@JUDGMENTTAG-ORDER
1. This petition coming on for hearing upon perusing the petition and the affidavit filed in support of W. P. No. 4699 of 1989 on the file of the High
court, and upon hearing the arguments of Mr. S. Subramanian, Advocate for the petition and of Mr. P. Narasimhan, Senior Central Governments
Standing Council on behalf of the Respondents, the court made the following order :-
2. Under identical circumstances, K. M. Natarajan, J., has directed the release of the goods covered by the bill of entry on payment of 50% of the
auxiliary duty in addition to the customs duty and on furnishing either bank guarantee or security in respect of the other 50% by the petitioner to the
satisfaction of the second respondent. Following that order in this case also, the goods in question will be released on payment of 50% of auxiliary
to the customs duty and on furnishing either bank guarantee or security in respect of the order 50% by the petition to the satisfaction of the second
respondent. This order is passed without prejudice to the contentions of either party in the main petition.
AFFIDAVIT OF R. VASUDEVAN
I. R. Vasudevan, son of late M. J. Raghvachary, aged about 38 years, residing at 2D Marble Arch, Bishop Wallers Avenue, Madras - 600 004,
do hereby sincerely and solemnly affirms and state as follows :
1. I am the Purchase Manager of the petitioner Company and I am well acquainted with the facts of the case and I am empowered to file this
affidavit on behalf of the Petitioner.
2. The Petitioner is a Public Limited Company incorporated under the Companies Acts, 1956, and has its registered office at Mettur Dam RS,
Salem District, Tamil Nadu. The Petitioner is engaged in the manufacture and sale of chemicals and refrigerant gases and has its factory at Mettur
Dam.
3. The present dispute with the respondent has arise under the provision of the Customs Acts.
4. u/s 12 of the Customs Act (hereinafter called the Act), duties of Customs shall be levied at such rates as many be specified under the Customs
Tariff Act, 1975 or any other law for the time being in force on goods imported into India. Section 25 of the Act empowers the Central
Governments, if it is satisfaction that it is necessary in the pubic interest so to do, to by notification in the Official Gazette, exempt generally either
absolutely or subject to such condition (to be fulfilled before or after clearance) as may be specified in the notification from the whole or any part of
duty of custom leviable thereon. Section 25(2) enable the Central Government, by special order in each case, to exempt from payment of duty
under circumstances of exceptional nature to be stated in such order, any goods on which duty is leviable.
5. The Customs Tariff Act, 1975 Specified the rates of duties of customs leviable under the Customs Acts and these rates are specified in the 1st
and IInd Schedules. Under Sec. 3 of the C. T. Act any article which is imported into India shall, in addition to basic customs duty, be liable to a
duty called the additional duty equal to the excise duty for the time being leviable on a like article if produced or manufactured in India.
6. At the time of the presentation of the budget every year, the Finance Bill for that year is introduced in the Parliament and u/s 35 of the Finance
Bill, in the case of goods mentioned in the Schedule I of the Customs Tariff Acts there shall be levied and collected an auxiliary duty of customs
equal to 50% of value of goods as determined in accordance with the provisions of Section 14 of the Customs Act, 1962. u/s 35(4), the provision
of customs Act and the Rules and Regulation made thereunder, including those relating to refunds and exemption from duties, shall as far as may
be, apply in relation to the levy and collection of the auxiliary duties of customs leviable under this Section in respect of any goods as they apply in
relation to the levy and collection of the duties of customs on such goods under that Act of those Rules and Regulations as the case may be.
7. I submit that all goods imported into India are subject to 3 types of duties at the time of import, namely basic customs duty at the Schedule I of
the Customs Tariff Act, 1975, additional duty which is equivalent to Central Excise duty applicable to similar goods if manufacture in India and
auxiliary duty under the Finance Bill read with Provisional Collection of Taxes Acts 1931. All the provision of Customs Acts relating to exemptions
are applicable to all the above three levies.
