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TMI Blog1991 (4) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... of incentives introduced by the Government of India in the year 1976 in order to encourage entrepreneurs to set up new units for the manufacture of tyres for which there was great demand in the country and was in short supply. This Scheme was given statutory effect and the first Notification No. 186 was issued on 6-6-1976 which was in force upto the end in the year 1980. By Notification No. 107/81 dated 24-4-1981, the exemption was continued for a further period of 5 years from the date of production. 5. Pursuant to representations made by the tyre manufacturers, the Central Government continued the incentive scheme for a further period of 7 years and issued Notification No. 268/82 dated 13-11-1982 exempting the duty of excise leviable on tyres, as was in excess of 75% of the duty of excise payable on tyres. This exemption was available for a period of seven years from the date of first clearance and the amount of exemption was enhanced to an amount equivalent to 50% of the investment made on plant and machinery prior to the date of first clearance and subject to other conditions. Under the said notification the exemption period of five years provided in Notification No. 107/81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 985 rescinding Notification No. 88/84. Pursuant to the rescinding of Notification 88/84 the Assistant Collector of C. Ex., Mysore stopped the clearances of the specified goods by the petitioner-company with effect from 16-7-1985. As a result, the petitioner company cleared the goods by paying the full excise duty and later made a claim for refund of the excess duty of Rs. 34,36,487.10. The petitioner-company demanded refund of the excess duty paid relying on the decisions of Rajasthan and Madras High Courts allowing similar claims for refund. The Assistant Collector of Central Excise declined to grant the refund by his endorsement dated 17-6-1987 (Annexure-D) and this order is impugned in this writ petition. 10. Sri Arshad Hidayatullah, the learned Counsel instructed by M/s. King and Partridge, Bangalore urged as the principal contention that the Notification No. 159/85 rescinding the Notification No. 88/84 which resulted in deprivation of the benefits that had accrued to the petitioner-Co., should be declared as ultra vires, applying the doctrine of promissory estoppel. As a consequence of the said declaration, the further prayer of the petitioners is that the benefit of Notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is not permissible." 14. The main plank of the argument of the learned Standing Counsel, as stated above, was that a notification issued in exercise of the delegated power under Rule 8 of the Central Excise Rules, is also a legislative function, and that, therefore, the principle of promissory estoppel does not apply to such legislative function. In support of this proposition, the statement of law contained in M.P. Sugar Mills' and Godfrey Phillips' cases, namely, "that the principle or promissory estoppel does not apply to legislative functions", was sought to be relied upon. 15. One other supporting argument for this proposition was that the Rules framed under Section 38 of the Central Excises Act are placed before the Parliament and the rules so framed are subject to any modification to be made or suggested by the Parliament. The argument was that the rules, therefore, become part of the statute and the notifications, therefore, are legislative in character and the notifications partake the nature of legislative functions. 16. Dealing with the factual position first, it is necessary to refer in brief, to the incentives given, from time to time, under various notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. The decisions, which according to the petitioner-company, have a direct bearing on the present case are : Pournami Oil Mill v. State of Kerala - 1987 (27) E.L.T. 594; A.C.C.T. v. Dharanendra Trading Company - (1988) 3 SCC 570 and the decision of this Court in : Dharanendra Trading Company v. A.C.C.T. - ILR 1979 (2) Kar. 1909 and the decision of the Bombay High Court in : Bharat Commerce Industries v. Union of India -1987 (32) E.L.T. 40. In Pournami Oil Mills case and Dharanendra Trading Company case, the Supreme Court had occasion to apply the doctrine of promissory estoppel to the statutory notifications issued under the Kerala Sales Tax Act and the Karnataka Sales Tax Act. 22. Though the appeals filed by the State of Karnataka against the judgment of this Court which was rendered in the year 1979 in Dharanendra Trading Company case were preferred in the year 1980, they were disposed of on 5th May, 1988, whereas, Civil Appeal in Pournami Oil Mill case, though filed in the year 1986, was disposed of earlier, i.e., on 19-12-1986. Therefore, I propose to take up Pournami Oil Mill case first, and then, refer to Dharanendra Trading Co., case. 23. In Pournami Oil Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promissory estoppel must be regarded as good law. 25. Sri Arshad Hidayatullah placed strong reliance on these two decisions in view of the fact that the statutory notifications issued under the Sales Tax Acts of Kerala and Karnataka, were involved in those two decisions, and the Supreme Court upheld the plea of promissory estoppel against the State. 