TMI Blog1998 (5) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... eir system so that they can supply large quantity of good quality milk and thereby earn higher profits. During 1995-96 the petitioner incurred an expenditure of Rs. 2.5 crores for the purpose of carrying out the activities to support the farmers. This amount was raised to Rs. 6 crores during 1996-97. The details of the expenses incurred by the petitioner are given below: Activities April 95 March 96 April 96 March 97 Milkotesters-Nos. 25 50 Sunehha (qtrly. magazine)-Nos. 3,000 10,000 Milking machines-Nos. Nil 4 Solar geysers-Nos. (For utensil cleaning) Nil 6 Farm coolers-Nos. and allied equipment 39 109 Discounted sale shops-Nos. 20 57 Actual expenditure-Milk District Development in crores of rupees 2.5 6.00. 3.. Petitioner, M/s. Milk Food Limited, has been purchasing milk from milk shed area covering 650 villages in and around District Patiala for manufacture of ghee, different types of milk powders-skimmed milk powder, whole milk powder, infant milk food, dairy whitener and yogurt. The compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on), Punjab, wrote memo dated April 26, 1996 to the Excise and Taxation Commissioner, who in turn, addressed a letter dated May 8, 1996 to all the Deputy/ Assistant Excise and Taxation Commissioners and the Deputy Collectors (Enforcement) in the State conveying the Government s decision. In that letter, it was also indicated that necessary notifications are under process and likely to be issued shortly. The officers were directed to take necessary action accordingly. In view of these developments, the petitioners submitted their quarterly returns for the period from April 1, 1996 to June 30, 1996 with a specific stipulation that purchase tax on milk is not being deposited from April 1, 1996 in view of the press statements of the Chief Minister and the Finance Minister and letters/ circulars issued by the department and in view of the assurance given by the Excise and Taxation Commissioner. Similar returns were filed for next three quarters ending on March 31, 1997. The respondents neither rejected the quarterly returns filed by the petitioners nor they initiated action against the petitioners for their alleged failure to deposit the amount of purchase tax along with the quarterly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sarin, Senior Advocates and Shri Raman Prashar, Advocate, appearing for the petitioners invoked the doctrine of promissory estoppel/equitable estoppel and argued that the policy decision taken by a duly elected Government is binding on the respondents and the mere change of party in power cannot be a valid ground to withdraw a promise made to the public upon which a major segment of society has acted upon. Shri Sibal and Shri Sarin invited our attention to the newspapers cutting the minutes of the meeting held on June 26, 1996 under the Chairmanship of the Chief Minister and the letters written by the functionaries of the Government to show that a well considered and firm decision had been taken by the Government to abolish the purchase tax on milk and, therefore, the respondents cannot give a go-by to the said decision and enforce recovery of purchase tax against the petitioners. Learned counsel also invited the court s attention to the advertisement issued by the Government headed by the present Chief Minister, Shri Prakash Singh Badal, to show that even the present Government is taking credit of having abolished purchase tax on milk. Learned counsel submitted that the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (iv) The matter regarding issuance of notification to abolish purchase tax on milk and to rationalise sales tax rates on milk products was discussed in a meeting presided over by the then Chief Minister, Shri H.S. Brar, and attended by the Finance Minister, the Minister for Housing and Urban Development and Excise and Taxation, the Minister of State for Public Health and Co-operation, the Financial Commissioner (Taxation), the Financial Commissioner (Co-operation), the Secretary, Finance (Expenditure), the Excise and Taxation Commissioner and the Managing Director, Milkfed. The extract of the minutes of meeting are reproduced below: It was informed by the Financial Commissioner (Co-operation) that the Honourable Chief Minister, Punjab, has already decided in principle to abolish the purchase tax on milk meant for manufacturing of milk products and a circular has already been issued by the Excise and Taxation Department No. T-I/96/2421 dated May 8, 1996 in pursuance of the assurance given by Honourable Chief Minister, Punjab while addressing a public meeting on February 26, 1996 organised by Milk Plant, Ludhiana. Honourable Chief Minister further clarified that this was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as implemented. On June 4, 1997, the new Council of Ministers decided to confirm the decision in respect of items like dhoop agarbatti, kum-kum, kirpan, pen and ball-pen but the decision regarding abolition of purchase tax on milk was abandoned. Thereafter draft notification dated July 9, 1997 was issued for grant of exemption to the four items with effect from April 1, 1996. 12.. In the background of these facts, it is to be seen whether the doctrine of promissory/equitable estoppel can be invoked by the petitioners to question the levy of purchase tax with effect from April 1, 1996. According to the learned Deputy Advocate-General, the petitioners cannot rely upon the declaration made by the Chief Minister and even the decision taken by the Council of Ministers because notification abolishing purchase tax on milk was not issued in accordance with the Act of 1948. She submitted that the issuance of notification under section 6(1) constitutes a condition precedent for grant of exemption from payment of purchase tax and as no such notification was issued after April 1, 1996, the petitioners are bound to pay the same in terms of section 4-B read with sections 5 and 10 of the 1948 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposal of the Administrative Department to abolish purchase tax on milk and the Council of Ministers, in its meeting held on August 21, 1996 formalised that decision; (f) acting on the declaration made by the Chief Minister in the meeting dated February 26, 1996 and the announcement made by the Finance Minister the budget speech dated March 30, 1996 in the Legislative Assembly and the letter circulated by the Financial Commissioner (Taxation) and the Excise and Taxation Commissioner, Punjab, the petitioners and other manufacturers of milk products as well as the milk producers diverted the funds available at their disposal. The petitioners used a substantial part of the saving for the benefit of the farmers and milk producers and did not collect the element of purchase tax. They also gave higher price for purchases made from the milk producers; (g) the Excise and Taxation Department and the assessing authorities accepted the returns filed by the petitioners without payment of purchase tax; (h) nobody objected to the filing of returns without payment of purchase tax even though no