TaxTMI 
TaxTMI 
2009 (6) TMI 624
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....r the parties. 2. In order to correctly appreciate as to what the grievances of the petitioners are, what reliefs they have sought for and on what basis, the respondents resist the writ petitions, certain material facts, not being in dispute, are set out as under : (i) Taking into account the continuing backwardness of the North-Eastern region, it was felt by the Government of India that a new synergetic incentive package would stimulate development of industries, for, such incentive package would attract investors. Thus, with a view to fostering industrial growth in North-Eastern region, the then Prime Minister of India made, on 27-10-96, at Guwahati, a statement that new incentives would be announced for industrial development of the North-Eastern region. Expert groups/committees were accordingly constituted to concretize the initiatives. By a notification, dated 24-12-1997, Government of India, eventually, announced a new Industrial Policy Resolutions (hereinafter referred to as '1997 IPR') containing a package of incentives and concessions for the investors in the North-Eastern region. As a measure of fiscal incentives, Government approved conversion of the grow....
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....for a period of 10 (ten) years from the date of publication of the notification in the official gazette or from the date of commencement of commercial production, whichever was earlier. (iii) Some of the writ petitioners, in the present set of writ petitions, claim to have set up, acting upon the promises made in the 1997 IPR and taking into account the relevant notifications issued in this regard, industries for manufacture of various commercial products, which the said notifications, granting exemption from payment of excise duty, had envisaged. Another set of writ petitioners plead that their industrial units had already existed, when the 1997 IPR came into force and, acting upon the incentives promised, they made substantial expansion by increasing the installed capacity of their respective industrial units to the extent as mentioned in the relevant notifications. (iv) In course of time, the petitioners were granted certificates of eligibility showing that they were entitled to receive various exemptions from payment of excise duty, which was, otherwise, leviable on their products. In fact, many of the petitioners, having set up their industries, started receivi....
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....turers, thus, allowed the Cenvat credit to be accumulated in their books of account with the object of utilizing the same at a latter stage. In other words, instead of utilizing the Cenvat credit, some of the manufacturers continued to make full payment of excise duty on finished products through the account current and claimed refund of the same. They let the Cenvat credit to so accumulate with the object of utilizing the same after expiry of a period of 10 years of exemption. This apart, the manufacturers, who did not use the Cenvat credit, were able to utilize the accumulated amount for payment of excise duty on such products, which were not eligible for exemption under the Notification Nos. 32/99-C.E. and/or 33/99-C.E., aforementioned. Since the inputs, in respect of which Cenvat credit had been taken, were to be utilized in the manufacture of finished goods, which were eligible for exemption as per Notification Nos. 32/99-C.E. and 33/99-C.E., dated 8-7-99, the Cenvat credit, in respect of such inputs, could not have been utilized for payment of excise duty in respect of finished products, which were not eligible for exemption under the said notifications, dated 8-7-99. Similar....
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....d during such month and pays only the balance amount in cash." The proviso to Clause (b) of paragraph 2 was also substituted by the following : "Provided that in cases, where the exemption contained in this notification is not applicable to some of the goods produced by a manufacturer, such refund shall not exceed the amount of duty paid less the amount of the Cenvat credit availed of, in respect of the duty paid on the inputs used in or in relation the manufacture of goods cleared under this Notification." (ix) The amendments, so introduced, made it mandatory for a manufacturer of those goods, which were made eligible for exemption under Notification No. 32/99-C.E., to, first, utilize the Cenvat credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and to pay balance amount only in cash. The substituted proviso further took care to see that refund is not claimed in respect of the duty paid on goods, which were not eligible for exemption. (x) Before expiry of the 1997 IPR, the Government of India announced a new industrial policy resolution by a Memorandum, dated 1-4-2007, namely, North-....
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....ed capacity of their respective industrial units to the extent as were necessary under the 2007 IPR, and claim, therefore, to have become entitled to receive the benefits as were promised and assured to them by the 2007 IPR. All these petitioners claim to have commenced their commercial production in terms of the relevant IPRs, namely, 1997 IPR and 2007 IPR, as the case may be. The petitioners claim that having established their industrial units, or having expanded their industrial units, and having started production from such industrial units within the prescribed period, they had been receiving, without any interruption, 100% refund of the amount of excise duty paid in terms of the notification Nos. 32/99-C.E., 33/99-C.E. and 25-4-2007. (xiv)The grievance of the petitioners is that with the help of the Notification No. 17/2008, dated 27-3-2008, the Ministry of Finance, Department of Revenue, Govt. of India has amended the notification, dated 32/99-C.E., aforementioned and by the notification, dated 27-3-2008, the excise duty refund has been restricted to the maximum limits as specified in the rate column of the table appended to the said notification, whereunder different rat....
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....pondents justify the issuance of the impugned notification in the following words : "7. An analysis of cases booked by the Excise department and the representations received from the Industry Associations has revealed that the following modus operandi is broadly being followed. (i) Reporting of bogus production by mere issuance of sale invoices without actual production of goods and supply/clearance of excisable goods. This would result in availment of Cenvat credit by buyers of such excisable goods in other parts of the country without actual production being carried out and in absence of actual receipt of goods. (ii)Reporting of bogus production by such units in these areas where actual production takes place elsewhere in the country. (iii)Over valuation of goods resulting in availment of excess of credit by buyer. (iv) Goods are supplied by manufacturers, importers to these units without issuance of sales invoice and these are backed by bogus sale invoices issued by traders who do not undertake actual supply of goods. The actual supplier of these goods issue bogus duty paid invoices to other manufacturers who take credit based on such invoices witho....
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.... Rs. 7/- which should be the only entitlement. In other words, the Government has to give refund for the goods manufactured in other parts of the country as a result of manipulation indulged into by such a manufacturer. 8. These are general illustrations of misuse exemption given by the Government, which was meant to be available only for genuine manufacturers. 9. Your humble applicant submits that by adopting such modus operandi, the unit in these areas were wanting to pay maximum amount of duty in cash so that they become entitled to a claim of refund of entire amount of duty paid in cash. In order to verify this aspect, a study has been made by the Excise department on receipt of information from the Director General, Central Excise Intelligence and other such agencies to find out the percentage of excise duty paid in cash and from the Cenvat Credit account by the units availing this area based exemption. On receipt of these details they were compared with the duty payment details of the same industry groups for all the units across the country to find out whether the percentage of duty paid by the units in cash in the specified areas is comparable with the units....