8. The First Respondent issued a Notification No. 208/88-Cus., dated 29- 6-1988 u/s 25(1) of the Customs Act exempting machinery and
equipment for generation of electrical power (including generating sets) of capacity 2.5 MW and above but not exceeding 50 MW from basic
customs duty as was in excess of 35% ad valorem and wholly from additional duty subjects to the following conditions :
A. That at the time of clearance, the importer produces a certificate from an officer duly authorised in this behalf by the Director General of
Technical Development of the Government of India in the Ministry or by the Director or Commissioner of Industries of the State Government
concerned in the case firms which are classified as falling in the small scale sector or by any other sponsoring authority concerned referred in
Projects Regulations, 1986, as the case may be, to the effects that the goods in respect of which the exemption under this Notification is required
for the purpose of generation of electrical power for captive use by an industrial plant and also recommending the grant of the exemption.
B. The Notification would not apply to generating sets using fuel other than low sulphur heavy stock or to heavy petroleum stock and to goods
imported as Project Imports falling under Heading 98.01 if the Customs Tariff Act and
C. This Notification shall be valid upto and inclusive of the 31-3- 1989.
9. By Notification No. 159/88 dated 13-5-1988, goods which were partially or wholly exempt from the duty of Customs specified in the First
Schedule of the C. T. Act, 1975, by virtue of the Notification of the Government of India in the Ministry of Finance or in the Department of
Revenue and Banking specified in the Schedule annexed to the Notification were wholly exempt from auxiliary duty and custom leviable on such
goods under Finance Act. This Notfn. No. 159/88 contained the following proviso:
Provided that the exemption under this Notification with respect to any goods mentioned in any notification specified in the said Schedule shall be
subject to the conditions. If any, subject to which such goods are exempt by virtue of such notification, either partially or wholly from the duty of
customs specified in the First Schedule to the said Customs Tariff Act.
This Notification was issued by the First Respondent in exercise of power conferred by Section 25(1) of the Act read with Section 77(4) of the
Finance Act , 1988, by Notification No. 209/88-Cus., dated 29-6- 1988,Notification No. 208/88-Cus., dated 29-6-1988 was included as Serial
No. 274 in the list of Notifications in the Scheduled to Notification in the Scheduled to Notification No. 159/88. In other words goods covered
Notification No. 208/88 dated 29-6-1988 was brought within the scope of Notification No. 159/88 and thus were totally exempt from auxiliary
duty of custom. The only condition for total exemption from auxiliary duty of customs was that the condition to which the goods covered by
Notification No. 208/88 were subject will be applicable even for the purpose of Notification No. 159/88. To qualify for total exemption from
auxiliary duty the importer will have establish that he has complied with the conditions of Notification No. 208/88. The conditions specified win
Notification No. 208/88 are applicable in equal proportions both to the importer and the Government of India. If the importer obtains a certificate
from the appropriate authority to establish the import of power generating machinery for captive use in its industrial plants, so long as the imports
are made before 31-3-1989 such goods are eligible for 35% ad valorem rate of basis custom duty and are totally exempt from additional duty and
auxiliary duty of customs.
10. The Petitioner on the basis of the representation made by the First Respondent to the effect that the power generating machinery for captive
use will be subject to only 35% customs duty and would be totally exempt from additional duty and auxiliary duty and in view of the growing
power shortage in the country approached a foreign supplier in Cechoslovakia, Messrs. Transakta, for the purpose of importing power generation
equipment of 65000 KW (6.5MW) capacity. After negotiations with the foreign supplier the Petitioner placed an order fir power generating
equipment of capacity 6500 KW (6.5MW) with the foreign supplier on 16-9-1988. Under this purchase order the price of the equipment was
fixed at Rs. 3.1 crores CIF Madras Port. The Petitioner there after obtained an import licensing authorities on 02- 12-1988 for import of the
power generating equipment. One if the purchase order was that the entire generating set inclusive of all tools, accessories and spare parts shall be
positively delivered not later than 15th March 1989 at Madras Port. The Petitioner had taken into account the sailing time from Europe to India
which is normally about 45 to 60 days and expected the shipment to arrive at any rate before 31st March 1989, the date till which benefit were
available with respect to Custom duty, additional duty and auxiliary duty under Notification No. 208/88 and 159/88. On this basis the Petitioner
entered into a lease agreement with Industrial Credit and Investment Corporation of India Limited (ICICI) for the equipment. The order for the
equipment was placed by the Petitioner on the foreign supplier with ICICI as Lessors.
