1. Import of machinery — Claim for customs duty exemption — Amendment of notification restricting exemption — Challenge to validity of amendment under Section 25(1), Customs Act 1962. (Para 1 , 2 , 3 )
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2023 Supreme(SC) 516
SUPREME COURT OF INDIA
S. Ravindra Bhat, Dipankar Datta, JJ.
Union of India & Ors. – Appellants
Versus
A.B.P. Pvt. Ltd. & Anr. – Respondents
Civil Appeal No. 986 of 2011
Decided On : 12-05-2023
Important Points
Every action of the executive government, including exercise of its power to grant or withdraw tax exemption, should be suffused with public interest. The government must provide relevant and sufficient reasons justifying the withdrawal of an exemption in public interest.
Subject
Tax Law - Customs Duty
Act Referred
Headnote
Customs Notification - Validity of Withdrawal - Customs Act 1962, Section 25(1) - The court discussed the validity of the withdrawal of a customs notification and its impact on the importation of high-speed cold-set web offset printing machines. The court analyzed the provisions of Section 25(1) of the Customs Act 1962, which grants the power to grant or withdraw exemptions, and emphasized that every action of the executive government should be suffused with public interest. The court referred to precedents such as Indian Express Newspapers v. Union of India and Kasinka Trading & Anr. v. Union of India to establish that while the government has the power to amend or withdraw an exemption notification, it must provide relevant and sufficient reasons justifying such action in public interest. The court also considered principles of promissory estoppel and held that benefits once granted cannot be divested by a retrospective statute or notification. Ultimately, the court set aside the judgment of the High Court and allowed the appeal.
Fact of the Case:
The case involved a challenge to the withdrawal of a customs notification regarding the importation of high-speed cold-set web offset printing machines.Finding of the Court:
The court held that every action of the executive government should be suffused with public interest and analyzed whether there were relevant and sufficient reasons justifying the withdrawal in public interest.Issues:
The main issue was whether the withdrawal of the customs notification was valid under Section 25(1) of the Customs Act 1962.Ratio Decidendi:
The court established that while the government has discretionary power to grant or withdraw exemptions, it must provide relevant and sufficient reasons justifying such action in public interest.Final Decision:
The court set aside the judgment of the High Court and allowed the appeal.Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Mr. Mukesh Kumar Maroria, AOR
For the Respondent(s): M/S. Karanjawala & Co., AOR
For the Appellant(s) : Mr. Mukesh Kumar Maroria, AOR
For the Respondent(s): M/S. Karanjawala & Co., AOR
Table of Contents
2. Validity of amending exemption notifications — Power to withdraw concessions as fiscal policy — Requirement of public interest justification — Applicability of promissory estoppel. (Para 4 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 )
3. Executive's domain in fiscal matters — Limited scope of judicial review — Relevance of indigenous manufacturing capacity in determining public interest for tax exemptions. (Para 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27 )
4. Judicial review of economic policy is limited to legality and bona fides; courts cannot review the merits, sufficiency, or wisdom of reasons for tax exemptions. (Para 28 , 29 )
5. Appeal allowed — High Court judgment set aside. (Para 30 )
6. To what extent can courts review the government's power to grant or withdraw tax exemptions under Section 25(1) of the Customs Act?
Judicial review is limited to legality, bona fides, and whether the decision is backed by germane reasons. Courts cannot undertake a merits review of economic policy, including the wisdom, soundness, or sufficiency of the reasons provided by the executive. (Para 28 , 29 )
7. Is the availability of indigenous manufacturing a relevant factor in determining public interest for withdrawing a customs exemption?
