Modi Rubber Ltd. vs Union Of India
1990 Latest Caselaw 42 Del

ORDER

Charanjit Talwar, J.

1. The petitioner company is carrying on the business of manufacturing tyres and tubes for motor vehicles. The case of the petitioner is that till the end of the year 1974, there was an acute shortage of tyres of tyres in India. New investment for setting up a tyre plant was difficult to get as hung investment of about Rs. 30 crores was required for an installed capacity of about 5 lakhs tyres per annum. By the time the petitioner's plant was completed and ready for production in October, 1974, the total investment of the company went up to even over Rs. 30 crores. It averred that during the time the petitioner was setting up its project, it explained the difficulties of new units to the Government of India for considering fiscal measures to be adopted for the tyre industry to enable new units to achieve a reasonable return on their investments and to be able to compete with the existing old established tyre companies.

2. It is claimed that the Government of India, after fully investigating the relevant facts pertaining to the tyre industry found that the cost of investment in putting up a new tyre industry had gone up by four times to that of the old established units and keeping that in view, recommended fiscal relief by way of rebate in Excise Duty.

3. Thus keeping in view the objective of giving incentive to various industries to increase their production as compared to the past production, a composite scheme was evolved by the Government of India. Thus scheme was given affect to It is urged, by promulgating Notification No. 198/76 dated the 16th June 1976 (Annexure `A' to the writ petition). Thus notification was issued in exercise of the conferred by sub rule (1) of rule 8 of the Central Excise Rule, 1944. This scheme was to remain in operation till March 31,1979 and it applied to 43 items given in the Table annexed to the Notification Tyres and falling within the purview of item No. 16 to the first Schedule to the Central Excises and Salt Act, 1944 have been showed in the said Table at SI Nos. 18 and 19.

4. Under this Notification, a manufacturer who cleared goods in excess of base clearance, as provided under the said scheme, was entitled to a rebate of 25% excise duty on such excess clearance.

5. It is the case of the petitioner company that it acted on the said Notification and submitted its declarations to the appropriate department authority from time to time which were accept by the department.

6. The salient features of the incentive scheme as provided in the said Notification were explained by the Government of India, Ministry of Finance, Department of revenue and Banking vide letter No. F.No. 2221/19/75 TRU. On the basis of the is letter, various Collectorate in India issued trade notices highlighting in the said incentive scheme. One such notice issued by the Nagpur Collectorate has been annexed as Annexure `C' to the petition. The opening para of that document shows that the scheme of excise duty relief and been bounced to encourage higher production. the silent features of the scheme, which as we have noticed above, was to remain in force up to 31st March, 1979 were detailed in the said trade notice of 25th June, 1976.

7. the petitioner has averred in paragraphs 19 to 27 of the petitioner that acting on the basis of the aforesaid and with a view to achieving the maximum benefit, in made large investment for increasing production.

8. However, on July, 1978 the Central Government issued the impugned notification No. 141/78 withdrawing the benefit of 25% excise duty relief on the excess production of tyres and tubes. This Notification was also issued in exercise of the excess production of tyres and tubes. This Notification was also issued in exercise of the power conferred by sub-rule (1) Rule 8 of the Central Excise Rules, 1944, amending the earlier Notification issued on 16th June, 1976.

9. The ,aid contention of the petitioner company is that the Notification dated the 16th June bearing No. of 198 of 1976 which was time bound up to March 31, 1979, could not be withdrawn as the Central Government was estoppel from doing so

10. Mr Ravinder narain learned counsel for the petitioner submits that the doctrine of promissory estoppel applies against the Central Government and in any event the Government has no no power to withdraw the benefit of exemption till the said date i.e. 31th March 1979.