formal notification had been issued; (i) nobody in the Government denied or controverted the new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. The doctrine of promissory estoppel has also been applied against the Government and the argument based on executive necessity has been categorically negatived. Thus, where the Government makes a promise knowing or intending that it would be acted upon by the promisee and in fact, the promisee relying on it alters its 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. However, in such matters the doctrine of promissory estoppel must yield when the equity so requires. If it can be shown by the Government that having regard to the facts of the case, it would be inequitable to bind the Government to the promise made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. Likewise, in cases in which the Government changed its policy in larger public interest and establishes before the court that it would be against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to go back on the representation made by it and stressed the point in the form of an interrogation by asking: 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 ? He observed that even if the resolution of the Government amounted merely to 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 (1866) LR 1 (HL) 129 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 . 18.. The next case in which the doctrine of promissory estoppel was enforced by the apex Court had gone in appeal against the judgment of this Court dated February 2, 1967 rendered in C.W.P. No. 1947 of 1965 (Anglo Afghan Agencies v. Union of India). The petitioner in that case had acted on the export promotion scheme issued by the Central Government and exported woollen garments to Afghanistan and clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cence to be granted to an exporter, and that the courts were powerless to grant relief, if the promised import licence was not given to an exporter who had acted to his prejudice relying upon the representation. Hence, the persons aggrieved because of the failure to carry out the terms of the scheme were entitled to seek resort to the court and claim that the obligation imposed upon the Textile Commissioner by the scheme be ordered to be carried out. Rejecting the argument that the Government is not bound by the representation made by it to the public the apex Court 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. 19.. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 44 STC 42 (SC); AIR 1979 SC 621, is a case which is parallel to the cases of the petitioners on facts as well as in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recorded in the form of a formal contract as required by article 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned: the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of honesty and good faith ? Why should the Government not be held to a high standard of rectangula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires 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 [1968] 2 SCR 366; AIR 1968 SC 718, 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 .......... 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 burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the court would insist on a highly rigorous standard of proof in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of corrugated fibre boards containers would not be includible in the value of the cigarettes for the purpose of assessment to excise duty. The respondents acted upon this representation and continued the use of corrugated fibre board containers for packing the cartons/outers of cigarettes and did not recover from the wholesale dealers the amount of excise duty attributable to the cost of such corrugated fibre board containers during the period 24th May, 1976 to 2nd November, 1982. It would be most inequitable to allow the excise authorities to assess excise duty on the basis that the value of the cigarettes manufactured by the respondents should include the cost of corrugated fibre board containers, when it was clearly represented by the Central Board of Excise and Customs in response to the submission made by the Cigarette Manufacturers Associationand this representation was approved and accepted by the Central Governmentthat the cost of corrugated fibre board containers would not be includible in the value of the cigarettes for the purpose of assessment of excise duty. Of course, this representation could operate to create promissory estoppel only if it was within the competen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of these cases, was no more than a ministerial act which remained to be performed, cannot be made basis for allowing the respondents to wriggle out of the promise made to the milk producers and the petitioners. On their part, the petitioners acted upon the promise made by the Government and invested huge amount in the projects involving welfare of the milk producers of their respective milk shed areas . They also did not make purchase tax as a part of the price of their products. The assessing authorities had also acted on the understanding that the purchase tax is not payable by the petitioners and they accepted the returns without insisting on the deposit of purchase tax. Thus, all the necessary ingredients which must be satisfied for applying the doctrine of promissory estoppel against the Government are found present in these cases. The argument that the Council of Ministers has reversed the previous decision in its meeting dated June 4, 1997 and, therefore, the promise made in the year 1996 should not be enforced completely ignores one of the fundamentals of the democratic system of governance, namely, that a decision taken by the Government keeping in view the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi Cloth General Mills Ltd. v. Union of India AIR 1987 SC 2414, their Lordships refused to invoke the doctrine of promissory estoppel on the ground that the letter on which the petitioner had based its claim contained a clear stipulation that decision contained therein was subject to review by Railway and, therefore, clear and unqualified assurance can be said to have been made to the appellant. 26.. In Amrit Banaspati Co. Ltd. v. State of Punjab [1992] 85 STC 493 (SC); AIR 1992 SC 1075, in which the appellant had invoked the doctrine of promissory estoppel for claiming refund of the sales tax, their Lordships highlighted the distinction between exemption from tax to encourage industrialisation as against the claim for refund of tax and held that the court cannot enforce a decision taken by the Government against public policy. 27.. In Kasinka Trading v. Union of India AIR 1995 SC 874, a two Judge Bench of the apex Court declined to invoke the doctrine of promissory estoppel to sustain the claim of the petitioner for continued grant of exemption from payment of customs duty. The appellant relied on the notification dated March 15, 1979 issued by the Central Government granti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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