TaxTMI 
TaxTMI 
2018 (4) TMI 585
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to be reflecting the common stand of the respondents to the challenge, with consent of both sides, we dispose of these writ petitions by this common Judgment and Order. 3. The writ petitions filed by MJ Juris and particularly Writ Petition No.3142 of 2017, treated as the lead matter, seeks to question Clause of Section 140(3) of the Central Goods and Services Tax Act, 2017 ("CGST Act" for short). 4. The petitioner in this petition states that it is a company registered under the Companies Act and is engaged in the manufacture of Excavators, Loaders, Compactors, etc., falling under Chapter Heading 8429. The petitioner has its manufacturing facility/place of business at PlotsA & B, Talegaon Floriculture & Industrial Village, Ambi Navlakh - Umbhare, Talegaon, Dabhade, Pune410 507 from where it supplies machines manufactured by it to its dealers located in various parts of the country. The petitioner's manufacturing facility/factory was registered under the erstwhile Central Excise Act and the petitioner paid central excise duty on clearance of such machines from its factory. The petitioner has a Duty Paid Depot in the State of Maharashtra at PlotsA & B of the same village....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng effect, the CGST Act provides for the input tax credit eligibility in terms of these transitional provisions. Section 140(1) of the CGST Act inter alia provides that a manufacturer will be entitled to carry forward the closing balance of CENVAT credit, subject to certain conditions. Further, Section 140(3) of the CGST Act inter alia allows a registered trader to avail input tax credit of goods held in stock as on 172017, subject to certain conditions. It is submitted that upon a plain reading of the provisions and particularly Clause (iv) of subsection (3) of Section 140, the input tax credit of stock of goods can be availed only when such goods are purchased after 3062016. A trader or a depot of a manufacturer was not entitled to avail credit as the CENVAT Credit Rules, 2004 allows credit availment only by a manufacturer or a service provider. However, there were provisions through which an importer could pass on the credit of duty paid by registration as first stage dealers. By the GST and particularly by virtue of the provisions contained in Section 140(1) and Section 140(3) of the CGST Act, a situation of inequality amongst the manufacturer and the depot/trader as far as the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 10. This challenge which we have summarised in the foregoing paragraphs is sought to be elaborated in the grounds set out in the Memo of the Petition. 11. Pertinently, there is no affidavit in reply to this petition. 12. The other petition being Writ Petition No.3212 of 2017 is by a petitioner having stock of machines who is further styled as a trader. The said petitioner also raises an identical challenge. Then we have Writ Petition No.3187 of 2017 wherein the petitioner before this Court is a trader. The Writ Petition No.3186 of 2017 is also by a Private Limited Company and carrying on business of trading. This is also an entity registered under the Maharashtra Value Added Tax Act, 2002. 13. The other petition being Civil Writ Petition No.12378 of 2017 is filed by a petitioner who is a Private Limited Company registered under the Companies Act, 1956 in the State of Karnataka. It is also a registered dealer under the Central Excise Rules, 2002 and having its office at Pune. This company carries on business as a dealer. The petitioner says that it is engaged in the business of dealing, stocking, importing and supplying wide and comprehensive range of carbon alloy and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on (3) of Section 140, as unconstitutional, ultra vires Articles 14 and 19(1)(g) of the Constitution of India and unenforceable qua the first stage dealer. 16. To this petition, an affidavit in reply has been filed after notice of the same was served on the Attorney General. The affidavit is filed by the Commissioner of Central Tax (GST), Pune1. 17. It is stated that the petitioner has challenged a policy decision taken by the Parliament which is not subject to judicial scrutiny. It is stated that the challenge is completely misconceived and untenable. It is stated that in the Value Added Tax, there is a restriction on availing of such credit. The same cannot be provided on grounds of hardship or equity. The impugned provisions clearly restrict the CENVAT credit for the stock lying in the warehouse, as on 3062017, only to the extent where the invoices or other prescribed documents issued are not earlier than twelve months preceding the appointed date, namely, 172017. Thus, a reasonable period of twelve months has been provided for availing of credit for such invoices or other prescribed documents. The writ petition is full of erroneous submissions and grounds. The decision ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....credit, as enlisted in Rule 4 of the CENVAT Credit Rules, 2004, and particularly subrule (7) thereof, would indicate that CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in Rule 9 is received. The Fifth proviso to this subrule is being relied upon but without any reasonable basis. It is submitted by the learned Senior Counsel that we should see these provisions in the backdrop of the object and that is to avoid the cascading effect. We must place reliance on the provision consistent with the object and purpose. It is submitted that merely because a new regime has been brought into force does not mean all the existing rights and conferred under the statute prevailing prior to the new law coming into force should be taken away. In other words, such of the restrictions and conditions as are now imposed cannot be said to be achieving the object and purpose or rather they have no nexus with the object sought to be achieved. 