' M/s. Raja Industries (Pvt.) Ltd., the petitioner, manufactures special kind/type of leather shoes with imported material of special quality and make.
' The shoes manufactured by the petitioner are exported in international market and, hence he has to face a cut-throat competition with the manufacturers and exporters of leather shoes, from other countries. The petitioner applied to the respondent No, 1, to claim special rebate/right of drawback, of custom duty and sales tax etc., being paid for the import of material referred to above, under section 21(c) of the Customs Act, 1969, which section reads as under:---
21. Power to deliver certain goods without payment of duty and to pay duty on certain goods.--- Subject to such conditions, limitations or restrictions as it thinks fit to impose, the Board may, in such general cases as may be prescribed by rules in particular cases by special order, authorize-- -
(a) the delivery without payment of the customs-duties chargeable thereon of goods which are imported only temporarily with a view to subsequent exportation;
(b) the delivery without payment of the whole or any part of the customs-duties chargeable thereon of imported goods of such classes or description as it may prescribe, intended to be used in the production, manufacture, processing, repair or refitting in Pakistan of goods of such classes or description as it may prescribe; and
(c) the repayment in whose or in part of the customs-duties paid on the importation of any goods of such classes of description as it may prescribe, which have been used in the production, manufacture, processing, repair or refitting in Pakistan of goods of such classes or descriptions as it may prescribe, provided such repayment shall not be made in respect of the class or description of goods for which drawback can be claimed under section 37."
2. The application was processed by the respondents, inquiries and varifications were held/made and after scanning of the whole case, the petitioner was held entitled to claim of drawback of customs-duty and refund of sales tax etc. At special rates, vide order/notification bearing S.R.O.
No,885(1)/90, dated 26-8-1990, reproduced as under:--- ' Government of Pakistan Central Board of Revenue. Islamabad, the 26th August, 1990. S.R.O.
885(1)90.---In exercise of the powers conferred by clause (c) of section ' 21 of the Customs Act, 1969 (IV of 1969); and subsection (2-A) of section 27 of the Sales Tax Act, 1951 (III of 1951) and in supersession of its Notification No,S.R.O. 1051(1)/89, dated the 23rd October, 1989, the Central Board of Revenue is pleased to authorize repayment of customs-duties and refund of sales tax to the extent specified in columns (4) and (5), respectively, of the table below paid on the importation of the raw materials specified in column (1) of the said table and used in the production or manufacture of the goods specified in column (2) thereof and exported during the period specified in column (3) of that table, subject to the following conditions, namely:---
(i) The goods have been manufactured according to the formula duly furnished to the Central Board of Revenue showing the quantity of various imported raw materials specified in column (1) of the said table and used in the production or manufacture of the goods specified in column (2) thereof;
(ii) the manufacturer maintains proper record of the goods manufactured in accordance with the formula referred to in sub-paragraph (i) and produces, on demand, such records and other evidence may be required by the Central Board of Revenue to satisfy itself that the imported raw materials have been used in accordance with the formula;
(iii) the manufactured goods are exported out of Pakistan and an application for repayment of customs dut ies and refund of sales tax is presented to the proper officer of Customs within two hundred and ten days of such exportation or of the publication of this Notification whichever is the later;
(iv) the exporter makes a declaration on the reverse of the original shipping bill or other export documents to the effect that he would claim repayment of the customs duties and refund of sales tax paid on the imported raw materials used in the production or manufacture of the goods being exported; and
(v) the repayment of customs duties and refund of sales tax of the rate specified shall be allowed that the goods exported are manufactured with the same constituents on which the rate of repayment and refund is notified and the manufacturer-cum-exporter shall immediately intimate to the Collector of Central Excise and Land Customs,---
(a) any change in the prices of the imported raw materials;
(b) any change in t he composition of the manufactured goods to be exported; and
(c) use of any indi genous raw material in place of the imported raw materials.
(vi) In case the firm has already received the repayment of customs duties and the refund of sales tax under the aforesaid superseded Notification, it shall be entitled only to get the difference of the amount payable by this notification and the aforesaid notification; Raw materials ImportedGoods produced or manufactured.Period -Extent of re-payment refund of of customs sales tax dutiesExtent of 12345 The following goods produced or manufactured by M/s. Raja Industries (Pvt.) Limited, Sialkot:----
1. Polyurethane glue gum rerin.Leather shoes with Polyurethane sole 6-7-1990From 1-1-1990 to16.84% of the f.o.b. value.5.56% of he f.o.b. alue.
2. Release agent.
3. PigmentsFrom 7-7-199020.81 % of the f.o.b.value.6.11 % of the f.o.b.value.
4. Cross Linker. onwards Isocynal
3. The petitioner thereafter continued to drawback/get refund of aforementioned levies in accord with the S.R.O. Referred to above; encouraged by the said incentive and special right granted to him by the Government, invested huge amount of money for boosting-up the product and export of the shoes, which is presently in huge demand in lot many countries of the world and by deploying the quality, expertise and marketing skill, has obtained huge orders for the export of leather shoes from foreign countries at the price settled in the light of the above-referred S.R.O.
4. In the year 1995, a general Notification S.R.O. No,118(1)1995 dated )6-2-1995 has been issued whereby S.R.O. No,885(1)1990 dated 26-8-1990 has been superseded, as a result whereof the petitioner's products have also been standardized along with others in matter of drawback of duty and refund of sales tax, which is reproduced as under:- Government of Pakistan Central Board of Revenue.
Islamabad, the February.
16. 1995.
NOTIFICATION (CUSTOMS/SALES TAX STANDARD)
' S.R.O. 118(1)95.---In exercise of the powers conferred by clause (c) of section 21 of the Customs Act, 1969 (IV of 1969) and subsection (2) of section 10 of the Sales Tax Act, 1990, and in supersession of its Notification No,S.R.O. 880(1)83, dated the 5th September, 1983, S.R.O. 691(1) 87, dated the 25th August, 1987 and S.R.O. 885(1)90, dated the 26th of August, 1990, the Central Board of Revenue is pleased to authorize repayment of customs duties and refund of sales tax to the extent specified in columns 3 and 4, respectively, of the table below paid on the importation of the raw materials specified in column 1 of the said table and used in the production or manufacture of the goods specified in column 2 thereof, subject to the following conditions, namely:---
(i) The manufactured goods are exported out of Pakistan and an application for repayment customs duties and refund of sales tax is presented to the proper officer of customs within two hundred and ten days of such exportation or of the publication of this notification, whichever is the later;
(ii) the exporter makes a declaration on the face of the original shipping bill or other export documents to the effect that he would claim repayment of the customs duties and refund of sales tax paid on the imported raw materials used in the production or manufacture of the goods being exported; and
(iii) the exporter or manufacturer has not claimed any adjustment of input tax paid on the raw materials at the time of import against the output tax payable at the time of manufacture of finished product and applicant produces a certificate to that effect issued by the Assistant Collector (Sales Tax) in whose jurisdiction the subject goods were manufactured.
Raw materials imported.Goods produced or manufactured.Extent of payment of customs dutiesExtent of refund of sales tax.
1 2 3 4
1. Natural raw rubber1. Canvas shoes (all varieties sizes).8.408 of the f.o.b. value.8.098 of the f.o.b. value.
2. Synthetic rubber.
3. Pale or brown crepe.
4. Titanium dioxide.
5. Vulcafor.
6. Antioxident.
7. Vulcacit.
8. Calcium Carbonate.
9. Stearic acid.
10. Rubber colour.
11. Reclaiming agent.
12. Blowing agent.
13. Polysar.
14. Sulphur powder.
15. Magnesium carbonate.
16. Latex.
17.Kurory PVA.
18. Olinor.
19. Leamin.
20. Kemetex.
21. Hydrogen peroxide.
22. Leveral.
23. Imarol.
24. Dyes.
1. Chrome tanned2. Ladies, gents and7.50% of the0.908 of the and finishedchildren shoes orf.o.b. value.f.o.b. value. leather.chappals with leather upper and leather sole 1 2 3 4
2. Sole leather.
3. Tacks.
4. Latex.
5. Cork sheet.
6. Buckle.
7. Solution (adhesive)
8. Abrasive paper.
9. Stamping foil.
10. Fobre board.
11. Chromosol.
12. Vulkacit.
13. Farafin wax.
14. Carbon black.
15. Sulpher powder.
16. Antioxidant.
1. Raw rubber.
2. Unit sole.
3. Glass paper.
1. Raw rubber.
2. Synthetic rubber
3. Thermoplastic moulding compound.
3. Chappals, sandals with nylon or plastic mesh PVC cloth upper with leather sole for ladies (all varieties and sizes).
4. Shoes with leather 8.008 of the upper and PVC f.o.b. Value injection moulded rubber sole, PU sole or TPR (all varieties and sizes)
0.908 of the f.o.b. Value.
6.008 of the f.o.b. Value.