11. Despite perennial power shortage affecting the production plans of the petitioner factory, Petitioner had not proceeded with the import of any
power generating equipment for captive use on view of the high cost of import duty on such sets prior to 29-6-1988. The effect of high level of
duties would have been to push the cost of power up resulting in the Petitioner not being competitive in the market. As such the cost of power
generated out of such an expensive power generation equipment would not have been justified. Only after 29-6- 1988, with the introduction of
Notfn. No. 208/88 the Petitioner decided to examine the feasibility of importing power generation equipment under Notfn. No. 208/88 read with
Notfn. No. 159/88 & 209/88. It was only for this reason that the Petitioner specifically stipulated with the foreign supplier that the generating
equipment should be positively delivered at Madras Port not later than 15th March 1989.
12. The Petitioner caused an irrevocable letter of credit to be opened on 15-12-1988 through its Lessor''s Bankers Bank of America for a sum of
Rs. 3.1 crores. The goods were shipped on 31st January 1989 under the bill of lading No. 2210 14 250581 dated 31-1-1989 to be precarried
from Maentyluoto to Bremen by Eden and from Bremen to Madras Port by vessel STATE OF ORISSA. I was specially deputy by the Petitioner
to proceed to Vasa, Finland and sure that the equipment was loaded on to the vessel on 26-1989, I then proceeded to Bremen where the
equipment was carried for shipment to India, to ensure that the consignment was put on board STATE OF ORISSA which left the port on 6-2-
1989. All these precautions were taken by the Petitioner solely with the object of ensuring that the goods would reach INDIA BEFORE 31-3-
1989.
13. The Finance Bill,1989 was introduced in the Parliament on 28-2-89 with effect form 1-3-89. Notfn. No. 208\88 was superseded by Notfn
No. 59/89 and Notfn No. 159/88 was rescinded by Notification No. 117/89 dated 1-3-1989 Another Notification No. 116/89-Cus., dt 1-3-89
was issued exempting all goods form the whole of the auxiliary duty of customs levied under the Finance Act; 1988. during the period 1-3-89 to
31-3-89 Notification No. 110/89 Cus dt 1-3-89 Was issued under which an effective rate of 30% ad valorem auxiliary duty was levied on goods
covered by Notification No. 59/89 which related to power generation The effect of these changes made on 1-3-89 was that the basic customs
duty on power generation equipment was reduced to 30% ad valorem while 30% duty was levied as auxiliary duty thus making a total duty liability
at the rate of 60% ad valorem on the good as against 35%ad valorem prior to 1-3-1989
14. The Vessel STATE OF ORISSA carrying the Petitioner''s goods berthed at the port o Madras only on 25-3-1989. The Petitioner filed a Bill
of Entry with the necessary certificated from the Directorate General of Technical Development and sought assessment at Nil rate so far as
auxiliary duty was concerned and at 35% ad valorem so far as basic customs duty was concerned in terms of Notifications No. 208/88 and
159/88 which has validity upto 31st March, 1989. The Petitioner also addressed a letter to the second respondent setting forth the grounds on
which it was claiming assessment of goods under these two notifications. The Petitioner brought to the notice of the second respondent that the
Petitioner had imported the power generation equipment only in view of the lower rate of duty payable under these two notifications and that the
government was bound to carry out and/or act in terms of the promise/representations made in the notifications. But, however, the second
respondent has rejected the claim of the customs duty and thirty per cent ad valorem toward auxiliary duty. The second respondent has assessed
BIll of entry No. 221d/89 dated 20-3-1989 on 29- 3-1989 accordingly and has demanded payment of a sum of Rs. 91,59,951 under Notification
No. 59/89 towards basic customs duty and a sum of Rs. 91,59,951 under Notification No. 110/89 towards auxiliary duty. The goods are wholly
exempt fro additional duty under Notification No. 59/89. The petitioner submits that the demand for auxiliary duty made by the second respondent
is arbitrary, illegal, without jurisdiction and without authority of Laws. Notifications No. 208/88 and 159/88 are deemed to be valid till 31st March,
1989 and the first respondent has no authority to rescind and/or supersede the same or even other respondent on the basis of which the petitioner
had imported the goods. The respondent between different. Importers who had imported the equipment before whereas the petitioner would not
be entitled to those benefits even though is equipment has arrived in Madras well before 31-3-1989. The petitioner has no adequate, effective
alternate remedy for redressal of its grievance since all the authorities who are acting under the statue are bound by the Notifications issued under
the statute. Hence it will be futile to approach any of the adjudicating or appellate authorities provided for under the Act to seek justice in this
matter. Even customs, excise and gold control appellate tribunal has held, being creatures of the statue, that they are bounds by the notification
issued by the Central Government and cannot question their validity. Further the question of promissory estoppel against the Government is
involved and the demand for auxiliary duty is also unconstitutional. Hence the petitioner has no other alternative remedy except to approach this
Hon''ble Court under Article 226 of the Constitution of India to quash the demands of the second respondent for auxiliary duty as assessed in Bill
of Entry No. 221/89 dated 20-3-1989 on the following among other.
