1 abs IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 992 OF 1989 Ispat Alloys Ltd. .. Petitioner V/s Union of India & Ors. .. Respondents Mr. Madhav R. Baya i/b Mr. N.N. Gawankar for the petitioner. Mr. R. Ashokan for the respondents. CORAM : FERDINO I. REBELLO & D.G. KARNIK, JJ. DATE : 12TH AUGUST 2009 JUDGMENT : (Per D.G. Karnik, J.) 1. The issue that arises for our consideration in this petition is: “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 2 of Bombay after rescinding of the notifications?” 2. On 29th June 1988, the Government of India in exercise of power conferred upon it under section 25 of the Customs Act, 1962 issued a notification no.208/88-Cus exempting machinery and equipment for generation of electrical power (including generating sets) of capacity of 2.5 MW or above but not exceeding 50 MW, from payment of customs duty in excess of 35% advalorem for a period upto 31st March 1989. By notification no.159/88-Cus dated 13th May 1988 also issued under section 25 of the Customs Act, 1962, the Government of India exempted several goods, which were granted full or partial exemption from customs duty, from payment of auxiliary duty of customs. On 10th September 1988, the petitioner placed orders for supply of two diesel generating sets of 4.3 MW each on Wartsila Diesel AB, Sweden for value of approximately Rs.3,86,73,175/-. After obtaining necessary licence from DGFT on 17th August 1988, the petitioner opened a letter of credit on 2nd January 1989 in favour of the vendor. The vendor shipped the diesel generating sets in several boxes. The first consignment valued at Rs.3,02,03,745/- appropriately arrived in the Port of Calcutta on 16th February 1989 and was cleared by the customs authorities applying the concessional rate of customs duty on the basis of exemption notifications referred to above. The balance cargo valued 3 at about Rs.84,69,430/- was shipped by the vendor from Sweden on 21st February 1989 and a bill of entry was filed on 27th March 1989 at the Port of Bombay claiming benefit of concessional rate of duty as per the exemption notification no.208/88-Cus read with exemption notification no.159/88-Cus. The customs authorities, however, declined to clear the goods on payment of concessional duty on the ground that the exemption notification no.208/88-Cus was superseded by notification no.59/89-Cus dated 1st March 1989 and that the notification no.159/88-Cus was also rescinded by customs notification no.177/89-Cus dated 1st March 1989. The petitioner has therefore filed the present petition for a direction to the customs authorities to clear the goods granting benefit to the petitioner of the exemption notification nos.208/88-Cus and 159/88-Cus. 3. Learned counsel for the petitioner submitted that relying upon the representation made by the Central Government in the shape of exemption notifications as above, the petitioner placed orders for importation of the DG sets which attracted concessional rate of customs duty. Clause (2) of the notification no.208/88-Cus dated 29th June 1988 specifically stated that the notification would be valid up to and inclusive of 31st March 1989. The Government was therefore not entitled to withdraw the customs notification before 31st March 1989. 4 Counsel submitted that the doctrine of promissory estoppel applies even in respect of the statutory notifications and therefore the Government was bound by the representation contained in the said notifications on the principle of promissory estoppel. The petitioner had a legitimate expectation that it would be allowed to import the DG sets on the basis of a concessional rate of duty and therefore the respondents were not entitled to withdraw the exemption notifications. In support of his submission, counsel referred to the three decisions of the Supreme Court rendered in (i) Shrijee Sales Corporation v. Union of India, 1997 (89) ELT 452 (SC), (ii) Dai-ichi Karkaria Ltd. v. Union of India, 2000 (119) ELT 516 (SC), and (iii) MRF Ltd. v. Assistant Commissioner (Assessment) Sales Tax, 2006 (206) ELT 6 (SC). 4. In the light of the decision of the Supreme Court in Dai-ichi Karkaria Ltd. v. Union of India (supra), the respondents were directed to file affidavit justifying its stand. Accordingly, Mr. Sanjay Sreenath, Deputy Commissioner of Customs has filed a further affidavit in reply dated 20th August 2002. No rejoinder has been filed by the petitioner. We have perused the petition, the first affidavit filed by the respondents as also the additional affidavit filed by Mr. Sanjay Sreenath. However, before we turn to the averments made in the petition and the affidavit 5 in reply, it would be appropriate to refer to the decisions relied upon by the petitioner. 5. In Shrijee Sales Corporation (supra), the facts were that a notification no.66-Cus was issued by the Government on 15th March 1979 granting exemption in respect of import of PVC resins falling under chapter 39 of the First Schedule to the Customs Tariff Act, 1975 from the duty of customs leviable thereon. On the faith of the said notification, the petitioner therein imported the goods which arrived in the Port of Bombay on 8th November 1980. However, before the arrival of the goods in the Port of Bombay, the notification no.66-Cus by notification no. 205-Cus was withdrawn by notification no.205/T-No. 355/141/80 with effect from 16th October 1980. The petitioner therein contended that the Government would be estopped from rescinding the benefit of notification no.66-Cus. The High Court rejected the contention of the petitioner on the ground that imposition of taxes and withdrawal thereof was a legislative function and there could be no estoppel against the Government and the withdrawal of the notification was not hit by the principle of estoppel. Reversing the decision of the High Court, the Supreme Court held that the principle of promissory estoppel is applicable even against the Government but in case where there is a supervening public equity, the Government can be allowed to 6 change its stand, it would then be able to withdraw the 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. Referring to its earlier decision in Motilal Padampat Sugar Mills Co. (P) Ltd. v. State of Uttar Pradesh, (1979 2 SCR 641, the Supreme court said that the determination of applicability of promissory estoppel against public authority/Government hinges upon balance of equity or public interest and that it is for the Court to determine whether the Government should be held exempt from the liability of the “promise” or “representation”. 