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....hem in the same manner as per existing scheme but refund would be granted only to the extent of duty paid on the actual value addition made by them in these specified areas. 10. That as a result of such modification which has been considered by the Central Government to be expedient in public interest and in the interest of the Revenue, such a modification has been brought out. The effect of such modification is as follows : (i) It is submitted that genuine manufacturers are not likely to be affected inasmuch as they would be getting the refund of same amount under the scheme before and after the modification, because if the inputs are duty paid then the refund under the earlier scheme and modified scheme should be of the same amount. (ii) Unscrupulous manufacturers reporting bogus production and who are resorting to fictitious purchase of inputs on the strength of invoices which are non duty paid invoices would be getting excise duty refund of duty paid on actual value addition made by such manufacturers who have industries in these specified areas. (iii) The excise duty exemption would be available only to the extent of actual value addition made i....
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.... respondents contend that a manufacturer would be entitled to exemption from payment of excise duty only if there is value addition and that the quantum of refund would be limited to the extent of value addition and no more. To put it a little differently, the respondents' case is that unless there is value addition, there is no entitlement to receive refund and the quantum of refund is limited to the extent of value addition made. Thus, if for instance, excisable input in a finished product is Rs. 10/- and the excise duty payable on the finished product is Rs. 50/-, the refund would be to the extent of Rs. 40A and no more. 6. I may pause here to point out that in some of the writ petitions even the notification, dated 10-6-2008, aforementioned, whereby Commissioner has been given the power to determine the actual value addition has been challenged on the ground that the mechanism, provided thereunder, does not make available to the petitioners exemption from payment of excise duty to the same extent as had been promised to them by the 1997 IPR and various notifications issued earlier in this regard. 7. I have heard learned counsel for the petitioners and Mr. K.N. C....
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....y has the effect, according to Mr. Goswami, of reducing the benefits of complete exemption from payment of excise duty inasmuch as the impugned Notification makes exemption available only to the extent of value addition; whereas the 1997 IPR and the earlier Notifications made exemption from payment of excise duty available on the finished products. This apart, points out Mr. Goswami, the exemption has, now, been made available only to the extent of specified rates, which have been fixed by the Government; whereas every industrial unit may pay different cost for raw-materials and it is not necessary that the value addition, in a given product, by two different industrial units would be to the same extent. 9. It is submitted by Mr. Goswami that if the statutory authority or an executive authority of the State, functioning on behalf of the State, in exercise of its legally permissible powers, had held out any promise to a party, who, relying on the same, has changed its position to its detriment and when such a promise made to the party does not offend any provisions of law or does not fetter any legislative or quasi judicial power inhering the promisor, then, on the strength ....
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....have indulged in such illegal or manipulative activities. Hence, the petitioners, contends Mr. Goswami, cannot be penalized for the unscrupulous activities, if any, of some manufactures other than the petitioners. If the Government is allowed to withdraw its promise On the ground that some manufacturers have indulged in bogus production, it would, pleads Mr. Goswami, result in great injustice to the petitioners, particularly, when the manufacturers, as a class, are not accused of having indulged in bogus production. If not restrained, the Government's action would, according to Mr. Goswami, be tantamount to not taking action against their own departmental personnel and, instead thereof, punishing the genuine manufacturers. 11. Punishing the petitioners for the acts, if any, of some unscrupulous manufacturers would be, submits Mr. Goswami, nothing, but arbitrary, for, having established their industrial units, the petitioners had legitimate expectation that so long as they continued to conduct their business in terms of the relevant IPR and various notifications issued thereunder, 100% exemption from payment of excise duty on their finished products, as had been envisaged an....
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....tition, at the very threshold, by contending that at no point of time, the petitioners had enjoyed complete or 100% exemption from payment of excise duty inasmuch as the excise duty were to remain confined, according to the respondents, to the value addition made in the specified areas. Yet another ground of resistance, offered by the respondents to the very maintainability of the writ petitions, is that none of the writ petitions, contend the respondents, lay necessary foundation to attract application of the doctrine of promissory estoppel inasmuch as the writ petitions, according to Mr. K.N. Choudhury, learned Senior counsel, do not furnish adequate materials warranting application of the doctrine of promissory estoppel. In this respect, Mr. Choudhury seeks to derive support from Union of India v. Ganpati Rolling Mills Pvt. Ltd., reported in (2006) 4 GLT 1. 15. It is further submitted by Mr. K.N. Choudhury that the impugned notifications merely give effect to the real indentment of the Union Government inasmuch as the 1997 IPR, according to Mr. Choudhury, aimed at giving benefit of exemption from payment of excise duty to such value additions, which may be made, in the s....
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....ment, namely, Department of Finance, had interfered with the exemption, which the State Cabinet, in Bihar, had promised. 18. In the present case, points out Mr. Choudhury, not only the IPR, but also the impugned notifications have the approval of the Union Cabinet. Hence, the decision, in Suprabhat Steels Ltd., (supra), has no application to the facts of the present case. 19. It is submitted by Mr. Choudhury that exemption from payment of excise duty was made available to the industrial units in terms of the Government Policy. The Government, according to Mr. Choudhury, cannot be made a slave of its policy and if, by virtue of a policy, the petitioners were receiving some benefits, there is no legal impediment, on the part of the Government, to adopt another policy and withdraw such benefit if withdrawing of such benefit is necessary in public interest. When the Government takes a decision, as in the present case, keeping in mind all relevant considerations, such a policy decision, contends Mr. Choudhury, cannot be interfered with and the doctrine of promissory estoppel cannot estop the Government from changing its policy if such change in policy is not irrational o....
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....earlier given to the petitioners, then, the effect would be that the 1997 IPR has remained intact and, if it has remained intact, then, the Finance Department, Government of India, cannot take away the benefits, which the 1997 IPR had promised, even if such a decision of the Finance Department receives approval from the Union Cabinet. 22. It is pointed out by Dr. Saraf that the Notification, dated 8-7-1999, was issued under Section 5A of the Central Excise Act, 1944, to give effect to the 1997 IPR and was not an independent notification. Section 5A, according to Dr. Saraf, does not empower the revenue authorities to curtail or withdraw the benefits given under the policy decision of the Union of India. In the present case, the impugned notifications have curtailed, according to Dr. Saraf, the extent of exemption, which were, otherwise, available to the petitioners, as manufacturers, and, when the 1997 IPR has remained, even according to the respondents, unaltered or unchanged, one of the Ministries of the Union of India, such as, the Department of Finance, cannot reduce the extent of exemption, which the 1997 IPR had promised and made available to the present petitioners, a....