GROUNDS
A. The demand for auxiliary duty by the second respondent is violative of Articles 14, 119(1)(g) and 265 of the Constitution and also without the
authority and sanction of law and without jurisdiction. The respondents are estopped from making any demand for auxiliary duty from the petitioner
on the power generation equipment imported by it for captive use before 31-3-1989 in terms of Notification No. 208/88 read with Notification
No. 159/88.
B. Notification No. 208/88 was valid until 31-3-1989 which is stated in the notification itself. By a proviso to Notification No. 159/88, the
conditions stipulated in Notification No. 208/88 was made a part ands parcel of Notification No. 1159/88. To avail of benefits of Notification No.
159/88, all conditions of Notification No. 208/888 have to be fulfilled and complied with. One of the conditions is also the validity of the
notification upto 31-3-1989. The proviso to Notification No. 159/88 is very clear. Under this proviso, exemption from auxiliary duty shall be
subject to fulfillment of all the conditions stipulated in Notification No. 208/88. One of the conditions in 208/88 is that the notification will be valid
upto 31-3- 1989. Just as the respondents would have denied the benefits of Notifications No. 208/88 and 159/88, if the goods had been imported
after 31-3-1989, the respondents are bound to extends the benefits of these notifications to import of power generation equipment made befores
31-3-1989. The petitioner has decided to import the power generation equipment only after these two notification came into effect on 29-6-1988
in view of the economic viability of import of power generation equipment and the cost of generation of captive power. The petitioner had acted
solely on the representations made by the first respondent that the rates of duty specified in Notifications Nos. 208/88 and 159/88 will be valid till
31- 3-1989. All the documents relating to the import of this equipment would clearly established that the petitioner decided to opt for import of
equipment only after 29-6-1988 and that too after weighing the economics of cost of power generation at the reduced rate of duty. The very fact
that the above two notifications were issued on 29-6-1988 with validity upto 31-3-1989 also disclose the intention of the respondent to set at rest
any anxiety that an importer might have regarding sudden or arbitrary change in the rate of duty, basic, additional or auxiliary. It is quite a well
known fact that import of any goods into INdia would take at least 7 to 8 months since a number of formalities have to be compelled with before
an import could take place. First suitable foreign suppler has to be located, terms and to be obtained, Letter of credit has to be opened, sufficient
time for the supplier has to be given for manufacture and testing of equipment and last but not the least the time for transportation by sea from
Europe to India should be taken into 7 to 8 months before the goods can actually arrive in India. Apparently these considerations had weighed on
the mind of the first respondent when Notifications No. 208/88 and 209/88 read with Notification No. 159/88 were issued in fixing the validity of
this notification till 31-3-1989. The petitioner had also acted diligently in importing the said goods. The first respondent having held out a
promise/representation that total exemption from auxiliary duty will be available to the petitioner till 31st March 1989 cannot now go back upon
that promise/representation and arbitrarily levy 30% auxiliary duty with effect from 1-3-1989.
C. While it may be true that the first respondent will have powers to alter or modify exemption notification issued u/s 25(1) of the Customs Act at
any point of time where the notification is not for a fixed duration, in cases where a date has been specified upto which the notification has been
declared to be valid, the Government cannot seek to rescind or supersede such notifications unliaterally exposing the importers who had acted on
the basis of notifications to great hardship and financial injury.
