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2000 DIGILAW 1262 (MAD)

S. S. D. Oil Mills Company Ltd v. Union Of India

2000-12-11

K.RAVIRAJA PANDIAN

body2000
Judgment :- The Order of the Court is as follows :- The above writ petition is filed seeking the relief of issuance of a writ of declaration to declare condition No. 4B(ii) of the Notification No. 88/2000, dated 12-6-2000 issued by the first respondent as unconstitutional, arbitrary, violative of Articles 14 and 19(1)(g) of the Constitution of India in so far as the petitioner is concerned. 2.The case of the petitioner as averred in the affidavit filed in support of the above petition is : that the petitioner is a manufacturer of refined edible oils, Vanaspathi and allied products; that the petitioner is a medium scale industry in the State of Tamil Nadu at Iyyappanthangal, Chennai; that it obtained 'No Objection' certificate to manufacture Vanaspathi from the Directorate of Vanaspathi as required by the provisions of erstwhile Vegetable Oil Products Control Order, 1947, which was replaced by Vegetable Oil Products (Regulation) Order, 1998 and Vegetable Oil Products (Standards of Quality) Order, 1975; that the Directorate of Vanaspathi, Government of India, has issued the registration certificate dated 17-8-1999 for manufacture of Vanaspathi and allied items; that the petitioner has set up a Vanaspathi unit with huge investment; that the petitioner has a captive Hydrogeneration plant; that for the manufacture of Vanaspathi, one of the raw material is crude Palm Oil; that the crude Palm Oil is refined in the petitioner's factory and hydrogen gas is added to Palm Oil to get the end product Vanaspathi; that the petitioner purchases the hydrogen gas from Chemfab Alkalies, Pondicherry; that the hydrogen gas is a by-product produced in alkali units; that certain other Vanaspathi manufacturers have set up their own captive hydrogen generation facility; that the setting up of captive hydrogen generation plant facility involves an expenditure of more than Rs. 2 crores besides requiring high power intensive; and that since the petitioner is a medium scale industry, it could not make an investment of such huge amount of Rs. 2 crores, it has only set up a captive hydrogenation unit to procure the hydrogen gas from outside. 2 crores besides requiring high power intensive; and that since the petitioner is a medium scale industry, it could not make an investment of such huge amount of Rs. 2 crores, it has only set up a captive hydrogenation unit to procure the hydrogen gas from outside. 3.It is the further case of the petitioner that the first respondent issued notification in Notification No. 16/2000, dated 1-3-2000 under Section 25 of the Customs Act; under the said notification, the Central Government granted exemption from payment of customs duty in excess of 15% of basic duty on the import of crude palm oil, that the said exemption was available to all the importers who manufacture Vanaspathi whether such manufacturers have captive Hydrogen generation facility or not; that however subsequently, on 12-6-2000, the first respondent issued another notification in Notification No. 88/2000 making some amendments to the earlier Notification No. 16 of 2000, dated 1-3-2000, that by the said amendment, the following conditions were inserted; "(1)The importer must register with the Directorate of Vanaspathi Vegetable Oils and Fats in the Department of Food and Public Distribution in the Government of India; (2)The importer satisfies the jurisdictional Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, that the goods are intended for use in the manufacture of Vanaspathi in a factory having captive hydrogen generation facility; and (3)The importer follows the procedure set out in the Customs" import of Goods at concessional rate of duty for Manufacture of Excisable Goods Rules, 1996". that according to the petitioner, prior to this amendment, crude palm oil was chargeable to the basic duty of 15% plus applicable special additional duty; however, after amendment, the concession was available only to those manufacturers of Vanaspathi who are having captive hydrogen generation facilities besides registration with Directorate of Vanaspathi; and that on 13-6-2000, the Government of India has issued a memorandum to the effect that :" The duty structure of edible oils was last revised on 30th December, 1999. The duty on refined oil was raised to 25% basic while that on crude oil was maintained at 15% basic for the vanaspathi manufacturers and refiners. The duty on refined oil was raised to 25% basic while that on crude oil was maintained at 15% basic for the vanaspathi manufacturers and refiners. In the context of large import of edible oils triggered by depressed prices of oils in the international market and its impact on domestic processing industry as also having regard to the adverse impact of import of Vanaspathi duty free from Nepal under Indo-Nepal Treaty of Trade, Government has reviewed the edible oil situation in depth and has decided to further rationalise the duty structure so as to harmonise the interest of the customers, formers and the processors and at the same time regulate the unabated import of edible oils. Crude Palm Oil was hitherto chargeable to basic duty of 15% when imported for manufacture of vanaspathi. It has now been decided that this benefit of concessional duty of 15% (basis) shall now be available only to those manufacturers having captive hydrogen generation facilities. Registration with the Directorate of Vanaspathi, Veg. Oils and Fats shall also be necessary for availing of this exemption. This is safeguard against the possibility of misuse of this facility. "4.It is the further case of the petitioner that the denial of the concessional rate of duty to non-captive hydrogen generation units is arbitrary and violative of Article 14 of the Constitution of India; and since the petitioner is not having a captive hydrogen generation facility, by virtue of this amendment made under Notification No. 88 of 2000, the petitioner become non-entitled to the concessional rate of duty. Hence, the present writ petition to declare condition No. 4B(ii) of the Notification No. 88/2000 which imposes that the industry availing the concessional rate of duty should have captive hydrogen generation facility as unconstitutional, arbitrary and violative of Articles 14 and 19(1) of the Constitution of India. 