2000 Supreme(SC) 765

2000(3) Supreme 535
SUPREME COURT OF INDIA
(From Bombay High Court)
S. Rajendra Babu & R.C. Lahoti, JJ.
Dai-Ichi Karkaria Ltd. - Appellant
versus
Union of India & Ors. -Respondents
Civil Appeal No. 7202 of 1995
Decided on 11-4-2000
Counsel for the Parties :
For the Appearing Parties : F.S. Nariman, R.F. Nariman, A.B. Diwan, Sr. Advocates, Sunil Dogra, S.S. Shroff, Ms. Monica Sharma, Shahid Rizvi, R. Sasiprabhu, Manish Garg, Ms. Nisha Bagchi, P. Parmeshwaran, Advocates.

Headnote:Customs Act-Section 25(i)-Customs Tariff Act, 1975-Section 3-Exemption from customs duty-Notification withdrawing exemption-Condition precedent-Formation of opinion as to public interest calling for withdrawal or modification of exemption already granted is a must-Notification No. 210/82 dated 10.9.1982 granting exemption on raw materials imported for manufacture of goods for supplying them to ONGC-Exemption was to be in force till 10.9.1987-Government, however amending notification reducing exemption to 25% by notification No. 517/86 dated 30.12.1986-Reason for reducing exemption not clear-Government had not taken into account all relevant factors while issuing amendment notifications reducing exemption to 25%-Notification on 210/86 would be effective till 30.9.1987-Appellant would be subject to duty only in accordance with notification No. 210/86.

       Held : Even in respect of exemptions that may have been made by the Government the doctrine of promissory estoppel will not be applicable if the change in the stand of the Government is made on account of public policy. (Para 6)

       Power to grant exemption under Section 25 of the Customs Act is a legislative power and a notification issued by the Government thereunder amounts to a piece of subordinate legislation, even then the notification is liable to be questioned on the ground that it is an unreasonable one inasmuch as a piece of subordinate legislation does not carry the same degree of immunity which is enjoyed by a statute passed by a competent legislature. Subordinate legislation may be questioned on any of grounds on which plenary legislation can be challenged: (i) that it does not conform to the statute under which it is made; (ii) that it is contrary to some other statute inasmuch as subordinate legislation must yield to plenary legislation, (iii) that it is unreasonable in the sense that it is manifestly arbitrary. The embargo of arbitrariness is embodied in Article 14 of the Constitution. An enquiry into the vires of delegated legislation must be confined to the ground on which the plenary legislation may be questioned, except that subordinate legislation cannot be questioned on the ground of violation of the principle of natural justice on which administrative action may be questioned. In cases where power vested in the Government is a power which has got to be exercised in public interest, as is the case in the present case, the court may require the Government to exercise that power in a reasonable way in accordance with the spirit of the Constitution. The mere fact that a notification issued under Section 25 of the Customs Act is required to be laid before Parliament under Section 159 of the Customs Act does not make any substantial difference as regards the jurisdiction of the court to pronounce on its validity. Section 25 of the Customs Act under which notifications are issued confers a power on the Central Government coupled with a duty to examine the whole issue in the light of public interest. If the Central Government is satisfied that it is necessary in the public interest so to do, it may exempt generally either absolutely or subject to such conditions, goods of any description, from the whole or any part of the customs duty leviable thereon. Power exercisable under Section 25 of the Customs Act is no doubt discretionary, but it is not unrestricted. The pattern of the law imposing customs duties and the manner in which it is operated to a certain extent exposes the citizens who are liable to pay customs duties to the vagaries of executive discretion. While Parliament has imposed duties by enacting the Customs Act and the Customs Tariff Act, 1975, the executive Government is given wide power by Section 25 of the Customs Act to grant exemption from the levy of customs duty. It is ordinarily assumed that while such wide power is given to the Government, it will consider all relevant aspects governing the question whether exemption should be granted or not. (Para 8)

       In the present case, it is clear that the only public interest disclosed is as stated above in the counter affidavit and those circumstances cannot stand close scrutiny because the appellant could not mis-utilise the exemption granted inasmuch as the appellant is obliged only to import goods for the purpose of supplying them to O.N.G.C. and the licence issued under the policy also clearly reflects the export obligation imposed on the appellant herein and the finished product Daitrolite manufactured from raw materials imported under the licences is highly specialised product and could be sold only to O.N.G.C., Oil India Ltd. and others. At the time in 1982 when the exemption was granted the prevailing basic customs duty was 60% and 70% on different materials imported for the manufacture of goods in question. However, it is not clear as to why duty is reduced to 25% by reason of exemption being modified. It is clear, therefore, that the factors taken into consideration by the Government appear to us to be wholly irrelevant and do not subserve public interest. 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 has failed to discharge its statutory obligation while issuing the impugned notifications. Justifications offered, to say the least, is far too naive to be accepted. The reason set out does not carry the case of the State Government further at all. 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. (Paras 7, 11 & 13)