2009 (11) TMI 902 - HC - Customs

Government's Promissory Estoppel on Concession Rates Upheld, Circular Quashed

SOUTHERN PETROCHEMICAL INDUSTRIES CORPORATION LTD. & ORS Versus UNION OF INDIA

The Court invoked the doctrine of promissory estoppel, finding that the Government's clear representation on concession rates for DAP in 1997-98 was ... Sudden increase in the price of phosphatic nutrient - concession provided by Government - rates of concession Issues Involved:1. Doctrine of Promissory Estoppel2. Retrospective Reduction of Concessions3. Adequacy of Pleadings4. Public Interest and Government Policy5. Procedural Fairness and Legitimate ExpectationDetailed Analysis:1. Doctrine of Promissory Estoppel:The Petitioners argued that the Government had made a clear and unequivocal representation through a statement in Parliament and subsequent circulars that the rates of concession on DAP would remain unchanged for the entire year 1997-98. They acted on this representation by placing orders for imports and scheduling their manufacture. The Court agreed, stating that the statement made by the Minister of Agriculture on 21st February 1997 was a clear representation that was acted upon by the Petitioners, thus invoking the doctrine of promissory estoppel. The Court cited Motilal Padampat Sugar Mills v. State of UP and other cases to support this doctrine, emphasizing that the Government is bound by its promises if the promisee has acted upon them.2. Retrospective Reduction of Concessions:The Government later reduced the concessions retrospectively from 1st October 1997 through a circular dated 3rd February 1998. The Petitioners contended that this reduction was arbitrary and caused them significant detriment as they had already placed orders and scheduled production based on the earlier announced rates. The Court found that the reduction was not merely marginal and held that the Petitioners were entitled to the rates of concession as announced on 5th March 1997 until 31st March 1998. The impugned circular dated 3rd February 1998 was quashed for being unsustainable in law.3. Adequacy of Pleadings:The Union of India argued that the Petitioners had not adequately pleaded that they had altered their position to their detriment based on the initial promise. The Court rejected this argument, stating that the pleadings in the writ petition did indicate that the Petitioners had placed orders for imports immediately after the Minister's announcement. The Court held that the requirement to show detriment was satisfied as the Petitioners had acted on the promise and would suffer prejudice if the Government were allowed to go back on its promise.4. Public Interest and Government Policy:The Government argued that the reduction in the rates of concession was in public interest, aimed at saving public money. The Court, however, emphasized that the Government must provide a clear and rational basis for such decisions and cannot claim public interest on vague grounds. The Court found no rational basis for the reduction announced on 3rd February 1998, especially since the rates were again revised upwards less than two months later.5. Procedural Fairness and Legitimate Expectation:The Petitioners argued that the procedural fairness was compromised as the Empowered Committee set up to recommend rates did not reach a consensus, and the decision was taken unilaterally by the Cabinet Committee on Economic Affairs (CCEA). The Court agreed that the Petitioners had a legitimate expectation based on the earlier announcements and the procedure laid out for determining the rates of concession. The delay in announcing the revised rates and the lack of a rational basis for the reduction further supported the Petitioners' case.Conclusion:The Court set aside the judgment of the learned Single Judge, quashed the circular dated 3rd February 1998, and held that the Petitioners were entitled to the rates of concession as announced on 5th March 1997 until 31st March 1998. The Union of India was directed to pay the differential amount along with interest at 7% per annum from 1st October 1997 till the date of payment. The appeal by the Union of India was dismissed, and the appeal by the Petitioners was allowed, with costs awarded to the Petitioners.