20. It is argued before us and with some vehemence that this condition and which is sought to be imposed ought to be viewed with reference to the time when the g....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the goods purchased by them either from the manufacturer or importer. The petitioner being the first stage dealer is termed as an assessee within the meaning of Rule 2(c) of the Central Excise Rules, 2002. Thus, a registered person who stores excisable goods is also termed as an assessee. He can pass on the credit to the customers. After inviting our attention to Rule 10 of the Central Excise Rules, 2002, it is urged that the petitioner is required to maintain the inventory of open stock, goods purchased, goods removed and closing stock along with duties payable on the said goods. This was maintained in the format of RG 23D. Further, they were also filing quarterly returns regularly as per Rule 12 of the Central Excise Rules, 2002. Further, it is submitted that the provisions of Rule 11 of the Central Excise Rules, 2002, for removal of goods from a factory or a warehouse under an invoice, shall apply mutatis mutandis to the first stage dealer. It is urged that as a first stage dealer, the petitioner had been purchasing various goods and passing on the credit of duty paid on the said goods to the customers by issuing invoice under the provisions of Rule 12 of the Central Excise Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ances, taking away such a right would be violative of the mandate of Article 300A of the Constitution of India. 25. Then it is urged that the first stage dealers were specifically eligible to pass on the CENVAT credit to their customers by issuing invoices with excise duty as per Rule 11 of the Central Excise Rules, 2002. Once they were so entitled, the prohibition on taking the credit for the purchases made prior to one year preceding the appointed day would wipe out the entire CENVAT credit on the goods which had been purchased/imported. Consequently, the petitioner's eligibility to pass on the CENVAT credit of the goods purchased/imported prior to 172016 is effaced. 26. The other argument of Mr. Raghuraman is that the impugned provisions are hit by the doctrine of promissory estoppel. It is claimed that there was an entitlement to transfer the credit of all goods purchased by the petitioner from time to time once they were registered under the Central Excise Law. If that right of the petitioner, as enumerated above, is taken away only on the strength of the transitional provision, then, even the principle of promissory estoppel would come into play. For all these reaso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en the wisdom thereof cannot be questioned by this Court. Mr. Anil Singh would submit that this matter is of a concession or relaxation. Nobody can claim a vested right in such measures evolved by the Legislature. It is entirely for the Legislature to make a provision and restrict the benefit or concession or relaxation either to a class of persons or even if it extends to all, it can restrict the term or period or limit up to which the concession can be availed of. In the instant case, the period of twelve months is provided as a safeguard against potential misuse of availment of credit during the transition period by placing restriction on availing credit based on documents which are not very old. There is no concept as equality in Tax matters. Apart therefrom, similar restrictions had been in place on the manufacturers/service providers under the Firth proviso to subrule (7) of Rule 4 of the erstwhile CENVAT Credit Rules, 2004. It is also argued by Mr. Anil Singh that when in a Value Added Tax there was a restriction on availing of credit in law, now, there is a substantive provision in the new law. However, it is only the transitional provision which inserts or incorporates the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed. 32. Mr. Raghuraman sought to rejoin to these submissions of the learned Additional Solicitor General by urging that the input tax credit under the GST is an integral part of the GST law. It cannot be termed as a concession by the Government. Further, the attempt is to harmonise the indirect tax structure across the country. In the Constitution 122nd Amendment Bill, 2014, the Objects and Reasons clearly set out that it is intended to remove the cascading effect of taxes and to bring out a nation wide taxation system. Therefore, there is a clear intention to have input tax credit as a nationwide objective at the Constitutional level. Hence, all the decisions prior to the CGST would not be applicable to the extent they term this as a concession. In this regard, he would read out certain paragraphs from the Statement of Objects and Reasons and heavily rely upon the principle that assuming, but without admitting, that input tax credit was in the nature of concession granted by the Government, but such concession has already been availed of by the petitioners on all the goods held in stock as on 3062017. The concession of input tax credit has been availed and the same has crystall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riction for dealers in the Maharashtra GST Act, 2017 while the first stage dealer registered under the Central Excise Act is being discriminated by Section 140(3)(iv) of the CGST Act, 2017. In such circumstances, the plea raised of revenue loss or economic policy does not appear to be consistent. 