of Punjab Vs. M/S Nestle India Ltd. & Anr
 Insc 370 (5 May
Pal & P.Venkatarama Reddi.
Civil Appeal Nos.5826/98, 6451/98 and 6450/98 RUMA PAL, J.
the respondents before us have factories in the State of Punjab where they produce various milk
products. For the purpose of their business, they purchase milk from villages,
each respondent from a particular "milk shed area" which covers
several hundred villages in and around such respondent's factory. As registered
dealers under the Punjab General Sales Tax Act, 1948, the respondents had been
and are at present paying purchase tax on milk in terms o f Section 4(B) of the
State Act. However, for one year i.e. for the period 1.4.96 to 4.6.97, none of
the respondents paid the purchase tax. They did not do so because they say that
the Government had decided to abolish purchase tax on milk for the period in
question and was estopped from contending to the contrary.
basis that the State had wrongly raised demands for purchase tax on milk on the
respondents for the period 1996-97, the respondents filed separate writ
petitions before the High Court. The High Court allowed the writ petitions and
quashed the demands raised. Aggrieved by the decision of the High Court, these
appeals have been preferred by the State Government.
circumstances under which the respondents had approached the Court
chronologically commenced with an announcement made by the then Chief Minister
of Punjab on 26th February 1996 while addressing dairy farmers at a state level
function, that the State Government had abolished purchase tax on milk and milk
products in the State. This announcement was given wide publicity in several
newspapers in the State.
second circumstance was the speech given by the Finance Minister of the State
while presenting the budget for the year 1996-97. Like all other budget
speeches, it consisted of a review of achievements and a delineation of future
economic measures proposed to be taken for the development of the State. It was
a package of measures, special relief was given to the farming community which
is the backbone of the State's economy .... Furthermore, last month the Chief
Minister has abolished the purchase tax on milk.
this would reduce the inflow of tax revenue to the extent of Rs.6.93 crores, it
will assist the milk producers, and also the milk co-operatives." The
budget speech also noted that despite the fact that the State Government had
given a large number of tax concessions during the year which reduced the
inflow of revenue, the collections under the sales tax, excise and other taxes
had increased by about 100 crores for the current year.
next circumstance was a memo of the Financial Commissioner dated 26.4.96
addressed to the Excise and Taxation Commissioner, the relevant extract of
which reads as follows:
to the announcements made by the Finance Minister, Punjab, on the floor of the
House and the announcement made by the Chief Minister, Punjab on 26.2.1996,
while addressing a public function organised by the Milk-fed in connection with
Milk Day at Milk Plant, Ludhiana relating to exemption of purchase tax on milk,
it has been decided in principle, to abolish the purchase tax on Milk w.e.f.
are requested to send proposal along with the financial implication involved
basis of the above decision, you are also requested to issue necessary
instructions to the field officers." In response to this memo, a circular
dated 26th April 1996 was issued by the Excise and
Taxation Commissioner, Punjab to all the Deputy and Assistant
Excise and Taxation Commissioners and the Deputy Directors (Enforcement) in the
State. The circular requires quotation:
Government have decided to abolish purchase tax on milk and to exempt dhoop- agerbati,
kumkun, kirpan, pens and ball-pens from the levy of sales tax. It has also
decided to reduce rate of tax on stainless steel utensils from 10% to 4% on
tractor parts from 8% to 2% and on bullion from 2% to 0.5% all these
exceptions/reductions will be effective from 1.4.1996.
implement these decisions, necessary notifications are under process and likely
to be issued shortly
This position may be brought to the notice of all the officers/officials for
information and necessary action.
receipt of this communication may please be acknowledged".
averred in the writ petitions and not disputed by the appellants that the
representatives of the respondents companies were informed about the
instructions contained in the above circular dated 18th May 1996 by the concerned officials of the Department. The fact of
exempting milk and milk products from purchase tax was also recorded in a
letter written by the Excise and Taxation Commissioner to the Financial
Commissioner in which it is also said that in compliance with the directions of
the Government, instructions had been circulated to the field officers to
charge the tax as per the decision of the Government. The issuance of the
necessary notification to implement the decision of the Government was urged,
to avoid any "legal complications or audit objection". That such
instruction has been issued is also recorded in a series of letters between the
Financial Commissioners which are not referred to in detail here.