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....i Rolling Mills Pvt. Ltd. (supra), ought to have shown, further points out Dr. Saraf, that they had increased the capacity of their respective industrial units to the extent as the 1997 IPR required, but they had made out no such specific case in their writ petitions inasmuch as none of the writ petitioners had claimed, in Ganapati Rolling Mills Pvt. Ltd. (supra), that they had increased the capacity of their respective industrial units, acting upon the 1997 IPR, to the extent as the 1997 IPR had made it mandatory for an industrial unit to claim exemption from payment of excise duty on their finished products. In such circumstances, the Court, in Ganapati Rolling Mills Pvt. Ltd. (supra), concluded, points out Dr. Saraf, that the petitioners had not laid a clear foundation for invoking the equitable doctrine of promissory estoppel. To the case at hand, submits Dr. Saraf, the decision in Ganapati Rolling Mills Pvt. Ltd. (supra) has no application at all inasmuch as the respondents have not even cited one case, in the present set of writ petitions, to clearly show as to which writ petition does not lay adequate foundation for attracting the application of the doctrine of promissory es....
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....he industrial units, established under the 1997 IPR, received full exemption from payment of excise duty and, in such circumstances, their tendency would be to pay excise duty as much as payable in law; whereas no such exemption being available to industrial units, in the areas, which fall outside the 1997 IPR, there is likely to be the tendency to avoid payment of excise duty and pay as less excise duty as possible; hence, it is quite possible, points out Dr. Saraf, that those industrial units, which are covered by 1997 IPR, have been, truthfully and faithfully, paying excise duty; whereas those industrial units, which are not covered by 1997 IPR, would be suppressing the extent of their respective excise duty liability and, consequently, paying less excise duty than the present petitioners. In such circumstances, further points out Dr. Saraf, the Government's assumption, that the industrial units, not covered by 1997 IPR, have been paying as much excise duty as were payable by them, cannot be readily and safely relied upon. Such a presumptuous approach by the Government is without any rational basis inasmuch as the Government has not placed any material to show, submits Dr. Saraf....
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....omplete or 100% exemption from payment of excise duty and that the excise duty refund, at all stages, had remained confined to the value additions, made in the specified areas, is correct. 29. While considering the above aspect of the case, it is necessary to point out that the 1997 IPR, with regard to the fiscal incentives, read, inter alia, thus : "FISCAL INCENTIVES TO NEW INDUSTRAIL UNITS AND THEIR SUBSTANTIAL EXPANSION. (i) Government has approved for converting the growth centers and IIDs into a total Tax Free Zone for the next 10 years. All industrial activity in these zones would be free from Income Tax, Excise for a period of 10 years from the commencement of production. State Government would be requested to grant exemptions in respect of Sales Tax and Municipal Tax. (ii) Industries located in the growth centers would also be given Capital Investment Subsidy at the rate of 15% of their investment in plant and machinery, subject to a maximum ceiling of Rs. 30.0 lakhs." 30. From a bare reading of the fiscal incentives offered by the 1997 IPR, it becomes clear that the incentive, which the 1997 IPR had promised, was that in the specified zon....
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....er Rule 9 read with Rule 173G of the Central Excise Rules, 1944. Thus, the 1997 IPR promised to give 100% exemption from payment of excise duty and the Notification No. 32-C.E./99, dated 8-7-99, too (which was published to make the exemption, so promised under the IPR, available) declared, unequivocally, that a manufacturer would be entitled to claim exemption from payment of so much of excise duty (or additional excise duty) as would, otherwise, be payable on the goods manufactured by him if the goods are such, which have been specified for the purpose of granting such exemption Thus, if a manufacturer produces specified goods, he would be entitled to refund of excise duty to the extent as would be payable on his finished products. It needs to be carefully noted that excise duty is payable on a finished product by the buyer of such a product and when the manufacturer realizes excise duty from the buyer, he is required to deposit excise duty, so collected, in the Government treasury. The benefit of excise duty exemption mean that though the buyer would pay excise duty and such excise duty is deposited by the manufacturer with the Government, the Government would return, in the form....
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.... of the Cenvat Credit availed of in respect of the duty paid on the inputs used in or in relation the manufacture of goods cleared under this Notification. 35. The amendments, so introduced, made it mandatory for a manufacturer of eligible goods to, first, utilize the Cenvat credit available to him on the last day of the month under consideration for payment of excise duty on goods cleared during such month and to pay balance amount in cash. The substituted proviso ensured that refund is not claimed in respect of the duty paid on goods not eligible for exemption. What these amendments, thus, aimed at achieving was to ensure that the amount, accumulated in Cenvat credit, gets exhausted before the manufacturer pays the excise duty in cash, and, secondly, it was also ensured that the refund is not claimed in respect of the duty paid on goods, which are, otherwise, not specified goods and are not eligible for exemption. The amendments, thus, plugged some loopholes, which existed in the notification, dated 8-7-1999. The extent of benefit of exemption was, however, continued to be made available as were available to a manufacturer at the very inception of the scheme of exemption.....
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....onclusion, so reached, is sufficient to reject the respondents' contention that the petitioners had, at no point of time, enjoyed complete or 100% exemption from payment of excise duty. 38. Confronted with the promise made under 2007 IPR, Mr. Choudhury agrees that even the 2007 IPR promised to continue to make 100% excise duty available as had been made available under the 1997 IPR. Situated thus, there can be no doubt that until the time the impugned notification, dated 27-3-2008, and/or notification, dated 10-6-2008, were issued, a person, establishing an industry, in terms of the 1997 IPR, had enjoyed 100% exemption from payment of excise duty on the finished products. 39. I may, at this stage, pause and refer to the written submission, submitted on behalf of the respondents, whereby the respondents have, inter alia, endeavoured to depict the refund mechanism until before issuance of the impugned notifications. The written submission reads like this : "..............that the exemption envisaged to the industrial units following the New Industrial Policy and the notification dated 8-7-99 was granted by way of refund mechanism. The mechanism operates in the foll....
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....deposits through PLA, is refunded to him. However, the Cenvat credit takes care of the excise duty, which the manufacturer had paid on his input. Thus, on the sale value of his finished products, the manufacturer receives, in the form of Cenvat Credit, excise duty, which he had paid on the input, and the remaining amount of excise duty paid by him, through the PLA, is refunded to him. Viewed from this angle, it becomes clear that the manufacturer was to receive, even according to the scheme, as depicted by the respondents themselves, complete exemption from payment of excise duty. When such a manufacturer goes for further production, what the manufacturer does is that while making payment of excise duty on inputs, he is required to, first, exhaust the Cenvat credit available with him and after exhausting the Cenvat credit, he can pay excise duty, in cash, through PLA. 41. Appearing on behalf of the respondents, Mr. K.N. Choudhury, learned Senior counsel, cites the following table for the purpose of showing that the petitioners were never entitled to 100% exemption from payment of excise duty : Value of input Excise duty on input Value of finished goods Excise du....
