, 2000. In that
affidavit what is stated is as follows :-
"It is further submitted that the oil section in
general had been enjoying various fiscal concessions since
1982. During December, 1986, a review was undertaken in
relation to various concessions accorded to oil exploration
and development of oil and natural gas production. The
conditions prevailing then compelled the government to
review the earlier concessions and to prescribe different
rates of duties on different goods required by the sector in
order to promote oil exploration in the country. It was
believed that the imposition of a nil rate of duty on the
import of raw materials and components required for the
manufacture and supply of products to the ONGC, OIL and GAIL
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could lead to misuse, specially by the private contractors
who have other interests, in addition to the supplies to the
Oil Sector. The Administrative requirements as also the
cost of the saving/earning of foreign exchange in the
economy (which is about 35%) were also taken into
consideration. Consequently, it was felt necessary to
exclude ONGC, Oil India Ltd. and Gas Authority of India
Ltd. from the scope of Notification No. 210/82 and to
prescribe a separate slab of duty of 25% in respect of such
imports in terms of notification No. 513/86."
The appellant filed a reply stating as follows :-
"(1) It is wrong to say that the appellant herein
could have misused the exemption because under the export
obligation clause, in keeping with the policy of the
government, the appellant was obliged only to import for
supplying to ONGC, respondent No. 4 herein. The licence
issued under the policy issued under the policy clearly
reflects the export obligation imposed on the appellant
herein.
(2) Furthermore, the finished product Daitrolite
manufactured from the raw materials imported under the
licence, being a highly specialised product could have been
sold only to ONGC, Oil India etc. and nobody else.
(3) At the time in 1982 when the exemption on customs
duty was allowed to the appellant, the prevailing basic
customs duty was 60% and 70% on different materials and even
if on account of probable misuse, the exemption why only a
25% customs duty was allowed to be imposed for bringing in
the raw materials."
The law on the matter is now well settled that even in
respect of exemptions that may have been made by the
Government the doctrine of promissory estoppel will not be
applicable if the change in the stand of the Government is
made on account of public policy. This position has been
explained in detail by this Court in Kasinka Trading & Anr.
(supra) and reiterated in Shrijee Sales Corporation & Anr.
v. Union of India, 1997 (3) SCC 398. In both these cases
this Court is concerned with notifications issued under
Section 25 of the Customs Act. In Kasinka Trading & Anr.
(supra) case it is stated that the exemptions granted under
Section 25(i) of the Customs Act in public interest is
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 and at a time when
the notification was withdrawn by the Government there was
no scope for any loss to be suffered by the importers and,
therefore, the change of policy was permissible. This
decision is the same in Shrijee Sales Corporation & Anr.
(supra) wherein it was noticed that once public interest is
accepted as the superior equity which can override
individual equity, the principle would be applicable even in
cases where a period has been indicated for which period the
notification would remain in force and Government is
competent to resile from a promise. It was further noticed
therein that the Government can resile from a promise even
if there is no manifest public interest involved provided,
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of course, that no one is put in any adverse situation which
cannot be rectified.
In the present case, it is clear that the only public
interest disclosed is as stated above in the counter
affidavit and those circumstances cannot stand close
scrutiny because the appellant could not mis-utilise the
exemption granted inasmuch as the appellant is obliged only
to import goods for the purpose of supplying them to
O.N.G.C. and the licence issued under the policy also
clearly reflects the export obligation imposed on the
appellant herein and the finished product Daitrolite
manufactured from raw materials imported under the licences
is highly specialised product and could be sold only to
O.N.G.C., Oil India Ltd. and others. At the time in 1982
when the exemption was granted the prevailing basic customs
duty was 60% and 70% on different materials imported for the
manufacture of goods in question. However, it is not clear
as to why duty is reduced to 25% by reason of exemption
being modified. It is clear, therefore, that the factors
taken into consideration by the Government appear to us to
be wholly irrelevant and do not subserve public interest.
In somewhat identical situation, this Court had occasion to
examine the scope of interference in respect of notification
issued under Section 25 of the Customs Act.
In Indian Express Newspapers (Bombay) Private Ltd.
Ors. Etc. Etc. v. Union of India & Ors. Etc. Etc.,
1985 (2) SCR 287, scope of interference in the notification
issued under Section 25 of the Customs Act, 1962 is
considered. This Court held that power to grant exemption
under Section 25 of the Customs Act is a legislative power
and a notification issued by the Government thereunder
amounts to a piece of subordinate legislation, even then the
notification is liable to be questioned on the ground that
it is an unreasonable one inasmuch as a piece of subordinate
legislation does not carry the same degree of immunity which
is enjoyed by a statute passed by a competent legislature.