On 27th June 1996, a meeting was held under the
chairmanship of the Chief Minister which was attended by the Finance Minister,
the Excise and Taxation Minister and various Financial Commissioners. At the
meeting, the decision to abolish purchase tax on milk was reiterated and it was
decided to issue a formal notification "in a day or two".
18th July 1996/24th July 1996 the Finance Minister made an announcement that
with a view to encourage milk producers and for granting relief to the common
people, traders and industrialists, the Government had abolished tax on milk.
Finance Department formally approved the proposal of the Administrative
Department to abolish purchase tax on milk and the Council of Ministers gave its
formal approval to the decision at its meeting on 21st August 1996.
it appears that the Chief Minister, the Council of Ministers and the Finance
Department had all decided to abolish purchase tax on milk w.e.f. 1st April 1996 and the Sales Tax Authorities have
taken the consequential action by issuing circulars. Consequently, the
respondents-milk producers did not pay the purchase tax along with their
returns for the year 1996-97 as required under the Rules framed under the Act.
with each return, it was expressly stated that "purchase tax on milk is
not being deposited from 1.4.96 due to various Press
statements/letters/circulars issued by Department and the issue has been
discussed with the Excise and Taxation Commissioner, Patiala and Assistant
Commissioner, Moga wherein we were informed that sales tax return will be
accepted on the basis of tax exemption on ground of purchase of milk".
returns were not rejected by the tax authorities.
to the respondents, the benefit which arose from the exemption of purchase tax
was passed on by them to the farmers and milk producers. Details of this
expenditure have been mentioned in the writ petitions filed.
of the facts which we have narrated earlier have been denied by the respondents.
In fact even after the end of the financial year 1996-97, the Government
published advertisements claiming credit for having abolished purchase tax on
the first time, on 4th
June 1997, the Council
of Ministers held a meeting to consider various items on the agenda. One of the
items related to the abolishing of purchase tax on milk. The minutes
cryptically record that the decision to abolish purchase tax on milk was not
accepted. Consequently on 3rd July 1977
the Excise and Taxation Officer issued notices to the respondents requiring
them to pay the amount of purchase tax for the whole of the year 1996-97.
this background, the High Court held that the State Government was bound by its
promise/representation made to the respondents to abolish purchase tax. According
to the High Court, "the absence of a formal notification was no more than
a ministerial act" which remained to be performed. The respondents had
acted on the representation made and could not be asked to pay the purchase tax
w.e.f. 1.4.96 but would be liable after the decision of the Government for the
subsequent period i.e. from 4.6.97.
appellants have not seriously questioned the fact that the Government had by a
series of actions on its part, in effect, made representations regarding the
non-levy of purchase tax w.e.f. 1.4.1996 nor is it denied that the respondents
had acted on the representations so made. The only question raised by the
appellant is that the principle of promissory estoppel would not arise when the
relevant statute prescribes a particular mode for the grant of relief in
respect of which the representation has been made. The relevant statute is the
Punjab General Sales Tax Act, 1948. It is said by the appellants that there can
be no estoppel against the statute and since no notification had been issued as
required by the statute, the respondents could not refuse to pay the tax on any
principle of promissory estoppel.
to the appellants the decision not to abolish purchase tax on milk was taken in
the public interest.
Punjab General Sales Tax Act, 1948 (hereafter referred to as 'the Act')
provides for the levy of tax on the sale and purchase of certain goods in the
State of Punjab. Rules have been framed under
Section 27 of the Act known as the Punjab General Sales Tax Rules, 1949
(referred to as "the Rules"). We are concerned with the purchase tax
which is payable under Section 4 read with Section 2(ff) on the acquisition of
goods mentioned in Schedule 'C' to the Act, milk when purchased for use in the
manufacture of goods (other than tax free goods) for sale is one of the items
in Schedule 'C'. The Excise and Taxation Commissioner (who has featured in the
various statements and correspondence referred to earlier) is appointed under
Section 3(1) as the Taxing Authority.
