Sales Corporation & Anr Vs. Union
of India  INSC 1658 (20 December 1996)
Singh, Sujata V. Manohar Ahmadi, Cji.
present appeal impugns the judgment of the High Court of Delhi dated 16.3.1983
which dismissed the writ petition filed by the appellants challenging the
Notification dated 16.10.1980 issued by the Government of India, Ministry of
Finance, Department of Revenue, being Notification No. 205/T-No.355/141/80-Cus
I. (hereinafter referred to as "Notification No.205"). This
Notification was issued in super session of an earlier Notification dated
15.3.1979 being Notification No.66 Cus. dated 15.3.1979 G.S.R. (hereinafter
referred to as "Notification No.66"). By the first Notification
No.66, the Government gave exemption to imports of polyvinyl chloride resins
(PVC) falling within Chapter 39 of the First Schedule to the Customs Tariff
Act, 1975 from the duty of customs leviable thereon specified in the first
schedule. The relevant part of the Notification No.66 is as under:
exercise of the powers conferred by Subsection (1) of Section 25 of the Customs
Act, 1962 (52 of 1962), and in supersession of the Notification of Government
of India in the Ministry of Finance, Department of Revenue, No.145-Customs,
dated the 27th. July, 1980, the Central Government, being satisfied that it is
necessary in the public interest so to do, hereby exempts polyvinyl chloride
resins, falling within Chapter 39 of the First Schedule to the Customs Tariff
Act, 1975 (51 of 1975), when imported into India, from the whole of the duty of
customs leviable thereon which is specified in the said First Schedule.
Notification shall be in force upto and inclusive of the 31st March, 1981." The case of the appellant is
that on the faith of the solemn assurance given by the Government. of India that no duty of customs would be leviable
on the importation of PVC resins upto 31.3.1981, they entered into an
arrangement for the import of PVC resin as an actual user with the U.P.
Corporation, Kanpur and opened Letters of Credit against the foreign suppliers
on 2.10.1980 and the goods arrived at the Bombay Port on 8.11.1980. However,
the impugned Notification withdrawing the exemption from payment of customs
duty was withdrawn on 16.10.1980. The relevant part of impugned Notification is
as under:- "In exercise of the powers conferred by sub section (1) of
Section 25 of the Customs Act, 1962 (52 of 1962) and in supersession of the
Notification of the Government of India in the Ministry of Finance, Department
of Revenue, .66 Customs, dated 15th March, 1979, the Central Government being
satisfied that it is necessary in the public interest so to do, hereby exempts
polyvinyl chloride resins, falling within Chapter 39 of the First Schedule to
the Customs Tariff Act, 1975 (51 of 1975), when imported into India, from so
much of the duty of Customs leviable thereon which is specified in the said
First Schedule as is in excess of forty per cent ad valorem.
Under Secretary to the Govt. of India." The appellants alleged that they
imported the PVC resin on the assurance that there would be no customs duty
imposed upon it and that but for this exemption, they would not have imported
the PVC resin as that would have been uneconomical.
therefore, contend that the Government should be estopped from withdrawing the
benefit of Notification No.66.
impugned judgment of the High Court is quite brief.
relies entirely on a Full Bench decision of the same High Court in the case of
Bombay Conductors And Electricals Ltd.
Another v. Government of India And Others 1986 (23) E.L.T. 87 (Delhi). The primary focus of the judgment
in the case of Bombay Conductors (supra) was that imposition of taxes and
withdrawal thereof are legislative functions and since there can be no estoppel
against the legislature, the withdrawal Notification was not hit by the
principles of estoppel. The impugned judgment, however, does not dispute that
the doctrine of promissory estoppel can be attracted against the State.
However, after an analysis of various previous judgments of this Court on the
question of promissory estoppel against public authorities, the judgment
concludes that the question of promissory estoppel cannot be invoked when the
public interest requires otherwise. The following part of the judgment in
Bombay Conductors can be quoted with profit to identify the reasoning of the
High Court as to why the impugned Notification could not be quashed, be it a
legislative function or an executive one.