D. Where Government exercises powers of subordinate legislation, it cannot act contrary to the promises/representations it had earlier made. The
Doctrine of promissory estoppel is that he who makes the representation is estopped form going back upon it provided he has the authority or
power to make the representation good. The Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and
Others, and in the case of Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., held that even thought he representations were made
by circular or letter was conferred upon the Government under the statute ands it was held that Government was estopped form going back. not he
representations that it had made. Therefore,t he doctrine of promissory estoppel was available agains the Government when it is exercising powers
conferred upon it by a statute or powers of subordinate legislation. As the Supreme Court has pointed out the Government is under no obligation
to make a representation but if it does it must be held to it. In a recent decision in the case of Poumami Oil Mills etc. v. State of Kerala and
Another, reported in 1987 (23) E. L. T. 594 (S.C) the Supreme e Court while dealing with a notification issued under the Kerala STate General
SAles Tax Acted that where a notification has secifieds the period for which certain benefits were available under that for Small SCale Industry
they would be certainly entitled to plead the rule of promissory estoppel in their favour sent he state purports to act differently. In that case the
Supreme Court held that whoever acted and/or promised under that Order for the full period of five years form the date they tasted production
and that new industries set up after the second notification would not be entitled to that benefit as they has noticed curtailment in exemption before
they came to set up their industries. Similarly in their present case, the first respondent can deny the benefits of Notification No. 159/88 only to
those who has taken steps to import the goods after 1- 3-1989. A Division Bench of the Bombay High Court has followed this ratio of the S. C.
and has applied it of the Bombay High Court has followed this ratio of the S. C. ands has applied it to notification issued under Sec. 25 of the
Customs Act in the case of Bharat Commerce and Industries Ltd. and another Vs. Union of India and others, .
E. It is therefore now well settled Law that any order issued under subordinate legislation will also be subject to rule or promissory estoppel. In the
present case the first respondent had held out promise to the petitioner that all power generation equipment for captive use imported into India
before 31-3-1989 would not be subject to auxiliary duty and the petitioner having acted on that representation by placing orders, procuring the
goods, the respondent has to make good the promise and cannot seek to levy any auxiliary duty so long as the import is made before 31-3-1989.
F. It is also logical that the first respondent having allowed a reasonable time within which the industries would be able to import captive generation
equipment with due diligence should not have changed it mind abruptly and arbitrarily at a time when import of these equipment started coming in.
There can be no public interest involved so as to warrant a change in the mind of the first respondent to arbitrarily rescind and/or supersede
Notifications No. 208/88 and 159/88. The first respondent would appeal to have acted as if it was not conscious of its representations in the
above said notifications and no consideration appears to have been given to the consequences by reselling from the representations. There is no
rhyme, reason or logic in this arbitrary act of the first respondent since no damage or loss would have resulted to public interest or to the public by
allowing imports free of auxiliary duty till 31-3-1989 as originally promised by the first respondent. The first respondent should have taken into
account all facts and the likely value of import at the time of issue of Notifications. No. 208/88 and 209/88 and 159/88. Hence there can be no
justification for the first respondent to arbitrarily change its stand midway. A Division Bench of this Hon''ble Court held in the case of M. Jamal
Company Vs. Union of India and Others, that where a specific period is indicated in a notification itself issued under the Customs Act, the importer
can plead promissory estoppel against the Government. On the other hand the act of the first responded in rescinding Notfn. No. 159/88 and
substituting it by Notfn. No. 110/89 with effect from 1-3-1989 amounts to trapping industries for considerations of revenue. Having tempted and
induced the Industries such as the petitioner to import power generation equipment for captive use, by holding out that there will be no auxiliary
duty on the imports till 31-3-1989l, and petitioner having acted upon that promise now finds itself trapped since it has to pay either an exorbitant
auxiliary duty which would put its economics of power generation into total disarray or abandon the goods for which it has paid Rs. 3.1 Crores.
Such an act on the part of the first respondent is uncontionable apart being against all principles of equity, justice and fair play.