Excise and Taxation Commissioner has overall superintendence and control over
the administration and the collection of tax leviable under the Act as well as
control on all officers empowered under the Act(Rule 69). The incidence of
taxation has been provided for under Section 4 of the Act under which every
dealer dealing in goods not declared tax free under Section 6 and whose gross
turnover exceeds the taxable quantum is liable to pay tax on the sales effected
or the purchases made. Certain goods have been made tax free under Section 6(1)
read with Schedule 'B' to the Act. Section 6(2) at the material time provided
that the State Government "after giving by notification not less than
twenty days notice of its intention so to do may by like notification add to or
delete from Schedule B and thereupon Schedule B shall be deemed to be amended
respondents are admittedly dealers within the meaning of the definition of the
word under Section 2(d) of the Act. Every dealer is required to pay tax in the
manner prescribed under Section 10 which requires furnishing of
returns/declarations by the dealer together with the receipt showing that the
full amount of tax due from the dealer under the Act according to such returns
had been paid in the prescribed manner. If there is failure to pay the tax in
the manner prescribed, the dealer may be liable to pay penalty of a sum upto
one and a half times of the tax payable under sub- section (6) of Section 10.
The substance of section 10 has been detailed in Rules 20 to 25 of the Rules.
Rule 20 provides for the furnishing of returns either quarterly or monthly.
24 provides for the form in which such returns are to be filed. Rule 25
provides that all returns which are required to be furnished under the Rules
"shall be signed by the registered dealer or the agent, and shall be sent
to the appropriate assessing authority together with the treasury or bank
receipt in proof of payment of the tax due". The Assessing Authority then
passes an order of assessment on such return under Section 11 unless he is
satisfied that the returns are not correct and complete.
from the power to treat goods otherwise leviable to tax under the Act as tax
free under Section 6(2), the State Government has the power under Section 31 to
amend Schedule ''C' itself and thereby remove goods from imposition of tax
altogether. It provides:
State Government after giving by notification not less than twenty days notice
of its intention so to do, may by notification add to, or delete from, schedule
C any goods, and thereupon Schedule C shall be deemed to be amended
accordingly." (emphasis added) In addition, the State Government has the
power to exempt the payment of tax under Section 30 which reads:
to exempt (1) The State Government, if satisfied that it is necessary or
expedient so to do in the interest of cottage industries, may by notification
exempt any class of co- operative societies, or persons from the payment of tax
under this Act on the purchase or sale of any goods subject to such conditions
as may be specified in such notification.
*********** (3) Every notification made under sub-section (1) shall as soon as
may be after it is made, be laid before the State Legislature." (emphasis
added) Section 30-A also gives the State Government the power to exempt certain
industries from payment of tax. It provides:
State Government may, if satisfied that it is necessary or expedient so to do
in the interest of industrial development of the State, exempt such class of
industries from the payment of tax, for such period and subject to such
conditions, as may be prescribed..
The authority of the State Government to exempt in exercise of the powers
conferred on it by statute has not been disputed before us.
pleas raised by the parties for and against the operation of the doctrine of
promissory estoppel are to be considered against the background of these
first a recapitulation of the law on the subject of promissory estoppel. The
foundation of the doctrine was laid in the decision of Chandrasekhar Aiyar, J.
in Collector of Bombay V. Municipal Corporation of the City of Bombay (1952 SCR
42). There, in 1865, the Government of Bombay had passed a resolution authorising
the grant of an area to the municipality rent free for the purpose of setting
up a market.
possession of the site was made over to the then Municipal Commissioner no
formal grant was in fact executed as required by the applicable statute. Acting
on the resolution, the Corporation spent considerable sums of money in building
and improving the market and was in possession for 70 years during which period
no revenue had been paid to or claimed by the Government. At this stage, a
demand was sought to be raised on account of rent under the Bombay City Land
Revenue Act, 1876. The Corporation impugned the demand by filing a suit. The
suit was dismissed. An appeal was preferred before the High Court. The High
Court reversed the decision of the Trial Court and held that the Corporation
was entitled to hold the land for ever without payment of any rent and the
Government had no right to assess the premises.