37. For these reasons, it is submitted by Mr. Raghuraman that the writ petitions be allowed. 38. For properly appreciating the rival contentions, we must refer to the Central Goods and Services Tax Act, 2017. 39. The same is an Act to make a provision for levy and collection of tax of interState supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto. Chapter I contains preliminary provisions. The Section 2 is a definition section and unless the context otherwise requires, the definitions would operate. By Section 2, Clause (21), the term "central tax" is defined to mean central goods and services tax levied under Section 9. The expression "existing law" is defined in Section 2, Clause (48) to mean any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (5) The Government may, on the recommendations of the Council, by notification, specify c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed: Provided also that the recipient shall be entitle....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... input tax credit in the new regime is unconditional or without any restriction. Thus the conditional input tax credit, as can be availed of and strictly within the four corners of the statute, particularly the substantive provisions, is not questioned nor the validity and legality of these provisions put in issue. Pertinently, by Section 17 apportionment of credit and blocked credits is dealt with and by Section 18, the availability of credit in special circumstances is provided. There as well as subsection (1) of Section 18 says that it is subject to such conditions and restrictions as may be prescribed. By subsection (2) of Section 18, it is evident that a registered person shall not be entitled to take input tax credit under subsection (1) in respect of any supply of goods or services or both to him after the expiry of one year from the date of issue of tax invoice relating to such supply. By Section 19, taking input tax credit in respect of inputs and capital goods sent for job work is dealt with and by Section 20, the manner of distribution of credit by Input Service Distributor is provided for. The manner of recovery of credit distributed in excess is set out in Section 21. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l registration being cancelled are set out in subsection (3) of Section 139. Such person shall be treated as not liable to registration under Section 22 or Section 24. 45. Then comes Section 140 with all its subsections and that reads as under: "140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed: Provided that the registered person shall not be allowed to take credit in the following circumstances, namely: (i) where the said amount of credit is not admissible as input tax credit under this Act; or (ii) where he has not furnished all the returns required under the existing law for the period of six months immediately preceding the appointed date; or (iii) where the said amount of credit relates to goods manufactured and cleared under such exemption notifications as are notified by the Government. (2) A registered person....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of services, is not in possession of an invoice or any other documents evidencing payment of duty in respect of inputs, then, such registered person shall, subject to such conditions, limitations and safeguards as may be prescribed, including that the said taxable person shall pass on the benefit of such credit by way of reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be prescribed. (4) A registered person, who was engaged in the manufacture of taxable as well as exempted goods under the Central Excise Act, 1944 or provision of taxable as well as exempted services under Chapter V of the Finance Act, 1994, but which are liable to tax under this Act, shall be entitled to take, in his electronic credit ledger, (a) the amount of CENVAT credit carried forward in a return furnished under the existing law by him in accordance with the provisions of subsection (1); and (b) the amount of CENVAT credit of eligible duties in respect of inputs held in stock and inputs contained in semifinished or finished goods held in stock on the appointed day, relating to such exempted goods or services, in accordance with the pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowed to take, in his electronic credit ledger, credit of the amount of CENVAT credit carried forward in a return, furnished under the existing law by him, in respect of the period ending with the day immediately preceding the appointed day in such manner as may be prescribed: Provided that if the registered person furnishes his return for the period ending with the day immediately preceding the appointed day within three months of the appointed day, such credit shall be allowed subject to the condition that the said return is either an original return or a revised return where the credit has been reduced from that claimed earlier: Provided further that the registered person shall not be allowed to take credit unless the said amount is admissible as input tax credit under this Act: Provided also that such credit may be transferred to any of the registered persons having the same Permanent Account Number for which the centralised registration was