Yes, the indigenous angle—specifically the availability of equipment within the country and the potential adverse impact on domestic manufacturers—is considered a germane and relevant factor for the executive when granting or withdrawing exemptions. (Para 29 )
8. Can an assessee invoke the doctrine of promissory estoppel against the government to maintain a tax concession?
No, a plea of promissory estoppel is not available to an assessee against the exercise of legislative power, and no vested right accrues to an assessee in the matter of the grant of any tax concession. (Para 23 , 26 )
9. What is the legal position regarding the retrospective withdrawal of tax exemptions?
Benefits once granted cannot be divested by a retrospective statute or notification. Retrospective cancellation or reduction of an exemption is equivalent to levying a tax retrospectively, which is generally impermissible. (Para 24 , 25 )
JUDGMENT :
S. Ravindra Bhat, J.
1. This civil appeal arises from a judgment,1[Dated December 23, 2008], in Writ Petition No 298/ 2004, of the Calcutta High Court which held the withdrawal of a customs notification invalid.
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2. ABP Pvt Ltd (“assessee/respondent”) in October 2003, imported one set of high speed cold set (Universal 70) Web Offset printing machine along with the necessary parts and accessories and claimed exemption from payment of the duty relying upon the notification dated May 28, 2003 (hereinafter, “First Notification”). 2[ Notification No 86 of 2003 (Cus) Classification 844 311 00.] The First Notification provided for levy of custom duty on the import of High Speed Cold-Set Web Offset Rotary Printing Machines with a minimum speed of 70,000 copies per hour (hereafter, “Imported Machine”) at a concessional rate of 5 %. Relying upon the first notification, the assessee caused an irrevocable letter of credit,3[Dated 18th October, 2003], to be issued, for the purchase of the Imported Machine. This First Notification was subsequently amended by the Central Government through a fresh notification dated November 11, 2003,4[Notification No 164 of 2003],(hereafter, “Amended Notification”). The Amended Notification shifted the benefit of the concessional rate from “High Speed Cold-Set Web Offset Rotary Printing Machine with minimum speed of 70,000 copies per hour” to “High Speed Coldset Web Offset Rotary Double Width Four Plate Wide Printing Machine with a minimum speed of 70,000 copies per hour”.
3. On 09.02.2004, the assessee filed a Bill of Entry claiming the benefit of a 5% concession (under the First Notification). However, owing to the Amended Notification, the assessee was ineligible for the benefit of the previously enjoyed concession, under the First Notification, and was liable to pay customs duty at 39.2% on the value of the Imported Machine amounting to Rs. 1,92,54,318. Assesee filed a writ before the High Court,5[Writ Petition No 298/2004], for declaring the Amended Notification ultra vires Section 25(1) of the Customs Act 1962 (hereafter, “the Act”) and thus sought, a declaration for withdrawal of the Amended Notification. On 18.03.2004, a single judge made an interim order, 6[Order dated 18.03.2004 in WP No 298/2004], directing the release of the imported machinery provisionally on payment of a concessional rate of duty against the bank guarantee for the differential amount of Rs.1,67,98,410.
4. On December 5, 2005, a single judge bench, 7[By order dated 5 December, 2005 in WP No 298/2004], set aside the amended notification on the ground that no intelligible differentia existed for granting concession on one type of machinery and withdrawing concession to other types of machinery. The court therefore, directed that the exemption be granted to the imported machinery of the assessee. Aggrieved by the order of the single judge bench, the Union preferred an appeal to the Division Bench of the High Court. The Union contended that its power to grant exemption also includes the power to modify or alter any of the exemption, already granted and that delegation done is within the powers of the legislature. The Union further argued before the Division Bench that the subject matter involves economic policy over which the legislature has exclusive domain.
5. The High Court by its impugned judgment upheld the judgment and order of the single judge bench. The High Court observed that the imported machine was neither manufactured in any part of the country at the relevant point of time nor any copy of representation received from domestic manufacturers questioning the exemption granted to the imported machine was shown by the revenue.
6. The High Court relied upon the affidavit of the Union where it was contended that the imported machine has no indigenous angle. The High Court further placed reliance upon the decision of this court in Indian Express Newspapers v. Union of India [(1985) 2 SCR 287] (hereafter, “Indian Express N