Collector preferred an appeal before this Court. There was no dispute that by
reason of non-compliance with the statutory formalities, the Government
resolution of 1865 was not a factual grant passing title in the land to the
Corporation. There was also no dispute that there was no enforceable contract
between the State Government and the Municipal Corporation.
three Judges, Das, J. held that the possession of the Corporation not being referrable
to any legal title was adverse to the legal title of the Government and the
right acquired by the Corporation to hold the land in perpetuity included an
immunity from payment of rent. Patanjali Sastry, J differed.
Aiyar, J., concurred with the conclusion of Das, J but based his reasoning on
the fact that by the resolution, representations had been made to the
Corporation by the Government and the accident that the grant was invalid did
not wipe out the existence of the representation nor the fact that it was acted
upon by the Corporation. What has since been recognised as a signal exposition
of the principle of promissory estoppel, Chandrasekhara Aiyar, J. said:
invalidity of the grant does not lead to the obliteration of the
the Government be now allowed to go back on the representation, and if we do
so, would it not amount to our countenancing the perpetration of what can be
compendiously described as legal fraud which a court of equity must prevent
being committed. If the resolution can be read as meaning that the grant was of
rent-free land, the case would come strictly within the doctrine of estoppel
enunciated in section 115 of the Indian Evidence Act. But even otherwise, that
is if there was merely the holding out of a promise that no rent will be
charged in the future, the Government must be deemed in the circumstances of
this case to have bound themselves to fulfil it.. Courts must do justice by the
promotion of honesty and good faith, as far as it lies in their power".
other words, promissory estoppel long recognised as a legitimate defence in
equity was held to found a cause of action against the Government, even when,
and this needs to be emphasised, the representation sought to be enforced was
legally invalid in the sense that it was made in a manner which was not in
conformity with the procedure prescribed by statute.
principle was built upon in M/s Union of India & Ors. V. M/s Indo-Afghan
Agencies Ltd. (1968 (2) SCR 366) where it was said (at p. 385):
our jurisprudence the Government is not exempt from liability to carry out the
representation made by it as to its future conduct and it cannot on some
undefined and undisclosed ground of necessity or expediency fail to carry out
the promise solemnly made by it, nor claim to be the judge of its own
obligation to the citizen on an ex parte appraisement of the circumstances in
which the obligation has arisen:.
the superstructure of the doctrine with its pre- conditions, strengths and
limitations has been outlined in the decision of M/s Motilal Padampat Sugar
Mills Co. Ltd. V. State of Uttar Pradesh and Others 1979 (2) SCC 409. Briefly
stated the case related to a representation made by the State Government that
the petitioners factory would be exempted from payment of sales tax for a
period of three years from the date of commencement of production. It was
proved that the petitioners had, as a consequence of the representation, set up
the factory in the State. But the State Government refused to honour its
representation. It claimed sales tax for the period it had said that it would
not. When the petitioners went to Court, the State Government took the pleas :
the absence of notification under Section 4-A, the State Government could not
be prevented from enforcing the liability to Sales Tax imposed on the petitioners
under the provisions of the Sales Tax Act;
That the petitioners had waived its right to claim exemption and;
That there could be no promissory estoppel against the State Government so as
to inhibit it from formulating and implementing its policies in public
Court rejected all the three pleas of the Government. It reiterated the
well-known preconditions for the operation of the doctrine.
clear and unequivocal promise knowing and intending that it would be acted upon
by the promisee;
acting upon the promise by the promisee so that it would be inequitable to
allow the promisor to go back on the promise.
its strengths it was said: that the doctrine was not limited only to cases
where there was some contractual relationship or other pre-existing legal
relationship between the parties. The principle would be applied even when the
promise is intended to create legal relations or affect a legal relationship
which would arise in future.