obtained under the existing law. (9) Where any CENVAT credit availed for the input services provided under the existing law has been reversed due to nonpayment of the consideration within a period of thr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able under section 66B of the Finance Act, 1994, in respect of inputs and input services received on or after the appointed day." A bare perusal thereof would indicate that transitional arrangements for input tax credit are set out therein. Pertinently, subsection (1) deals with a registered person, other than a person opting to pay tax under Section 10. He shall be entitled to take, in his electronic credit ledger, the amount of CENVAT carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law in such manner as may be prescribed. The proviso to subsection (1), however, says that the registered person shall not be allowed to take credit in the circumstances set out therein. By subsection (2), a registered person, other than a person opting to pay tax under section 10, his availment of input tax credit of the unavailed CENVAT credit in respect of capital goods is dealt with. Pertinently, there as well, the proviso imposes conditions. 46. None of these subsections are challenged and by the class of persons covered therein. They have understood that the transitional arrangemen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nths immediately preceding the appointed day. Pertinently, the transitional provisions relating to job work, miscellaneous transitional provisions and other provisions of the law are not questioned. There are various other compliances which have to be made by the law which is now brought in and equally they are not questioned. In this behalf a reference can usefully be made to Section 140(4), (5), (6) and pertinently the Clauses of subSection 6 which contain similar conditions. The persons covered therein are not aggrieved nor are complaining about the conditions or restrictions all of which are to be found in a Taxing Statute. Secondly, they are inserted in a transitional provisions. Thirdly, while judging their legality and validity we are bound by the settled legal principles. In the case of P. M. Ashwathanarayana Setty and Others vs. State of Karnataka and Others reported in AIR 1989 SC 100 and in the case of Kerala Hotel and Restaurant Association and Ors. vs. State of Kerala and Ors., reported in AIR 1990 SC 913 the principles are summarised as Under: AIR 1989 SC 100 "30. The problem is, indeed, a complex one not free from its own peculiar difficulties. Thou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (hereafter referred to as the repealed Acts) are hereby repealed. (2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (hereafter referred to as "such amendment" or "amended Act", as the case may be) to the extent mentioned in the subsection (1) or section 173 shall not (a) revive anything not in force or existing at the time of such amendment or repeal; or (b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts: Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notificatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be asserted, will affect adversely the larger public interest that cannot be permitted to be enforced. {See in this context the decision of the Hon'ble Supreme Court reported in (2004) 1 SCC 663 [Howrah Municipal Corporation & Others v. Ganges Rope Co. Ltd. & Others]}. In this context, a useful reference can be made to the Judgment of the Hon'ble Supreme Court in the case of Kanya Ram and Others vs. Rajender Kumar and Others reported in AIR 1985 SC 371. The observations in paragraph 10 are very pertinent and the same reads as under: "10. Much reliance was placed on the decision of this Court in Rameshwar's case, supra, but it is clearly distinguishable on facts. There, the Court was dealing with a case where the tenants who had applied for purchase of their holdings under Section 18(1) of the Act had in compliance with the order made by the Prescribed Authority in their favour, made the requisite deposit of the first instalment of the purchase price as required by Section 18(4)(a) and thereupon were deemed to have become owners of the lands by reason of the legal fiction contained in Clause (b) thereof, The Court was therefore dealing with a case where the tena....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... claimed without any restriction or conditions. Once under the existing law no such preconditions were imposed for the enjoyment or availment of that right, then, the present regime which seeks to impose a condition which is unreasonable and arbitrary, therefore, would make the statutory provision violative of Articles 14 and 19(1)(g) of the Constitution of India. 53. What is asserted before us is a right and flowing from the provisions of the CENVAT Credit Rules. 54. Before that we must also refer to the Central Excise Rules, 2002, copy of which has been handed under a compilation by Mr. Raghuraman. The Central Excise Rules are referable to Section 37 of the Central Excise Act, 1944. These Rules precede the Central Excise (No.2) Rules, 2001. By these Rules and after the definitions what is contemplated is appointment and jurisdiction of Central Excise Officer, duty payable on removal, date for determination of duty and tariff valuation, and by Rules 6, 7 and 8, assessment of duty, provisional assessment and manner of payment. The further Rule and which is styled as Rule 8A enables payment in respect of specified goods on which excise duty has been imposed with effect from 13....