6. In Dai-ichi Karkaria Ltd. v. Union of India (supra), the facts were that by notification no.210/82-Cus dated 10th September 1982, the Government of India exempted from payment of customs duty and additional duty of customs on all raw materials and components imported for manufacture of goods to be supplied to various organisations such as I.D.A. and I.B.R.D. The notification stated that it would remain in force till Separate 1987. By notification no.513/86- Cus dated 30th December 1986, the Government exempted raw materials and components required for the manufacture of goods to be 7 supplied to O.N.G.C. or G.A.I.L. from so much of the duty of customs leviable thereon which was specified in First Schedule to the Customs Tariff Act, 1975 as was in excess of the amount calculated at the rate of 25% ad valorem and whole of the additional duty subject to certain conditions. By another notification no.517/86-Cus dated 30th December 1986, it was notified that notification no.210/81-Cus dated 10th September 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 therein who was manufacturer and supplier of certain goods to O.N.G.C. became liable to pay duty to the extent of 25% for the period between 30th December 1986 and 10th September 1987. The appellant filed a petition before the High Court contending therein that it had taken importation of the material on the basis that no duty was leviable or payable on the imported material and withdrawal and therefore the Government was bound by the doctrine of promissory estoppel. The High Court held that notification no.210/82-Cus had been issued in public interest and modified again in public interest and therefore dismissed the petition. Referring to its earlier decision in Indian Express Newspapers (Bombay) Pvt. Ltd. v. Union of India, 1985 (2) SCR 237 = 1999 (110) ELT 3 (SC), the Supreme Court observed that the power to grant exemption under 8 section 25 of the Customs Act is a legislative power and the 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; and (iii) that it is unreasonable in the sense that it is manifestly arbitrary. The Supreme Court held that though the Government was competent to withdraw the earlier notification in public interest, it had not proved that the notification was withdrawn in public interest and therefore allowed the appeal. 7. In MRF Ltd. v. Assistant Commissioner (Assessment) Sales Tax (supra), the Supreme Court has made an exhaustive review of its earlier decisions. It noted its earlier decision in Shri Bakul Oil Industries v. State of Gujarat, AIR 1987 SC 142, wherein it was held that the exemption granted by the Government is only by way of a 9 concession for encouraging entrepreneurs to start industries in rural and undeveloped areas and as such it was always open to the State Government to withdraw or revoke the concession. However, the power of revocation or withdrawal would be subject to one exception, viz. power cannot be exercised in violation of rule of promissory estoppel. It also noted its earlier decision in Pawan Alloys and Casting Pvt. Ltd. v. U.P. Electricity Board, 1997 (7) SCC 251, wherein it was held that it is settled principle that State authorities as well as its limbs like the Board covered by the sweep of Article 12 of the Constitution of India which are “State” can be made subject to equitable doctrine of promissory estoppel in cases where because of their representation the party claiming estoppel has changed its position and if such an estoppel does not fly in the face of any statutory prohibition, absence of power and authority of the promissor and is not otherwise opposed to public interest and also when equity in favour of the promisee does not outweigh equity in favour of the promisor entitling the latter to legally get out of the promise. The Court also referred to its decision in Dai- ichi Karkaria Ltd. v. Union of India (supra), wherein it was held that withdrawal of a notification must not be arbitrary or unreasonable. The Court also referred to its earlier decision in Bannari Amman Sugars Ltd. v. Commercial Tax Officer, 2005 (1) SCC 625, wherein the doctrine 10 of legitimate expectation was explained. 8. These decisions lay down that the doctrine of promissory estoppel is available even against the State and its limbs who are bound by the representations made by it if a subject has altered his position to his/her disadvantage relying on the representations. The State however is entitled to alter or withdraw a notification (and thereby withdraw the representations made in it) if the public interest requires it to do so. The burden of showing overriding public interest would be on the State. 9. Referring to the facts of the present case, it may be noted that the petitioner has not pleaded the doctrine of legitimate expectation at all. However, some pleadings relating to promissory estoppel are found in ground no. (d) of the writ petition. Though the pleadings in that respect are not very satisfactory, perhaps because the law was not so developed when the writ petition was filed in the year 1989, we would assume that the petitioner relied upon the representation made by the Government in the exemption notification for the purpose of importation of DG sets and examine whether the State has made out a case of overriding public interest for premature withdrawal of the notification.. 11 10. In the affidavit in reply filed by Mr. Sanjay Sreenath and in particular paras 6, 7 and 8 thereof, the respondents have explained the public interest involved in withdrawal of the notification. It is stated that during the years 1987-88 due to failure of monsoon there was a drought in many parts of the country and consequently acute shortage of hydel power. The notifications 208/88-Cus and 159/88-Cus granting exemption from customs duty in excess of 35% of the customs duty and auxiliary duty of customs were issued in order to encourage the industrial units to install their own power plants for captive use. Representations were received by the Government from local manufacturers of DG sets that due to the exemption from part of the customs duty and the whole of the auxiliary duty of customs, the imported power plant had become cheaper when compared to those indigenously manufactured. This was affecting the local manufacturers. Department of Public Enterprises had also written to the Government that the concession was adversely affecting the local industries manufacturing similar equipment including BHEL. Keeping in view the public interest of providing adequate incentive/protection to the domestic power generation equipment manufacturers, the notifications were withdrawn/superseded with effect fro 1st March 1989. Protection of domestic industry is certainly in the public interest and the extent of 12 protection is a matter of public policy. The respondents have placed on record the material showing public interest involved which led to the withdrawal of exemption notifications. 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. 10. For these reasons, we are satisfied that there is no merit in the petition which is hereby dismissed. Rule discharged with no order as to costs. (D.G. KARNIK, J.) (FERDINO I. REBELLO, J.)