2023 (5) TMI 620 - SC - Customs

Validity of withdrawal of a customs notification - Notification No 86 of 2003 amended by fresh notification dated November 11, 2003 Notification No 164 of 2003 - ultra vires Section 25(1) of the Customs Act 1962 or not - payment of customs duty at 39.2% on the value of the Imported Machine - the amended notification was set aside on the ground that no intelligible differentia existed for granting concession on one type of machinery and withdrawing concession to other types of machinery - HELD THAT:- The court, however, did not strike down the withdrawal notification, but recorded that the government failed to consider the impact of the withdrawal, on newspaper publishers, and how that would affect the exercise of freedom of speech. Therefore, the court required the executive to review the matter, after considering all relevant factors. In Dai-Ichi Karkaria [2000 (4) TMI 42 - SUPREME COURT], a customs notification which reduced exemption from 75% to 25% for a particular period (30-12-1986 to 10-9-1987) was held unjustified because the executive had “not taken into account all the relevant factors while issuing the impugned notifications reducing the exemption to 25% for the aforesaid period” and “failed to discharge its statutory obligation while issuing the impugned notifications. Justifications offered, to say the least, is far too naive to be accepted.”

In Bannari Amman Sugars Ltd. [2004 (11) TMI 320 - SUPREME COURT], the court held that there is no “vested right as to tax-holding is acquired by a person who is granted concession. If any concession has been given it can be withdrawn at any time and no time-limit should be insisted upon before it was withdrawn.” This court also held that promissory estoppel “can be invoked only if on the basis of representation made by the Government, the industry was established to avail benefit of exemption.”

The decision in Mahabir Vegetable Oils (P) Ltd. v. State of Haryana [2006 (3) TMI 234 - SUPREME COURT] is along the same lines as MRF Ltd. [2006 (9) TMI 278 - SUPREME COURT], which is that benefits once granted, cannot be divested by a retrospective statute or notification. These decisions, in this court’s opinion stand on a different footing, because they primarily concern exercise of statutory power, i.e. withdrawal, in a manner that has an extremely prejudicial or unreasonable impact, which is retrospective in effect.

This court is of the opinion, that the High Court, by the impugned judgment, erred in judging the merits of the reasons which led the executive government to issue the Amended Notification. No mala fides or oblique considerations were pleaded or urged; the exercise of power was in line with the provisions of the Act. The indigenous angle, i.e. availability of equipment, cannot be characterized as an irrelevant factor or consideration, since grant of exemption to a class of goods, which are similar to those manufactured within the country, and its likely adverse impact on such manufacturers or producers, is germane and relevant.

Appeal allowed.