Madras High Court
Union Of India vs Chakra Tyres Limited on 1 January, 1800
Equivalent citations: 1991(32)ECC6, 1990(45)ELT3(MAD)
JUDGMENT Bakthavatsalam, J.
1. The above writ a appeal is dialed against the order of Shanmukhan, J. allowing the writ petition filed by the respondent.
2. The respondent is a public limited company and was incorporated on 26, 1982. Its main object being to manufacture tyres and tubes for automobiles and other rubber products. The Central Government with a view to promote industrial growth in this country granted certain tax concession under Central Excises and Salt Act 1 of 1944 to new industries which commenced production. We are concerned in this case with the Notification Nos. 268/84 and 159/85.
3. Notification No. 268/82 Central Excises dated 13-11-1982 reads as follows :-
"GSR 693 (E) In exercise of the powers conferred by-rule (1) of Rule 8 of the Central Excise Rules, 1984, the Central Government hereby exempts tyres (excluding tubes and flaps) falling under Item No. 16 of the First Schedule to the Central Excise and salt Act, 1944 (1 of 1944), from so much of the duty of excise leviable thereon under Section 3 of the said Act as is in excess of the amount calculated at the rate of seventy five per cent of the rate of duty leviable on such tyres under the said First Schedule, read with any notification issued under sub-rule (1) - of Rule 8 of the said rules in force for the time being :
Provided that such tyres are manufactured in a factory which is a new industrial undertaking licensed under Section 11 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and from which the clearances of tyres are effected for the first time during the period commencing on the 1st day of April 1976, and ending with the 31st day of March 1984.
Provided further that the exemption contained in the notification shall not apply to clearances of tyres effected after the expiry of a period of seven years from the date of the first clearance of tyres from any factory.
Provided also that the exemption contained in the notification shall apply to first clearance of tyres for home consumption during any financial year only upto a total quantity not exceeding seventy five percent, of the initial annual licensed capacity of tyres as certified by the Development Officer of the Directorate-General of Technical Development.
Provided also that the exemption contained in the notification shall not apply to such of the clearance of tyres in respect of which the aggregate of the amount of exemption under this notification and the amount of exemption, if any, availed in respect of clearances of tyres, under all or any of the notifications of the Government of India in the Department of Revenue and Banking No. 198/76- C. E., dated the 16th June 1976, or in the Ministry of Finance (Department of Revenue No. 142/73- C. E., dated 14-7-1978 or in the Ministry of Finance (Dept. of Revenue) No. 107/81-C. E., dated the 24-4-1981, equals fifty per cent of the sum total of the value of the capital investment made on plant and machinery in the said factory for the manufacture of tyre prior of the date of the first clearance of tyres as certified by the Development Officer of the Directorate General of Technical Development. Explanation No. 1 : For the purposes of computing the period of seven years from the date of the first clearance, the period commencing on the first day of April, 1980 and ending with the 23rd day of April, 1981 shall not be taken into account."
It can be seen this Notification was issued by the Central Government under powers conferred by sub-rule (1) of Rule 8 of Central Excise Rules, 1944. The concession is for a definite period of seven years since the date of the first clearance of tyres from any factory.
4. By Notification No. 88/84 Central Excises Act, 1944 dated 6-4-1984, the notification No. 268/82 under went slight changes. This notification No. 88/84 was revised by another notification No. 15-7- 1985. Notification No. 159/85 dated 15-7-1985 Central Excise Rules read as follows :-
"GOVERNMENT OF INDIA MINISTRY IF FINANCE (Department of Revenue) New Delhi the 15-7-1985, 25 Asadha, 1907 (Saka) NOTIFICATION No. 159/85 - Central Excise GSR 572/E In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 the Central Government hereby rescinds the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 88/84 - Central Excises, dated the 6th April 1984.
Sd K.S. Venkatagiri Under Secretary to the Government of India F. No. 3313/3/84 - ERU Explanatory Note : The aforesaid notification rescinds notification No. 88/84 - C. E., dated 6-4-1984 as applicable to tyres falling under Tariff Item 16 of the C. E. T."
5. The respondent aggrieved by the Notification No. 150/85 Central Excise, preferred writ petition No. 11078 of 1985 before this Court to quash the notification No. 159/86 Central Excise, dated 15-7-1985 rescinding the notification No. 88/84 Central Excise dated 6-4-1984 to direct the respondents therein to permit the petitioner therein to clear the goods viz. Tyres and Tubes at the concessional rate of duty in terms of the Notification No. 88/84 Central Excise dated 6-4-1984 for the balance period covered by the said Notification.
Shanmukham, J.