4. Finished leather (cow and buffalow calf).
5. Leather board.
1 2 3 4
6. Fibre scard.
7. Stamping foil.
8. Tacks.
9. Adhesive.
10. Abrasive paper.
11. Latex.
1. Raw rubber 5. Chappals or 6.008 of the 0.508 of the sandals-slippers f.o.b. Value. f.o.b. Value.
2. Synthetic with leather upper rubber. And rubber sole (all varieties and sizes).
3. Vulkacit.
4. Zink oxide.
5. Wax parafin.
6. Stearic acid.
7. Iron oxide.
8. Carbon black.
9. Leather board.
10. Adhesive.
11. Filler hydrolene.
12. Abrasive paper.
13. Stamping foil.
14. Chrome tauned and finished leather.
1. Polyol issocynate 6. Conga sandals 7.228 of the 10.808 of the compound A and B. f.o.b. Value. f.o.b.
Value.
2. Additives 81 and 82
3. Pigments dry colours.
4. Release agent.
5. D.M.F. Diemythyl formamide.
6. Methylene chloride.
7. Dioctyl phthalate.
1. Polyurathene (glue gum resin) compound A & B.
2. Polyurethene (addi
3. Pigments and dry.c
4. Dimethyle formam
5. Release agent.
6. Methylene cholori
7. Dicotyle phthalate
8. Leather uppers.
1. PVC compound and granules.
7. Joggers 3.498 of the 5.508 of the f.o.b. Value. f.o.b. Value. Synthetic upper with polyurcthene or PVC soles.
8. PVC shoes and chappals made from minimum 958 PVC and not containing rn"'"" man 58 filler. {{TABLE}}
5. The Deputy Collector, Central Excise and Sales Tax, Sambrial, District Sialkot issued, show-cause notices to the petitioner for refund of duty and sales tax drawn by him in accord with S.R.O.
No,885(1)90 for the period after 16-2-1995, and also threatened to prosecute him, with a further notice of rejection of his pending claims. Aggrieved of the aforementioned show-cause notices etc., petitioner filed a Writ Petition No,10006 of 1995 in the Lahore High Court, Lahore at the Principal Seat. Mr. Izharul Haq, Advocate, learned counsel for the Department appeared on Court's call at limine stage and admitted that Notification dated 16-2-1995 was not in the knowledge of the department and, therefore, it was not acted upon earlier, hence, writ petition was disposed of in terms that customs authorities shall re-determine the question of drawback facility to the petitioner; no penalty shall be imposed upon him under section 32 of the Customs Act, 1969, read with section 156(1)/4 of the Act and if the petitioner is aggrieved of the fresh determination under the Notification dated 16-2-1995, he may seek remedy against the same before the higher forums in accordance with law. Question of the validity and vires of the Notification No,118(1)95, dated 16-2- 1995, however, remained undetermined. Aggrieved of the order passed by the learned Single Judge, petitioner filed an I.C.A. No,343 of 1995 in the Lahore High Court which is pending in motion hearing before a Division Bench.
6. The petitioner whose place of business is also at Rawalpindi, submitted consignment Form No,0450408 for export of shoes of the above-referred quality, to the respondent No,2, with a claim of duty drawback facility in accord with the S.R.O. No,885(1)90 but the said respondent refused to clear the goods on the basis of the aforementioned S.R.O. And insisted that the said consignment shall have to be governed by the subsequent S.R.O. No,118(1)95 dated 16-21995, hence, the petitioner has filed this Constitutional petition before this Court, challenging the legality and vires of the act of refusal of the respondent No,2 and also of S.R.O. No,118(1)95 dated 16-2-1995. Following prayers have been made in this writ petition:-
(a) That by an appropriate writ/order the S.R.O. No, 118(1)95, dated 16-2-1995, the action/order of the respondents, in not clearing the petitioner's consignment in accord with the provisions of S.R.O.
885(1)90 and in not acceding to the petitioner's claim to,be treated with the S.R.O. No,885(1)90 in the matter of calculation of drawback customs duty and sales tax etc., may kindly be declared to be illegal and without lawful authority and the subsequent S.R.O. No,118(1)95 dated 16-2-1995 may kindly be declared as void, illegal and without jurisdiction to the extent of the petitioner;
(1) that the respondents may kindly be directed to clear the Consignment Form No,ERO 0450408 of the petitioner in terms of S.R.O. 885(1)90 and in this behalf refrain the respondents from refusing, claims of the petitioner. Costs of the petition may also kindly be awarded.
' It is also prayed that during the pendency of the titled writ petition, the operation of S.R.O.
No,118(1)95, dated 16-2-1995, may kindly be suspended and the respondents may be directed to clear the consignment of the petitioner (noted above) in accord with S.R.O. No,885(1)90.
7. Mr. Mansoor Ahmad, Advocate, has appeared on behalf of the petitioner whereas Mr. Bashir Ahmad Kiani, Advocate, has appeared on behalf of the respondents.
8. Learned counsel for the petitioner has raised the following contentions:--- That S.R.O. No,885(1)90, dated 26-8-1990 conferred upon the petitioner .a special right/privilege on the basis of speciality of his product, therefore, the respondents have no lawful authority to withdraw the said right/privilege without giving the petitioner an opportunity of hearing to comment thereagainst and to file a representation thereagainst to the Federal Government, hence, the subsequent S.R.O. No,118(1)95, dated 16-2-1995, superseding the ' S.R.O. No,885(1)90, referred to above qua the petitioner, is without a lawful authority as per principles of 'legitimate expectations', 'promissory estoppel', 'fair procedure', 'principles of natural justice', 'principles of administration of justice in accordance with Injunctions of Islam' as well as the guaranteed fundamental rights by the Constitution of Islamic Republic of Pakistan, 1973. In support of his contentions, reliance has been placed on the cases of Pakistan through the Secretary, Ministry of Finance v. Muhammad Himayatullah Farukhi. PLD 1969 SC 407, Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 SCMR 916, Al Badar Corporation v. Federation of Pakistan 1990 PTD 565, Council of Civil Service Unions and others v. Minister for the Civil Service 1984 All England Law Reports 935, Pakistan through Secretary, Ministry of Commerce and 2 others v.
Salahuddin and 3 others PLD 1991 SC 546, Messrs Army Welfare Sugar Mills Ltd. And others v.
Federation of Pakistan and others 1992 SCMR 1652, Federation of Pakistan through Secretary Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd. And others 1992 SCMR 1898, Muhammad Ashraf and others v. Dr. Muhammad Zaman and others 1994 SCMR 249 and Rees and others v. Crane 1994 SCMR 1682.
(ii) That the spiritual S.R.O. Conferring benefit upon the petitioner could not have been withdrawn by a general S.R.O.
9. Elaborating his arguments, learned counsel for the petitioner has contended that in the present era of competition Governments of various countries provide encouraging incentives to manufacturers and exporters of their countries so that they could successfully compete with the exporters of other countries, in the international market and earn foreign exchange for the parent country. Enactment of the provisions of section 21 of the Customs Act read with the relevant provisions of Sales Tax Act are intended to achieve the same object. Clauses A & B of section 21 deal with grant of exemption in payment of duty etc., for fixed period of time and are general in nature whereas provisions of section 21(c) have been enacted a claim in a particular situation in favour of an individual concern, and, hence, under the said provision a right can be granted in favour of an individual concern/person to claim rebate/drawback of the duty as well as refund of sales tax, paid by him on special rates while importing raw material for manufacturing of the special product for a specified or indefinite period of time. He contends that S.R.O. No,885(1)90, hence, conferred upon the petitioner a right to continue to manufacture and export his products with a special claim of duty drawback and refund of sales tax up to 6-7-1990 at the rates of 16.84% of f.o.b. Value and 5.56% of the f.o.b. Value respectively and for the period with effect from 7-7-1990 onwards, 20.81% of the f.o.b. Value as regards the customs duty and 6.11% of the f.o.b. Value as regards the sales tax, therefore, he was entitled to continue to enjoy the aforementioned right till infinity which right could not have been withdrawn without giving him an opportunity of hearing, disclosure of reasonable grounds for withdrawal thereof, providing an opportunity to represent and hence following fair procedure. Therefore S.R.O. No,118(1)95 which has been issued without complying with/completing the aforementioned formalities, is illegal and without a lawful authority.
It is further contended that special notification could not have been superseded by a general notification merely on the ground that a new budget has come into force wherein some change has been made in the rates of levies in general.
10. Learned counsel for the respondents, on the other hand, has contended that although a formal show-cause notice was not issued to the petitioner before superseding the previous S.R.O., yet he has been participating in the proceedings which ultimately culminating in the standardization of the rate of drawback duty; that rate of drawback duty has to be decreased as the rate of import duty as well as sales tax has also been reduced in the current budget, therefore, it was necessary to reduce the duty drawback rates applicable to the petitioner so as to commensurate with the rates applicable to others, hence, the petitioner has no actionable just cause of action against the respondent; that the petitioner when aggrieved of the show-cause notice issued to him by the Deputy Collector (Customs) Sialkot, filed a similar petition in the Lahore High Court, which was disposed of with a direction, that penalty etc. Shall not to be charged from the petitioner as he has drawn the duty and sales tax under a bona fide mistake, which is now pending in I.C.A., hence, this petition is not maintainable in law; that principles of legitimate expectations, promissory estoppel and fair action/procedure are not attracted in this case as per provisions of section 31(a) of the Customs Act, which are reproduced as under:--- 31-A. Effective rate of duty.---(1) Notwithstanding anything in any other law for the time being in force or any decision of any Court, for the purposes of sections 30 and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under section 18 (**) and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof.