26. One other decision which needs to be next referred to is the Division Bench decision of the Bombay High Court in: Bharat Commerce Industries v. Union of India -1987 (32) E.L.T. 40. The question that came up for decision in that case was: whether the plea of promissory estoppel was available to a party aggrieved, against the Central Government, in relation to a notification issued under Section 25 of the Customs Act. The notification that came up for interpretation in that case before the Bombay High Court was a notification issued under Section 25(1) of the Customs Act. 27. The brief facts of that case were: The appellants imported viscose staple fibre and viscose tow on the basis of a notification dated 5-1-1979 issued by the Central Government under Section 25(1) of the Customs Act. By the time the fibre reached Bombay, a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contrary to the terms of its representation, the Courts will not require the Government to honour its representation; but subject to that, it must". Dealing with the ratio of the decision of the Supreme Court in Pournami Oil Mill's case, the Bombay High Court observed that the Supreme Court was very well aware that the Kerala Government in that case was exercising power under Section 10 of the Kerala Sales Tax Act when it made the representation and when it sought to act contrary to the terms of the representation made in the notification. The Bombay High Court reproduced the observations made by the Supreme Court in M.P. Sugar Mill's case at page 51 of its Judgment wherein the observations made by Sri Shah, J. in Indo-Afghan case were adverted to by Supreme Court. Sri Shah, J. pointed out that the Government may claim to be exempt from the liability to carry out the promise "on some indefinite and undisclosed ground of necessity or expediency" but the grounds for such repudiation must be disclosed to the Court and the Court must decide whether the subsequent events are such as to render it inequitable to enforce the liability against the Government. Sri Shah, J. further ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case and should be made applicable for upholding the claim of the petitioners-company in this writ petition. 30. The learned Counsel for the petitioner-company also relied upon some decisions of other High Courts which have taken similar view, which would be referred to later. 31. Before parting with the Bombay case, I must observe that Sri Arshad Hidayatullah, who argued the case of the appellants before the Bombay High Court, has put in all the labour and effort before the Bombay High Court in order to drive home his point and succeeded in doing so. The judgment of the Bombay High Court is, therefore, a reflection of his arguments presented before the Bombay High Court which has made his task before this Court easier since all the decisions on the subject have been considered by the Bombay High Court. 32. The other decisions relied upon by the learned Counsel for the petitioner-company are: 1. Union of India v. J.K. Industries -1990 (49) E.L.T. 511 (Rajasthan) 2. Union of India v. Chakra Tyres - 1990 (45) E.L.T. 3 (Madras). 33. Both these decisions dealt with the Notification 88/84 and upheld the similar plea of promissory estoppel urged by the assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Paragraph 12 of their Judgment their Lordships also distinguished the applicability of the Judgment of the Supreme Court in the case of Jayantilal Amrutlal Shodan v. F.N. Rana - AIR 1964 SC 648, and also distinguished the view expressed by the Full Bench of the Delhi High Court in Bombay Conductors and Electricals Ltd. Anr. v. Government of India and Anr. - 1986 (23) E.L.T. 87 (Delhi) which I propose to deal with later in the course of this order. 38. The following are the decisions relied upon by Sri Ashok Haranahally in support of the proposition that the Notification issued under Rule 8 of the Rules is legislative in nature : (1) Orient Weaving Mills v. Union of India - A.I.R. 1963 S.C. 98 = 1978 (2) E.L.T. (J 311) (S.C.): The Supreme Court held that Rule 8 of the Central Excise Rules does not suffer from excessive delegation. The Supreme Court was dealing with the contention of the assessees, which had challenged the constitutional validity of Rule 8 of the Central Excise Rules, that it suffers from the vice of excessive delegation of powers to the Central Government, inasmuch as, it confers power on the Central Government to exempt wholly or partly any duty. This ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pel