Government was held to be equally susceptible to the operation of the doctrine
in whatever area or field the promise is made, contractual, administrative or
statutory. To put it in the words of the Court:
law may, therefore, now be taken to be settled as a result of this decision,
that where the Government makes a promise knowing or intending that it would be
acted on by the promisee and, in fact, the promisee, acting in reliance on it,
alters his position, the Government would be held bound by the promise and the
promise would be enforceable against the Government at the instance of the promisee,
notwithstanding that there is no consideration for the promise and the promise
is not recorded in the form of a formal contract as required by Article 299 of
the Constitution. (p.442).
Equity will, in a given case where justice and fairness demand, prevent a
person from insisting on strict legal rights, even where they arise, not under
any contract, but on his own title deeds or under statute.(p.424) Whatever be
the nature of the function which the Government is discharging, the Government
is subject to the rule of promissory estoppel and if the essential ingredients
of this rule are satisfied, the Government can be compelled to carry out the
promise made by it. " (p. 453) (emphasis added) So much for the strengths.
Then come the limitations. These are:
the doctrine of promissory estoppel is an equitable doctrine, it must yield
when the equity so requires. But it is only if the Court is satisfied, on
proper and adequate material placed by the Government, that 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.( p.443)
representation can be enforced which is prohibited by law in the sense that the
person or authority making the representation or promise must have the power to
carry out the promise. If the power is there, then subject to the preconditions
and limitations noted earlier, it must be exercised. Thus, if the statute does
not contain a provision enabling the Government to grant exemption, it would
not be possible to enforce the representation against the Government, because
the Government cannot be compelled to act contrary to the statute. But if the
statute confers power on the Government to grant the exemption, the Government
can legitimately be held bound by its promise to exempt the promisee from
payment of sales tax. (p.387-388) The remaining decisions are illustrative of
various aspects of the framework set up by the Court in the decision in M.P.
Sugar Mills. For example Century Spinning & Manufacturing Company Ltd.
& Anr. v. The Ulhasnagar Municipal Council & Anr.  3 SCR 854 emphasised
the strengths defined earlier:
the representation is acted upon by another person it may, unless the statute
governing the person making the representation provides otherwise, result in an
agreement enforceable at law ; if the statute requires that the agreement shall
be in a certain form, no contract may result from the representation and acting
thereupon but the law is not powerless to raise in appropriate cases an equity
against him to compel performance of the obligation arising out of his
representation". (p.859) An apparently aberrant note was struck in Jit Ram
Shiv Kumar & Ors. etc. v. State of Haryana and Anr. etc.( 1980(3) SCR 689
where despite all the factors of promissory estoppel being established, the
plea of estoppel is not available against the State in the exercise of its
legislative or statutory functions". (P.699) Of course, it was also found
that the representator had no authority to make the representation it had. To
that extent the decision could not be said to have deviated from the earlier
pronouncements of the law.
discordant note struck by Jitram's case was firmly disapproved by a bench of
three Judges in Union of India & Ors. v. Godfrey Philips India Ltd.etc.etc. (1985) 4 SCC 369. It
was affirmed that:
There can therefore be no doubt that the doctrine of promissory estoppel is
applicable against the Government in the exercise of its governmental, public
or executive functions and the doctrine of executive necessity or freedom of
future executive action cannot be invoked to defeat the applicability of the
doctrine of promissory estoppel". (p.387) It was held that irrespective of
the nature of power wielded the Government is bound to wield that power
provided it possessed such power and has promised to do so knowing and
intending that the promisee would act on such promise and the promisee has done
think that the Central Government had power under Rule 8 sub-rule (1) of the
Rules to issue a notification excluding the cost of corrugated fibreboard
containers from the value of the cigarettes and thereby exempting the
cigarettes from the part of the excise duty which would be attributable to the
cost of corrugated fibreboard containers. So also the Central Board of Excise
and Customs had power under Rule 8 sub-rule (2) to make a special order in the
case of each of respondents granting the same exemption, because it could
legitimately be said that, having regard to the representation made by the
Cigarette Manufactures' Association, there were circumstances of an exceptional
nature which required the exercise of the power under sub-rule (2) of Rule 8.
