Karnataka High Court
Karnataka Minerals And Manufacturing ... vs Union Of India (Uoi) And Anr. on 21 January, 1991
Equivalent citations: 1991(33)ECC272
ORDER S.R. Rajasekhara Murthy, J.
1. The first petitioner is a private limited company and the second petitioner is a share holder. The company was incorporated during January, 1979 with the object of setting up a mini cement plant for manufacturing cement. The company was incorporated pursuant to a press note issued by the Government of India (Ministry of Industry and Industrial Development) on 4.1.1979 offering certain incentives for the establishment of a mini cement plant with the object of achieving rapid increase in production of cement in the country. A copy of the press note is produced along with the writ petition as Annexure-A. The important incentives offered by the Central Government were:
i) Uniform rate of Rs. 296 per ton to the cement manufactured by the mini cement plant for a period of 5 years from the date of commercial production;
ii) Rebate up to 50 per cent in the payment of central excise duty for a period of 5 years.
2. After preparing a project report for setting up cement plant, the petitioner obtained a letter of intent from the Government of India on 14.5.1981 which was converted into a industrial licence on 23.4.1983. The factory went into commercial production from 20.12.1985.
3. After the press note dated 4.1.1979 was issued by the Government of India, notification No. 194/79 was issued on 30.5.1979 by the Central Government in exercise of the powers con¬ferred by Rule 8(1) of the Central Excise Rules, 1944. Under the said notification, exemption from payment of excise duty of 50 per cent of the prevailing rate of Rs. 65 per metric tonne was granted to cement manufacturers in a mini cement plant.
4. There were two more notifications issued thereafter on 28.2.1982 and 1.3.1983 (Notification Nos. 81/82 and 60/63). Under notification dated 28.2.1982, exemption of 50 per cent granted under notification 194/79 was substituted by Re. 50 per metric tonne. By notification dated 1.3.1983, it was reduced to Rs. 25 per metric tonne. All notifications were to be in force up to 31.3.1984 which was the outer limit for the grant of exemption announced from time to time. Between 1.4.1984 and 11.6.1987, there was no exemption and from 12.6.1987 onwards, the exemption up to Rs. 25 per tonne was revived.
5. As already mentioned, the petitioner started production on 20th December, 1985 and paid central excise duty at the full rate amounting to Rs. 1,10,14,551-20 between the period 20.12.1985 and 31.3.1987. In this writ petition the petitioner claims refund of Rs. 55,07,275-60 being the duty paid by the petitioner in excess of 50 per cent of the levy as per the press note. The petitioner has therefore prayed for issue of a mandamus to respondent No. 1-Union of India to grant the refund and allow rebate to the extent of 50 per cent of tariff rate up to 19.12.1990.
6. The case of the petitioner is that by virtue of the invitation by the Central Government to the entrepreneurs to set up mini cement plants in the Country, it was obligatory on its part to honour its own promise and extend the incentives to the petitioner in terms of the press note. Since there was delay in commissioning the mini cement plant with effect from 20.12.1985, it cannot be denied the concessional rate in the payment of central excise duty and the demand made to pay full rate of duty is illegal and contrary to the policy of the Government. The petitioner has, in this writ petition prayed for reliefs against the Central Government and has contended that the Central Government is bound by the principle of promissory estoppel and as a consequence, grant the refund of the excess duty paid. The claim of the petitioner is that he is entitled to get the rebate of 50 per cent in the central excise duty for a period of 5 years from the date of commencement of production irrespective of the notifications issued by the Central Government.
7. The decisions of the Supreme Court in Union of India v. Anglo Afghan Agencies case AIR 1968 SC 718, M.P Sugar Mills case and the Second Indian Express case are relied upon by Sri. Naganand, the learned Counsel for the petitioner in support of his arguments invoking the rule of promissory estoppel against the Central Government.