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....Rs. Rs. 200 20 1000 100 100 100-20=80 80 100-80= 20+F = 100 Total =100 45. From the above chart, it becomes more than demonstrative that although after utilization of Cenvat credit, the amount paid, through PLA account, was Rs. 80/- only and though the refund to be granted by the Excise Department was Rs. 80/- only, the fact remains that the manufacturer had collected Rs. 100/- from the customer and thereby retained Rs. 20/- with him, while making payment through PLA account. 46. What surfaces from the above discussion is that until issuance of the impugned Notifications, the ultimate benefit of exemption, available to the manufacturer, remained the same, i.e., 100%. There is considerable force in the submission of Dr. Saraf that exemption can be granted by prescribing various modes like making payment of the excise duty first and, then, get refund of the amount or by not making payment of excise duty at all and receive remission. It is clear from the scheme, as depicted from the above chart, that while exemption to the extent of Rs. 80/- was granted by way of refund, Rs. 20/- was by way of remission inasmuch as the manufacturer coll....
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....ies. Those industrial activities, which were not making any real value addition and which amounted to merely peripheral activities, such as, the ones as mentioned hereinbefore, it was made clear by 2007 IPR that such activities, though may be industrial activities, would not entitle a person to claim the benefit of exemption. Nothing, contained in what has been reproduced above, indicates that if a person is, otherwise, carrying on an activity, which is not excluded from the benefit of exemption, such a person would not be entitled to full exemption of excise duty on his final product. 52. I may pause here to point out that even while packing or re-packing, labeling or relabeling; etc, there is definitely some value added to the goods, but such addition of value, not being significant and material, would not be regarded, under the 2007 IPR, as activities, which would entitle a manufacturer to claim exemption from payment of excise duty on the finished product. But when an activity, which is, otherwise, regarded as an industrial activity, is carried on under the 2007 IPR, the benefit of exemption would be available to the manufacturer. What is, however, of immense importance....
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....the 1997 IPR envisaged. In 1997 IPR, it had not been clarified as to what activities would amount to industrial activities as envisaged by the 1997 IPR. There was, therefore, a room for controversy, as in the case of R.C. Tobacco (supra), on the question as to whether the activities, which the cigarette manufacturer had been carrying on, in the North-Eastern Region, amounted to the kind of industrial activities, which the 1997 IPR had aimed at achieving. To set at rest any controversy, in this regard, and in order to make it clear that the peripheral activities would not be treated as activities making any value addition, the 2007 IPR makes it clear that certain peripheral activities, as mentioned hereinbefore, would not be regarded as activities, which would entitle a manufacturer to claim exemption from payment of excise duty. 55. There is yet another flaw in the submissions, made on behalf of the respondents, that the excise duty exemption was available only to the extent of value addition. It is not necessary that in every finished product, the input must also involve an excise duty payable item. There may be a finished product, which involves input, which is entirety e....
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....il before issuance of the impugned notifications, had perceived. 58.Let me, now, determine if the refund mechanism, which stands introduced by the impugned notifications, dated 27-3-2008 and 10-6-2008, has reduced the quantum of refund payable to a manufacturer, who has established his industrial unit on the promises made by the 1997 IPR and re-assured by the Notification Nos. 32/C.E.-99 and 33/C.E.-99, both dated 8-7-1999, issued in this regard. While considering this aspect of the case, it is of paramount importance to recall that in their affidavit-in-opposition, the respondents have contended, as already indicated in para 3 of this decision, that an analysis of the cases, booked by the Excise Department and the representations received from the association of the industries, revealed bogus production by mere issuance of sale invoices without actual production of goods and supply/clearance of excisable goods. This would result, according to the respondents, in availing of Cenvat credit by buyers of such excisable goods, in other parts of the country, without actual production being carried out and also in absence of actual receipt of goods. The respondents further claim that ....
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.... issued subsequent notification, dated 10-6-2008, aforementioned, modifying some of the clauses of the earlier notification, dated 27-3-2008, to take care of some of the grievances of the industries. The averments, so made by the respondents in their additional affidavit, more than amply demonstrate that taking into account the representations made by, or on behalf of, the industrial units, in the specified areas, some modifications have been made in the earlier impugned notification, dated 27-3-2008. Necessarily, therefore, one has to determine as to what the essential features of this subsequent notification, dated 10-06-2008, are. 61. Without entering into detailed analysis of the refund mechanism, introduced by the subsequent impugned notification, dated 10-6-2008, suffice it to point out, as already indicated at para 5 of this decision, that under the notification, dated 10-6-2008, if a representation is made by a manufacturer, in a specified areas, the jurisdictional Commissioner shall determine the actual value addition in the production of the goods and, then, refund accordingly the excise duty to the extent of value addition actually made. The determination of such....
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....rers. The averments, made in this regard, read thus : "i. It is submitted that genuine manufacturers are not likely to be affected inasmuch as they would be getting the refund of same amount under the scheme before and after the modification, because if the inputs are duty paid then the refund under the earlier scheme and modified scheme should be of the same amount." 66. The expression "genuine manufacturers are not likely to be affected" is an admission of the fact by the respondents that they are not assuring the Court (but hoping) that the refund mechanism, which they have, now, introduced, does not have any room for error and that notwithstanding the subsequent impugned notifications, 100% exemption from payment of excise duty to a manufacturer, in the specified area, would continue. Had the respondents been sure that 100% exemption for payment of excise duty would remain available to manufacturers, in the specified areas, as had been promised to them under the 1997 IPR, the respondents could have asserted, on oath, that the genuine manufacturers will not be affected by the changes in the policy. The respondents have not done so; rather, they aver, "genuine man....
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....orted in AIR 1951 SC 469. The facts giving rise to this case were, in brief thus : In the year 1865, the Government of Bombay called upon the predecessor-in-title of the Municipal Corporation of Bombay to remove old markets from a certain site and vacate the same. On the application of the Municipal Commissioner, the Government passed a resolution approving and authorising the grant of another site to the Municipality. The resolution adopted by the Government further stated, "the Government do not consider that any rent should be charged to the Municipality as the markets will be, like other public buildings, for the benefit of the whole community". Although possession of the site was made over to the then Municipal Commissioner, no formal grant was, in fact, executed as required by the relevant statute. Acting, however, on this resolution, the Municipal Corporation gave up the site on which the old markets were situated and spent a sum of Rs. 17 lakhs in erecting and maintaining markets on the new site. In 1940, the Collector of Bombay assessed the new site to land revenue and the Municipal Corporation, thereupon, filed a suit for a declaration that the order of assessment was ult....