11. This petitioner was file on 27th June i.e. within a fortnight of issuance of the impugned notification. by the time, it seams to us that the principal of promissory estoppel against the Government has not for consideration of the Supreme Court. It was in Motilal pandamp at Sugar Mills Co. Ltd. v. State of U.P., that this doctrine was thoroughly. While holding that there con be no promissory estoppel against the legislature in the exercise of its legislative functions, it was held that:

"It is true that taxation is a sovereign, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government, so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the fiction which the Government in discharging the Government si 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. We are therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by in the State of utter pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax tax from the appellant."

12. However, it was made clear in this judgment that the principle of 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. It was further pointed out that the doctrine of promissory estoppel being an equitable doctrine, it has to yield when the equity so requires.

13. In Jit Ram Shiv Kumar v. State of Haryana , the Supreme Court while dealing with very proposition, however, held that the principle of promissory estoppel was not available against the Government in exercise of not only its legislative or sovereign power but also in exercise of executive power. As this decision could not be reconciled with the decision in Motilal's case (supra), it was expressly disapproved in the case Unions of India & Others v. Godfrey India Limited, The law in regard to the doctrine of promissory estoppel, as laid in the earlier case of Motilal Sugar Mills (supra) was held to be a correct law and it has thereafter been followed in a number of distends by the Supreme Court.

14 We are of the opinion that in the facts of the present case the doctrine of promissory estoppel against the Government can be pleaded by the petitioner.

15. In cent tyres of India Limited v. Union of India & Others, reported in 1987(31) E.L.T. 332 (BOM.), the very question which has fallen for our consideration viz, withdrawal of rebate on exercise duty on excess production of tyres and tubes, fell for decision by the Bombay High Court. After serving the case law, that Court was of the view that the exercise of power of exemption under Rule 8 of the Central Excise Rules cannot be held to be legislative fiction and the promise held by the Government can be enforced. in paragraph 18 of the reported judgment, it was held as follows:

"Therefore, it is clear that when an exemptions has been issued under Rule 8 of the Central Excise Rules, such exercise of power cannot be equated with the legislative fiction and the promise held by the Central Government to grant exemption in given conditions, can be enforced and the Government is bound by it and the obligation cannot be released on the basis that such exemption is in. legislative exercise of its fiction. It is legislative in character but the Parliament has not make made it. The Government can make and unmake such laws, day in and day out. It cannot be said that in such cases the sectarian promissory has no application,"

Before the Bombay High Court the Respondents had taken up the plea that the petitioner had not acted in pursuance of the Notification of 1979 nor had they suffered any loss or damage. Before us, in reply to the averments contained in paragraphs 16 to 27 regarding the petitioner having altered its position in pursuance of the said Notification and having spent a huge amount to increase production, the respondents have merely denied the allegations., It is stated in the counter as follows in reply to the said paragraphs:

"Nothing is admitted which is not borne out by record."

16. We agree with learned counsel for the petitioner that the above reply is vague and cannot be considered a denial in the eyes of law. The petitioner having altered its position because of the Notification of 1976 has to be accepted. The said doctrine, we hold, is applicable

17. The other argument urged by Mr. Rajinder dutt, learned counsel for the respondents was that it whole be inequitable to hold the Government to its promise made in the Notification of 1976. He reiterated the plea taken up in the counter-affidavit that the working of the scheme was reviewed at the end of the second year, i.e., 1977-78 and it was found that in respect of tyre industry certain anomalies and distortions and crept in. Therefore, the relief granted earlier was required to be withdrawn and thus in public interest the scheme was modified vide the impugned Notification. It is to be noticed that apart from a bare assertion, the respondents have not given any particulars or data to support the assertion. In Ceat Tyres's case4 (supra) it was held that it is just not enough to state that the exemptions were withdrawn in the public interest of that there was a change in. the policy because of review of the scheme. We agree with the view of the Bombay High Court. The bald assertion of the respondents tat the scheme was reviewed and modified in public interest is of no effect and rejected. The impugned Notification No. 141/78 issued on 14th July, 1978 is hereby quashed.

18 We allowed the petition and make the rule absolute . However, in the circumstances of the case, there will be no order as to costs.