1999 (12) TMI 83 - HC - Customs

Customs Duty Exemption Withdrawal Upheld in AUTOCONER Case: Government Authority Affirmed

The High Court held that the withdrawal of the customs duty exemption for the imported 'AUTOCONER' machine was valid, as it was based on public interest ... Exemption - Promissory estoppel Issues Involved:1. Withdrawal of Customs Duty Exemption2. Doctrine of Promissory Estoppel3. Public Interest Consideration4. Authority to Modify or Withdraw ExemptionDetailed Analysis:1. Withdrawal of Customs Duty Exemption:The respondents, engaged in the textile business, imported an automatic winding machine called 'AUTOCONER,' which was initially exempted from customs duty under Notification No. 246/88. However, the exemption was withdrawn by Notification No. 143/89, issued on 21st April 1989. The respondents had already entered into a contract for importing the machine and opened a Letter of Credit based on the earlier exemption notification. The High Court examined whether the withdrawal of the exemption was valid and whether the respondents were entitled to clear the goods without paying customs duty.2. Doctrine of Promissory Estoppel:The respondents argued that the withdrawal of the exemption violated the doctrine of promissory estoppel. They claimed that they had acted on the basis of the earlier exemption notification, which constituted a promise by the government. The High Court referred to various Supreme Court judgments, including Union of India v. Anglo Afghan Agencies Pvt. Ltd. and Kasinka Trading v. Union of India, to analyze the applicability of promissory estoppel. It was noted that the doctrine is well-established in administrative law and is applicable against the government to prevent injustice. However, it cannot compel the government to carry out a representation or promise that is contrary to law or beyond the authority of the public official.3. Public Interest Consideration:The High Court emphasized that the power to grant or withdraw exemptions under Section 25 of the Customs Act is vested in the government to regulate, control, and promote industries in the public interest. The withdrawal of the exemption was an exercise of statutory power based on public interest considerations. The court cited Kasinka Trading, which highlighted that public interest is the dominant factor in determining the validity of a notification withdrawing an exemption. The respondents did not argue that the withdrawal was not in public interest, thus reinforcing the validity of the notification.4. Authority to Modify or Withdraw Exemption:The court examined the scope of the government's power to grant, modify, or withdraw exemptions under Section 25 of the Customs Act. It was established that the power to exempt includes the power to modify or withdraw the exemption. The liability to pay customs duty arises when the taxable event occurs, and an exemption notification only suspends the collection of duty. The court reiterated that a notification under Section 25 does not constitute an unequivocal promise by the government that cannot be revoked. The respondents' reliance on the earlier notification did not create a legal relationship that could invoke the doctrine of promissory estoppel.Conclusion:The High Court concluded that the learned Single Judge erred in applying the doctrine of promissory estoppel to prevent the government from withdrawing the exemption. The withdrawal was valid as it was based on public interest, and the respondents were liable to pay customs duty on the imported 'AUTOCONER.' The appeal was allowed, and the judgment of the learned Single Judge was set aside. All interim orders were vacated, and no order as to costs was made.