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....nothing to do with any conduct on the part of the Corporation which can be said to have rendered the representation about non-liability to assessment of no legal effect or consequence. The invalidity of the grant does not lead to the obliteration of the representation.'' 28. Can the Government be now allowed to go back on the representation and, if we do so, would it not amount to our countenancing the perpetration of what can be compendiously described as legal fraud which a court of equity must prevent being committed? If the resolution can be read as meaning that the grant was of rent-free land, the case would come strictly within the doctrine of estoppel enunciated in Section 115 of the Indian Evidence Act. But even otherwise, that is, if there was merely the holding out of a promise that no rent will be charged in the future, the Government must be deemed in the circumstances of this case to have bound themselves to fulfil it. Whether it is the equity recognised in Ramsden's case, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power. As pointed out by Jenkins C....
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....rations of the equity and, at the same time, approving the views expressed by Chandrashekhara Aiyar, J., in Municipal Corporation of the City of Bombay (supra), that Courts must do justice by the promotion of justice and good faith as far as it lies within their power, a three Judges Bench of the Supreme Court, speaking through J.C. Shah, J., in Union of India v. Anglo Afghan Agencies, reported in AIR 1968 SC 718, held, "Under our jurisprudence, the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen." 74. The decision, in Anglo Afghan Agencies (supra), shows that the Supreme Court laid down one of the important principles of good governance, the principle being that the Government, same as any other individual, cannot be exempted from carrying out its liability, which it has incurred as a result of the representations, which it had made to ....
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....d the Court. The plea taken by the Government for not keeping to its promises were as follows :- (1) in the absence of notification under Section 4-A, the State Government could not be prevented from enforcing the liability to sales tax imposed on the petitioners under the provisions of the Sales Tax Act; (2) that the petitioners had waived their right to claim exemption; and (3) that there could be no promissory estoppel against the State Government so as to inhibit it from formulating and implementing its policies in public interest. 77. The Apex Court, in Motilal Padmapat Sugar Mills Co. Ltd. (supra), rejected all the above three pleas of the Government and observed, "The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no Consideration for the promise and the promise is not ....
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....Government were required to carry out the promise, the Court would have to balance the public interest, in the Government, carrying out a promise made to a citizen, which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine, which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government cannot, as Shah, J., pointed out, in the Indo-Afghan Agencies' case, claim to be exempt from the liability to carry out the promise "on some indefinite and undisclosed ground of necessity or expediency", nor can the Government claim to be the sole Judge of its liability and repudiate it "on an ex parte appraisement of the circumstances". If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempt from the liability and it would be for the Co....
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....ttracted to such a case, because, on the facts, equity would require that the Government should be held bound by the promise made by it. When the Government is able to show that public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest vis-à-vis the position of the one, who has altered his position, and it is the Court, which has the duty to determine which way the equity lies. 79. Clarified the Supreme Court, in unambiguous words, in Motilal Padmapat Sugar Mills Co. Ltd. (Supra), that it would not be enough for the Government merely to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. If the Government wants to resist the liability, it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exempted from the liability and it would, then, be for the Court to decide whether those facts and circumstances are such as would render it inequitable to enforce the liability against the Go....
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....being that when the statute prohibits the exercise of powers necessary for carrying out the representation made by the Government or when the overriding public interest permits the Government not keep itself within the bounds of the promise made by it, the Government has the freedom to resile from the promise made. In short, as long as, by asking the Government to keep to its promise, the Court does not force the Government to act contrary to law or against supervening public interest, the Court will not be doing anything wrong. 82. Some latter decisions of the Supreme Court, rendered in Commissioner of Commercial Taxes (Asstt) v. Dharmendra Trading Co. Ltd., reported in (1988) 3 SCC 570, M/s. Pine Chemicals & Ors. v. Assessing Authority & Ors., reported in (1992) 2 SCC 683 = 1993 (67) E.L.T. 25 (S.C.) and Pournami Oil Mills & Ors. v. State of Kerala & Anr. reported in 1986 (Supp) SCC 728 = 1987 (27) E.L.T. 594 (S.C.), make it clear that a mere claim by the Government that larger public interest permits the Government not to abide by its representation will not be enough to free the Government from the commitments that it had made, for, the Government cannot be the judge of....
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....would render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from the liability; the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. The Court would not act on the mere ipse dixit of the Government, for, the Government cannot be the judge of its own cause and it is the Court, which has to, ultimately, decide and not the Government, whether the Government should be held exempt from liability. The doctrine of promissory estoppel would apply even when the promise would, if acted upon, give rise to legal relationship in future. The doctrine of promissory estoppel would not be attracted if the promise made by the Government is barred by law. However, when the law does not bar the Government from making the promise, as might have been made by the Government, or when making of the promise itself is not contrary to law, the Government would be required to abide by the promise. The Government has to function as a cohesive bo....
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....icy decision of the Government to withdraw an incentive, when a case is governed by the doctrine of promissory estoppel, cannot be upheld merely because the Government feels it necessary to have a change in its policy. Such change in policy can, however, be allowed if supervening public interest requires that the Government be not compelled to continue to provide the incentive, which it had promised. 85. There can be no dispute, and it is correctly contended by Mr. K.N. Choudhury, learned Senior counsel, that judicial opinion has been consistent that if a person has to invoke the doctrine of promissory estoppel, it is necessary that a clear, sound and positive foundation is laid by him in the petition itself. A mere bald assertion, without any supporting material to the effect that the doctrine is attracted, because the petitioner, invoking the doctrine, has altered his position, relying on the assurances of the Government, would not be sufficient to invoke the doctrine. It is, therefore, duty of the Court to examine in a case, such as, the present one, if the petitioners have laid a clear foundation attracting the doctrine of promissory estoppel. 86. What is, howev....
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....), on examination of the writ appeals, found that inmost of the cases, there was no clear foundation in order to attract application of the doctrine of promissory estoppel inasmuch as the appellants had not indicated if they had set up their industries acting upon the incentives promised by the Government and thereby had altered their position to their detriment or had expanded the installed capacity of their respective industries to the extent of 25% as the 1997 IPR required. It was in such circumstances, and in the absence of complete supporting materials, attracting the application of the doctrine of promissory estoppel, that the Court dismissed a large number of writ appeals, but allowed the appeal, where clear foundation for attracting the doctrine of promissory estoppel had been laid. 89. Thus, the dismissal of some of the writ appeals by the Court, in Shree Ganapati Rolling Mills (supra), was on the basis of the fact that the appellants, in those appeals, had not been able to lay a clear foundation, which could attract the doctrine of promissory estoppel. The cases at hand, however, are quite different inasmuch as there are adequate pleadings and materials, in the wr....