(2) For the purpose of determining the value of any imported or exported goods, the rates of exchange at which any foreign exchange is to be converted into Pakistan currency shall be the rate of exchange in force---
(a) in the case of goods referred to in clause (a) of section 30, on the date (immediately preceding the date) referred to in that clause;
(b) in the case of goods referred to in clause (b) of the aforesaid section, on the date (immediately preceding the date) referred to in that clause; and
(c) in the case of goods referred to in section 31, on the date referred to in that section; the impugned notification having been issued in exercise of legislative authority vested in the respondents.
11. I have considered the arguments addressed at the bar, have perused the record have gone through the statutory provisions on the subject and relevant cases on the subject.
' In case of Pakistan through the Secretary, Ministry of Finance v. Muhammad Hamayatullah Farukh PLD 1969 SC 407, it has been held that although an authority competent to make order has the power to undo it, however, the order cannot be withdrawn or rescinded once it has taken legal effect and certain rights have been created in pursuance thereof in favour of an individual.
' In case of Works Cooperative Housing Society, Karachi and another v. The Karachi Development Authority PLD 1978 Kar. 529, it has been held that the Government is bound to stand by his commitment.
' In case of Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others PLD 1991 SC 546, it has been held that doctrine of "promissory estoppel" applies against the Government and the statutory corporation but does not extend to legislative and sovereign functions, however, executive actions are not excluded from its operation.
' In case of Faisal Spinning Mills Limited, Karachi v. State Bank of Pakistan, Karachi PLD 1993 Kar. 360, it has been held that under the rights accrued to a person "Pay-as-you-Earn" Scheme framed by the Government, cannot be taken away or abridged vested with retrospective effect.
' In case of Council of Civil Service Unions and others v. Minister for the Civil Service 1984 All England Law Reports, Chapter "D" 935 it has been held that decision of a public authority effecting an individual by depriving him of some benefit or advantage which in the past he had been permitted to enjoy and which he could legitimately expect to be permitted to continue to enjoy either until he was given reasons for its withdrawal and the opportunity to comment on those reasons or because he had received an assurance that it would not be withdrawn, before he had been given the opportunity of making representations against the withdrawal. The appellant's legitimate expectation arising from the existence of a regular practice of consultation which the appellants could reasonably expect to continue gave rise to an implied limitation on the minister's exercise of the power contained in Art.4 of the 1982 Order, namely, an obligation to act fairly by consulting the GCHQ Staff before withdrawing the benefit of trade union membership. The minister's failure to consult prima facie entitled the appellants to judicial review of the minister's instruction.
' In case of Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917 where vide notification dated 8-6-1972 exempting certain goods from 'so much of customs duties leviable thereon as was in excess of 20% ad valorem' and the importer on the faith of earlier notification purchasing goods from foreign Company and contract was confirmed in writing on 7-6-1977, it has been held that vested right of importer to then existing notification, granting exemption in customs duty, could not be taken away and destroyed by modification of earlier notification in exercise of powers under the General Clause Act.
' In case of Messrs Army Welfare Sugar Mills Ltd. And others v. Federation of Pakistan and others 1992 SCMR 1652 it has been held that once an order has taken legal effect and certain rights are created in favour of any individual, the principle of locus poenitentiae would be available and such order hence cannot be withdrawn; that the principle of promissory estoppel is available in Pakistan against Government functionaries as well and that exemption from payment of excise duty or in other tax, granted for specific period of time, on certain conditions, creates a vested right in favour of an individual, hence, the exemption cannot be withdrawn through an executive instrument like a notification and the only course open to withdraw such vested right is by a legislative provision.
' In case of M/s. Abdul Wahid Abdul Majid v. Government of Pakistan and others 1993 SCMR 17 it has been held that withdrawal of exemption from payment of the duty imposed under the Customs Act is permissible under the provision of section 31-A of the Customs Act, 1969, as the doctrine of promissory estoppel cannot be invoked against Legislature or laws framed by it because Legislature cannot make a representation.
' In case of Muhammad Ashraf and others v. Dr. Muhammad Zaman and others 1994 SCMR 249, it has been held that withdrawal of increments to respondent civil servant without hearing the respondent being detrimental to his interest or violated principles of natural justice and the same could not have been sustained on merits.
' In case of Rees and others v. Crane 1994 SCMR 1682 it has been held that the Courts took their stand several centuries ago on the broad principle that bodies entrusted with legal power could not validly exercise it without first hearing the person who was going to suffer. This principle was applied very widely to administrative as well as to judicial acts, and to the acts of individual ministers and official as well as to the acts of collective bodies such as justices and committees.
The hypothesis on which the Courts built up their jurisdiction was that the duty to give every victim a fair hearing was just as much a canon of good administration as of good legal procedure. Even where an order or determination is unchallengeable as regards its substance, the Court can at least control the preliminary procedure so as to require fair consideration of both sides of the case, which is more likely to conduce to good administration. Natural justice is concerned with the exercise of power that is to say, with acts or orders which produce legal results and in some way alter someone's legal position to his disadvantage. But preliminary steps, which in themselves may not involve immediate legal consequence, may lead to acts or orders which do so. In this case the protection of "fair procedure", might have been needed throughout, and the successive steps must have been considered not only separately but also as a whole. The question must always be whether looking at the statutory procedure as a whole each separate step is fair to the persons affected.
' In case of Syed Ali Shah v. Government of Pakistan through Ministry of Defence and 2 others 1994 CLC 369, it has been held that public functionaries and statutory bodies while dealing with subjects must act justly and fairly in accordance with law and they are bound to stand by their commitments--Failure of public functionaries and statutory bodies to stand by their commitment, would result in undermining confidence of public in such bodies. At page 381 of the report, it has been held as under:--- "It is an established proposition of law that public functionaries and the statutory bodies while dealing with the subjects have to act justly and fairly in accordance with law and are bound to stand by their commitments as in case of failure of the public functionaries and the statutory authorities to stand by their ' commitments results in undermining the confidence of the public in the said bodies which is not permissible under the Constitution of Islamic Republic of Pakistan, 1973.
In case of Bashir Ahmad Bilour v. M.C., Peshawar and 3 others PLD 1976 Pesh. 1 when a contract to collect octroi instead of giving to the highest bidder, was given through private negotiations and highest bid was not accepted by the Provincial Government who had to grant approval thereof without issuing any notice to the highest bidder their Lordships struck down negotiated contract and held that the action of the statutory body was not only repugnant to the law but is also manifestly unjust and designed to undermine public confidence. This judgment was challenged before the Hon'ble Supreme Court of Pakistan and was upheld by their Lordships of the Supreme Court in case of Arsallah Khan v. Bashir Ahmad Balour and 3 others PLD 1976 SC 581. Similarly in case of Pakistan through Secretary, Ministry of Commerce and 2 others v. Salahuddin and 3 others PLD 1991 SC 546 (supra), their Lordship of the Supreme Court of Pakistan have held that principle of promissory estoppel ' is applicable to the executive' and statutory authorities' except in those cases which fall within the exceptions enumerated in the said judgment. At pages 555 to 557 of the above-referred case, it has been held as under:--- ' What distinguishes the appeals now before us is that it is not the case of the Government itself that the non-reparable Investment Scheme was in any manner or to any extent beyond the competence of the Government of Pakistan or against the Laws of the Land. Therefore, the Scheme, the terms thereof and the inducement therein were in accord with law, were in advancement of public policy and had been presented by the competent authority. Inducing thereby Pakistani, living and earning abroad to invest in machine of the required description. By providing that no sanction of any sort would be needed after a No-Objection Certificate had been granted and the practice having been so observed, it cannot be said that in those cases where the ' No-Objection Certificate' had been granted any further impediment remained. Making of an application to the Chief Controller of Imports and Exports and getting an import licence from him was a consequential formal step and no discretion as such was involved where bona fide No-Objection Certificate was held by an applicant. The contention of the learned Deputy Attorney-General that the doctrine of promissory estoppel does not extend to legislative, executive or sovereign functions of the State is correct to the extent that it does not indeed extend to legislative and sovereign functions, but executive actions are not excluded from the operation of the doctrine. The learned Deputy Attorney-General has basically relied for his contentions on the decision given in Ram Niwas Gupta and others v. State of Haryana through Secretary, Local Self-Government, Chandigarh and .Another AIR 1970 Punjab and Haryana 462 which was approved by the Indian Supreme Court in the case of M/s. Jit Ram Shiv Kumar and others AIR 1980 SC 1285, but both these decisions were overruled by the Indian Supreme Court itself in Union of India and others v. Godrey Philips Ltd. AIR 1986 SC 806, and the following observations were made in para. 12 of the judgment which are relevant:--- ' There can therefore be no doubt that the doctrine of promissory estoppel is applicable against the Government in exercise of Governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive actions cannot be invoked to defeat the doctrine of promissory estoppel. We must concede that the subsequent decision of this Court in Jit Ram v. State of Haryana (1980) 3 SCR 689. AIR 1980 SC 1285 takes a slightly different view and holds that a doctrine of promissory estoppel is not available against the exercise of executive functions of the State and the State cannot be prevented from exercising its functions under the law. This decision also expresses its disagreement with the observations made in Moti Lal Sugar Mills' case AIR 1979 SC 621 that the doctrine of promissory estoppel cannot be defeated by invoking the defence of executive necessity, suggesting by necessary implication that the doctrine of executive necessity is available to the Government to escape its obligation under the doctrine of promissory estoppel. We find it difficult to understand how a Bench of two Judges in Jit Ram's case could possibly overturn or disagree with what was said by another Bench of two Judges in Moti Lal Sugar Mills' case. If the Bench of two Judges in Jit Ram's case found themselves unable to agree with law laid down in Moti Lal Sugar Mills' case they could have referred Jit Ram's case to a larger Bench, but we do not think it was right on their part to express their disagreement with the enunciation of the law by a coordinate Bench or the same Court in Moti Lal Sugar Mills'.