against the legislature in the exercise of its legislative functions. The Supreme Court expressed its disagreement with the general observations made in Jit Ram's case and reiterated the enunciation of the principle in M.P. Sugar Mills' case. (5) Indian Express v. Union of India - A.I.R. 1986 S.C. 515. The Supreme Court was dealing with the power of the Central Government to grant exemption under Section 25(1) of the Customs Act. The Supreme Court observed that the Notification under the Customs Act is a piece of legislation. (See: Paras 69 and 70 of the Judgment). No question relating to the applicability of promissory estoppel of subordinate legislation came up for consideration in that case. But the Court upheld the power of the Court to question such notification on the ground of unreasonableness. (6) M/s. Sree Sitaram Sugar Co. v. Union of India - A.I.R. 1990 S.C. 1277. That was a case of fixation of sugar price under the Essential Commodities Act. Such orders fixing the sugar price were held to be legislative in nature. The Supreme Court did not interfere with the challenge made to the Sugar Price Control Orders on the ground that it is not a matter for judicial r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms - 1986 (27) E.L.T. 626 (Calcutta). It was held that the principle of promissory estoppel cannot be sustained against the notification issued by the Central Government under the Customs Act. The Calcutta High Court placed reliance on the Full Bench decision of the Delhi High Court in Bombay Conductors' case. 39. Deriving sustenance from these decisions, Sri Ashok Haranahally made a forceful attempt to persuade this Court to hold that the statutory notifications issued by the Central Government as applicable to the tyre manufacturers are in the nature of subordinate legislation and that, therefore, the plea of promissory estoppel pleaded by the petitioner-company in this case should be rejected as not applicable to notifications issued in exercise of legislative function. The learned Standing Counsel also submitted that the petitioner-company has failed to make out that the additional investment was made pursuant to and acting upon the Notification No. 88/84, which was issued only on 6-4-1984. He also drew my attention to the observations made by the Supreme Court in M.P. Sugar Mills case, that the principle of promissory estoppel cannot be invoked against the legislative func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the full period of seven years from the date of commencement of production. The learned Counsel, therefore, submitted, that applying Notification No. 88/84 to the petitioners case, on the undisputed facts, they are entitled to the refund of the excess duty paid upto 22-10-1986 consequent on the rescission of the Notification 88/84 with effect from 16-7-1985. 42. So far as the law on the question that arises for decision in this case is concerned, it was reiterated that the principle of promissory estoppel was applied by the Supreme Court even in cases of delegated legislation in the form of Notification issued under the statutes. In this context, the learned Counsel relied upon the two decisions of the Supreme Court in : (i) Jayantilal Amrutlal Shodan v. F.N. Rana - A.I.R. 1964 S.C. 648, and (ii) Indian Express v. Union of India - A.I.R. 1986 S.C. 515. wherein the Supreme Court was dealing with the Notifications issued under Section 25(1) of the Customs Act and observed that the Government does perform a delegated or subordinate legislative function in exercising power under Section 25 of the Customs Act and the notification issued under that Section is a piece of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that the claim of the respondents in that case was appropriately founded upon the equity which arose in their favour as a result of the representation made on behalf of the Union of India under the export promotion scheme. This dictum was reiterated by the Supreme Court in Godfrey Phillips' case. The Supreme Court pointed out and applied the principles of the decision in M.P. Sugar Mills' case in so far as the doctrine of promissory estoppel was made applicable against the Government. Quoting Indo-Afghan case for the enunciation of the law as expounded in Indo-Afghan case against the executive action and against public bodies as applied in Century Spinning Mills case - A.I.R. 1971 S.C. 1021, the only exception as expounded by the Supreme Court on a review of these cases was that the doctrine must yield when equity so requires, i.e., if it can be shown by the Government or public authority that it would be inequitable to hold the Government or the public authority to the promise or representation made by it and the enforcement of the obligation against the Government or the public authority would be contrary to the statute or affects prejudicially the interests of revenue or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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