The Central Government and the Central Board of Excise and Customs were
therefore clearly bound by promissory estoppel to exclude the cost of corrugated
fibreboard containers from the value of the goods for the purpose of assessment
of excise duty for the period May 24, 1976 to November 2, 1982". (p.389)
(emphasis added) The limitations to the doctrine delineated in M.P. Sugar Mills
(supra), however, were also reaffirmed when it was said:
that there can be no promissory estoppel against the Legislature in the
exercise of its legislative functions nor can the Government or public
authority be debarred by promissory estoppel from enforcing a statutory
prohibition. It is equally true that promissory estoppel cannot be used to
compel the Government or a public authority to carry out a representation or
promise which is contrary to law or which was outside the authority or power of
the officer of the Government or of the public authority to make. We may also
point out that the doctrine of promissory estoppel being an equitable doctrine,
it must yield when the equity so requires; if it can be shown by the Government
or public authority that having regard to the facts as they have transpired, it
would be inequitable to hold the Government or public authority to the promise
or representation made by it, the Court would not raise an equity in favour of
the person to whom the promise or representation is made and enforce the
promise or representation against the Government or public authority".
(pp.387-388) In all these decisions, Chandrasekhar Aiyar, J.'s judgment was
quoted with approval. In the case before us, the State Government had the power
to exempt or abolish milk as a taxable commodity. There was nothing in law
which prohibited it from doing so. The representation to exempt milk was made
by persons who had the power to implement the representation. Can it not be
said that there are such circumstances in this case which required the State
Government to exercise its powers to exempt milk from the burden of purchase
tax, a power which it undoubtedly had? Before we determine the answer to this
question, we may consider the remaining decisions cited to determine whether
the principles relating to promissory estoppel as culled out from these earlier
cases still hold the field.
decision in Bakul Cashew Co. V. Sales Tax Officer, Quilon Q1986 (2) SCC 365 was
a case dealing with the preconditions on the fulfilment of which a plea of
promissory estoppel can be raised viz., that the representation must not only
be definite but must be satisfactorily established. The alteration of the
petitioner's position acting upon such representation must also be pleaded with
particularity and sufficiently supported with material. The Court found that it
had not been established that any prejudice had been suffered by the
petitioner. As we have noted earlier, each of the respondents in these appeals
has given a detailed account of how the monies which were otherwise payable on
account of purchase tax have been expended on the milk shed areas and producers
of milk. No dispute has been raised by the appellants to this.