' In our country the doctrine of promissory estoppel has found acceptance and enforcement in the case of Federation of Pakistan v. Ch. Muhammad Aslam and others 1986 SCMR 916.
' A very appropriate case from the Indian jurisdiction is Union of India v. M/s. Anglo-Afghan Agencies AIR 1968 SC 718 wherein an export incentive scheme had been notified to the public under the same section 3 of the Imports and Exports (Control) Act, 1917 by the Export Promotion Bureau of the Indian Government. After the party had acted on the inducement, satisfied the required condition, there was an attempt to resile. The relief was granted in that case in terms of the representation as hereunder reflected in para. 23 of that judgment; ' Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct, it cannot on some undefined and undisclosed ground of necessity or expediency failed 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. We agree with the High Court that the impugned order passed by the Textile Commissioner and confirmed by the Central Government imposing cut in the import entitlement of the respondents should be satisfied and quashed and that the Textile Commissioner and the Joint Chief Controller of Imports and Exports be directed to issue the respondents Import Certificate for the total amount equal to 100 per cent. Of the f.o.b. Value of the goods exported by them unless there is some decision which falls within clause 10 of the scheme in question."
' In case of Union of India v. M/s. Anglo-Afghan Agencies AIR 1968 SC 718, it has been held that in a case where Export Promotion Scheme for woollen textiles and woollen goods has been promulgated by the Central Government and the persons acting on the representation made by the Government had asked for carrying out of the promise, it has been held that even without there being a formal contract, the Government is bound to carry out the promise as the section 115 of the Evidence Act, is fully attracted against the Government as well. Paragraph 20 of the judgment is reproduced as under:--- "This case, is in our judgment, a clear authority that even though the case does not fall within the terms of section 115 of the Evidence Act, it is still open to a party who has acted on a representation made by the Government' to claim that the Government shall be bound to carry out the promise made by it, even though the promise is not recorded in the form of a formal contract as required by the Constitution."
' In case of M.P. Sugar Mills v. State of U.P AIR 1979 SC 621, it has been held that once the State represents to the subject on the basis whereof he changes his position, the principle of estoppel will dabar the Government to withdraw the promise without giving him an opportunity of hearing and filing of a representation against the proposed action, as the doctrine of promissory estoppel will debar the Government from being do so. In paragraphs Nos.7, 8, 9, 10, 19, 24, 27, 28 and 33, it has been held as under:- "7. That takes us to the question whether the assurance given by the 4th respondent on behalf of the State Government that the appellant would be exempt from sales tax for a period of three years from the date of commencement of production could be enforced against the State Government by invoking the doctrine of promissory estoppel. Though the origin of the doctrine of promissory estoppel may be found in Hughes v. Metropolitan Rly. Co. (1877) 2 AC 439 and Birmingham and District Land Co. v. London and North Western Rly. Co. (1888) 40 Ch D 268 authorities of old-standing decided about a century ago by the House of Lords. It was only recently in 1947 that it was rediscovered by Mr. Justice Denning, as he then was, in his celebrated judgment in Central London Property Trust Ltd. v. High Trees House Ltd. (1956) 1 All ER 256: 1947 KB 130. This doctrine has been variously called 'promissory estoppel', 'equitable estoppel', ' quasi-estoppel' and 'new estoppel'. It is a principle evolved by equity to avoid injustice and though commonly named 'promissory estoppel', it is, as we shall presently point out, neither in the realm of contract nor in the realm of estoppel. It is interesting to trace the evolution of this doctrine in England and to refer to some of the English decisions in order to appreciate the true scope and ambit of the doctrine particularly because it has been the subject of considerable recent development and is steadily expanding. The basis of this doctrine is always, true to form, stepped in to mitigate the rigours of strict law. The early cases did not speak of this doctrine as estoppel. They spoke of it as ' raising an equity'. Lord Cairns stated the doctrine in the earliest form--it has undergone considerable development since then--.-in the following words in Hughes v. Metropolitan Rly. Co. (supra): 'It is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results.... Afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.'
8. This principle of equity laid down by Lord Cairns made sporadic appearances in stray cases now and then but it was only in 1947 that it was disinterred and restated as a recognised doctrine by Mr. Justice Denning, as he then was, in the High Trees case. The facts in that case were as follows: The plaintiff leased to the defendants, a subsidiary of the plaintiffs, in 1937 a block of flats for 99 years at a rent of pound 2,500 a year. Early in 1940 and because of the war, the defendants were unable to find sub-tenants for the flats and unable in consequence to pay the rent. The plaintiffs agreed at the request of the defendants to reduce the rent to pound 1,250 from the beginning of the term. By the beginning of 1945 the conditions had improved and tenants had been found for all the flats and the plaintiffs, therefore, claimed the full rent of the premises from the middle of that year. The claim was allowed because the Court took the view that the period for which the full rent was claimed fell outside the representation, but Mr. Justice Denning, as he then was, considered obiter whether the plaintiffs could have recovered the covenanted rent for the whole period of the lease and observed that in equity the plaintiffs could not have been allowed to act inconsistently with their promise on which the defendants had acted. It was pressed upon the Court that according to the well-settled law as laid down in Jorden v. Money (1854) 5 HLC 185 no estoppel could be raised against the plaintiffs since the doctrine of estoppel by representation is applicable only to representations as to some state of facts alleged to be at the time actually in existence and not to promises de future which, if binding at all, must be binding only as contracts and here there was no representation of an existing state of facts by the plaintiffs but it was merely a promise or representation of intention to act in a particular manner in the future.
' Mr. Justice Denning, however, pointed out: ' The law has not been standing still since Jorden v. Money. There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppel are not really such.
They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the Courts have said that the promise must be honoured.'
' The principle formulated by Mr. Justice Denning was, to quote his own words, 'that a promise intended to be binding, intended to be acted on and in fact acted on is binding so far as its terms properly apply. Now Hughes v. Metropolitan Rly. Co. (supra) and Birmingham and District Land Co. v. London and North Western Rly. Co. (supra), the two decisions from which Mr. Justice Denning drew inspiration for evolving this new equitable principle, were clearly cases where the principle was applied as between parties who were already bound contractually one to the other. In Hughes v. Metropolitan Rly. Co. (supra) the plaintiff and the defendant were already bound in contract and the general principle stated by Lord Cairns, L.C. Was: ' If parties who have entered into definite and distinct terms involving certain legal results afterwards... Enter upon a course of negotiations.'
' Ten years later Bowen, L.J. Also used the same terminology in Birmingham and District Land Co. v.
London and North Western Rly. Co. (supra) that--- 'If persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe ' These two decisions might, therefore, seem to suggest that the doctrine of promissory estoppel is limited in its operation to cases where the parties are already contractual bound and one of the parties induces the other to believe that the strict rights under the contract would not be enforced.
But we do not think' any such limitation can justifiably be introduced to curtail the width and amplitude of this doctrine. We fail to see why it should be necessary to the applicability of this doctrine that there should be some contractual relationship between the parties. In fact Donaldson, J. Pointed in Durham Fancy Goods Ltd. v. Jackson (Michael) (Fancy Goods) Ltd. (1968) 2 All ER 987: 'Lord Cairns in his enunciation of the principle assumed a preexisting contractual relationship between the parties, but this does not seem to me to be essential, provided that there is a pre- existing legal relationship which could in certain circumstances give rise to liabilities and penalties.'
' But even this limitation suggested by Donaldson, J. That there should be a pre-existing legal relationship which could in certain circumstances give rise to liabilities and penalties is not warranted and it is significant that the statement of the doctrine by Mr. Justice Denning in the High Trees' case does not contain any such limitation. The learned Judge has consistently refused to introduce any such limitation in the doctrine and while sitting in the Court of Appeal, he said in so many terms, in Evenden v. Guildford City Association Football Club Ltd. (1975) 3 All ER 269: ' Counsel for the appellant referred us, however, to the Second Edition of Spencer Bower's book on Estoppel by Representation (1966), pp.340-342 by Sir Alexandar Turner, a Judge of the New Zealand Court of Appeal. He suggests the promissory estoppel is limited to cases where parties are already bound contractually one to the other. I do not think it is so limited: See Durham Fancy Goods Ltd. v.
