Madras Vanaspati Ltd. vs Union of India

This Petition coming on for hearing on this day upon perusing the petition and the affidavit filed in support thereof the order of the High Court

dated 25-9-1989 and made herein and the records relating to the order in Notification 39/89-C.E. (N.T.), dated 25-8-1989 on the file of the 3rd

Respondent comprised in the return of the said respondent to the Writ made by the High Court, and upon hearing the arguments of Mr. A. K.

Mylsamy, Advocate for the petitioner and of Mr. K. Jayachandran, Additional Central Government Standing Counsel on behalf of the

Respondents the Court made the following order -

The writ petition is for the issue of a writ of certiorarified mandamus to call for and quash the proceedings in the Notification No. 39/89-C.E.

(N.T.), dt. 25-8-1989 of the 3rd respondent and to direct the respondents to allow the petitioner to avail the credit of Rs. 15,88,336.63 earned

and accrued to it in R.G. 23-B, Part II.

The petitioner company is carrying on business of manufacturing Vanaspati and Refined oil. The raw material for the manufacture of Vanaspati is

Palm oil, Ricebran oil, Rapeseed oil, Mustard oil, Soyabean oil, Sesame oil, Cotton Seed oil, Solvent Extracted oil, etc. According to the affidavit

filed in support of this writ petition, the Central Government was originally supplying the raw materials through the State Trading Corporation of

India till the control was lifted and now the oil price is fixed according to the fluctuation of the oil market by the manufacturers; That in exercise of

the powers conferred under Rule 57K of the Central Excise Rules, 1944, the Government of India issued a Notification bearing No. 27/87-C.E.,

dt. 1-3-1987 allowing money credit on the usage of minor oils in the manufacture of Vanaspati falling under sub-head 1504 of the Schedule to the

Central Excise Tariff Act, 1985 (5 of 1986); and the grant of credit and the utilisation is subject to the rights and terms of the Notification issued

under Rule 57K and subsequently the said Notification dt. 1-3-1987 appears to have been amended by the Notification No. 192/87-C.E., dt. 12-

8-1987. The petitioner would claim that by virtue of the notifications referred to above, the petitioner earned the credit in respect of Minor oil

subjected to hydrogenation on or before 1-3-1987 and that the credit so earned could be used at any time subject to certain restrictions. It is also

claimed that as on 25-8-1989 the credits earned by the petitioner in terms of the Notification referred to above, amounted to Rs. 15,88,336-63

and that the Register R.F. 23-B Part II, maintained under Rule 57K of the Rules would go to substantiate the details with regard to the quantum of

credit earned. While so, the Government of India appears to have published the Notification No. 38/89-C.E. (N.T.) rescinding the earlier

Notifications 27/87 dated 1-3-1987 and 192/87 dt. 12-8-1987 and thereby withdrawing the scheme of money credit in respect of minor oils used

in the manufacture of Vanaspati and soaps. The petitioner also claims that on 10-9-1989 the petitioner came to know of the Notification No.

39/89 and the petitioner has been paying Central Excise duty in cash, without prejudice to its right to the Money Credit earned till 25-8-1989. It is

further stated that the petitioner received a letter from the 1st respondent pointing out, that the petitioner is not entitled to claim credit or to avail

credit earned till 25-8-1989 on the said scheme based on the Notifications 27/87 and 192/87, and directed the petitioner to debit a sum of Rs.

38,580/- and further directed the petitioner to reverse he said credit of Rs. 38,580/- and to pay a sum of Rs. 83,130/- the credit utilised by the

petitioner from 25-8-1989 to 31-8-1989. The 1st respondent so appears to have sent another letter dt. 15-9-1989 demanding once again a sum

of Rs. 2,13,630/- on the clearance made by the petitioner utilising the credit earned during 25-8-1989 and 10-9-1989. Aggrieved thereby the

petitioner has filed the present writ petition contending that the petitioner acquired the right to the credit earned under the Notification dated 1-3-

1987 and 12-8-1987 when they were in force and that the credit earned cannot be abrogated by the subsequent notification issued under

Notification 39/89 dt. 25-8-1989. It is further contended, that the credit earned and accumulated is a right and benefit accrued to the petitioner

and such rights are protected by virtue of the provisions contained in Section 6(c) of the General Clauses Act and the same cannot be taken away.