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....conducted by the authorities concerned, revealed that payment of excise duty, through PLA and Cenvat credit, is much higher in the areas, where the two industrial policies aforementioned are in force, as against the areas, where no such incentive is available. Such higher payment of excise duty is, in the comprehension of the respondents, due to bogus production, which some unscrupulous manufacturers, according to the respondents, have been indulging in the specified areas, which are covered by the two IPRs. It is to obviate such misuse of excise duty exemption, contend the respondents, that the impugned notifications have been brought into force with the help of the policy decision adopted by the Union Cabinet in its meeting held on 22-1-2008. 93. Thus, according to the respondents, it is to arrest manipulation of the incentives, promised by the Government, that the impugned notifications have been published. Such change in policy decisions, according to the respondents, is necessitated by public interest, which must be allowed to override the interest of the manufacturers, such as, the present petitioners. It is further contended by the respondents that it was, as a matte....
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....rivate individual. 96. Logically, therefore, when the Government cannot become the judge of its own cause, it has the responsibility of not only showing that it has taken the decision to resile from its promises on the basis of some materials, but it would also remain the obligation of the Government to satisfy the Court, in this regard, by placing before it all such materials, which it had considered, so as to make the Court decide clearly as to whether the materials justify the decision, reached by the Government, to withdraw the promises, which it had made. It, of course, remains true that if, in a given case, there are two possible views and the Government has taken one of such possible views, the Court would not substitute its views in place of the views of the Government. However, to say, as contended by Mr. Choudhury, that in the present case, the Government of India has made a change in its policy decision and while the decision-making process is open to examination by the Court under Article 226, the adequacy of materials, based on which such a changed policy decision was taken, cannot be examined by the Court. To put it a little more clearly, one can say, and not ....
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....through PLA, in case of a specified product, may be 60%. Input purchased which are all excisable Excise duty Levied & paid Value of finished goods Excise duty payable finished goods Value addition Excise duty to be paid by the manufacturer on finished goods Excise duty on value addition Amount to be paid from PLA 0% of payment from PLA to total duty (a) (b) (c) (d) (e) (f) = (d)-(b) (g) (h) = (d)-(b) (i) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) 200 20 500 50 300 50-20=30 30 50-20 = 30 30*100/50 = 60 99. For the same industry and for the same specified product, the percentage of payment, through PLA, may be 90%, when some of the inputs purchased are either non-excisable or purchased from SSI Units. The following chart reflects a case, where excise duty paid, through PLA, on the same product, was 90% of the total excise duty. Input purchased which are all excisable Excise duty Input purchased on non-excisable or purchased from SSI unit Sale value on finished goods Excise duty on finished goods Amount available for Cenvat credit ....
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....payments made, through PLA, between the manufacturer of a given product in North-Eastern region vis-à-vis the manufacturer of the same product in other parts of the country (where 1997 IPR is not applicable) reflects bogus production. The respondents, however, do not claim, on oath, that this assessment, which they have made, is correct. 104.No wonder, therefore, that the respondents, having by virtue of the notification, dated 27-3-2008, assessed and fixed specified rates, for each of the items, chose to modify the same by subsequent notification, dated 10-6-2008, and prescribed special rates. However, the special rate has been made available only when the manufacturer finds that his actual value addition in the production or manufacture of his goods is, at least, 115% of the rate specified in the table in the said notification. Thus, those manufacturers, whose actual value addition would be less than 115%, will, eventually, receive less than the actual amount of excise duty, which they may pay on their products, because such a manufacturer would not be covered by the impugned notification, dated 10-6-2008. 105. Referring to MRF Ltd. v. Asstt. Commissioner (Asses....
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....nterest in a person to claim enforcement of his right. The protection of legitimate expectation does not, however, require fulfilment of the expectation, where such fulfilment would be against overriding public interest. Hence, when a person's legitimate expectation is not fulfilled, while taking a decision, the decision maker, when questioned in the Court, must be able to justify the denial of such expectation by showing some overriding public interest, [See Union of India v. Hindustan Development Corporation, reported in (1993) 3 SCC 499]. 109. The logical extension of the above principle is that it is implicit in Article 14 that a change in policy by the Government is made fairly and must not give the impression that the change, in the policy, was arbitrary. The basic requirement of Article 14 is fairness in every State action. This, in turn, implies non-arbitrariness and obliges the State to act in a manner, which cannot be regarded as arbitrary. If the State has to avoid arbitrariness in its action, it must show that its decision is based by taking into account all relevant factors and by keeping excluded from consideration all such factors, which were irrelevant. Cons....
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....stors or a substantial number of the investors have been indulging in bogus production. 112. The impression that the State is conscious of the fact in the facts of the present case, it cannot reduce the incentives promised under the two IPRs is reinforced by the fact that it is scared to admit that the incentives promised had been reduced and it is for this reason that it claims, though not boldly, that honest investors would not be adversely affected. The decision to withdraw the concession by the Government is, to say the least, baffling. While the Government makes the quantum of excise duty paid by those industrial units, which fall outside the relevant IPR, as the basis to conclude that the excess quantum of payment of excise duty is due to bogus production, the Government, amazingly enough, does not assert, on oath, or assures the Court, or prove before the Court, that their basis is correct. The correctness of this basis could have been taken as proved, had the State asserted, on oath, as rightly complained by Dr. Saraf, that the quantum of excise duty paid by the industrial units, which fall outside the two industrial policies, is the correct quantum of excise duty p....
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....case (supra), which Mr. Goswami has relied upon is, I find, quite relevant. In U.P. Power Corporation Ltd's case (supra), the UP State Electricity Board, which subsequently became UP Power Corporation, framed its tariffs allowing some hill development rebates to new industrial units for a period of five years. The concession, so granted, was continued by issuing further notifications. Subsequent thereto, the percentage of rebate was reduced. This reduction, in the percentage of rebate, was challenged as arbitrary and barred by the principle of promissory estoppel. As the High Court allowed the writ petitions, the Corporation carried the matter to the Supreme Court. One of the justifications offered was that there was large scale theft of energy. Merely because of the fact that there were large scale theft of energy, the State cannot persuade the Court to hold that revocation of concession was in public interest; so observed the Apex Court. 115. Clarified the Supreme Court, in U.P. Power Corporation Ltd's case (supra), that since the benefit was given to the units in the hill areas, there should have been overwhelming evidence to show some mala fide on the part of the invest....
