2009 (8) TMI 421 - HC - Customs

Exemption- withdrawal of exemption- Notification No. 208/88-Cus., dated 29th June 1988 and No. 159/88-Cus., dated 13th May 1988 - Whether the petitioner is entitled to the benefit of exemption notification issued under Section 25 of the Customs Act, 1962 bearing Notification No. 208/88-Cus., dated 29th June 1988 and No. 159/88-Cus., dated 13th May 1988 in respect of a consignment which arrived in the Port of Bombay after rescinding of the notifications? Held that- The Supreme Court has held that the exemption notification can be withdrawn in the public interest and in such an event, the principle of promissory estoppel would not apply to the action of withdrawal. We are satisfied that the withdrawal of the notifications was in the public interest and consequently the petition must fail, thus, there is no merit in the petition which is hereby dismissed. Rule discharged with no order as to costs.

Issues Involved:
1. Entitlement to benefit of exemption notifications under Section 25 of the Customs Act, 1962.
2. Application of the doctrine of promissory estoppel.
3. Justification of public interest in the withdrawal of exemption notifications.

Detailed Analysis:

1. Entitlement to Benefit of Exemption Notifications:
The primary issue was whether the petitioner was entitled to the benefit of exemption notifications (No. 208/88-Cus. and No. 159/88-Cus.) for a consignment arriving after the notifications were rescinded. The petitioner had placed orders for diesel generating sets under the concessional duty rates provided by these notifications. The first consignment was cleared with concessional duty, but the second was denied as the notifications were superseded by Notification No. 59/89-Cus. and Notification No. 177/89-Cus. before its arrival.

2. Application of the Doctrine of Promissory Estoppel:
The petitioner argued that the government was bound by the principle of promissory estoppel, as they had placed orders based on the representation made by the exemption notifications. The petitioner cited Supreme Court decisions (Shrijee Sales Corporation, Dai-ichi Karkaria Ltd., and MRF Ltd.) to support the claim that the government could not withdraw the notifications before the specified date, as it had created a legitimate expectation.

The court reviewed the doctrine of promissory estoppel, noting that it applies even against the government. However, the government can withdraw its representation if there is a supervening public interest. The court referred to previous judgments where the principle of promissory estoppel was discussed, emphasizing that the government must show overriding public interest to justify such withdrawal.

3. Justification of Public Interest in the Withdrawal of Exemption Notifications:
The respondents justified the withdrawal of the notifications by citing public interest. The affidavit by Mr. Sanjay Sreenath explained that the exemptions were initially granted to encourage industrial units to install their own power plants due to a power shortage caused by drought. However, local manufacturers of DG sets were adversely affected by the exemptions, leading to representations from these manufacturers and the Department of Public Enterprises. The government decided to withdraw the exemptions to protect domestic industries, including BHEL.

The court acknowledged that protecting domestic industry is a matter of public policy and that the government had provided sufficient material to show that the withdrawal was in the public interest. The court concluded that the principle of promissory estoppel would not apply in this case since the withdrawal was justified by overriding public interest.

Conclusion:
The court dismissed the petition, ruling that the withdrawal of the exemption notifications was in the public interest. The doctrine of promissory estoppel did not apply as the government had shown sufficient public interest to justify the withdrawal. The petitioner's claim for concessional duty on the second consignment was denied, and the rule was discharged with no order as to costs.

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