It is also contended that the Notification rescinding the earlier Notification dt. 1-3-1987 and 12-8-1987 cannot be applied retrospectively so as to

deny the petitioner of his vested rights, which accrued in favour of the petitioner. A plea based on estoppel from preventing the petitioner from

utilising the credit already earned and accrued to his credit on the basis of the earlier Notification Nos. 27/87 and 192/87 has also been raised.

The respondents have filed a counter affidavit in WMP No. 18672/89 and crave leave of this court to treat the counter affidavit filed in the main

writ petition itself. According to the counter affidavit filed by the respondents, in the year 1987, the Central Government introduced a new scheme

called ''Credit of Money Scheme'' by insertion of Section AAA in Chapter V of the Central Excise Rules, 1944 by the Central Excise (First

Amendment) Rules, 1987 issued under Notification No. 25/87-C.E., dt. 1-3-1987 and the said scheme is similar to the MODVAT Scheme,

introduced by the Government earlier. Under the scheme in question, the credit is not equal to the excise duty paid on inputs, but it is to be

calculated at a special rate and the rate at which the credit is to be availed would be fixed in the Notification specifying the raw materials and the

excisable goods. It is for this purpose, the Central Government framed Rule 57K to 57P under the Central Excise Rules, 1944. Rule 57K(i)

empowers the Central Government to issue notification to specific finished excisable goods (final products) and the raw materials used in the

manufacture of these final products (inputs) for the purpose of this scheme and also specify the rate at which credit of money can be availed on the

inputs by the manufacture of final products. Under Rule 57K(2) of the Rules, the credit so availed can be utilised for payment of excise duty on the

final product. Under Rule 57K the Central Government issued Notification No. 27/87 dt. 1-3-1987 specifying the inputs viz., minor oils used in

the manufacture of Vanaspathi falling under Central Excise Tariff Heading 1504-00, and the rates at which credit of money may be granted for use

of such inputs in the manufacture of the said final products. Accordingly the petitioner was availing the scheme, as per the Notification No. 27/87

dt. 1-3-1987 as amended from time to time. But, in view of the recent Notification No. 39/89-C.E. (N.T.), dt. 25-8-1989, the petitioner is not

entitled to the credit of money in respect of minor oils used in the manufacture of Vanaspati with effect from 25-8-1989. In such circumstances, the

1st respondent issued a letter in O.C. No. 1222/89 dt. 11-9-1989 directing the petitioner to reverse the credit amount of Rs. 38,500/- in the RG

23 B Part II and also to compensate a sum of Rs. 83,130/- already utilised for payment of duties on Vanaspati cleared during the period from 25-

8-1989 to 31-8-1989 by making a suitable debit entry in the PLA and also to take similar action in respect of credits and debits in the R.G. 23B

Part II during the period from 1-9-1989 onwards.

The claim of the petition is contexted on the ground that the writ petition is not maintainable for the following reasons.

(a) The grant or withdrawal of certain scheme is purely a policy decision of the Government and the Government is not under any legal obligation

to keep any Notification in force upto a particular date and the policy decision of the Government of India on fiscal matters cannot be challenged in

the Court of Law under Article 226 of the Constitution of India. The decision of the Delhi High Court in Delhi Bottling Company Limited case in

C.W.P. No. 3032/87 (Vide order dt. 30-10-1987) is relied on for the said purpose.

(b) The doctrine of promissory estoppel claimed by the petitioner is not applicable, since, according to the respondents, there was no promise by

the Prime Minister or Finance Minister in the Parliament to the industry that the scheme in question will continue for a specified period. There

cannot be any estoppel against the legislative powers of Centre and States and in this connection the decision in Black Diamond Beverages Ltd.

Vs. Union of India (UOI), is relied upon.

(c) The applicability of Section 6(c) of the General Clauses Act is disputed to the situation under consideration and it is claimed that the General

Clauses Act, 1897 would apply only when the Act or Rules are repealed, and the principles therein would not ensure in respect of case of

notification granting or withdrawing the ''Credit of Money Scheme'' issued under Rule 57K of the Rules. The Credit of money granted is said to be

concession and the right of the Government to withdraw the same at any time cannot be questioned by the petitioner.