6. Granted the relief as prayed for. The learned Judge accepted the respondents' contention that the concession given originally by Notification No. 268/82 Central Excises, dated 13-11- 1982 is for a certain period of seven years since the date of the first clearance of tyres from any factory and other conditions envisaged under the said notification are satisfied by the respondent herein i. e. the respondent's contention that he is entitled to have the concession for a period of 7 years with effect from 25-1-1984 under the doctrine of promissory estoppel was upheld by the learned Judge. As a matter of fact, the principal controversy before the learned Judge was whether the concession was the time bound or whether it was available for seven years as claimed by the respondent or whether the said period has nothing to do with the life or period of currency of the exemption notification would be force as urged by the appellants. The learned Judge held that the concession was available for seven years since the date of fires clearance as claimed. With regard to other contentions, the learned Judge held that but for the principle of promissory estoppel, the appellant is entitled to rescind that concession within the period of seven years. The learned Judge after considering the ruling of then Supreme Court in Union of India v. Godfrey Philips India Limited a case under the Central Excises and Salt Act and held that the principle of Promissory estoppel applies to the facts of this case. The learned Judge referred to the decision in Tapti Oil Industries v. State of Maharashtra [1984 (2) E. C. C. 307] (Decision of the Bombay High Court), Bombay Conductors Ltd. v. Haryana in considering the principle of promissory estoppel.
7. Mr. Jothi, the learned counsel for the appellants raises the following contentions :
(i) The company was started even in June 1982 whereas the notification was only made in November 1982. So, no question of promissory estoppel will arise.
(2) The Notification issued under the Rules under the Central Excises and Salt Act is delegated legislation and as such there cannot be a promissory estoppel against the legislative power. In short, the learned counsel for the appellants contends that the notification had been issued under Rule 8 which has been framed under Section 37 of the Central Excises and Salt Act, 1944 and as such the notification itself has to be taken at one issued under legislative power. The learned counsel referred the decisions in Jit Ram v. Haryana and Bansal Exports v. Union of India (1987 E. L. T. Vol. 30, p. 361) for this proposition. Based on these decision, the learned counsel for appellants contends that the doctrine of estoppel cannot be pleaded against the legislature and that the delegated legislation is not some form of inferior legislation and is equivalent to an Act of Parliament and as such the respondent cannot plead doctrine of Promissory estoppel on the facts of this case.
8. On the other hand, Mr. Seshadri, the learned counsel for respondent contends that the principle of promissory estoppel applies to the facts of the case and that the learned Judge arrived at the correct conclusion by granting relief to the respondents.
9. Before discussing the contentions raised by the learned counsel for appellants on the principle of promissory estoppel, it is worthwhile to refer a passage in Principles of Administrative Law by M. P. Jain which reads as follows :-
"..... The enforecement of the law is made dependent upon the fulfillment of condition, and what is delegated to t he outside agency is the authority to determine, by exercising its own judgment, whether or not the condition has been fulfilled. Thus in conditional legislation, the law is there but its taking effect is made to depend upon determination of some fact or condition by an outside agency ."
With regard to plenary power of the legislature and the delegated powers it is worthwhile to refer to Queen v. Burah (5 Indian Appeals 178) in which it is stated as follows :-
"In 1869 the legislature passed an Act to remove Garo Hills from the system of law and courts prevailing therein, and to vest the administration of justice there in such officers as the Lt. Governor of Bengal might appoint. The law also authorised the Lt. Governor to extend to Garo Hills any laws which might be then in force in other territories under him. The Act was to come into force on a day appointed by the Lt. Governor. The Act was held valid by the Privy Council on the ground that the legislature having determined that a certain change should take place, had left to the discretion of the Lt. Governor the time and manner of carrying the same into effect. The legislature had exercised its judgment as to the place, persons, laws, powers and legislated on all these things conditionally..."
".....From the above it is clear that when a legislature enacts a law and authorities an executive authority to bring it into force in such area, or at such time, as it decides,or to extend the life of the legislation, it is characterised as conditional legislation."
".......The assumption underlying conditional legislation is that not much discretion is conferred on the executive because the law as enacted by the legislature is more or less complete, and that the executive only brings the law as it is into operation or extends its operation..."
When considering the scope of subordinate legislation in Kerala State Electricity Board v. Indian Aluminium Co. referring the case of Queen v. Burah (5 Indian Appeals 178) the supreme court observed as follows; (at p. 1049) "Even so, we do not think that where an executive authority is given power to frame subordinate legislation within state limits, rules made by such authority if outside the scope of the rule making power should be deemed to be valid merely because such rules have been placed before the legislature and are subject to such modification, amendment or annualment, as the case may be, as the legislature may think fit. The process of such amendment, modification or annulment is not the same as the process of legislation and in particular it lacks the assent either of the President or the Governor of the State, as the case may be. We are, therefore, of opinion that the correct view is that notwithstanding the subordinate legislation being laid on the table of the House of Parliament or the State Legislature and being subject to such modification, annualment or amendment as they may make, the subordinate legislation cannot be said to be valid unless it is within the scope of the rule making provided in the statue."
Virtually, the Supreme Court followed the principles, what it called conditional legislation and held on the facts there was no excessive delegation or any application of power on the part of legislature. In the decision Kerala State Electricity Board v. Indian Aluminium Co. considering the case Coble and Co. Ltd. v. Kropp [1976 (1) A. C. 141)] observed as follows :- (at p. 1049).