In M.P. Sugar Mills it was recognised that where the Government owes a duty to
the public to act differently, promissory estoppel cannot be invoked to prevent
the Government from doing so. The Government cannot be prevented from acting in
the discharge of its duty under the law (AIR 1979 SC 621 at 646).
One thing is clear from the authorities. There is not a single case which has
gone to the length of saying that estoppel can be pleaded even against public
interest. The present is a case essentially of "public interest".
the authorities uniformly hold that against "public interest" the
plea of estoppel will not avail a party. Otherwise the Government will not be
able to assert its power and will be a helpless spectator even if public
interest requires it to act differently. It would amount to surrender by the
Government of its legislative powers which have to be used for the public good.
This is why Section 25 confers a statutory power on the Central Government to
act in public interest and to grant exemption or rescind it.
cannot be invoked where the result will be to compel the Government to continue
the exemption which a competent enactment has validly authorised the executive
to withdraw in the public interest at any time. In public interest exemption
can be granted. In public interest exemption can be rescinded. In other words,
the rights of individuals are subordinated to take paramount interest of the
public good. Section 25 underlines the importance of the common good.
interest" dominates the economic scene. If in public interest the Central
Government finds that it is necessary to protect its own industry by putting up
a tariff wall it will be futile to say that it cannot do so because it is bound
by its promise to continue the exemption up to a particular time. The traders
may feel incensed at the behaviour of the executive at its imposition,
exemption, reimposition and re- exemption of taxes and levies. But when to
exempt and when to impose duty is left to the executive by the legislature. It
will depend on the economic climate. New times require new measures. In a world
of growing inter-dependence the first thing every country wants is protection
for its domestic industry.
Governed by the market forces and the laws of supply and demand, if the
Government finds that it must withdraw the exemption notification at once it
can do so.
actuated the Government to take the step of exemption and reimposition was
enlightened self- interest, such self-interest as would subserve the common
good. The imposition and exemption of customs duty are the chief vehicles of
the Government to protect a domestic market and to steady the level of prices.
The tariffs are its chosen instruments to shield domestic production from
foreign competition." The same impugned Notification No.205 came to be
challenged in another set of appeals decided by this Court in Kasinka Trading
& Anr. etc. v. Union of India & Anr. JT 1994 (7)
S.C. 362. The Notification was upheld by a Division Bench of this Court
comprising of M.N. Venkatachaliah, CJI and A.S. Anand, J. It is, however,
contended before us that the judgment in Kasinka Trading is not correct.
not necessary for us to go into a historical analysis of the case law relating
to promissory estoppel against the Government. Suffice it to say that the
principle of promissory estoppel is applicable against the Government but in
case there is a supervening public equity, the Government would be allowed to
change its stand; it would then be able to withdraw from 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.
the Court must satisfy itself that such a public interest exists. The law on
this aspect has been emphatically laid down in the case of M/s. Motilal Padampat
Sugar Mills Co. (P.) Ltd. v. State of Uttar Pradesh & Others  2 S.C.R. 641. The portion relevant for
our purpose is extracted below :- "It is only if the Court is satisfied,
on proper and adequate material placed by the Government, the overriding public
interest requires that the Government should not be 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
rigorous 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 promise a reasonable opportunity of
resuming his position" provided of course it is possible for the promisee
to restore status quo ante. If however, the promisee cannot resume his
position, the promise would become final and irrevocable. Vide Emmanuel Ayodeji
Ajayi v. Briscoe,  3 All. E.R. 556." Two propositions follow from
the above analysis :
The determination of applicability of promissory estoppel against public
authority/Government hinges upon balance of equity or 'public interest'.
is the Court which has to determine whether the Government should be held
exempt from the liability of the "promise" or
present case, the first Notification exempting the customs duty on PVC itself
recites "....Central Government being satisfied that it is necessary in
public interest to do so....". In the Notification issued later which gave
rise to the present cause of action, the same recitation is present.
