Customs duty exemption for licensed raw material imports cut to 25% u/s25 "public interest"; curtailment quashed

The dominant issue was whether the executive validly curtailed, under s.25 of the Customs Act, an existing exemption notification by reducing exemption to 25% for a specified period on the ground of "public interest." The SC held that the purported public interest was not substantiated: the import licence and export obligation limited use of the raw materials to specialized goods supplyable only to specified public sector purchasers, negating any realistic scope for misuse, and the Government relied on irrelevant considerations without addressing relevant factors governing the exemption. The amended notification reducing exemption was quashed, and the earlier exemption notification (as modified) was directed to operate for its full term; duty was payable only accordingly, and the appeal was allowed.

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Issues Involved:
1. Validity of the amended Notification No. 210/82.
2. Applicability of promissory estoppel against the government.
3. Public interest justification for modifying the exemption notification.
4. Government's statutory obligation in issuing notifications under Section 25 of the Customs Act.
5. Judicial review of subordinate legislation.

Detailed Analysis:

1. Validity of the amended Notification No. 210/82:
The appellant challenged the validity of the amended Notification No. 210/82, which initially exempted customs duty on raw materials for goods supplied to organizations like ONGC. The amendment removed ONGC from the exemption, resulting in a 25% duty. The appellant argued that the notification was issued to encourage indigenous manufacturing and should not have been altered during its validity period until September 10, 1987.

2. Applicability of promissory estoppel against the government:
The appellant contended that the withdrawal of the exemption violated the doctrine of promissory estoppel, as they had made significant investments based on the initial notification. However, the court reiterated that promissory estoppel does not apply if the government changes its stance based on public policy considerations, as established in previous cases like Kasinka Trading and Shrijee Sales Corporation.

3. Public interest justification for modifying the exemption notification:
The respondents argued that the exemption was reviewed and modified to prevent misuse by private contractors and to address fiscal concerns. However, the court found these reasons insufficient, noting that the appellant's importation was strictly for ONGC, and the finished product was highly specialized and could only be sold to specific entities. The court concluded that the factors considered by the government were irrelevant and did not serve public interest.

4. Government's statutory obligation in issuing notifications under Section 25 of the Customs Act:
The court emphasized that while the government has discretionary power under Section 25 of the Customs Act, it must exercise this power reasonably and in public interest. The court found that the government failed to consider all relevant factors and did not fulfill its statutory obligation in issuing the amended notification.

5. Judicial review of subordinate legislation:
The court held that notifications issued under Section 25 of the Customs Act are subordinate legislation and can be challenged on grounds of unreasonableness and arbitrariness. The court referred to the Indian Express Newspapers case, which established that subordinate legislation must conform to the statute and public interest. The court found that the amended notification did not meet these criteria and was therefore invalid.

Conclusion:
The court quashed the amended notification applicable from December 30, 1986, to September 10, 1987, and reinstated the original notification and its 1983 modification. The appeal was allowed, and the appellant was subject to duty only as per the original notifications. The High Court's order was set aside, and no costs were awarded.

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