Jackson Michael (Fancy Goods) Ltd. It applies whenever a representation is made, whether of fact or law, present or future, which is intended to be binding, intended to induce a person to act on it and he does act on it.'
' This observation of Lord Denning clearly suggests that the parties need not be in any kind of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would seem to apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations or affect a legal relationship which will arise in future. Vide Halsbury's Laws of England; 4th Edn. p. 1018, Note 2 to para. 1514. Of course it must be pointed out in fairness to Lord Denning that he made it clear in the High Trees' case that the doctrine of promissory estoppel cannot found a cause of action in itself, since it can never do away with the necessity of consideration in the formation of a contract, but he totally repudiated in Evenderis' case the necessity of a pre-existing relationship between the parties and pointed out in Crabb v. Arun District Council, (1975) 3 All ER 865 that equity will in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights even where they arise not under any contract, but on his own title deeds or under statute. The true principle of promissory estoppel, therefore, seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise 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 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, and this would be so irrespective whether there is any pre-existing relationship between the parties or not.
9. It may be pointed out that in England the law has been well settled for a long time, though there is some indication of a contrary trend to be found in recent juristic thinking in that country, that promissory estoppel cannot itself be the basis of an action. It cannot found a cause of action: it can only be a shield and not a sword. This narrow approach to a doctrine which is otherwise full of great potentialities is largely the result of an assumption, encouraged by its rather misleading nomenclature, that the doctrine is a branch of the law of estoppel. Since estoppel has always been traditionally a principle invoked by way of defence, the doctrine of promissory estoppel has also come to be identified as a measure of defence. The ghost of traditional estoppel continues to haunt this new doctrine: formulating and applying this new equity in the High Trees' case (1956) 1 All ER 256 Lord Denning added a qualification that though in the circumstances set out, the promise would undoubtedly be held by the Courts to be binding on the party making it, not understanding that under the old common law it might be difficult to find any consideration for it, the Courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it. Lord Denning also pointed out in Combe v. Combe (1951) 2 KB 215 that 'Much as I am inclined to favour the principle stated in the High Trees' case, it is important that it should not be stretched too far, lest it should be endangered.
That principle does not create new cause of action where none existed before. It only prevents a party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties...." so also said Buckley, J. In the more recent case of Beesly v. Hallwood Estates Ltd. (1960) 2 All ER 314: ' The doctrine may afford a defence against the enforcement or otherwise of enforceable rights: it cannot create a cause of action.' It is, however, necessary to make it clear that though this doctrine has been called in various judgments and textbooks as promissory estoppel and it has been variously described as 'equitable estoppel', 'quasi-estoppel' and 'new estoppel', it is not really based on the principle of estoppel, but it is a doctrine evolved by equity in order to prevent injustice where a promise is made by a person knowing that it would be acted on by the person to whom it is made and in fact it is so acted on and it is inequitable to allow the party making the promise to go back upon it.
' Lord Denning himself observed in the High Trees' case, expressly making distinction between ordinary estoppel and promissory estoppel, that cases like the one before him were ' ... Not cases of estoppel in the strict sense. They are really promises, promises intended to be binding, intended to be acted upon and in fact acted upon.' Jenkin, C.J. Also pointed out in Municipal Corporation of Bombay v. Secretary of State (1905) ILR 29 Bom. 580 at p.607 that the 'doctrine is often treated as one of estoppel, but I doubt whether this is correct, though it may be a convenient name to apply'.
The doctrine of promissory estoppel need not, therefore, be inhibited by the same limitation as estoppel in the strict sense of the term. It is an equitable principle evolved by the Courts for doing justice and there is no reason why it should be given only a limited application by way of defence.
10. It may be noted that even Lord Denning recognised in Crabb v. Arun District Council (1975) 2 All ER 865 (supra) that 'there are estoppels and estoppels. Some do give rise to a cause of action.
Some do not' and added that ' in the species of estoppel called 'promissory estoppel' it does give rise to a cause of action'. The learned Law Lord, after quoting what he had said in Moorgate Mercantile Co. Ltd. v. Twitching's (1975) 3 WLR 286 namely that the effect of estoppel on the true .Owner may be that--- 'his own title to the property, be it land or goods, has been held to be limited or extinguished, and new rights and interests have been created therein. And this operates by reason of his conduct---what he has led the other to believe---even though he never intended it.' proceeded to observe that 'the new rights and interests, so created by estoppel, in or over land, will be protected by the Courts and in this way give rise to a cause of action'. The Court of Appeal in this case allowed Crabb a declaration of ' a right of access at point B over the verge on to Mill Park Road and a right of way along that road to Hook Lane' on the basis of an equity arising out of the conduct of the Arun District Council. Of course, Spencer Bower and Turner, in their Treaties on 'The Law Relating to Estoppel by Representation' have explained this decision on the basis that it is an instance of the application of the doctrine of estoppel by encouragement or acquiescence or what has now come to be known as proprietary estoppel which, according to the learned authors, forms an exception to the rule that estoppel cannot found a cause of action. But if we look at the judgments of Lord Denning and Scarman, L.J., it is apparent that they did not base their decision on any distinctive feature of proprietary estoppel but proceeded on the assumption that there was no distinction between promissory and proprietary estoppel so far as the problem before them was concerned. Both the learned Law Lord and the learned Lord Justice applied the principle of promissory estoppel in giving relief to Crabb. Lord Denning, referring to what Lord Cairns had said in Hughes v. Metropolitan Rly. Co. (1877) 2 AC 439 at p.448 a decision from which inspiration was drawn by him for evolving the doctrine of promissory estoppel in the High Trees' case (1956) 1 All ER 256 observed that--- ' It is the first principle on which all Courts of equity proceed that it will prevent a person from insisting on his strict legal rights on his title deeds, or by statute---when it would be inequitable for him to do so having regard to the dealings which have taken place between the parties'. The decision in the High Trees' case was also referred to by the learned Law Lord and so also other cases supporting the doctrine of promissory estoppel. Scarman, L.J. Also observed that in pursuing the inquiry as to whether there was an equity in favour of Crabb, he did not find helpful 'the distinction between the promisor and proprietary estoppel'. He added that this 'distinction may indeed be valuable to those who have to teach or expound that law, but I do not think that, in solving the particular problem raised by a particular case, putting the law into categories is of the slightest assistance'. It does appear to us that this was a case decided on the principle of promissory estoppel. The representative of the Arun District Council clearly gave assurance to Crabb that they would give him access to the new road at point B to serve the Southern portion of his land and the Arun District Council in fact constructed a gate at point B, Crabb agreed to sell, tilt Northern portion of his land without reserving for himself as owner of the Southern portion any right of way over the Northern portion for the purpose of access to the new road. This was the reason why the Court raised an equity in favour of Crabb and held that the equity would be satisfied by giving Crabb 'the right of access at point B free of charge without paying anything for it'. Arun District Council was held bound by its promise to provide Crabb access to the new road at point B and this promise was enforced against Arun District Council at the instance of Crabb. The case was one which fell within the category of promissory estoppel and it may be regarded as supporting the view that promissory estoppel can be the basis of a cause of action. It is possible that the case also came within the rule of proprietary estoppel enunciated by Lord Kingsdown in Ramsden v. Dyson (1866) 1 HL 129: 'The rule of law applicable to the case appears to me to be this: If a man, under a verbal agreement with a landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a Court of equity will compel the landlord to give effect to such promise or expectation', and Spencer Bower and Turner may be right in observing that that was perhaps the reason why it was held that the promise made by Arun District Council gave rise to a cause of action in favour of Crabb. But, on what principle, one may ask, is the distinction to be sustained between promissory estoppel and proprietary estoppel in the matter of enforcement by action. If proprietary estoppel can furnish a cause of action, why should promissory estoppel not? There is no qualitative difference between the two. Both are the off springs of equity and if equity is flexible enough to permit proprietary estoppel to be used as a cause of action, there is no reason in logic or principle why promissory estoppel should also not be available as a cause of action, if necessary to satisfy the equity.
19. When we turn to the Indian law on the subject it is heartening to find that in India not only has the doctrine of promissory estoppel been adopted in its fullness but it has been recognized as affording a cause of action to the person to whom the promise is made. The requirement of consideration has not been allowed to stand in the way of enforcement of such promise. The doctrine of promissory estoppel has also been applied against the Government and the defence based on executive necessity has been categorically negative. It is remarkable that as far back as 1880, long before the doctrine of promissory estoppel was formulated by Denning, J., in England, a Division Bench of two English Judges in the Calcutta High Court applied the doctrine of promissory estoppel and recognised a cause of action founded upon it in the Ganges Mfg. Co. v. Sourujmull (1880) ILR 5 Cal.
