FENO PLAST PVT LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) Section 25 of the Customs Act, 1962 empowers the Central Government, if it is satisfied that it is necessary in the public interest so to do, to exempt generally either absolutely or subject to such conditions as may be specified in the notification, goods of any specified description from the whole or any part of the duty of customs leviable thereon under the Act. In exercise of this power, the Central Government issued notification No. 66/79 dated 15/03/1979 which is to the following effect :- "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, No. 145-Customs, dated the 27/07/1978, 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. This notification shall be in force upto and inclusive of the 31/08/1979." By a subsequent notification the date " 31/08/1979" was substituted by the words " 31/03/1980" and by another notification No. 37/80 dated 25/03/1980 the words " 31/03/1981" were substituted for the words " 31/03/1980. However on 16/10/1980 the Central Government issued another notification bearing No. 205/F. No. 355/141/80 Customs 1, impugned herein, modifying the earlier notification. It reads : "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 No. 66-Customs, dated the 15/03/1979, 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".

(2.) The petitioners herein are manufacturers of certain products involving the use and consumption of polyvinyl chloride resins. Polyvinyl chloride resin, according to the petitioners, has to be mainly imported from abroad. Though according to Chapter 39 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), the customs duty leviable is 100% of the value, the Central Government under notification No. 66/79 dated 15/03/1979, referred to above, exempted these goods from the customs duty altogether. The petitioners say that in view of the said notification they placed orders abroad for import of the said product and that it was actually imported into India and sought to be removed from the concerned warehouse well before 31/03/1981. (The customs duty, as held by the Supreme Court, on imported goods is levied and becomes payable when the goods are sought to be removed from the warehouse. However, by the date the petitioners sought to remove the goods from the warehouse, the impugned notification dated 16/10/1980 had come into force and accordingly the customs authorities demanded customs duty to the extent of 40% of the value of the goods as a pre-condition for premitting the goods to be removed from the warehouse. The petitioners then approached this Court. Their case is that they had placed the order for the import of the PVC Resin only in view of and acting upon the exemption notification aforesaid which clearly stated that it is operative till 31/03/1981. They made arrangements for importing the goods and for removing them from the warehouse well before that date. But the impugned notification was issued after they placed orders for the import and furnished Bank guarantee for the price thereof, as is the practice in the import trade and before the goods were actually imported into India and sought to be removed from the ware-house. In such a case, the Central Government is estopped from giving effect to the impugned notification on the principle of promissory estoppel. Having represented that the exemption shall be effective till 31st March, 81 thereby inducing the petitioners to import the goods, the Central Government is precluded from revoking the exemption, even partialy since such a course of conduct if permitted, is likely to cause grave prejudice and loss to the petitioners. Reliance is placed upon the well known decisions of the Supreme Court in Union of India v. Anglo Afghan Agencies - A.I.R. 1968 S.C. 718; M. P. Sugar Mills v. State of U.P. - A.I.R. 1979 S.C. 621 and M/s. Jit Ram Shiv Kumar v. State of Haryana A.I.R. - 1980 S.C. 1285. On the other hand it is contended by Shri K. Subrahmanya Reddy, the learned Standing Counsel for the Central Government, that there is no room for applying the rule of promissory estoppel or equitable estoppel in this case. He submits that the exemption notification is one issued by the Central Government in exercise of a statutory power and that the impugned notification is also one issued under the same power. There can be no estoppel against statute or exercise of statutory power. Merely by mentioning the date 31/03/1981 as the date until which the exemption was operative, no representation is involved that it would not be rescinded or modified before that date. The fact that the exemption notification has been issued under Section 25(1) of the Customs Act and because the very same power is available for rescinding or modifying such a notification, the petitioners ought to have known that the said notification was liable to be revoked or modified at any time. The impugned notification has been issued in public interest and since no representation was even made to the petitioners to any effect by the Central Government, the plea of promissory estoppel is not available against the Central Government. The learned standing counsel for the Central Government placed strong reliance upon the decision of the Supreme Court it Excise Commissioner, U.P. v. Ram Kumar - A.I.R. 1976 S.C. 2237 and submitted that the decisions relied upon by he counsel for the petitioners do not in any manner run counter to his propositions.

(3.) The rule of promissory estoppel has become fairly well settled in India. As stated by Bhagwati J. in M.P. Sugar Mills v. State of U.P., (supra) "it is a principle evolved by equity to avoid injustice and though commonly named promissory estoppel, it is neither in the realm to contract nor in the realm of estoppel. The true principle to promissory estoppel seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not. The doctrine of promissory estoppel need not be inhibited by the same limitation as estoppel in the strict sense of the term. It is an equitable principle evolved by the courts for doing justice and there is no reason why it should be given only a limited application by way of defence... ... ... It is not necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that the promisee should have altered his position in reliance on the promise." It is held that this doctrine is enforceable even against the Government notwithstanding the fact that there is no contract executed in the form required by Article 299 of the Constitution or that there is no consideration for the promise. The statement of law was affirmed by another Bench of the Supreme Court in M/s. Jit Ram Shiv Kumar v. State of Haryana (supra). However both the decisions have recognised certain exceptions to this rule. Kailasam, J., stated those exceptions in the latter decision, in the following terms :- (1) The plea of promissory estoppel is not available against the exercise of the legislative functions of the State. (2) The doctrine cannot be invoked for preventing the Government from discharging its functions under the law. (3) When the officer of the Government acts outside the scope of his authority, the plea of promissory estoppel is not available. The doctrine of ultra vires will come into operation and the Government cannot be held bound by the unauthorised acts of its officers. (4) The officer would be justified in charging the terms of the agreement to the prejudice of the other part on special considerations, such as difficult foreign exchange position or other matters which have a bearing on general interest of the State."