8. The case of the respondents as advanced by its Counsel Sri. Mukund Menon is that the press note issued by the Government of India must be interpreted and understood in the light of the statutory notifications issued by the Central Government under Rule 8 (1) of the Central Excise Rules. It is the case of the Department that the press note stood superseded by the statutory notifications issued by the Central Government and what should prevail and govern the question of rebate is the notifications and not the press note nor the statement made by the Minister on the floor of the Parliament. It was argued by the learned Counsel that the policy of the Government or the promise held out by the Central Government was translated into an enforceable concession in the form of a notification issued under Rule 8(1) and the manufacturers are bound by the statutory notifications. It was also argued by the learned Counsel that there could be no esttoppel against statute and the notifications which take the place of statute in the matter of rebate in the payment of central excise, duty apply to mini cement plants. It was also argued with emphasis by Sri. Menon that the petitioner having started production on 20.12.1985 cannot, on any principle of interpretation, claim rebate for a period of 5 years from the date of production ignoring the time limit fixed in the several notifications which ceased with effect from 31.3.1984. It was argued that the rebate or concession extended to mini cement plants ended on 31.3.1984 and no rebate can be granted beyond that date under any circumstances. I will refer to the decisions relied upon by Sri. Mukund Menon later.
9. Let me first deal with the press note and its implications. It cannot be disputed by the petitioners that by the issue of press note, the policy of the Government to encourage setting up of the mini cement plants in the country to step up production of cement was published for the information of all the entrepreneurs. The two clauses which are important in the press note are Clause-iv and Clause-v which are reproduced below:
iv) The ex-works price of cement produced by the mini cement plants would be the same as the price admissible to new large sized plants, viz., Rs. 296 per tonne. This price will be assured for a period of five years from the date of going into commercial production;
v) Mini cement plants will be allowed a rebate in the payment of excise duty up to 50% for a period of five years.
The 1st clause assures same rate for cement produced in mini cement plants as are applicable to large size plants, viz., Rs. 296 per tonne for a period of 5 years. A uniform price was assured to mini cement plants in order to neutralise the cost of production and to compete with the large cement plants who were in a position to market cement at a lower rate. Such regulation was within the powers of the Central Government under the Cement Control Order. In the 2nd clause, rebate in the payment of central excise duty up to 50 per cent for a period of 5 years was promised. According to the petitioners' interpretation of this clause, they should get a rebate for 5 years from the date of commencement of production at 50 per cent of the normal rate.
10. The question that arises on the arguments of the learned Counsel for both the sides is, whether the Central Government is bound by the press note and whether the petitioners are entitled to the rebate of 50% as contended by them?
The other point that arises for decision is, in view of the notifications issued by the Central Government, whether the rebate the mini cement plants are entitled to, should be worked out as provided in the notifications or whether the Central Government is bound by the press note and its contents?
11. The following decisions were relied upon by Sri. Naganand, learned Counsel for the petitioner in support of his contentions:
1) (M.P. Sugar Mitt's case) The principle of the promissory estoppel as laid down by the Supreme Court was that where one party had, by his words or conduct made to the other, a clear and unequivocal promise which was intended to create legal relations or effect of a legal relationship to arise in future knowing or intending that it would be acted upon and it was infact so acted upon, the promise was binding on the party making it and he was not entitled to go back upon it if it was inequitable to allow him to do so having regard to the dealings which had taken place between the parties.
2) Pournami Oil Mills v. State of Kerala The Supreme Court held that the ratio in M.P. Sugar Mill's case directly applies and the exemption should be extended for the full period of 5 years to those who had set up industries prior to the date of second notification.
These decisions were followed by the Bombay High Court in Bharath Commerce and Industries v. Union of India 32 ELT 40. That was a case where exemption rate was varied and a subsequent notification under Central Excise Rules was issued by the Government. The Court held that the Government was governed by the principle of promissory estoppel.
3) Srichakra Tyres v. Union of India The incentives extended to the tyre manufacturers by the notifications 268/82 and 88/84 came up for consideration before the Madras High Court. It was held that the petitioners were entitled for a concession for a full period of 7 years. The decision of Supreme Court in Union of India v. Godfrey Philip's case was followed by the Madras High Court.
4) J.K Industries v. Union of India The High Court held that notification 88/84 was applicable to the facts of the case.
12. On behalf of the respondents, Sri. Menon relied upon the following decisions:
1) (Bansal Exports v. Union of India) The question that came up for interpretation was whether the Export Control Orders are was legislative in character. It was also held that the promissory estoppel is not applicable against Government policies which can be changed in public interest. The Court was dealing with Section 3 of Import and Export Control Act, 1947 and observed that the legislative powers are delegated to Central Government and Export Control Orders are legislative in character.
2) Orient Weaving Mills v. Union of India (1978) ELT (J) 311 (SC) It was held that notifications are part of the statute itself.
3) Black Diamond Beverages v. Union of India It was held that the Budget Speech made by Finance Minister cannot be enforced in a writ petition.