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....discharged their onus of proving that there was overriding public interest in issuing the impugned notifications. A Government has no obligation to make promises; but if it chooses to make promise, it cannot withdraw the promise merely because it does not have desirable wherewithal to ensure that its enforcement machinery functions efficiently and properly. For the failure of its own machinery to check bogus production, a State cannot punish the bona fide investors. Acceptance of such a logic by a Court of law would shake not only the credibility of the Government as an executive, but also the Courts as the protectors of the rights and legitimate expectations of fair decision by every person in this country. 118. Reminds the Supreme Court, in U.P. Power Corporation Ltd's case (supra), that in this 21st century, when there is global economy, the question of faith is very important. When the Government offers certain benefits to attract the investors, it cannot withdraw such benefits, for, such action of the State would shake the faith of the people in governance. The relevant observations, made in this regard, read : "35. In this 21st century, when there is global ec....
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...., in the other, the exemption is granted, not because of promises made but because of the fact that the State considers granting of such exemption necessary to meet exigency of a situation in public interest. In the case of the former, there is no inducement; whereas, in the latter case, there is an element of inducement. When there was inducement, the State can resile from the promises made by it only when it establishes, to the satisfaction of the Court, that overriding public interest so requires. Only when such a nature of public interest is established by the State can the State be allowed to withdraw the concessions, which might have lured the investors. However, even in the case of statutory exemption, which was granted by the State not pursuant to any promises made but under its sovereign power, the State, if it choses to withdraw exemption, has the obligation to satisfy the Court that its act of withdrawing the concession is fair and just. 121. Let me, now, turn to the decision, in Kaniska Trading v. Union of India, reported in (1995) 1 SCC 274 = 1994 (74) E.L.T. 782 (S.C.), which the respondents have relied upon, to show that an exemption granted does not vest any....
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....ific finding, recorded in Kaniska Trading (supra), was that the Government had presented sufficient materials before the Court to show that it was, in the larger public interest, that the exemption be withdrawn. It was, thus, on the basis of twin factors, namely, that there was no promise held out by the notification, in question, and also that larger public interest justified the withdrawal of exemption, that the decision, in Kaniska Trading (supra), was rendered. 124. The decision in Shirjee Sales Corporation v. Union of India reported in 1997 (89) E.L.T. 452 (S.C.) = (1997) 3 SCC 398, relied upon by Mr. Choudhury, is a case, wherein the correctness of the decision in Kaniska Trading (supra), came to be re-examined by a Bench of three Judges of the Apex Court and the decision, reached in Kaniska Trading (supra), came to be affirmed therein. In Shrijee Sales Corporation (supra) too, the specific finding of the Court was that 'there is a supervening public interest and hence it should not be mandatory for the Government to give a notice before withdrawing the exemption' and it was, in these circumstances, that the Court, in Shrijee Sales Corporation (supra), declared that t....
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....e not designed or issued to induce the appellants to import PVC resin; hence, strictly speaking, the notifications could not have been said to have extended any 'representation', much less a 'promise', to anyone enabling him to invoke the doctrine of promissory estoppel against the State. It must, therefore, be held, in the light of the decision, in Pawan Alloys & Casting Pvt. Ltd. (supra), that the decision, in Kaniska Trading (supra), had clearly proceeded on the basis that by issuing the earlier notification, under Section 25 of the Customs Act, ho promise had been held out to any of the importers that the notification's life would not be curtailed earlier. 129. The Apex Court has, however, clarified, in Pawan Alloys & Casting Pvt. Ltd. (supra), that the decision, in Kaniska Trading (supra), is not an authority for the proposition that even if a claim of exemption from import duty was resorted to in public interest by way of an incentive for a class of importers, though such public interest continued to subsist during the currency of such exemption notification, and even though the promisee, for whose benefit such exemption was granted, had changed their position, relyin....
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....ore the status quo ante. The Court, therefore, in Pawan Alloys & Casting Pvt. Ltd. (supra), held, by invoking the doctrine of promissory estoppel, the Government bound by the promises that it had made. 134. What follows from a close and combined reading of the decisions in Kaniska Trading (supra), Shreeji Sales Corporation (supra) and Pawan Alloys & Casting Pvt. Ltd. (supra), is that where the Government makes representations inviting investments against incentives promised by it and a person acts on such a promise, yet the Government may, even where no overriding public interest so demands, resile from such promise by giving reasonable notice or opportunity to the premise to resume his original position; but if it is impossible for the promisee to resume his original position or restore status quo ante, the promise would become final and irrevocable. To put it differently, the Government can, even in the absence of supervening public interest, resile from its promise until such a stage is reached, when the promise becomes irrevocable due to the fact that the promisee cannot resume his original position or that the status quo ante cannot be restored. In the present cases, i....
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....Kaniska Trading (supra), is not an authority for the proposition that even if a claim of exemption from import duty was resorted to, in public interest, by way of an incentive for a class of importers and even though such public interest continued to subsist during the currency of such exemption notification and that promisee, for whose benefit such exemption was granted, had changed their position, relying on the said exemption notification, it could be still withdrawn before the time mentioned therein even though public interest did not require the said exercise to be undertaken and even though there were subsisting equities in favour of the promisee. The Apex Court, in Pawan Alloys (supra), also distinguished its decision, rendered in Kaniska Trading (supra), by holding that in Kaniska Trading's case (supra), exemption notification was issued in exercise of statutory powers vested in the Government and the Government could exercise such powers, from time to time, in public interest and that the notification, in Kaniska Trading (supra), was in exercise of sovereign taxing power of the State and had created no relationship between the authority, which issued the notification, and ....
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....not sustainable. The case of Dai-Ichi Karkaria (supra), therefore, does not at all help the stand of the respondents; rather, the case of Dai-Ichi Karkaria (supra) helps the case of the petitioners, for, what the Supreme Court has laid down, in Dai-Ichi Karkaria (supra), is that when exemption is granted by the Government, in exercise of its sovereign power, by taking resort to statutory provisions and not as a result of any promises made, such exemption, promised by the Government, would not be allowed to be withdrawn unless it is proved by the government that public interest requires such withdrawal of the promise made, while issuing the statutory notification, that such exemption would continue for a specified period. The relevant observations made, in paragraph 6 of Dai-Ichi Karkaria (supra), reads as under : "6. The law on the matter is now well settled that even in respect of exemptions that may have been made by the Government the doctrine of promissory estoppel will not be applicable if the change in the stand of the Government is made on account of public policy. This position has been explained in detail by this Court in Kaniska Trading and reiterated in Shrijee S....