X X X X Extracts X X X X
X X X X Extracts X X X X
....then follows and which is relied upon is Rule 4 of these Rules. This Rule sets out conditions for allowing CENVAT credit. One of the conditions and which is heavily relied upon by the learned Additional Solicitor General is to be found in subrule (7) of Rule 4. It is, therefore, evident that the fifth proviso to subrule (7) of Rule 4 would indicate that availment of CENVAT credit is conditional upon the satisfaction of all the provisos. Thus, there is a period stipulated for availment of this CENVAT credit. In addition thereto, there are conditions imposed for the availment. 56. To our mind, therefore, the learned Additional Solicitor General is right in his contention that a CENVAT credit is a mere concession and it cannot be claimed as a matter of right. If the CENVAT Credit Rules under the existing legislation themselves stipulate and provide for conditions for availment of that credit, then, that credit on inputs under the existing law itself is not a absolute but a restricted or conditional right. It is subject to fulfilment or satisfaction of certain requirements and conditions that the right can be availed of. It is in these circumstances that we are unable to agree with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessees argued that the Rule should be quashed because MODVAT credit lying in balance with the assessee as on 1631995 represents a vested right accrued or acquired by the assessee under the existing law and such right is sought to be taken away by the impugned Rule. The Central Government has no power under Section 37 of the Central Excise Act, 1944 or any other provision thereof to frame such a Rule. The impugned Rule is arbitrary and unreasonable as the same has been framed without due application of mind to the relevant facts and it has been exercised on the basis of nonexistent facts or which are patently erroneous. Then, the argument was that Section 37 of the Act does not enable the Central Government to frame a Rule enabling the lapsing of the balance in MODVAT account and is, therefore, ultra vires the rule making power. The argument of the other side was that the impugned Rule is only a part of the scheme providing for giving concessions under the taxation enactment. That cannot be continued for all times to come and could be put to an end at any time. 60. In para 5 of this Judgment, the introduction was traced and it was held that if on the inputs the assessee had a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he original tax invoice and availing the input tax credit, the vendor gave a discount and purchase credit note was issued for a lesser price. The dealer took into account the price which it had paid to the vendor after adjusting the discount that was subsequently given to the dealer to arrive at net cost and adding VAT which was limited to the vendors by the dealers. The goods were resold at a lesser price. After the introduction of subsection (20) in Section 19 and once again, which has a nonobstante clause, the obligation was to reverse the input tax credit. In other words, if the registered dealer sold goods at a price lesser than the price of the goods purchased by him, he had to reverse the amount of input tax credit over and above the output tax of those goods. It was such an issue which was considered and in considering that the definitions and substantive provisions of the Tamil Nadu Value Added Tax Act, 2006 were referred. The Supreme Court noted that input tax credit is a form of concession provided by the Legislature. It is not permissible to all kinds of sales and certain specified sales are specifically excluded. The concession of input tax credit is available on certa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng arbitrary in the legislation, then, we cannot take assistance of this principle. This is not a case where Article 14 can be invoked on the principle as is projected by Mr. Raghuraman. 64. He had also argued that just as equals cannot be treated as unequal, treating unequals equally also would be violative of the mandate of this Article. We are not concerned with such a situation here for the simple reason that in the transitional provisions possibly every person and who is going to be affected by the movement or transition to the new regime is included. In this transitional phase, some of the benefits and concessions derived under the existing law are protected but consistent with the conditions already imposed under the existing Law for their enjoyment. In these circumstances, we do not see how the principle as enunciated in Shayara Bano will be of any assistance. 