The Government had withdrawn the Modvat Scheme. It was held that there can be no estoppel against rule making authorities to issue and/or withdraw the notifications.
4) Sriram Sugar Company v. Union of India It was held that the price fixed on levy sugar under Essential Commodities Act is in the nature of legislative action and orders issued under the Essential Commodities Act are legislative in character. The Court further held that there can be no judicial review in matters relating to economic policy.
Sri. Menon also cited an unreported decision of Andhra Pradesh High Court in Deccan Cements Ltd. v. The Union of India (Civil Miscellaneous Petition No. 12644/84 dated 1.2.1985) wherein a similar contention to extend the benefit of 50% of duty for a period of 5 years from the date of commencement of production was rejected by the Andhra Pradesh High Court.
Another unreported decision of Patna High Court in Sri. Durga Cement Co. Ltd v. Union of India (Civil Writ Jurisdiction Case No. 209/87 dated 3.2.1988) was also cited by Sri. Menon. This decision does not help the Department since it was held by the Patna High Court that 50% rebate should be allowed to the mini cement plants for 5 years from the date of the press note.
13. The law as to the promissory estoppel is well settled. But the parameters of this plea and its application pose considerable difficulty. It is not a universal and blind application of the rule of promissory estoppel to all cases and circumstances. One has to be circumspect in interpreting it and apply to a given case. The rule of promissory estoppel is a principle evolved by equity. It confers a special right to a citizen to hold the Government or any other statutory authority or a public body to its assurance and enforce it to its/his advantage. The law has been evolved and crystallised over a period of time by Courts. It had its origin in England and it was rediscovered by Justice Lord Denning. That was in his celebrated judgment in Central London Property Trust Ltd. v. Trees House Ltd. 1986 (1) All England Reporter 256. This plea is accepted by Courts in India and history of this doctrine has been exhaustively dealt with by Justice P.N. Bhagavathi in the landmark decision on the subject in M.P. Sugar Mills v. State of U.P. .
The principle of promissory estoppel indicated has developed by passage of time and by enunciation by Courts by giving it a wider horizon in its application. In M.P. Sugar Mill's case it is stated thus:
That a promise intended to be binding, intended to be acted on and in fact, acted on is binding so far as its terms properly apply. (Page 630) After dealing with the history and devolution of this principle in detail, his Lordship sums up the law thus at Page 631 (Para 8):
The true principle of promissory estoppel, therefore, 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 affect 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, if 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 whether there is any pre-existing relation-ship between the parties or not.
The rule of estoppel is invoked principally as a defence and the doctrine of promissory estoppel has come to be identified as a measure of defence. It is the view of some authors that promissory estoppel can be used as a cause of action without according to it operative contractual force. It was observed by the authors Spence Bower and Turner thus:
A contention that a promissory estoppel may be used to find a cause of action must be regarded as an attack on the doctrine of consideration and further observed that to give a plaintiff a cause of action on the promissory estoppel must be little less than a contract where consideration is not shown on the doctrine of promissory estoppel as developed by American Judges.
The doctrine of promissory estoppel as enunciated by American Judges and the basic requirement to invoke this that must be present, namely, that the fact situation must be such that injustice can be avoided only by enforcement of the promise.
14. The next aspect of the case is that whether the doctrine of promissory estoppel is applicable against Government. In the decision rendered by the Supreme Court in Union of India v. Anglo Afghan Agencies AIR 1968 SC 718, it was categorically held that doctrine on promissory estoppel is applicable against the Government and it can be defeated by invoking the defence of executive necessity. In the context of decision in Collector of Bombay v. Municipal Corporation of the City of Bombay the view expressed by Chandrasekhara Aiyar, J. was approved by the Supreme Court in Indo Afghan case.
15. I have given careful thought to the controversy and considered the press note and the notifications issued by the Central Government. The press note issued on 4.1.1979 was a mere publication of the policy of the Government with the object of encouraging entrepreneurs to set up mini cement plants in the country. The promise held out by the Central Government by issue of the press note was immediately followed by issue of a notification dated 30.5.1979, when it was put in the form of a statutory notification. The press note did not indicate unequivocally that 50 per cent of the duty would be allowed as a concession for 5 years. The Central Government only announced that a rebate up to 50 per cent in the payment of central excise duty would be allowed without stipulation as to the period. I agree with the Central Government's contention that its policy was put in the form of statutory notification issued immediately thereafter on 30.5.1979 and the rebate is to be granted only in terms of the said notification which was modified later.