669. The doctrine of promissory estoppel was also applied against the Government in a Case subsequently decided by the Bombay High Court in Municipal Corporation of Bombay v. Secretary of State (1905) ILR 29 Bom.
580.
24. This Court finally, after referring to the decisions in the Ganges Mfg. Co. v. Sourujmull (1880) ILR 5 Cal. 669 (supra), Municipal Corporation of the City of Bombay v. Secretary of State for India (1905)
ILR 29 Bom. 580 (supra) and Collector of Bombay v. Municipal Corporation of City of Bombay, AIR 1951 SC 469 (supra), summed up the position as follows:--- "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."
' The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee, and, in fact, the promise, acting 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 promise, 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 Art 299 of the Constitution.
It is elementary that in a republic governed by the rule of law, no one, how so ever high or low, is above the law. Everyone 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 rectangular rectitude while dealing with its citizen'? There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligation, but, let it be said to the eternal glory of this Court, this doctrine was emphatically negatived in the Indo-Afghan Agencies' case AIR 1968 SC 718 and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of the promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promisee and the promisee would alter his position relying upon it. But if the Government makes such a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual. The law cannot acquit legitimacy and gain social acceptance unless it accords with constant endeavour of the Courts and the Legislatures must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of ilk facts which have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and later his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires 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, 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'. If the Government wants to resist the liability, it will have to disclose to the Court what are the subsequent events on accounts of which the Government claims to be exempt from the liability and it would be for the Court to decide whether those events are such as to render it inequitable to enforce the liability against the Government.
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 the Court can judge for itself which way the public interest lies and what the equity of the case demands. It is only if the Court is satisfied, on proper and adequate material placed by the Government, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. The Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. 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 the discharge of this burden. But even where there is no such overriding public interest, it may still be competent to the Government to resile from the promise 'on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position' provided of course it is possible for the promisee to restore status quo ante. If, however, the promisee cannot resume his position, the promise could become final and irrevocable. Vide Ajayi v. Briscoe (1964) 3 All ER 556).
27. We must also refer to the decision of this Court in M. Ramanatha Pillai v. State of Kerala (1974) 1 SCR 515: AIR 1973 SC 2641 because that was a decision strongly relied upon on behalf of the State for negativing the applicability of the doctrine of estoppel against the Government. This was a case where the appellant was appointed to a temporary post and on the post being abolished, the service of the appellant was terminated. The appellant challenged the validity of termination of service, inter alia, on the ground that the Government was precluded from abolishing the post and terminating the service, on the principle of promissory estoppel. This ground based on the doctrine of promissory estoppel was negatived and it was pointed out by the Court that the appellant knew that the post was temporary, suggesting clearly that the appellant could not possibly be led into the belief that the post would not be abolished. If the post was temporary to the knowledge of the appellant, it is obvious that the appellant knew that the post would be liable to be abolished at any time and if that be so, there could be no factual basis for invoking, the doctrine of promissory estoppel for the purpose of precluding the Government from abolishing the post. This view taken by the Court was sufficient to dispose of the contention based on promissory estoppel and it was not necessary to say anything more about it, but the Court proceeded to cite a passage from American Jurisprudence. Vol. 28 (2 d) at 783, paragraph 123 and observed that the High Court rightly held--- ' That the Courts exclude the operation of the doctrine of estoppel, when it is found that the authority against whom estoppel is pleaded has owed a duty to the public against whom the estoppel cannot fairly operate.'
' It was this observation which -was heavily relied upon on behalf of the State but we fail to see how it can assist the contention of the State. In the first place, this observation was clearly obiter, since, as pointed out by us there was on the facts of the present case no scope for the applicability of the doctrine of promissory estoppel. Secondly, this observation was based upon a quotation from the passage in para. 123 at page 783 of Volume 28 of American Jurisprudence (2 d), but unfortunately this quotation was incomplete and it overlooked, perhaps inadvertently, the following two important sentences at the commencement of the paragraph, which clearly shows that even in the United States the doctrine of promissory estoppel is applied against the State ' when justified by the facts'; 'There is considerable dispute as to the application of estoppel with respect to the State. While it is said that equitable estoppel will be invoked against the State when justified by the facts, clearly the doctrine of estoppel should not be lightly invoked against the State.' (Emphasis supplied).
' Even the truncated passage quoted by the Court recognised in the last sentences that though, as a general rule, the doctrine of promissory estoppel would not be, applied against the State in its governmental, public or sovereign capacity, the Court would unhesitatingly allow the doctrine to be invoked in cases where it is necessary in order 'to prevent fraud or manifest injustice'. This passage leaves no doubt that the doctrine of promissory estoppel may be applied against the State even in its governmental, public or sovereign capacity where it is necessary to prevent fraud or manifest injustice. It is difficult to imagine that the Court citing this passage with approval could have possibly intended to lay down that in no case can the doctrine of promissory estoppel be invoked against the Government. Lastly, a proper reading of the observation of the Court clearly shows that what the Court intended to say was that where the Government owes a duty to the public to act in a particular manner, and here obviously duty means a course of conduct enjoined by law, the doctrine of promissory estoppel cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The doctrine of promissory estoppel cannot be applied in teeth of an obligation or liability imposed by law.
28. We may then refer to the decision of this Court in Assistant Custodian v. Brij Kishore, (1975) 2 SCR 359: AIR 1974 SC 2325. It is not necessary to reproduce the facts of this case, because the only purpose for which this decision was relied upon on behalf of the State was to show that the view taken by the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. 1951 AC 837 (supra) was preferred by this Court to that taken by Lord Denning in Robertson v. Minister of Pension (1949) 1 KB 227 (supra). It is true that in this case the Court expressed the opinion 'that the view taken by the House of Lords is the correct one and not the one taken by Lord Denning' but we fail to see how that can possibly help the argument of the State. The House of Lords did not in Howell's case negative the applicability of the doctrine of promissory estoppel against the Government. What it laid down was merely this, namely, that no representation or promise made by an officer can preclude the Government from enforcing a statutory prohibition. The doctrine of promissory estoppel cannot be availed to permit or condone a breach of the law. The ratio of the decision was succinctly put by Lord Normand when he said: neither a minister nor any subordinate officer of the Crown can by any conduct or representation bar the Crown from enforcing a statutory prohibition or entitle the subject to maintain that there has been no breach of it.'
It may also be noted that promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The Legislature can never be precluded from exercising its legislative 'function by resort to the doctrine of promissory estoppel. Vide State of Kerala v. Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. (1974) 1 SCR 671: AIR 1973 SC 2734.
33. The State, however, contended that the doctrine of promissory estoppel had no application in the present case because the appellant did not suffer any detriment by acting on the representation made by the Government; the Vanaspati factory set up by the appellant was quite a profitable concern and there was no prejudice caused to the appellant. This contention of the State is clearly unsustainable and must be rejected. We do not think it is, necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that the promisee should have altered his position in reliance on the promise. This position in reliance on the promise. This position was impliedly accepted by Denning J. In the High Trees' case when the learned Judge pointed out that the promise must be one--- ' which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made and which was in fact acted on.' (Emphasis supplied). If a promise is 'acted on' 'such action, in law as in physics, must necessarily result in an alteration of position.' This was again reiterated by Lord Denning in W.J. Alan & Co. Ltd. v. EL Nasr Export and Import Co. (1972) 2 All ER 127 at page 140 where the learned Law Lord made it clear that alteration of position---only means that he (the promisee) must have been led to act differently from what he would otherwise have done. And, if you study the cases in which the doctrine has been applied, you will see that all that is required is that the one should have acted on the belief induced by the other party.'
' Viscount Simonds also observed in Tool Metal Mfg. Co. Limited v. Tungsten Electric Co. Ltd. (1955) 2 All ER 657 that ' the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position.' The judgment of Lord Tucker in the same case would be found to depend likewise on a fundamental finding of alteration of position, and the same may be said of that of Lord Cohen. Then again in Ajayi v. Briscoe (1964) 3 All ER 556 (supra) Lord Hodson said: ' This equity is, however, subject to the qualifications (a) that the other party has altered his position' . The same requirement was also emphasised by Lord Diplock in Kammin's Ballrooms Ltd. v. Zenith Investments (Torguay) Ltd. (1970) 2 All ER 871. What is necessary, therefore, is no more than that there should be alteration of position on the part of the promisee. The alteration of position need not involve any detriment to the promisee. If detriment were a necessary element, there would be no need for the doctrine of promissory estoppel because, in that event, in quite a few cases, the detriment would form the consideration and the promise would be binding as a contract. There is in fact not a single case in England where detriment is insisted upon as a necessary ingredient of promissory estoppel.
In fact, in W.J. Alan & Co. (supra) Lord Denning expressly rejected detriment as an essential ingredient of promissory estoppel, saying: ' A seller may accept a less sum for his goods than the contracted price, thus inducing (his buyer) to believe that he will not enforce payment of the balance: see Central London Property Trust Ltd. v.
High Trees House Ltd. (1956) 1 All ER 256 and D & C Builders Ltd. v. Rees (1965) 3 All ER 837). In none of these cases does the party who acts on the belief suffer any detriment. It is not a detriment, but a benefit to him to have an extension of time or to pay less, or as the case may be. Nevertheless, he has conducted his affairs on the basis that he has had that benefit and it would not be equitable now to deprive him of it.'