65. Equally, we do not think that there is any merit in the argument that the Clause (iv) of SubSection 3 of Section 140 of the GST Act violates the principle of promissory estoppel. As is rightly contended before us, there cannot be a estoppel against a statute. Apart therefrom, we do not find any promise which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make." There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspect including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d been exempted from sales tax vide Notification No. ST 1149/X-802 (33)- 51 dated April 6, 1959 could not operate as an estoppel against the State Government and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the Revenues of the State which are required for execution of the plans designed to meet the ever increasing pressing needs of the developing society. It is now well settled by catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers." Prof. S.A. De Smith in his celebrated treatise "Judicial Review of Administrative Action", 3rd Edn. at p.279 sums up the position thus : "Contracts and Covenants entered into by the Crown are not to be construed as being subject to implied terms that would exclude the exercise of general discretionary powers for the public good: On the contrary they are to be construed as incorporating an implied term that such powers remain exercisable. This is broadly true of other public authorities also. But the status and functions of the Crown in this regard are of a higher order. This Crown cannot be allowed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing power under Section 157, assuming that a legislative practice can be read as a limitation." 17. In M.P. Sugar Mills case (supra) it was observed that the doctrine of promissory estoppel would not apply in the teeth of an obligation or liability imposed by law and that there can be no promissory estoppel against the exercise of legislative power. ..... 20. The facts of the appeals before us are not analogous to the facts in Anglo Afgan Agencies (AIR 1968 SC 718) (supra) or M. P. Sugar Mills (AIR 1979 SC 621) (supra). In the first case the petitioner therein had acted upon the unequivocal promises held out to it and exported goods on the specific assurance given to it and it was in that fact situation that it was held that Textile Commissioner who had enunciated the scheme was bound by the assurances thereof and obliged to carry out the promise made thereunder. As already noticed, in the present batch of cases neither the Notification is of an executive character nor does it represents a scheme designed to achieve a particular purpose. It was a Notification issued in public interest and again withdrawn in public interest. So far as the second case (M. P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f it was conceived and issued on the Central Government "being satisfied that it is necessary in the public interest so to do." Strictly speaking, therefore, the Notification cannot be said to have extended any "representation" much less a "promise" to a party getting the benefit of it to enable it to invoke the doctrine of promissory estoppel against the State. It would bear repetition that in order to invoke the doctrine of promissory estoppel, it is necessary that the promise which is sought to be enforced must be shown to be an unequivocal promise to the other party intended to create a legal relationship and that it was acted upon as such by the party to whom the same was made. A Notification issued under Section 25 of the Act cannot be said to be holding out of any such unequivocal promise by the Government which was intended to create any legal relationship between the Government and the party drawing benefit flowing from the said Notification. It is, therefore, futile to contend that even if the public interest so demanded and the Central Government was satisfied that the exemption did not require to be extended any further, it could still not withdraw the exemption. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce as otherwise they would be put to huge loss. The courts have to balance the equities between the parties and indeed the courts would bind the Government by its promise "to prevent manifest injustice or fraud." The following observations from Malhotra & Sons v. Union of India AIR (1976) J & K 41 have been noticed with approval by this Court in Excise Commissioner v. Ram Kumar and in M.P. Sugar Mills case (supra) : The courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its governmental, public or sovereign capacity. The burden of customs duty etc. is passed on to the consumer and therefore the question of the appellants being put to a huge loss is not understandable. No injustice has been done much less fraud practised by the Government in withdrawing the exemption. 23. The appellants appear to be under the impression that even if, in the altered market conditions the continuance of the exemption may not have been justified, yet, Government was bound to continue it to give extra profit to them. That certainly w....