"After referring to the various provisions of the Act as well as the powers of the Queens land Legislature the Priya Council rejected the argument that the effect of the Acts was to create a new legislative authority. The Privy Council pointed out that it cannot rationally be said that there was any abandonment or abdication of power in favour of a newly created to the observations of the Privy Council in the Queen v. Burah (1878 Indian Appeals 178) (P. C.) (supra). The privy council then went on to point out that nothing comparable with "a new Legislative Power" armed with "General authority" has been created by the passing by the Queensland Legislature of the various Transport Acts."
So, it is clear that the notification made in this case is not plenary power of the Legislature but under subordinate legislation. If the notification is made under plenary power, there will be some force in the argument of the appellants. But, since the notification is issued under Rule 8(1), it is certainly a subordinate legislation and the argument of Mr. Jothi, has to rejected. The Principle of Promissory estoppel as enunciated by the decision in Union of India v. Godfrey Philips India Limited squarely applies to the facts of this case.
10. Further in page 9 of the Prospectus of the Respondent, the respondent has taken into note of the incentives/concessions given by the Government, which reads as follows :
".... 3 Excise Duty concession of 25% of the duty payable on tyres for the first seven years subject to the limit of 50% of the value of initial Plant & Machinery..."
So, in our view by withdrawing the concessions, certainly the appellants have acted to the detriment of the respondent. The contention of the learned counsel for appellants that the notification has to be taken as a piece of legislation cannot be sustained on any ground. We are of the view that the principle of promissory estoppel will not apply if action falls under delegated legislation. It is futile to contend that the order being legislative in character it becomes an action of the legislature.
11. The Bombay High Court in a case reported in Ceat Tyres of India v. Union of India [1987 (31) E. L. T. 332] has clearly held that an exemption notification issued under Section 8 of the Central Excises and Salt Act, 1944 cannot be equated with the Legislative functions. To the same effect it is held in Bharat Commerce & Industries Ltd. v. Union of India and others [1987 (32) E. L. T. 40] which read as follows :-
".. It is true that the doctrine of promissory estoppel is not available against the legislature in exercise of its legislative functions. But, here one is concerned with a situation where Government exercises powers conferred upon it by statue or the powers of Subordinate legislation in acting contrary to the terms of a representation it had earlier made."
12. The Supreme Court explaining the doctrine in Union of India v. Godfrey Philips India Limited referred to the judgment of Denning, J. as he then was in his celebrated judgment in Central London Property Trust Ltd. v. High Trees House Limited [1956 All. E. R. 256]. It referred to the decision in Mothilal v. State of Uttar Pradesh . The Supreme Court in this case at page 815 referred to the judgment in G. V. Seetharam v. Haryana (A. I. R. 1980 S. C. 1205) and held that what was stated in Mothilal v. State of Uttar Pradesh represents the correct law in regard to the doctrine of promissory estoppel and they expressed their disagreement with the observations in Jit Ram v. Haryana to the extent that they conflict with the statement of the law in Mothilal v. State of Uttar Pradesh .
13. The Supreme Court in a recent decision in Assistant Commissioner of Commercial Taxes v. Dharmendra Trading Co. has held as follows :-
"....Government bound by doctrine of promissory estoppel not to go back on the assurance extended and exemption granted by its initial order to entrepreneurs who acting upon the same had set up new industries during the period between the dates of commencement of the first order and its supersession by the second order..."
The learned counsel also placed upon a decision in State of Bihar v. Usha Martin Industries Ltd. (Sales Tax Cases Vol. 65, 1987 at page 431) for the doctrine of promissory estoppel.
14. In our view the theory of promissory estoppel is not applicable only when the power is exercised under any plenary power of the Legislature, and not when the power is exercised under a delegated legislation.
15. We feel it is worthwhile to refer a passage in the book LORD DENNING THE DISCIPLINE OF LAW BY BUTTERWORTHS (at page 223) which reads as follows :-
"It is a principle of Justice and of equity. It comes to this. When a man, by his words or conduct has led to another to believe that he may safely act on the faith of them - and the other does not on them - he will not be allowed to go back on what he has said or done when it would be unjust or inequitable for him to do so.."
16. Viewed from any angle the order of the learned single Judge cannot be assailed. We are not able to support and appreciate the arguments of the learned counsel for appellants that the principle of promissory estoppel will not apply to the facts of this case, because the notification issued under Rule 8 itself has to be taken as a piece of legislation in other words a legislative action.
17. It may be seen the judgment of Supreme Court in Union of India v. Godfrey Philips India Limited also arose out a notification issued under Rule 8 under the Central Excises and Salt Act the doctrine of promissory estoppel is applied to the facts of that case.
18. For the reasons stated above, we dismissed the appeal, affirming the order of a single Judge. However, there will be no order as to costs. Leave refused.