16. The Central Government is empowered under Rule 8 of the Central Excise Rules to exempt any excisable goods from the whole or part of the duty leviable on such goods. Pursuant to the policy of the Government as stated in the Press Note, the Central Government issued the first notification on the subject on 30.5.1979 under which the duty in excess of Rs. 32-50 per metric tonne was exempted. This exemption was to be in force up to 31.3.1984. The effect of this notification on the entrepreneurs who set up mini cement plants pursuant to the press note dated 4.1.1979 on or after 30.5.1979 is, that they were entitled to a rebate of 50 per cent of the duty up to 31.3.1984 from the date of commencement of the production. Even in the subsequent two notifications dated 28.2.1982 and 1.3.1983, though the rates of rebate underwent a change, the outer limit of 31.3.1984 remained unchanged. That rate was varied in the subsequent notification dated 28.2.1982 (Notification 81/82) by substituting it by Rs. 50 per metric tonne and in the last notification dated 1.3.1983 (Notification 60/83), the excise duty in excess of Rs. 170 per metric tonne was exempt in case of mini cement plants. Therefore, the intention of the Central Government that can be gathered from these notifications is, that the rebate allowed would be in force only up to 31.3.1984. On this understanding of the policy of the Government as implemented by issue of notifications, the manufacturers of cement in mini cement plants were governed by the terms of the notifications and they cannot ignore them and fall back on the press note. The contention of the Central Government that the press note stood superseded by the subsequent notifications deserves to be accepted. The press note does not stand by itself or rather, is not the only document on the basis of which the claim for rebate should be decided on the facts of this case.
17. The facts of the present case are distinguishable from those that obtained in M.P. Sugar Mill's case in which the Supreme Court issued a mandamus to the Government of Uttar Pradesh to give effect to the letter issued by the Chief Secretary and grant consequential reliefs to the petitioners. But in the present case, the press note was immediately followed by a statutory notification issued on 30.5.1979 by which the policy of the Government was implemented by indicating the extent of exemption that mini cement plants were entitled to. In the absence of a statutory notification, perhaps it was open to the mini cement plants to develop an argument relying upon the press note to compel implementation of the promise by the Central Government. What is more, the press note does not in clear terms say that 50 per cent of the rebate in excise duty would be given to all the mini cement plants. In view of this vagueness in the press note and for the reasons above mentioned, the only reasonable way and in my opinion, the appropriate way to look at the entire matter is to hold that the notification dated 30.5.1979 issued by the Central Government under Rule 8(1) of the Central Excise Rules should prevail and govern the petitioners' case and not the press note.
18. But unfortunately, the petitioner in the present case was not able to set up the mini cement plant up to 20.12.1985. By the time production was commenced by the petitioners, the rebate offered by the Central Government had ceased to be in force with effect from 31.3.1984. The petitioners' attempt and argument that they can still fall back on the press note and seek a mandamus by this Court to enforce the claim of rebate against the Central Government is too far fetched an argument and cannot be countenanced. Whoever wanted to take advantage of the concession under the notifications had to work out their remedy within the framework of the notifications and cannot, for any purpose, rely upon the press note which stood superseded by the statutory notification issued thereafter.
The argument of Sri. Naganand is that the petitioner took all steps to set up the mini cement plant immediately after the press note was published and for reasons beyond his control, could not commission the plant till 20th December, 1985 and therefore, the petitioner should not be deprived of the rebate which was allowed to all mini cement plants established pursuant to the press note. It is not open to the petitioner to advance this argument since the petitioner was aware of the notification issued on 30.5.1975 when the first notification was published pursuant to the press note. No extraneous circumstances as pleaded by the petitioner can be taken into consideration in order to extend the benefit of rebate in excise duty beyond 31.3.1984 which was the outer limit fixed by the Central Government. Therefore, the petitioner who started production in the year 1985, for whatever reason, cannot claim that the 5 year period should be reckoned from the date of commencement of production irrespective of and ignoring the statutory notifications. On the facts of the present case, it cannot be disputed that the policy of the Government was translated into action in the form of notifications under Central Excise Rules which alone should from the basis for the manufacturers to claim the concessional rate. I agree with the persuasive arguments of Sri Mukund Menon for the respondents.
In the result the Writ petition is dismissed.