Subordinate legislation may be questioned on any of grounds
on which plenary legislation can be challenged : (i) that
it does not conform to the statute under which it is made;
(ii) that it is contrary to some other statute inasmuch as
subordinate legislation must yield to plenary legislation,
(iii) that it is unreasonable in the sense that it is
manifestly arbitrary. The embargo of arbitrariness is
embodied in Article 14 of the Constitution. An enquiry into
the vires of delegated legislation must be confined to the
ground on which the plenary legislation may be questioned,
except that subordinate legislation cannot be questioned on
the ground of violation of the principle of natural justice
on which administrative action may be questioned. In cases
where power vested in the Government is a power which has
got to be exercised in public interest, as is the case in
the present case, the court may require the Government to
exercise that power in a reasonable way in accordance with
the spirit of the Constitution. The mere fact that a
notification issued under Section 25 of the Customs Act is
required to be laid before Parliament under Section 159 of
the Customs Act does not make any substantial difference as
regards the jurisdiction of the court to pronounce on its
validity. Section 25 of the Customs Act under which
notifications are issued confers a power on the Central
Government coupled with a duty to examine the whole issue in
the light of public interest. If the Central Government is
satisfied that it is necessary in the public interest so to
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do, it may exempt generally either absolutely or subject to
such conditions, goods of any description, from the whole or
any part of the customs duty leviable thereon. Power
exercisable under Section 25 of the Customs Act is no doubt
discretionary, but it is not unrestricted. The pattern of
the law imposing customs duties and the manner in which it
is operated to a certain extent exposes the citizens who are
liable to pay customs duties to the vagaries of executive
discretion. While Parliament has imposed duties by enacting
the Customs Act and the Customs Tariff Act, 1975, the
executive Government is given wide power by Section 25 of
the Customs Act to grant exemption from the levy of customs
duty. It is ordinarily assumed that while such wide power
is given to the Government, it will consider all relevant
aspects governing the question whether exemption should be
granted or not. Ms. Nisha Bagchi, learned counsel for
respondents, relied on Union of India v. Indian Charge
Chrome, 1999 (112) ELT 753 (S.C.). In this case, however,
the law stated in Kasinka Trading & Anr. (supra) is
reiterated but there is no plea in the petition that the
formation of opinion as to public interest is based on no
material or was vitiated by malafides. In the present case,
the position is altogether different. Specific plea has
been raised that there is no basis for formation of the
opinion as to public interest calling for withdrawal or
modification of the exemption already granted. Therefore,
the principle stated in that case has no application to the
facts of the present case.
Relying upon a decision in Collector of Central Excise
v. R.M.D.C. Press Pvt. Ltd., 1997 (92) ELT 29 (S.C.), it
was further submitted by the learned counsel for the
respondents that public interest should be presumed to exist
even when the judgment under appeal does not expressly refer
to public interest which moved the respondents to curtail
the period of exemption. When a specific contention had
been raised regarding non-existence of public interest in
curtailing the period of exemption, we fail to understand as
to how this decision can be of any assistance to the learned
counsel.
In the present case, by issuing different set of
notifications and granting exemption at different stages and
limiting only to the extent of 75% for the period from
December 30, 1986 to September 10, 1987 and for the reasons
stated earlier in the manner set out in the counter
affidavit clearly indicate that the Government has not taken
into account all the relevant factors while issuing the
impugned notifications reducing the exemption to 25% for the
aforesaid period. We may state that the Government has
failed to discharge its statutory obligation while issuing
the impugned notifications. Justifications offered, to say
the least, is far too nave to be accepted. The reason set
out does not carry the case of the State Government further
at all. However, Ms. Nisha Bagchi sought to distinguish
the different notifications by stating that different
notifications issued subsequently are in respect of
different commodities and it is always open to the
Government to change its policy. Undoubtedly it is so, but
those factors per se would not discharge the burden of the
Government in establishing as to what public interest
governed the Government in reducing the extent of exemption.
We have already held that the Government has failed to
discharge that burden. In the result, we have no hesitation
in quashing the amended notifications which are applicable
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for the period from December 30, 1986 to September 10, 1987
reducing the extent of exemption. The notification issued
earlier on September 10, 1982 and modified in 1983 shall be
effective till September 10, 1987. The appellants should be
subject to duty only in accordance with those notifications
issued under the Customs Act.
The appeal is allowed accordingly by setting aside the
order made by the High Court in allowing the writ petition
filed by the appellant in the manner indicated therein.
There shall be no order as to costs.