20 December 1996
Supreme Court
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SHRIJEE SALES CORPORATION & ANOTHER Vs UNION OF INDIA

Bench: N.P. SINGH,SUJATA V. MANOHAR
Case number: Appeal Civil 3000 of 1984


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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:                       J U D G M E N T      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

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    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

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    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

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    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

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    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

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    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

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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.