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.

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