(d) It is also contended that the 1st respondent has advised the petitioner to approach him in case of any doubt or difficulty that may be entertained

in complying with the direction given on 11-9-1989 and 15-9-1989 and that instead of approaching the 1st respondent, the petitioner has rushed

to this court, which it is claimed, is not correct in law.

Mr. A. K. Mylsamy, learned counsel for the Petitioner, in support of the submissions on the basis of the points raised in the pleadings as

referred to above, relied upon the following decisions :

(1) Unreported decision of a Division Bench of Punjab & Haryana High Court in Amrit Banaspati Co. Ltd. and Another Vs. Union of India (UOI)

and Others, .

(2) Dipak Vegetable oil Industries Ltd. Vs. Union of India, .

(3) The Modern Mills Ltd. Vs. Union of India, .

Mr. K. Jayachandran, Add. Central Govt. Standing Counsel, in support of the stand taken in the counter affidavit, relied upon the following

decisions;

(1) Jayprakash Match Works, Kovilpatti and Others Vs. Union of India and Others, ;

(2) S. Ramabadran another Vs. State of Tamil Nadu and another, ;

(3) Sulochana Enterprises (P) Ltd. Vs. Union of India, .

(4) Tan India Ltd. Vs. U.O.I., ;

Before considering the terrability of the submissions on either side, it will be useful to refer to the decision relied upon be the learned counsel

appearing on either side.

In the unreported decision in C.W.P. 11654/89 the Punjab and Haryana High Court, while considering the very notification and rights of the

manufacturer of Vanaspati who was placed in similar circumstances like the petitioner, held that the manufacturer concerned is entitled to utilise the

credit already earned up to the date of revocation. The learned Judges of Punjab and Haryana High Court applied the principle of promissory

estoppel to the case on hand. In Dipak Vegetable oil Industries Ltd. Vs. Union of India, the Division Bench of Gujarat High Court was concerned

with the very same identical question, as in the present case and the Division Bench while sustaining the claim of the manufacturer held, that the

right, which was acquired as a result of the statutory provision, cannot be taken away retrospectively, unless statutory provision so provides or by

necessary implication it has such an effect, and inasmuch as the Notification No. 39/89-C.E. (N.T.), dt. 25-8-1989 merely rescinded the earlier

Notifications and not the Rules themselves, the only consequence would be that from the date on which, the said Notification came to be

rescinded, the manufacturers concerned cannot claim to earn the benefit of credit of money, while manufacturing their final products by using the oil

concerned, but at the same time they cannot be deprived of their right to use credit of money which they had earned validly. The learned Judges of

Gujarat High Court also placed reliance on the fact that Rules 57N had continued to be on the statute, a book and that the said rule confers a right

to use the credit already earned.

In the The Modern Mills Ltd. Vs. Union of India, , the Karnataka High Court has held that the accumulated credit earned would not cease the

moment the notification is rescinded and that principle of promissory estoppel applies to such a situation.

In Jayprakash Match Works, Kovilpatti and Others Vs. Union of India and Others, a Division Bench of the Madras High Court has held that

since the policy of the Government varies and depends on a number of economic factors, the courts have neither the withall nor the equipment to

decide the wisdom of that policy. That was a case where the Division Bench was concerned with a challenge to an exemption notification and the

Court was of the view that the exemption notification issued under R. 8, cannot be questioned on the ground that the policy of the Government was

not static.

In S. Ramachandran v. State of Tamil Nadu AIR 1591 Mad 371 a Division Bench of this Court, to which I was a party, took the view that the

doctrine of promissory estoppel would not be implied in the matter of Government giving concession or assurances and that there can be no

promissory estoppel against the legislature in the exercise of its legislative function nor can the Government of Public Authority be debarred by

promissory estoppel from enforcing a statutory provision or that the principle of promissory estoppel could be used to compel the Government of

Public Authority to carry out a promise or representation which is contrary to law or which is outside their authority or power. That was a case

where the ultimate decision rendered turned also upon the absence of the necessary factual basis for the very applicability of the doctrine of

promissory estoppel as well as on the applicability of the said doctrine itself so as to preclude the legislature or competent authority exercising

statutory duties and functions from discharging their duties for future unlike the case on hand.

In Sulochana Enterprises (P) Ltd. Vs. Union of India, , Kanakaraj J. has held that there can be no estoppel against a Authority to exercise

from time to time its powers either by issuing Notification giving a benefit and withdrawing the same and that the budget speech of the Finance

Minister extending Modvat Scheme to aerated waters, cannot be relied upon to challenge the subsequently withdrawal of the applicability of the

scheme as such.

