Case: Dai-Ichi Karkaria Ltd Vs. Union Of India

By Notification No. 210 of 1982 dated September 10, 1982 (as amended by Public Notice dated September 20, 1983) issued under Section 25(i) of the Customs Act the Government of India exempted from payment of customs duty and additional duty of customs on all raw materials and c components imported for the manufacture of goods to be supplied to various organisations such as I.D.A. that is, the International Development Association, International Bank for Reconstruction and Development (I.B.R.D.) or bilateral or multilateral aided projects. The said notification stated that it would be in force till September 10, 1987. By Notification No. 513 of 1986 dated December 30, 1986 issued under Section 25(i) of the Customs Act the Central Government exempted raw materials and components required for the manufacture of the goods to be supplied to the O.N.G.C. or G.A.I.L. from so much of that portion of the duty of customs leviable thereon which is specified in the first Schedule to the Customs Tariff Act, 1975 as is in excess of the amount calculated at the rate of 25% ad valorem and whole of the additional duty leviable thereon under Section 3 of the Customs Tariff Act, 1975 subject to certain conditions. By another Notification No. 516 of 1986 of the same date the Central Government exempted goods imported in connection with off-shore oil exploration or exploitation from the whole of the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty leviable there under Section 3 of the Customs Tariff Act, 1975 subject to certain conditions. By another Notification No. 517 of 1986 dated December 30, 1986 it was notified that Notification No. 210 of 1982 dated September 10, 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 who is manufacturer and supplier of certain goods to O.N.G.C. in connection with oil exploration viz. flow Improver under the trade name "Daitrolite" became liable to pay duty to the extent of 25% for the period between December 30, 1986 and September 10,several contentions had been raised in the High Court in challenging the action of the respondents, in the appeal before us what is urged is only one contention which is asNotification No. 210 of 1982 dated September 10, 1982 and the extended Notification thereto to apply to O.N.G.C. was issued to encourage manufacture of goods indigenously for effecting supplies to essential India enterprises as a part of the scheme which was Project based and the exemption under the said Notification was a part of Project Based exemption scheme. Public interest did not demand the variation during the period the exemption was in force by Notification No. 210 ofthe writ petition before the High Court the contention raised by the appellant is that the fact that many persons, including the petitioners have undertaken importation of materials on the basis that on duty was leviable or payable on the imported material and that there have been no new events nor any supervening circumstances which could form a basis for or justify the withdrawal of the benefit contained in the exemption Notification No. 210 of 1982 as amended in 1983 after being satisfied that public interest required that there should be no duty of customs nor additional duty of customs in respect of raw materials and components imported for supplies therefrom to O.N.G.C. for a fixed and definite period up to September 10, 1987; that the policy of the first respondent is to indigenise production as is the policy of O.N.G.C. to indigenise; that the appellant had secured orders for supply of goods against global tenders where foreign suppliers also participated and in the teeth of International competition the company had been awarded the contracts by O.N.G.C.; that pursuant to the exemption that has been granted the company had invested since 1983 a large amount of money in respect of its plant for manufacture of goods to be supplied to O.N.G.C.; that public interest which prompted the first respondent to issue the exemption notification No. 210 of 1982 remains unaltered and no new supervening circumstances have justified reversal of the said policy and, in fact, such a reversal to encourage foreign manufacturers at the cost of Indian manufacturers is per se contrary to public interest drain on foreignHigh Court took the view that this Court had laid down in Kasinka Trading & Anr. v. Union of India & Anr. , 1995(1) SCC 274, that the power to exempt flows from Section 25 of the Customs Act; that just as the notification issued granting exemption is in public interest, by another notification it can also be modified or withdrawn in public interest, irrespective of whether exemption is project based or specific goods related. The High Court having held that Notification No. 210 of 1982 had been issued in public interest and modified again in public interest, dismissed the petition Hence this appeal.

Court's reasoning:
In the present case, by issuing different set of notifications and granting exemption at different stages and limiting only to the extent of 75% for the period from December 30, 1986 to September 10, 1987 and for the reasons stated earlier in the manner set out in the counter affidavit clearly indicate that the Government has not taken into account all the relevant factors while issuing the impugned notifications reducing the exemption to 25% for the aforesaid period. We may state that the Government had failed to discharge its statutory obligation while issuing the impugned notifications. Justifications offered, to say the least, is far too halve to be accepted. The reasons set out does not carry the case of the State Government further atMs. Nisha Bagchi sought to distinguish the different notifications by stating that different notifications issued subsequently are in respect of different commodities and it is always open to the Government to change its policy. Undoubtedly it is so, but those factors per se would not discharge the burden of the Government in establishing as to what public interest governed the Government in reducing the extent ifhave already held that the Government has failed to discharge that burden. In the result, we have no hesitation in quashing the amended notifications which are applicable for the period from December 30, 1986 to September 10, 1987 reducing the extent of exemption. The notification issued earlier on September 10, 1982 and modified in 1983 shall be effective till September 10, 1987. The appellants should be subject to duty only in accordance with those notifications issued under the Customs Act.