5.The third respondent filed a counter denying all the averments made by the petitioner in the affidavit filed in support of the above writ petition and contended,inter alia,that the withdrawal of the concession to the non-captive hydrogen generation units and restricting the concessional rates of duty to the units having captive hydrogen generation facility is to encourage the crude palm oil importers to convert into Vanaspati without directly selling it into the market. The contention that the restriction imposed under Clause 4B of Notification No. 88 of 2000 would cause great hardship to the medium and small-scale units like the petitioner cannot justify the grant in favour of the petitioner, who is not having any hydro-generation facilities. Further, by Notification Nos. 111 and 112 of 2000, dated 20-8-2000 and 29-8-2000 respectively, the persons like the petitioner who are not having hydro-generation facilities were given time up to 29-2-2000 to set up the generation unit, so as to avoid selling the imported crude palm oil in the market stealthily and the contention of the petitioner that setting up of the hydrogen generation facility would cost him more would not be a ground for assailing the restriction imposed in the notification. On the other hand, the respondent also has given certain facts that setting up of such industry would be beneficial rather than procuring hydrogen from others. 6.The learned Senior Counsel Mrs. Nalini Chidambaram appearing for the petitioner elaborated the contentions of the petitioner by arguing that the restriction imposed to have a hydrogen generation facility for availing the concession granted in the said notification is very harsh. The object of giving the concession is to encourage crude palm oil importers to convert it into Vanaspathi without directly selling in the market. But the condition now imposed to have a hydrogen generation facility has absolutely no nexus to the object sought to be achieved. The classification of manufacturers of Vanaspathi having hydro-generation facility and manufacturers having no hydro-generation facility is very severely hit by Article 14 of the Constitution of India. Section 25 of the Customs Act empower the Government to issue exemption notification in the public interest. While that being so, the withdrawal of the concession should also be exercised in the like manner. The impugned notification restricted the concession to units having captive hydrogen generation facility and not to other manufacturers of Vanaspathi is not in public interest and isultra viresto Section 25 of the Customs Act. She further contended that except a few multi-national companies, most of the manufacturers are producing Vanaspati by procuring hydrogen gas from other suppliers. The impugned notification restricted the concession to units having captive hydrogen generation facility and not to other manufacturers of Vanaspathi is not in public interest and isultra viresto Section 25 of the Customs Act. She further contended that except a few multi-national companies, most of the manufacturers are producing Vanaspati by procuring hydrogen gas from other suppliers. Because of this restriction imposed, only the multi-national companies are benefited and not the units of medium and small-scale sectors and thereby the restriction is against the public interest and further contended that the withdrawal of the concession to units having no facility to manufacture hydrogen is violative of Article 19(1)(g) of the Constitution. 7.On the other hand, Mr. Balaji, learned Counsel, appearing for the respondent has contended that the concession notification issued under the fiscal statutes has to be construed strictly. It is true that the notification has been issued taking into consideration of the public interest, at the first instance, without imposing restriction as introduced by Clause 4(B)(ii), but the practical experience gained by the Department would prove that some unscrupulous importers importing the crude palm oil under the concession granted by the Government without making use of such palm oil for manufacturing Vanaspathi, for which purpose only the concession is granted, stealthily selling it in the open market in view of the demand of the palm oil to the public of lower strata and thereby making huge money to themselves. Hence, the public interest sought to be achieved by granting concession is totally frustrated and taken note of the individual gains only to safeguard the public interest, the restriction has been imposed and the petitioner cannot question the notification, which is an exemption in nature, necessarily, the petitioner has to comply with the condition imposed by the Government, that too, in the public interest to avail the concession. He also relied on the following decisions to support his contentions : (1)Union of India and Othersv.M/s. Jalyan Udyog of India and Anotherreported in, and (2)Union of Indiav.Paliwal Electricals (P) Ltd.reported in. 8.Heard the arguments of the Counsel on either side and perused the record. 9.It is now well settled that under Section 25 of the Customs Act, the exemption granted may be absolute one or subject to such conditions as may be specified in the notification. 8.Heard the arguments of the Counsel on either side and perused the record. 