In the Delhi Bottling Co. Ltd. v. U.O.I. & Other (in C.W.P. No. 3032/87/- order dt. 30-10-1987) a Division Bench of the Delhi High Court

has held that the question of withdrawal of the benefit of MODVAT Scheme to aerated waters is a matter of policy, and therefore, it was not a fit

case for examination under Article 226 of the Constitution of India.

In Tan India Ltd. Vs. U.O.I., S. Ramalinga, J. expressed the view that the exemption from excise duty can be granted only by exercise of

statutory power, and the statement of the Hon''ble Minister on the floor of the House of Legislature, does not have the effect of automatically

making it a law, muchless statutory Law.

The question for my consideration in the present case as projected by the petitioner is not so much as to the competency or the authority of the

Government of India to rescind or withdraw a scheme or concession granted. Equally it is not the contention for the petitioner that the Government

having once exercised its discretion by formulating a scheme or granting an exemption or concession, is precluded by the principles of promissory

estoppel from going behind the same or taking a different view prospectively. The real question for my consideration is whether the notification

issued on 25-8-1989 rescinding the earlier notifications has the effect of depriving the petitioner of the credit earned and the benefit which accrued

to him during the period when the scheme was in force. None of the decisions relied on for the Revenue has any relevance to support the claim

made before me for the respondents in such as those decisions were not concerned with such a situation or question. The applicability of the

principle of promissory estoppel, so as to preclude the legislature or the statutory functionaries from exercising its power from time to time in

derogation of the view earlier taken or the policy earlier promulgated or the concession earlier given, was the only issue that was under

consideration in the cases relied for the respondents. In my view the issue now before me has arisen in the same manner only in cases relied on for

the petitioner and rightly, in my view, in all those decisions, the Courts have countenanced the right of the manufacturer concerned to avail of the

credit benefit already earned by the respective manufacturer, when a particular scheme was inforce. As noticed by the Division Bench of the

Gujarat High Court, the mere rescinding of the earlier notification does not have the effect or consequence in law of abrogating even the rights

already earned by the petitioner under the scheme or under the notification concerned. The continued existence of Rule 57N which regulated or

protected the right to utilise the credit already earned is a vital factor, which will go to support the claim of the petitioner, that the notification

rescinding the earlier notifications, had no effect in law to totally abrogate and destroy the rights accrued in the form of credit earned to their

account or disallowing the petitioner from utilising the credit accrued to them in terms of the scheme.

I am in respectful agreement with the views expressed by the Division Bench of Punjab and Haryana High Court, as noted above, and Gujarat

High Court Dipak Vegetable oil Industries Ltd. Vs. Union of India, as well as the Karnataka High Court The Modern Mills Ltd. Vs. Union of

India, . Consequently I held that the petitioner has a right to utilise the credit earned by the petitioner in accordance with the scheme when the

scheme was in force and prior to 25-8-1989.

The plea raised by the respondents that the petitioner has rushed to this court, without approaching the very authorities, particularly when the

petitioner has been told that in case of any doubt or difficulty, he may approach the authorities, does not merit any serious consideration. In the light

of the stand taken and in the light of the issues raised between the parties, it cannot be seriously contended for the respondents that if approached

the respondents would themselves have granted the relief that is now sought for before this court or would have allowed the petitioner to avail of

the credit already earned by them, particularly having regard to the stand taken before this court that in view of the Notification dt. 25-8-1989

rescinding the earlier notifications, the petitioner is not entitled to avail the credit even already earned by them.

So far as the question of the nature of the relief granted to the petitioner is concerned, the prayer for quashing the Notification No. 39/89-C.E.

(N.T.), dt. 25-8-1989 cannot be granted inasmuch as the Government of India cannot, in my view, be precluded from prospectively exercising the

statutory powers to grant exemption or withdraw the exemption. Having regard to the nature of relief sought for and the conclusion arrived at by

me, the issue of a direction in the nature of writ of mandamus directing the respondents to allow the petitioner to avail of the credit legitimately

earned by the petitioner in terms of the relevant notification prior to 25-8-1989 will issue. The writ petition will stand ordered in the above terms.

No Costs.