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....s. Justifications offered, to say the least, is far too naive to be accepted. The reasons set out does not carry the case of the State Government further at all." 141. From the decision, rendered in Dai-Ichi Karkaria (supra), what also becomes transparent is that even in a case of statutory exemption, granted by the government, in exercise of its sovereign power and not pursuant to the promise made in any industrial policy, the government shall take into account all relevant factors, while issuing the notification, in this regard, and if it is not so done, the withdrawal would be treated as not subserving the public interest. 142. State of Rajasthan v. J.K. Udaipur Udyog, reported in (2004) 7 SCC 673 is yet another case, which Mr. Choudhury, learned Senior counsel, for the respondents, relies upon. In J.K. Udaipur Udyog (supra), on examination of the State Government's power to withdraw or modify the exemption, granted under Section 15 of the Rajasthan Sales Tax Act, and Section 8(5) of the Central Sales Tax Act, 1956, the Court held that the State Government is competent to modify or revoke the grant of exemption, if public interest so require, unless the governmen....
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....ourt is, now, bound to examine if it is the supervening public interest, which has compelled the Government to issue the impugned notifications. For determination of the question aforementioned, it is imperative that this Court is satisfied by the respondents' contention that all the factors, which were relevant in the context of the present cases, had been taken into account by the Government at the time of issuing the impugned notifications, and, at the same time, the Government had eschewed, while taking the decision, all such factors, which were irrelevant. If, on the basis of the materials placed before this Court, the Court comes to the conclusion that there is overriding public interest in favour of withdrawing the exemption promised and guaranteed, the writ petitions have to be dismissed. However, if the finding of the Court is otherwise, then, the writ petitions have to be allowed. 144. Turning to the case of State of Tamilnadu v. Sun Paper Mills, reported in (1998) 9 SCC 693, which the respondents rely upon, it may be pointed out that this case too is a case, where the exemption was granted not due to a promise made in an industrial policy, but in exercise of the ....
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.... Court finds that the Government has reasonably established its case, the government would not be held bound by the promise. Embedded in the decision rendered, in Dharmendra Trading Company (supra), is the reiteration by the Apex Court that when supervening public interest requires the government to resile from the promise, the Government must be allowed to do so. However, while examining the Government's plea of misuse of the concession granted, or that undue advantage was being taken of the concessions granted, the Court must bear in mind that mere misuse of the concessions, granted under a policy, may not be, in a given case, regarded as a circumstance establishing supervening public interest unless the Government is proved to have taken all relevant factors into account. 147. I have already pointed out above that R.C. Tobacco Pvt. Ltd. v. Union of India, (2005) 7 SCC 725 = 2005 (188) E.L.T. 129 (S.C.), is a case, where the finding of the Court was that the manufacturers of cigarette, as a class, had not been conducting themselves in a manner, which would have sub-served the objectives with which the relevant industrial policy had been announced. In such circumstances, t....
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....d not effectuate the objectives of the industrial policy, the Apex Court upheld the Government's decision to withdraw the concessions. The relevant observations, made in R.C. Tobacco Pvt. Ltd. (supra), read as under : "26. The exemption notifications were issued under Section 5-A of the Central Excise Act, 1944 as a delegate of Parliament. In a cabinet form of Government, the executive is expected to reflect the views of the legislature. It would be impossible for the legislatures to deal in detail and cater to the innumerable problems, which may arise in implementing a statute. When the power of subordinate legislation is conferred by Parliament in certain matters it can only lay down the policy and guidelines and expect that what is done by the executive is in keeping with such policy. It does of course retain control over its delegate and can exercise that control by repealing the action of delegate. Consequently, if the executive has failed to carry out the object of Parliament, such control may be exercised by introspectively enacting what the executive ought to have achieved." 149. In the present case, unlike R.C. Tobacco (supra), the respondents have not been....
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....msp;While considering the question, so posed, it is important to bear in mind that a Government, perceived under the Constitution of India, runs as an organized, harmonious, orderly, coherent, systematic and homogenous body and it functions on the principles of collective responsibility. Two different Departments of a Government cannot adopt policies, which are contrary to, and inconsistent with, each other, for, the citizens must know what the policy of the Government concerned. The Government must, therefore, as warranted by the Constitution, behave with such responsibility as is conceived under the Constitution and eschew such a course, which would make its functions impossible to be carried out in accordance with the provisions of the Constitution, for, collision between two departments of a State will reveal arbitrary manner of functioning of the Government and such arbitrary functioning will jeopardize rule of law and make a mockery of the Constitution, which perceives a coherent functioning of various organs or departments of the Government in the spirit of collective responsibility. Bearing in mind this subtle, but definite pre-requisite for effective functioning of the Gov....
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.... Steels Ltd. (supra), is a decision rendered in a different fact situation. 153. In Suprabhat Steels Ltd. (supra), the State Government issued notification, on 4-4-1994, in exercise of the powers under Section 7 of the Bihar Finance Act, where under the old Industrial Units, which had started production prior to 1-4-1993, but whose investments in the plants and machinery had not exceed Rs. 15 Crores on 1-4-1993, were denied the benefit of sales tax exemption on the purchase of raw materials. In other words, the Industrial Units, which were, otherwise, entitled to the sales tax exemption on the basis of the industrial policy of 1993, were denied the exemption on the basis of the fact that those industries had already taken some benefits under the prior industrial policy of 1986. The notification, dated 4-4-1994, aforementioned, issued by the State Government was challenged before the High Court and the High Court struck down the notification. The State of Bihar carried the matter to the Supreme Court. While dealing with the said notification, the Apex Court observed and held as under :- "7. Coming to the second question namely, the issuance of notification by the Sta....
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....s Ltd. (supra), laid down was that when a State Cabinet makes a promise by virtue of its industrial policy, no department of such a State Government, in exercise of its statutory powers, either refuse to give effect to the industrial policy declared by the State or publish a notification, which sets at naught the industrial policy, which was approved, decided and announced by the State Government. To the facts of the case at hand, as already indicated above, the decision, in Suprabhat Steels Ltd. (supra), has no application inasmuch as the 1997 IPR as well as the 2007 IPR stand modified not by one of the Departments of the Union Government alone, but by the Union Government as a whole. Whether the Union Government could have done so or not is a question, which I would deal now. 155. Notwithstanding the fact that the decision, in Suprabhat Steels Ltd. (supra), is not applicable to the facts of the present case, it needs to be noted, as already discussed above, that the respondents have not been able to show any supervening public interest, which could warrant reduction in the quantum of refund of excise duty. 156. As already indicated above, in the present case, when....