9.It is now well settled that under Section 25 of the Customs Act, the exemption granted may be absolute one or subject to such conditions as may be specified in the notification. Since the Parliament cannot constantly monitor the needs of and the emerging trends in the economy and is in no position to engage itself in day to day regulation and adjustment of import, export trade, the power is conferred upon the Central Government to provide for exemption from duty of goods either wholly or partly and with or without condition as may be called for and in the public interest. If the public interest demands that the exemption should be absolute, the Central Government can do so. Similarly, if the public interest demands that the exemption should be granted only subject to certain conditions, it can provide such conditions. The power to grant exemption from payment of duty flows from Section 25 of the Act. Power to grant exemption includes power to modify or withdraw the same. The liability to pay customs duty arises when the taxable event occurs. An exemption notification issued under Section 25 of the Act had the effect of suspending collection of duty. Such an exemption by its very nature is susceptible of being modified or subjected to certain other conditions. From the very nature of the power of exemption granted under Section 25, it is obvious that the same is with a view to enable the Government to regulate, control and promote the industries in the country. 10.In the present case, originally, concession was granted to all importers as stated in Notification No. 66 of 2000 so as to promote and encourage the manufacturers in Vanaspathi, but however having realised the fact that the importer, who is not having the hydro-generation facility are indulging in otherwise disposing of the crude palm oil which was imported on availing the concession than for the purpose for which concession has been granted, in the public interest, for the purpose of regulation, the 1st respondent has imposed the condition that the concession could be available to those units which have the captive hydrogen generation unit by Notification No. 88 of 2000. 11.The learned Senior Counsel Ms. 11.The learned Senior Counsel Ms. Nalini Chidambaram relied on the decision of the Supreme Court in Civil Appeal No. 7202 of 1995 dated 11-4-2000 Dai-Ichi Karkaria Ltd. v.Union of India]to contend that the power exercisable under Section 25 of the Customs Act is not unrestricted. The pattern of law imposing customs duty and the manner in which it is operated to a certain extent exposes the citizens who are liable to pay customs duties to the vagaries of executive discretion and contended that the restriction imposed is not in the public interest. I am at loss to understand how this judgment would advance the case of the petitioner in assailing the condition imposed to have the hydrogen generation facilities to avail the benefit under Notification No. 88 of 2000. On the other hand, the entire reading of the judgment only, supports the well settled principle that the Government while issuing the notification, by exercising power under Section 25 of Customs Act, can impose condition, which is in the public interest. 12.The first decision relied on by the learned counsel for the respondents in referred supra is as to the well accepted and uncontroverted legal principle that the Government can issue notification providing exemption either wholly or partly or with or without any condition in the public interest and for regulation of the economy to encourage or discourage as the situation may call for the import and export of certain goods as also for serving the social object of the State and the notification can be adjusted on the basis of the trial and error method and in all such circumstances, the only criteria is the public interest and further the counsel relied on referred supra for the proposition that when a person moved the Court that particular notification is discriminatory under Article 14 of the Constitution of India, the burden is heavy on the person challenging the validity of the exemption notification and Court should presume that the amendment of the notification must necessarily for giving effect to the policy of the Government and cannot call upon the Government to establish the reason behind the amendment. 13.The above said judgments reaffirmed the uncontroverted legal principle as to the power of Central Government in issuing exemption notification under Section 25 of Customs Act and the one and only consideration is the public interest. 13.The above said judgments reaffirmed the uncontroverted legal principle as to the power of Central Government in issuing exemption notification under Section 25 of Customs Act and the one and only consideration is the public interest. If the petitioner is not able to assail the notification on the ground that the restriction imposed in the notification is against the public interest, he cannot assail the restriction on any other grounds. 14.The public interest in imposing the condition to have the hydrogen generation plant to avail the benefit of the Notification is amply manifested from the memorandum dated 13-6-2000, wherein it is clearly stated that" the Government has reviewed the edible oil situation in depth and has decided to further rationalise the duty structure so as to harmonise the interest of the customers, formers and the processors and at the same time regulate the unabated import of edible oils. Crude Palm Oil was hitherto chargeable to basic duty of 15% when imported for manufacture of vanaspathi. It has now been decided that this benefit of concessional duty of 15% (basis) shall now be available only to those manufacturers having captive hydrogen generation facilities. Registration with the Directorate of Vanaspathi, Veg. Oils and Fats shall also be necessary for availing of this exemption. This is safeguard against the possibility of misuse of this facility." If once the court comes to the conclusion that the restriction imposed is in the public interest, then any amount of attempt on the part of the petitioner to assail the restriction as violative of Articles 14 and 19(1)(g) of the Constitution of India would be of no avail. In view of the above discussion and the settled principle of law as to the imposition of condition in the exemption notification, none of the contentions raised by the learned Senior Counsel are sustainable and they have to be rejected and the writ petition as filed by the petitioner has to be dismissed and as such, it is dismissed. However, there shall be no order as to costs. Consequently, the connected W.M.Ps. are also dismissed.