doctrine of promissory estoppel has also been extended to service law. In Surya
Narain Yadav and Others V. Bihar State Electricity Board 1985 (3) SCC 38, It
was found as a fact that the Bihar State Electricity Board had made
representations that graduates who would be taken as training engineers would
be regularised against appropriate posts and the submission that such
appointments would be contrary to statutory rules of the Board was brushed
aside and the Court directed the Board, following Chandrasekhara Aiyar, J's
opinion in Collector of Bombay V. Municipal Corporation (supra) as well as the
decisions Union of India V. Indo-Afghan Agencies (supra) and Century Spinning
& Manufacturing Co. Ltd. V. Ulhasnagar Municipal Council (supra) and Motilal
Padampat Sugar Mill Co. Ltd. v. State of U.P. (supra), to act in terms of the
representation made. Indeed the principles of promissory estoppel have been
applied time and again by this Court and it is unnecessary to burden our
decision by referring to all the cases except to note that the view expressed
by Chandrasekhara Aiyar, J in 1952 still holds good. [See: State of Madhya Pradesh vs. Orient Paper Mills (1990) 1 SCC
161; Delhi Cloth and General Mills v. Union of India 1998 1
SCR 383; Sharma Transport v. Govt. of A.P. (2002) 2 SCC 188; State of Orissa v. Mangalam Timber Products (2004)
1 SCC 139] The case of Kasinka Trading V. Union of India 1995 (1) SCC 274,
cited by the appellants is an authority for the proposition that the mere
issuance of an exemption notification under a provision in a fiscal statute
such as Section 25 of the Customs Act, 1962, could not create any promissory estoppel
because such an exemption by its very nature is susceptible to being revoked or
modified or subjected to other conditions. In other words there is no
unequivocal representation. The seeds of equivocation are inherent in the power
to grant exemption. Therefore, an exemption notification can be revoked without
falling foul of the principle of promissory estoppel. It would not, in the
circumstances, be necessary for the Government to establish an over-riding
equity in its favour to defeat the petitioner's plea of promissory estoppel.
The Court also held that the Government of India had justified the withdrawal
of exemption notification on relevant reasons in the public interest. Incidentally,
the Court also noticed the lack of established prejudice to the promises when
burden of customs duty etc. is passed on to the consumer and therefore the
question of the appellants being put to a huge loss is not
also Shrijee Sales Corporation v. Union of India 1997 (3) SCC 398 ; Sales Tax
Officer v. Shree Durga Oil Mills 1998 (1) SCC 572] . We do not see the
relevance of this decision to the facts of this case. Here the representations
are clear and unequivocal.
Co. Ltd. V. State of Punjab 1992 (2) SCC 411 is an example of where despite the
petitioner having established the ingredients of promissory estoppel, the
representation could not be enforced against the Government because the Court
found that the Government's assurance was incompetent and illegal and "a
fraud on the Constitution and a breach of faith of the people". This
principle would also not be applicable in these appeals. No one is being asked
to act contrary to the statute. What is being sought is a direction on the
Government to grant the necessary exemption. The grant of exemption cannot be
said to be contrary to the statute. The statute does not debar the grant. It
the view expressed by two Judges in Jitram's case (supra) has been disapproved
in Godfrey Phillips (supra), it was ostensibly resuscitated in ITC Bhadrachalam
Paperboards V. Mandal Revenue Officer, A.P. 1996 (6) SCC 634. In that case the
State Government had the power to remit assessment under section 7 of the
Andhra Pradesh Non-Agricultural Lands Assessment Act, 1963. Section 11 of that
Act provided for exemption to be made by an order of the State Government which
was required to be published in the Andhra Pradesh Gazette prior to which the
order had to be laid on the table of the Legislative Assembly. The Court
construed the provisions of the State Act and came to the conclusion that the
nature of the power under Section 11 did not amount to delegated legislation
but conditional legislation. It was held that "If the statute requires
that a particular act should be done in a particular manner and if it is found,
as we have found hereinbefore, that the act done by the Government is invalid
and ineffective for non-compliance with the mandatory requirements of law, it
would be rather curious if it is held that notwithstanding such non-purpose of
invoking the rule of promissory/equitable estoppel. Accepting such a plea would
amount to nullifying the mandatory requirements of law besides providing a licence
to the Government or other body to act ignoring the binding provisions of law.
Such a course would render the mandatory provisions of the enactment
meaningless and superfluous. Where the field is occupied by an enactment, the
executive has to act in accordance therewith, particularly where the provisions
are mandatory in nature.
is no room for any administrative action or for doing the thing ordained by the
statute otherwise than in accordance therewith.
