1993 (9) TMI 367 - SC - Central Excise

Supreme Court Sets 15% Margin for Pondicherry Licensees

The Supreme Court allowed the appeals, directing the Government to establish a formula ensuring a 15% margin on the annual bid for Pondicherry licensees. ... - Issues Involved:1. Maintainability of writ petitions.2. Change in the rate of supply of arrack.3. Application of promissory estoppel.4. Alleged losses incurred by licensees.5. Jurisdiction of High Court in modifying contracts.6. Specific circumstances of Mahe licensees.Issue-wise Detailed Analysis:1. Maintainability of Writ Petitions:The Administration argued that the writ petitions were not maintainable as the matter was purely contractual. The High Court overruled this objection, stating that the writ petitions were maintainable.2. Change in the Rate of Supply of Arrack:The licensees contended that the Administration did not notify the change in the rate of supply for the excise year 1981-82 at the time of auction, leading them to assume the rate would remain the same as the previous year. The Administration argued that there was no statutory obligation to supply a specific quantity and that the rate of supply could be revised during the lease period as per condition 22(3) of the licence.3. Application of Promissory Estoppel:The licensees argued that the Administration was precluded from changing the rate of supply due to the rule of promissory estoppel. The Administration countered that the rate of supply had always been subject to change and that the licensees had no basis for assuming a fixed rate.4. Alleged Losses Incurred by Licensees:The High Court found that at the rate of supply prescribed for 1981-82, the licensees were bound to incur losses. It demonstrated this by setting out a table showing that even at the revised rate of one decalitre for an annual bid of Rs. 34,000/-, the licensees could not meet their expenses. The Administration contended that the licensees' claims of loss were not factual and that the High Court had no obligation to ensure profit for the licensees.5. Jurisdiction of High Court in Modifying Contracts:The Administration argued that the High Court exceeded its jurisdiction by remaking the contract. The High Court, however, held that the contracts were inherently impossible and modified the 'kist' amount to be paid by the licensees based on the previous year's rate. The Supreme Court acknowledged the High Court's reasoning but devised a new formula to ensure a 15% margin on the annual bid, remitting the matter to the Government for final determination.6. Specific Circumstances of Mahe Licensees:The Mahe licensees did not deposit the required 'kist' and abandoned their shops after 15 days. They sought interim relief from the High Court, which granted an injunction restraining the Administration from taking action against them. The Supreme Court criticized this order, stating that the licensees could not escape their obligations and must pay the full amount due. The benefit of the modified 'kist' formula for Pondicherry licensees was not extended to them.Conclusion:The Supreme Court allowed the appeals with directions to the Government to devise a formula ensuring a 15% margin on the annual bid for Pondicherry licensees. The appeals by Mahe licensees were dismissed, and they were ordered to pay the full 'kist' amount. The judgment emphasized the need for caution in granting interim orders affecting public revenue.