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Judgment
A.P. Ravani, J.—The petitioner is a private limited company engaged in the busines of manufacturing aerated waters and soft drinks. The
petitioner challenges the legality and validity of Notification No. 203 of 1987, dated September 9, 1987. By this notification the Central
Government has withdrawn the ''modvat'' benefits granted to aerated waters. Earlier, by Notification No. 83 C.E., dated March 1, 1987
''Modvat'' benefit was granted to aerated water also, along with other articles. The petitioner also challanges the legality and validity of letter dated
October 28, 1987 written by the Superintendent of Central Excise, AR II, Division III, Ahmedabad. By this letter the petitioner has been asked to
reverse the ''modvat'' credit taken by it on inputs lying in stock as on 30.9.1987/1.10.1987. As stated in the letter the ''Modvat'' credit so taken by
the petitioner amounted to Rs. 11,26,995.64 (Rupees eleven lacs twenty six thousand nine hundred ninety five and paise sixty four). By this letter
the petitioner has also been asked to comply with the same by making debit entry and inform the Department immediately.
It is an undisputed position that by notification dated March 1, 1987 the ''modvat'' benefit was granted to aerated waters. However, by the
impugned Notification No. 203 of 1987 dated September 9, 1987 the ''modvat'' benefit granted to aerated water has been withdrawn. The
petitioner contends that similar benefit was given to other articles by notification dated March 1, 1987. The benefit given to other articles has been
continued, while the benefit given to aerated water has been withdrawn. Therefore, it is contended that manufacturers of aerated waters have been
treated with hostile discrimination.
There is no substance in the aforesaid contention. The Hon''ble Supreme Court, in the case of East India Tobacco Co. Vs. State of Andhra
Pradesh, , has inter alia observed that in deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that the State has a
wide discretion in selecting the persons or objects it will tax, and that a statute is not open to attack on the ground that it taxes some persons or
objects and not others. It is only when within the range of its selection, the law operates unequally, and that cannot be justified on the basis of any
classification, that it would be violative of Article 14.
In this connection, reference may be made to a decision of the Supreme Court in the case of Hind Plastics and Another Vs. Collector of
Customs, Bombay and Another, . In para 15 of the reported decision it is inter alia observed by the Hon''ble Supreme Court as follows :
What should be taxed is a mater not to be decided by the Courts, but by appropriate instrumentalities or functionaries.
In view of the aforesaid settled legal position, the contention that the impugned notification is discriminatory and, therefore, it is violative of Articles
14 of the Constitution of India has no merits and the same has got to be rejected.
Reference may be made to an order passed by Division Bench of the Delhi High Court (Coram : Yogeshwar Dayal, C.J., as he then was, G. C.
Jain, J.) in C.W.P. No. 3032 of 1987, decided on October 30, 1987. This very notification was under challenge before the Delhi High Court. The
Delhi High Court has rejected the petition by passing the folowing order :
By the impugned order dated 9th September, 1987 the Government of India has withdrawn the Modvat benefit to aerated waters which benefit
was extended to them by notification dated 1st March, 1987. This is a matter of policy, whether the benefit should be extended or withdrawn. It is
not a fit case for examination under Article 226 of the Constitution of India. With these remarks the petition is dismissed.
Learned Counsel for the petitioner contends that in respect of subordinate legislation also there should not be arbitrariness. He submits that the
Government was estopped from withdrawing the benefit granted to the manufacturers of aerated waters. In support of this submission reliance is
placed on decision of the Supreme Court in the case of Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., . In that case the doctrine
of promissory estoppel was invoked against the Government in view of the letter dated 24th May, 1976 issued by the Central Board of Excise and
Customs. In the instant case, there is no such representation made by the Government. The principle of Promissory Estoppel has been stated by
the Supreme Court in the case of Godfrey Phillips India Ltd. (supra). In para 9 of the reported decision the Hon''ble Supreme Court has observed
as folows :
The true principle of promissory estoppel is that where one party has by his word or conduct made to the other a clear and unequivocal promise
or representation which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be
acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or
representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to
do so, having regard to the dealings which have taken place between the parties.
In this case, there is no promise held out by the Government nor any such representation made by the Government. It is not even shown that
relying on such promise or representation the petitioner changed his position and acted to his detriment. Therefore, the contention raised on the
basis of the doctrine of promissory estoppel has no merits and the same is rejected.
It may be noted that the provision under which the petitioner claims benefit (Rule 57A of the Central Excise Rules, 1944) itself is a piece of
delegated legislation. It grants benefit of modvat only in case when such benefit is to be extended by issue of notification. Section 21 of the General
Clauses Act makes it clear that an authority which has power to issue notification has also the power to rescind the same. Therefore, whatever
promise or assurance was contained in the notification issued under Rule 57A implicitly contained a condition that it can be withdrawn as and when
the authority so desires. This is also well setted that there is no estoppel from withdrawing from a promise or assurance prospectively. As the
impugned notification has been withdrawn prospectively by an authority having power to rescind the benefit conferred by earlier notification, no
question of applying promissory estoppel arises for consideration in the present case.
Learned Coursel for the petitioner submits that the impugned notification is a subordinate legislation, but it is not immune from being challenged
on the ground of arbitrariness. In support of this submission reliance is placed on the decision of the Supreme Court in the case of Indian Express
Newspapers (Bombay) Pvt. Ltd. v. Union of India, reported in AIR 1986 SC 515. In the aforesaid decision the Hon''ble Supreme Court has held
that the validity of subordinate legislation cannot be decided by the Court by applying the standard applicable to administrative action. However, it
is liable to be questioned on the ground that it is unreasonable, i.e. manifestly arbitrary. There is no dispute with regard to the aforesaid principle. In
the instant case by no stretch of reasoning it can be said that the withdrawal of modvat benefit granted by the earlier notification dated March 1,
1987 is in any way unreasonable so as to call for interference in exercise of the powers under Article 226 of the Constitution of India. Neither in
the petition nor at the time of argument such manifest unreasonableness has been pointed out.
In view of the aforesaid settled legal position the petition as far as the challenge to the legality and validity of the impugned Notification No. 203
of 1987, dated 9th September, 1987, Annexure E to the petition must fail.
Learned Counsel for the petitioner submits that once a credit entry is made, the manufacturer would be entitled to claim the ''modvat'' benefit
irrespective of the fact whether the raw material purchased by it has been used in the manufacture of the article in question or not. This submission
is made in support of the challenge to the letter dated October 28, 1987 written by the Superintendent of Central Excise, AR II, Division III,
Ahmedabad. In our opinion, having regard to the overall facts and circumstances of the case and particularly having regard to the fact that disputed
questions of fact and law are likely to arise, this question can very well be agitated before the departmental forum. In this petition we do not think it
proper to decide the question of legality and validity of letter dated October 28, 1987 produced at Annexure-G to the petition. In our opinion the
ends of justice would be met if the following direction is given with respect to the challenge to the letter Annexure-G, dated October 28, 1987.
In the result the petition is rejected as far as the prayer relating to the consitutional validity of Notification No. 203 of 1987, dated September
9, 1987 is concerned. As far as the challenge to the letter dated October 28, 1987 produced at Annexure-G to the petition is concerned, it is
directed that if the petitioner files appeal to the appropriate appellate authority, i.e. Collector (Appeals), Allahabad, on or before September 15,
1994, the same shall be entertained by the appellate authority and will be decided without taking objection as to limitation. It is hoped that the
appeal that may be filed will be decided by the appellate authority concerned as expeditiously as possible. Rule made absolute to the aforesaid
extent only, with no order as to costs.