of course, the matter is not governed by a law made by a competent legislature,
the executive can act in its executive capacity since the executive power of
the State extends to matters with respect to which the legislature of a State
has the power to make laws (Article 162 of the Constitution). The proposition
urged by the learned counsel for the appellant falls foul of our constitutional
scheme and public interest. It would virtually mean that the rule of promissory
estoppel can be pleaded to defeat the provisions of law where the said rule, it
is well settled, is not available against a statutory provision. The sanctity
of law and the sanctity of the mandatory requirement of the law cannot be
allowed to be defeated by resort to rules of estoppel. None of the decisions
cited by the learned counsel say that where an act is done in violation of a
mandatory provision of a statute, such act can still be made a foundation for
invoking the rule of promissory/equitable estoppel.
when the Government acts outside its authority, as in this case, it is
difficult to say that it is acting within its ostensible authority". (p.657-658)
It would appear that these observations are in conflict with the earlier and
subsequent pronouncements of the law on promissory estoppel. Chandrasekhara Aiyar,
J. had held that the representation was enforceable despite the
"accident" that the grant was invalid inasmuch as it was contrary to
Sugar Mills (supra) had said that the promise was enforceable against the
Government despite the requirement of Article 299 of the Constitution.
Similarly, Century Spinning (supra) held that despite the requirement of the
statute prescribing the manner and form to grant exemption from payment of octroi,
a promise not made in that manner or form could be enforced in equity. Then
again in Godfrey Philips (supra), the Court directed an exemption to be granted
on the basis of the principles of promissory estoppel even though Rule 8 of the
Central Excise Rules 1944 required exemption to be granted by notification.
the Government cannot rely on a representation made without complying with the
procedure prescribed by the relevant statute, but a citizen may and can compel
the Government to do so if the factors necessary for founding a plea of
promissory estoppel are established. Such a proposition would not "fall
foul of our constitutional scheme and public interest". On the other hand,
as was observed in Motilal Sugar Mills. case and approved in the subsequent
is indeed the pride of constitutional democracy and rule of law that the
Government stands on the same footing as a private individual so far as the
obligation of the law is concerned : the former is equally bound as the latter.
It is indeed difficult to see on what principle can a Government, committed to
the rule of law, claim immunity from the doctrine of promissory estoppel."
None of these decisions have been considered in ITC Bhadrachalam Paperboards V.
Mandal Revenue Officer (supra) except for a brief reference to Chandrasekhara Aiyar,
J's judgment which was explained away as not being an authority for the
proposition that even where the Government has to and can act only under and in
accordance with a statute an act done by the Government in violation thereof
can be treated as a presentation to found a plea of promissory estoppel. But
that is exactly what the learned Judge had said.
event judicial discipline requires us to follow the decision of the larger
Bench. The facts in the present case are similar to those of prevailing in
Godfrey Philips (supra). There too, as we have noted earlier, the statutory
provisions require exemption to be granted by notification. Nevertheless, the
Court having found that the essential pre-requisites for the operation of
promissory estoppel had been established, directed the issuance of the
appellants have been unable to establish any overriding public interest which
would make it inequitable to enforce the estoppel against the State Government.
The representation was made by the highest authorities including the Finance
Minister in his Budget Speech after considering the financial implications of
the grant of the exemption to milk.
found that the overall benefit to the state's economy and the public would be
greater if the exemption were allowed.
respondents have passed on the benefit of that exemption by providing various
facilities and concessions for the upliftment of the milk producers. This has
not been denied. It would, in the circumstances, be inequitable to allow the
State Government now to resile from its decision to exempt milk and demand the
purchase tax with retrospective effect from 1st April 1996 so that the respondents cannot in
any event re-adjust the expenditure already made. The High Court was also right
when it held that the operation of the estoppel would come to an end with the
1987 decision of the Cabinet.
case before us, the power in the State Government to grant exemption under the
Act is coupled with the word "may" signifying the discretionary
nature of the power. We are of the view that the State Government's refusal to
exercise its discretion to issue the necessary notification
"abolishing" or exempting the tax on milk was not reasonably
exercised for the same reasons that we have upheld the plea of promissory estoppel
raised by the respondents. We, therefore, have no hesitation in affirming the
decision of the High Court and dismissing the appeals without costs.