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TMI Blog1987 (7) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... fect, inter alia, of discouraging an increase in the production. As increase in production was in the interest of the country and the consumers generally, the Central Government with a view to increase production issued a notification bearing No. 198 of 1976, dated June 16, 1976. 3. The salient features of this notification were (a) The scheme was to remain in operation until March 31, 1979. (b) The scheme applied to the goods listed in the table to the said scheme. The said table listed as many as 43 separate products and included, inter alia, tyres and tubes falling within the ambit of Item 16 of the said Tariff. (c) Under the scheme any manufacturer who cleared goods in excess of base clearances computed as provided under the said scheme was entitled to a rebate of twenty five per cent excise duty on such excess clearances. The scheme, of course, gives further directions as to how to claim the benefit of exemption and how necessary declarations have to be filed etc. 4. The petitioners acted on this notification and submitted their declarations to the Superintendent of Central Excise on or about September 29, 1976. The said declarations were accepted by the department. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the power conferred by the statute and that, therefore, the notifications have statutory force. He submitted that there can be no promissory estoppel as against the statute. Secondly, he submitted, that the petitioners cannot be said to have acted on the 1976-notification and in any event they have not acted to their detriment and, therefore, it cannot be said that they can insist on the benefit of the said exemption upto March 31, 1979. Lastly, he submitted that the second notification has been issued in the public interest and, therefore, where public interest is involved, against doctrine of promissory estoppel would not apply. 9. Mr. Setalvad, appearing for the petitioners, has rightly conceded that these notifications cannot be construed as mere executive orders but they are of a legislative character. But his contention is that that should not make any difference. 10. Mr. Advani relied on a judgment of Mr. Justice Jahagirdar in writ petition No. 1300 of 1986 (G.T.C. Industries Ltd. and another v. Union of India and others, reported in 1986 (25) E.L.T. 925), wherein the learned Judge has observed that the notification issued in exercise of powers conferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e State of Kerala v. Gwalior Rayon Silk Mfg. Co. Ltd. - (1974) 1 S.C.R. 671" Again : There can be no promissory estoppel against the legislature in the exercise of its legislative function." The learned Judge thereafter takes note of the fact that taxation is the prerogative of the legislatures and observes: "Imposition of tax and exemption from tax are acts of a positive kind. These cannot be created by estoppel. In a democratic system, a tax can only be imposed by law. Thus the Courts or the administration do not have a "creative power" to make things or transactions taxable where it is not proved that the legislature wished them to be taxable. Likewise exemption from tax cannot be claimed by pressing against the legislative power the doctrine of promissory estoppel." The learned Judge was dealing with the case under Section 26 Sub-section (1) of the Customs Act, 1962, which delegates power to the Central Government to grant exemption from duty whenever it thinks necessary to do so in the public interest. He then observes : "No Court can restrain the exercise of legislative power which is to be exercised for the public good. This was firmly established in Narinder Chand, A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd., reported in 1985 (22) E.L.T. 306 (S.C.), expressly disapproved of Jit Ram. This is what the Chief Justice said in which the two Judges agreed... "We find it difficult to understand how a Bench of two Judges in Jeet Ram's case could possibly overturn or disagree with what was said by another Bench of two Judges in Motilal Sugar Mills case. If the Bench of two Judges in Jeet Ram's case found themselves unable to agree with the law laid down in Motilal Sugar Mills case, they could have referred Jeet Ram's case to a larger Bench, but we do not think it was right on their part to express their disagreement with the enunciation of the law by a coordination Bench of the same Court in Motilal Sugar Mills case. We have carefully considered both the decisions in Motilal Sugar Mills case and Jeet Ram's case and we are clearly of the view that what has been laid down in Motilal Sugar Mills case represents the correct law in regard to the doctrine of promissory estoppel and we express our disagreement with the observations in Jeet Ram's case to the extent that the conflict with the statement of the law in Motilal Sugar Mills case and introduce reservations cutting down the full wid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by itself the observations made by the Court that "there can be no question of estoppel against the Government in exercise of its legislative, sovereign or executive powers" may appear to be wide and unqualified, it is not so, if read in its proper context. This observation was made on the basis of certain decisions which the Court proceeded to discuss in the succeeding paragraphs of the judgment. The Court first relied on the statement of the law contained in Para 123 at Page 783, Volume 28 of the American Jurisprudence but it omitted to mention the two important sentences at the commencement of the paragraph and the words "unless its application is necessary to prevent fraud or manifest injustice" at the end, which clearly show that even according to the American Jurisprudence, the doctrine of promissory estoppel is not wholly inapplicable against the Government in its governmental, public or sovereign capacity, but it can be invoked against the Government "when justified by the facts" as for example where it is necessary to prevent fraud or injustice. In fact, as already pointed above, there are numerous cases in the United States where the doctrine of promissory estoppel has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , observe that the power of revocation or withdrawal would be subject to one limitation viz. the power cannot be exercised in violation of the rule of Promissory Estoppel and depriving an industry entitled to claim exemption from payment of tax under the said rule." 17. Yet another case from Rajasthan was cited being the case of J.K. Industries Ltd. v. Union of India and others, reported in 1986 (26) E.L.T. 703 (Raj.), which is more explicit and it deals with exemption notifications issued by the Central Government in exercise of its statutory power under Rule 8 of the Central Excise Rules, 1944. Following Motilal and Godfrey Philips, the learned Judges explained the legal position as follows : "Now, the question is whether the Notification issued by the Central Government in exercise of the powers under Rule 8 of the Excise Rules whether such notifications can be equated with the legislative function or not. My answer to this question is in negative. The clear distinction has to be borne in mind between primary legislation and sub-ordinate legislation and if the legislature passed any Act or laying down any law which is contrary to any earlier notifications then against such leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llied machinery. They have also stated that they were faced with production constraints in some areas, and, therefore, they contracted out at a heavy annual cost, certain other manufacturing processes viz. mastication and cord dipping. They have also stated that they have placed orders for rubber manufacturing machinery to assist the enhanced production capacity. They also further stated that certain items of machinery which had already been purchased but were to be installed over a period under a phased programme, were commissioned much ahead of this planned schedule and they stated that the commitment on this account was to the extent of rupees six crores approximately. They have also stated that they had to have an agreement with the labour force for the purpose of implementing the scheme. 20. Mr. Advani pointed out that it cannot be said that all these things were done pursuant to the exemption notification as such. He submitted that there is no evidence to show that the petitioners have imported any special machinery after the issuance of exemption notification as such. He also submitted that their own statement shows that the machinery had been imported earlier but according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s designed to assist smaller manufacturers of tyres, such as the Third and Fourth Respondents and others, by allowing them a rebate upon excise duty on clearances of tyres and upto 75 per cent of their licensed capacity." And again in Para 30 : "The intention of the First Respondent is to give the benefit of the scheme of exemption to tyre manufacturers whose factories have installed capacities or licensed capacities of lower than 5,00,000 units. The said scheme gives an incentive to tyre manufacturers so that they could raise their production and go on tyres on the basis of their rebate under the scheme till they reach 75 per cent of their licensed capacity. This is a direct incentive to smaller manufacturers to increase their outputs and obtain the benefit of the said Notification." 23. Here, it is worthwhile to note what Motilal has stated as to how the public interest should be proved and what should be the standard in that behalf. The relevant portion is at Page 644, and it reads as follows : "But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 regorous 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 promisee a reasonable opportunity of resuming his position" provided of course it is possible for the promisee to restore status quo ante. If, however, the promise cannot resume his position, the promise could become final and irrevocable." 24. Therefore, in my view, it is not en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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