We do not think that in order to invoke the doctrine of promissory estoppel it is necessary for the promisee to show that he suffered detriment as a result of acting in reliance on the promise. But we may make it clear that if by detriment we mean injustice to the promisee which would result if the promisor were to recede from his promise, then detriment would certainly come in as a necessary ingredient. The detriment in such a case is not some prejudice which would be caused to the promisee, if the promisor were allowed to go back on the promise. The classic exposition of detriment in this sense is to be found in the following passage from the judgment of Dixon, J. In the Australian case of Grundt v. Great Boulder Pty. Gold Mines Ltd., (1938) 59 CLR 641: ' It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite-party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own proximal change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong, and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite-party, the consequence would be to make his original act or failure to act a source of prejudice' .
' If this is the kind of detriment contemplated, it would necessarily be present in every case of promissory estoppel, because it is on account of such detriment which the promisee would suffer if the promisor were to act differently from his promise, that the Court would consider it inequitable to allow the promiser to go back upon his promise. It would, therefore, be correct to say that in order to invoke the doctrine of promissory estoppel it is enough to show that the promisee has, acting in reliance on the promise, altered his position and it is not necessary for him to further show that he has acted to his detriment. Here, the appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. Desmet (India) Pvt. Ltd., Bombay and setting up a Vanaspati plant, in the belief induced by the representation of the Government that sales tax exemption would be granted for a period of three years from the date of commencement of the production. The Government was, therefore, bound on the principle of promissory estoppel to make good the representation made by it. Of course, it may be pointed out that if the U.P. Sales Tax Act, 1948 did not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute, but since section 4 of the U.P. Sales Tax Act, 1948 confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or Governmental function, but,, for reasons which we have already discussed, no distinction can be made between the exercise of the sovereign or Governmental function and a trading or business activity of the Government, so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of Vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax from the appellant."
' In case of "Union of India v. Godfrey Philips India Ltd. AIR 1986 SC 806 when the excise duty was not being recovered on fibre board containers on the representation contained in the letter it has been held that doctrine of promissory estoppel is fully attracted. In paragraphs Nos.12 and 15 of the judgment, it has been held as under:--- "12. There can therefore be no doubt that the doctrine of promissory estoppel is applicable against the Government in the exercise of its Governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel. We must concede that the subsequent decision of this Court in Jit Ram v. State of Haryana (1980) 3 SCR 689: AIR 1980 SC 1285 takes slightly different view and holds that the doctrine of promissory estoppel is not available against the exercise of executive functions of the State and the State cannot be prevented from exercising its functions under the law. This decision also expresses its disagreement with the observations made in Motilal Sugar Mills' case AIR 1979 SC 621 that the doctrine of promissory estoppel cannot be defeated by invoking the defence of executive necessity, suggesting by necessary implication that the doctrine of executive necessity is available to the Government to escape its obligation under the doctrine of promissory estoppel. We find it difficult to understand how a Bench of two Judges in Jeet Ram's case could possibly overturn or disagree with what was said by another Bench of two Judges in Motilal Sugar Mills case. If the Bench of two Judges in Jeet Ram's case found themselves unable to agree with law laid down in Motilal Sugar Mills case, they could have referred Jeet Ram's case to a larger Bench, but we do not think it was right on their part to express their disagreement with the enunciation of the law by a coordinate Bench of the same Court in Motilal Sugar Mills."
12. We may now turn to examine the facts in the light of the law discussed by us. Here a representation was undoubtedly made by the Central Board of Excise and Customs and approved and accepted by the Central Government, that the cost 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' Association---and this representation was approved and accepted by the Central Government---that 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 competence of the Central Board of Excise and Customs and the Central Government to make good such representation and the exclusion of the cost of corrugated fibre board containers from the value of the cigarettes was not contrary to law. We think that the Central Government had power under rule 8, sub-rule (1) of the Rules to issue a notification excluding the cost of corrugated fibre board containers from the value of the cigarettes and thereby exempting the cigarettes from that part of the excise duty which would be attributable to the cost of corrugated fibre board containers. So also the Central Board of Excise and Customs had power under rule 8, sub-rule (2) to make a special order in the case of each of the respondents granting the same exemption, because it could legitimately be said that, having regard to the representation made by the Cigarette Manufacturers' Association, there were circumstances of an exceptional nature which required the exercise of the power under sub-rule (2) of rule 8. The Central Government and the Central Board of Excise and Customs were therefore clearly bound by promissory estoppel to exclude the cost of corrugated fibre board containers from the value of the goods for the purpose of assessm ent of excise duty for the period 24th May, 1976 to 2nd November, 1982.
' In case of Selvi Travels v. Union of India AIR 1993 Madras 216 where order of recognition of the travel agents, withdrawn by the Government, it has been held that the withdrawal order had not satisfied the test of reasonableness and if the order is not reasonable the principle of promissory estoppel will fully apply and at any rate the order of withdrawal could not have been passed without giving the agent an opportunity of hearing and to make a representation. Paragraphs 20, 21, 22, 25, 29 and 32 of the judgment are reproduced as under:-- "20. Two of the contentions of the petitioners are based on the above ruling. (i) The impugned orders are arbitrary and unreasonable; (ii) the general orders withdrawing the recognition granted to the petitioners without considering the individual cases is unsustainable: Both contentions are well-founded.
21. The reasons given in the counter-affidavit for passing the impugned orders are---(i) the existing system has created a privileged group of people; (ii) there are cases of misuse of passports by people who are neither Indians nor resident in India; (iii) passports issued on applications deposited by travel agents and sent to the individuals concerned to the addresses given in the applications have returned undelivered with the endorsement that there are no such addresses. The first of the reasons is wholly unintelligible. One can even say that it is ridiculous.
Whenever a system of licensing is introduced and certain criteria are fixed for issuing licenses, those who satisfy the requirements and obtain licences will certainly form a class different from those who are not able to get licences as they fail to fulfil the requirements. There is no substance in the contention that out of five thousand travel agents only seven hundred and fifty were recognised. They were recognised because they could comply with the conditions prescribed and the others could not. The contention is as much absurd as saying that out of several lakhs of residents in a city there are only a few thousands of lawyers. The second reason is no better. It is not the case of the respondents that the petitioners or other recognised travel agents were parties to any misuse of passports by non-Indians or they were even aware of the same. The question of misuse of passports will arise only after issue of passports. It is not the case of the respondents that in the case of applications deposited by the recognised travel agents, the inquiry prescribed in the Passports Act is dispensed with. The authorities cannot ignore the provisions of the statute and an inquiry has to be made with respect to each application whether presented directly or through a travel agent. Hence the recognised travel agents cannot be blamed as a class for any misuse of passports. The third reason has not been substantiated at all. Even the averment in the counter- affidavit is vague. No details are furnished. In the course of arguments, counsel appearing for the respondents produced some returned postal envelopes, numbering around ten, containing endorsements ' no such addressee'. The postal seals on all the envelopes produced before me showed that they were posted on 8-8-1992, during the pendency of these writ petitions. No material has been placed before me as to whether the applications in these cases were deposited by recognised travel agents. Hence, no credence can be attached to such returned envelopes.
22. Thus, it is seen that the reasons adduced in the counter-affidavit are not reasons at all. The impugned orders do not satisfy the test of reasonableness. With reference to reasons two and three if any recognised travel agent is found to be party to misuse of passports or if it is found that any travel agent has presented applications of nonexistent persons action should be taken against such travel agents only. Besides cancelling the recognition granted, other action can also be initiated against such erring travel agents. That will not be ground for withdrawing all the recognitions and cancel all the registration certificates. Reference is made in this connection by learned counsel for the petitioners to the following observation made by the Supreme Court in Gujarat Steel Tubes Ltd. v. Its Mazdoor Sabha, AIR 1980 SC 1896: 'The cardinal distinction in our punitive jurisprudence between a commission of enquiry and a Court of Adjudication, between the cumulative causes of a calamity and the specific guilt of a particular person, is that speaking generally, we have rejected as a nation, the theory of community guilt and collective punishment and instead that no man shall be punished except for his own guilt. Its reflection in the disciplinary jurisdiction is that no worker shall be dismissed save on proof of his individual delinquency. Blanket attainder of a bulk of citizens on any vicarious theory for the gross sins of some only, is easy to apply but abnoxious in principle.'
25. Thus, it can be seen that there is no nexus between the proclaimed object of the impugned order and the actual order that has been passed. According to the respondents, the new policy of liberalisation has been adopted in order to put an end to the misuse of passports. Far from achieving the said object, the result which may ensue may be directly contrary or diabolically opposite to the same.