G. The very intention of the first respondent was to encourage industries to set up their own power generation plant so that their reliance on public
power distribution system will be reduced and the industries will be able to function to their rated capacity thereby contributing to the national
growth. It was with this public interest in mind that the first respondent extended concession to industries petitioner craves leave of this Hon''ble
Court to refer to the historical background and statements of various Minister and Govt. Officials made to the public in this connection. It is not
known now how the public interest will be served by sudden revenue will be served it is certain that public interest will not be served by this
arbitrary act on the part of the first respondent. Hence the very Notfn. No. 110/89 is not in public interest.
H. The act of the first respondent in levying auxiliary duty on power generation equipment imported for captive use will also be violative of Art.
19(1)(g) as it amounts to restraint of trade, since it would make the petitioner''s goods non competitive as Caustic Soda industry is power intensive
industry and even a small increase in the cost of power generation would have disastrous effect on the power costs per tone of Caustic Soda. The
action of the respondents is also violative of ARt. 14 of the Constitution since it would discriminate between various industries who had imported
power generation equipment for captive use on the basis of the Notfns. No. 208/88 & 159/88 as some of the importers might have received the
goods before 1-3-89 and some others, such as the petitioner, might t receive the goods after 1-3-89 but before 31-3-89 due to factors totally
beyond their control. Art. 265 of the Constitution has also been violated since the impugned demands of the second respondent does not have to
sanction of law, since it does not conform to Notification No. 159/88.
I. There can be no ambiguity about the applicability of the conditions specified in Notification No. 208/88 to Notification No. 159/88. Even if their
is any ambiguity, it is submitted that, as held buy the Supreme Court in various cases such an ambiguity should be resolved in favour of the citizen.
J. The auxiliary duty was levied u/s 77 of the Finance Act, 1988 and notification relating to exemption of auxiliary duty were issued on 29-6-1988.
As per sub-section (2) of Section 77, Section 77 would remain in force upto 31-3-1989. This is also made clear by the very fact that Notification
No. 159/88 was rescinded by Notification No. 117/89. Notification No. 116/89 exempted form auxiliary duty all goods for the period 1-3-1989
upto 31-3-1989. Hence apart form, the fact that there was a positive promise/representation made by the First Respondent with regard to total
exemption from auxiliary duty for the Petitioner''s goods, the intention of the First Respondent can also be inferred from the above facts.
15. It can thus be seen that the action of the first respondent in levying auxiliary duty on the power generation equipment imported by the petitioner
for captive use is arbitrary, unconstitutional and unjust and against well settled principles of Law as declared by the Supreme Court. The
respondents are bound to permit the import of these goods free of auxiliary duty as specified in Notification No. 159/88 read with 209/88. The
impugned demand of the second respondent is liable to be quashed in the face of settled Law. The second respondent would not permit the
petitioner to clear the goods covered by Bill of Entry No. 221/89 dated 20-3-1989 unless the petition prays the auxiliary duty demanded by him in
the assessment made in the Bill of Entry. The auxiliary duty alone comes to Rs. 91,59,951 and it would cause great hardship and prejudice to the
petitioner has not taken into account this heavy additional duty burden in arranging finance for the said import. The petitioner is also advised that it
has goods chances of success in this write petition in view of the well settled principles of Law declared by the Supreme Court. Hence the balance
of convenience is in favour of this Hon''ble declared by the Supreme Court. Hence the balance of convenience is in favour of this Hon''ble Court
restraining the second respondent from collecting any auxiliary duty on the goods covered by Bill of Entry No. 221/89 dated 20-3-1989 and
directing him to permitting to aside by any conditions that this Hon''ble Court may be pleased to impose upto the petitioner in this connection.
16. For the reasons stated above, it is prayed that this Hon''ble Court may be pleased :
(a) to call for the records of the Second Respondent pertaining to import under Bill of Entry No. 221/89 dated 20-3-1989 by the Petitioner and
issue a writ of certiorari or any other writ or order or direction in the nature of writ and quash the assessment made therein so far as it related to
auxiliary duty customs under Notification No.110/89 dated 1- 3-1989;
(b) to direct the second respondent to permit the petitioner to clear the go covered by Bill of Entry No. 221/89 dt. 20-3-89 without payment of a
auxiliary duty of customs pending disposal of the above Writ Petition; pass such further or other orders as this Hon''ble Court may deem fir and
proper in the circumstances of this case and render justice.
Solemnly affirmed at Madras this 29th day of March, 1989 and signed his name in my presence.