the Court has actually gone into this aspect. In para 19, the Court says :
resins, it is not disputed, is manufactured in India and is also imported from abroad. In the counter to the
Writ Petition filed by the Union of India in the High Court, the justification
for the issuance of the exemption Notification No.66/79 in the "public
interest" was spelt out by the respondents. It was stated that it was with
a view to equalising sale prices of the indigenous and the imported material
and to make the commodity available to the consumer at a uniform price, keeping
in view the trends in the supply of the material, that the Cabinet had decided
to issue the exemption Notification No.66 of 1979 under Section 25(1) of the
Act. Subsequently, when it was found and realised that the international prices
of the product were falling and consequently the import prices had become lower
than the exfactory prices of the indigenous material, the material was examined
by the Government of India and it was decided in "public interest" to
withdraw the exemption Notification. Thus, the Union of India has disclosed the
circumstances under which the exemption was initially granted as well as the
change of circumstances which warranted the withdrawal of the exemption
notification. The reasons given by the Union of India justifying withdrawal of
the exemption notification, in our opinion, are not irrelevant to the exercise
of the power in 'public interest', nor are the same shown to be insufficient to
support the exercise of that power. From the material on the record it is
apparent that the exemption Notification issued under Section 25(1) of the Act,
in "public interest", was designed to off set the excess price which
the local entrepreneurs were required to pay for importing PVC resin at a time
when the difference between the indigenous product and the imported product was
substantial. No importer could be expected to import PVC resins after paying
duty and incur losses. The exemption Notification, was therefore, issued with a
view to set off those losses to the extent possible. The Notification was not
issued as a potential source of extra profit for the importer. Again, at the
time when the Notification was withdrawn by the Government there was no scope
for any loss to be suffered by the importers as was clearly saved in the
counter filed by the Union of India and which contention has remained unrebutted.
the counter filed by the Union of India in the High Court it is abundantly
clear that the necessity for the continuation of the exemption, in view of the
changed circumstances, was no longer necessary." It can be seen that the
High Court in the case of Bombay Conductors had also noticed a similar public
interest in withdrawing the Notification of exemption. The appellants in the
present case have not disclosed any facts which could show the existence of
better equity in their favour. All that they have alleged is that they would
not have imported the PVC resin without the exemption as that would have been
imported the PVC resin without the exemption as that would have been
"unviable" & "uneconomical" and further that many
persons took full advantage of the exemption; moreover, the exemption accorded
preferential treatment to some persons, but not to the appellants. The facts of
the economic situation explained in the judgment of Kasinka have not been controverted.
Nor is it alleged by the appellants that public interest did not call for supersession
of the Notification, No.66.
next question is whether the fact that the Notification No.66 mentioned the
period during which it was to remain in force, would make any difference to the
situation. In other words, could it be said that an exemption notified without
specifying the period within which the exemption would remain in force, would
be withdrawn in public interest but not the one in which a period has been so
specified? Once public interest is accepted as the superior equity which can
override individual equity, the principle should be applicable even in cases
where a period has been indicated. The Government is competent to resile from a
promise even if there is no manifest public interest involved, provided, of
course, no one is put in any adverse situation which cannot be rectified. To
adopt the line of reasoning in Emmanuel Ayodeji Ajayi v. Briscoe (1964) 3 All.E.R,
556 quoted in M.P. Sugar Mills (supra) even where there is no such overriding
public interest, it may still be within the competence of 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 the status quo ante. If,
however, the promisee cannot resume his position, the promise would become
final and irrevocable.
in the present case, there is a supervening public interest and hence it should
not be mandatory for the Government to give a notice before withdrawing the
opinion, the judgment in Kasinka Trading is based on a correct analysis of
facts and law. We see no reason to differ from the judgment. The present appeal
is accordingly dismissed. Parties shall bear their own costs.