Withdrawal of tax concession upheld where no enforceable promise, hostile discrimination, or arbitrariness was established

Withdrawal of MODVAT benefit on aerated waters was treated as a fiscal policy decision within government discretion. The classification challenge failed because tax concessions may be granted or withdrawn for selected persons or objects so long as there is a rational basis, and no hostile discrimination was shown. Promissory estoppel did not apply because no clear promise or enforceable representation by the Government was established. The notification, issued as delegated legislation under Rule 57A, could be rescinded under Section 21 of the General Clauses Act, and the prospective withdrawal was not shown to be manifestly arbitrary. The substantive challenge therefore failed, while the credit-reversal letter was left to be pursued before the appellate authority with limitation relief.

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Issues: Whether the notification withdrawing modvat benefit from aerated waters was invalid on the grounds of hostile discrimination, promissory estoppel, or arbitrariness.

Analysis: The withdrawal of the benefit was treated as a matter of fiscal policy within the Government's discretion. In taxation matters, the State has wide latitude in selecting the persons or objects to be taxed or given benefit, and a classification challenge succeeds only if the law operates unequally without a rational basis. No clear promise or representation by the Government was shown so as to attract promissory estoppel. The benefit under Rule 57A of the Central Excise Rules, 1944 flowed from delegated legislation and could be rescinded under Section 21 of the General Clauses Act. The impugned withdrawal was prospective and no manifest arbitrariness was established.

Conclusion: The notification withdrawing modvat benefit was upheld and the challenge to its validity failed.

Final Conclusion: The substantive challenge to the withdrawal of modvat benefit was rejected, while the challenge to the letter demanding reversal of credit was left to be pursued before the appellate authority with relief on limitation.

Ratio Decidendi: A prospective withdrawal of a fiscal concession granted by notification is not unconstitutional absent manifest arbitrariness, discriminatory classification, or an enforceable promise attracting promissory estoppel, and the authority issuing the notification may rescind it under the general power to modify or withdraw delegated legislation.

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