29. Learned counsel for the petitioners have placed reliance on the principles laid down by the House of Lords in Council of Civil Service Unions v. Minister for the Civil Service (1984) 3 All ER 935. In that case, an oral instruction issued by the Minister for Civil Service to the effect that the terms and conditions of civil servants at Government Communication Headquarters (GCHQ), which was a breach in the civil service, whose main functions were to ensure the security of the United Kingdom military and official communications and to provide signals intelligence for the Government, would be revised so as to exclude membership of any trade union other than a departmental staff association approved by the Director of GCHQ. That instruction was issued without prior consultation with the staff at GCHQ and pursuant to the Minister's power under Article 4 of the Civil Service Order in Council, 1982, which enabled the Minister to give instructions for controlling the conduct of the Service and providing for the conditions of service. The order itself was made under the royal prerogative. The appellants before the House of Lords challenged the validity of the said instruction on the ground that the Minister had acted unfairly in removing their fundamental right to belong to a trade union without consultation. The trial Judge granted the application on the ground that the Minister ought to have consulted the staff before issuing the instructions. The Court of Appeal allowed the Minister's Appeal on grounds of national security on further appeal to the House of Lords, it was held that irrespective of whether a power exercised directly under the prerogative was immune from judicial review, delegated powers emanating from a prerogative power were necessarily similarly immune, since the scope of such delegated powers would, either expressly or impliedly, be defined, e.g., by reference to their object or the procedure by which they were to be exercised, with the result that such powers were subject to judicial control to ensure that the scope and limits of the power were not exceeded. It was also held that an aggrieved person was entitled to invoke judicial review if he showed that a decision of a public authority affected him by depriving him of some benefit or advantage which in the past he had been permitted to enjoy and which he could legitimately expect to be permitted to continue to enjoy either until he was given reasons for its withdrawal and the opportunity to common on those reasons or because he had received an assurance that it would not be withdrawn before he had been given the opportunity of making representation against the withdrawal. In that case; it was found that the appellants' legitimate expectation arising from the existence of a regular practice of consultation, which the appellant could reasonably expect to continue gave rise to implied limitation on the Minister's exercise of the power contained in Article 4 of the Civil Service Order in Council, 1982, namely an obligation to act fairly by consult at the GCHQ Staff before withdrawing the tenant of trade union membership and the Minister's failure to consult prima facie entitled the appellants to judicial review of the Minister's instructions. However, on the facts, the Court held that the evidence produced by the Minister proved that the action taken was for reasons of national security and, therefore, it overrode any right of judicial review which the appellants had arising out of denial of legitimate expectation of consultation. In the present case, there is no plea of existence of any reason of national security for the action taken by the respondents. Hence, the impugned orders are vitiated inasmuch as they had been passed without giving any opportunity to the petitioners for making representation against the said action which runs counter to the legitimate expectation of the petitioners.
32. In the circumstances, there is no justification for de-recognising the travel agents, who have been granted certificates of registration under the so-called liberalization policy. Hence, the writ petitions are allowed and the impugned circular is quashed. The respondents shall continue to hand over to the petitioners the passports of the persons whose applications are deposited by the petitioners as it has been done hitherto, instead of sending them directly by registered post to the applicants themselves. The respondents shall pay the costs to the petitioners. Counsel's fee in each of the writ petitions Rs,2,000."
' In case of "M/s. Diamond Industries Ltd. v. Government of Pakistan (Writ Petition No, 1265 of 1991), decided by a Full Bench of the Peshawar High Court, wherein in the area of 'Gadoon Amazai' in the District Swabi exemption in payment of customs duty and sales tax on the machinery of raw material was withdrawn, the question arose as to whether the principle of locus poenitentiae is available to the respondent; whether vested right could be withdrawn by an executive notification; whether the doctrine of promissory estoppel debars the Government to withdraw the earlier notification and whether the doctrine of legitimate expectations still stands in the way of withdrawal of the notification of exemption? After taking into consideration various decided cases on the subject, their lordships of the Full Bench held that the impugned notification for withdrawal is illegal on the principles of promissory estoppel and legitimate expectation, yet the same has been upheld under the provisions of section 31-A of the Customs Act, 1969. Leave has been granted against this judgment in Re: C.P.S.L.A. No, 149 of 1994, C.P. No,224 of 1994 (C.A. 599/94), to consider the question of applicability of section 31-A of the Customs Act, 1969.
' In case of 'M/s. Jubilee Energy Ltd. v. Federation of Pakistan (W.P. No, 1007-95), decided on 17-8- 1995, notification of withdrawal of exemption from payment of customs duty on imported machinery has been upheld under section 31-A of the Customs Act, however, it has been set aside to the extent of withdrawal of exemption for payment of sales tax. This judgment has also been appealed against and is pending decision before the Hon'ble Supreme Court.
' In case of 'Collector of Central Excise and Land Customs and 3 others'
(PLD 1970 SC 439) it has been held that vested rights cannot be taken away by an executive order.
12-A. Following legal principles have been laid down in the aforementioned cases:--
(1) That the principles of legitimate expectations, promissory estoppel and fair/reasonable actions/fair procedure are applicable as against the Government as well.
(2) That in case a right or privilege is created on the basis of an order/notification amounting to a promise, the same cannot be withdrawn without giving the beneficiary an opportunity of hearing, without disclosing the reasons for withdrawal and without giving an opportunity to file a representation against the action/notification. Therefore, if such right/privilege is withdrawn without complying with the above-referred formalities, by a general notification, it shall be illegal, void and hence not sustainable in law.
(3) That the principles of ' legitimate expectations', 'promissory estoppel' and 'fair action/fair procedure' are not attracted to challenge the legislative actions of the Government/ Authorities.
13. Admittedly, the Notification S.R.O. No, 885(1)90, was issued under the provision of section 21(c) of the Customs Act, on the basis of the specialty of the product of the petitioner and hence conferred upon him a right to drawback the duty and sales tax paid by him at the special rates as mentioned in the S.R.O. Referred to above till infinity as is clear from the word "onward" used in the notification.
This notification is distinguishable from a S.R.O. Of exemption issued under section 21(a)(b).
Therefore, the same could not have been withdrawn without issuing a prior show-cause notice to the petitioner disclosing the reasons for withdrawal of the privileged notification without giving of an opportunity of hearing to the petitioner, to file representation there against and disclosure of grounds. Special notification could- not be superseded by a general notification in the case in hand as admittedly none of the afore mentioned requirements have either been followed or were even present in the mind of the respondent while issuing of S.R.O. No, 118(1) 95, dated 16-2-1995, therefore, I hold that the S.R.O. No,118(1) 95, dated 16-2-1995 to the extent it superseded S.R.O. No, 885(1) 90, dated 26-8-1990, is void and without lawful authority being violative of principles of legitimate expectations, promissory estoppel and fair action/procedure as explained in the case- law referred to above.
14. As regards the argument of the learned counsel for the respondents that the present writ petition is not maintainable in view of the disposal of the previous writ petition by this Court where against an appeal is pending, the present writ petition is based upon a fresh cause of action; the issues raised therein have not been finally decided in the earlier petition, which was disposed of at the limine stage just on the basis of the statement of the learned counsel for the respondents that the subsequent notification was not in the knowledge of the respondent. Therefore, the petition in hand is not barred in law, hence, is held to be maintainable.
15. As regards the argument of the learned counsel for the respondent to the effect that the petitioner has been participating in the proceedings which resulted in the standardization of drawback duty and taxes, hence, he cannot re-agitate this plea, the same is not supported by the original record produced by him. As per contentions of the department, the impugned S.R.O. Of standardization has been issued on account of coming into force of the finance Act, whereby general changes were made in the rate of the duty on import of goods. This is admitted position that the petitioner was never served with a prior show-cause notice nor was he conveyed the reasons for withdrawal of the S.R.O. No, 885(1)
90. He was also not given an opportunity to file a representation against the proposed supersession thereof. Therefore, the argument of the learned counsel is without substance and force, hence is repelled.
16. As regards the argument of the learned counsel for the respondents that provision of section 31(A) of the Customs Act authorises the respondents to issue the notification in question, suffice it to say that the said provision may save a notification issued under section 21-A & B of the Act, but does not authorise the respondents to withdraw a notification issued under section 21(c) of the Act, which has altogether different connotations and implications. Therefore, the case is fully covered by the principles of "legitimate expectations", "promissory estoppel" and "fair action/procedure" and the respondents are debarred and had no justification in law to supersede the Notification S.R.O.
No, 885(1) 90, which had to remain in force without limitation to time as held in cases of "M.P. Sugar Mills v. State of U.P.", "Council of Civil Service Unions and others", "Al-Samrez Enterprise", "M/s. Army Welfare Sugar Mills Ltd.", "Dr. Muhammad Zaman and others", "Rees and others", "Union of India and Salvi Travels" (supra). Therefore, I hold that the impugned Notification S.R.O. No, 118(1)95, dated 16- 2-1995, is illegal and without a lawful authority to the extent it supersedes the Notification S.R.O.
No,885(1)90, dated 26-8-1990, and hence, the same is set aside to the above extent with the result that the S.R.O. No, 885(1)90, shall be deemed to be still in force for all intents and purposes. Hence, the writ petition is accepted, which order has already been passed vide our short order dated 27/28-9-1995, which shall be read as a part of this judgment. There shall be no order as to costs.