Case Note & Summary
The appeal before the Supreme Court arose from the dismissal of a writ petition by the High Court of Delhi. The appellants, a private importer, had imported liquid caustic soda in bulk and were liable to pay customs, auxiliary and countervailing duty at an aggregate rate of 98.5%. The third respondent, State Chemicals and Pharmaceuticals Corporation of India Ltd., had also imported caustic soda but was required to pay duty only at 10% because of an exemption granted in the public interest under Section 25(2) of the Customs Act, 1962. The appellants challenged this differential treatment as discriminatory, praying that they be granted the same exemption or, in the alternative, that the exemption in favour of the third respondent be declared null and void. The High Court dismissed the writ petition. On appeal to the Supreme Court, it was not in dispute that the case would stand covered by the earlier decision in M. Jhangir Bhatusha v. Union of India, 1989 Supp (2) SCC 201, which upheld similar exemptions, but the appellants argued that special or peculiar circumstances created an equity in their favour. These circumstances stemmed from an interim order passed by the Supreme Court on 23 April 1980. That order permitted the appellants to clear the quantity of caustic soda on furnishing security for the difference in duty between 10% and 92.5%, and recorded their undertaking not to sell the caustic soda at a rate higher than Rs.5132 per metric tonne ex-godown. The appellants contended that because they had complied with this undertaking, they were unable to realise from purchasers a price sufficient to cover the balance 82.5% duty, and thus an equity arose in their favour to pay only 10% duty. The Supreme Court rejected this argument on several grounds. First, the interim order was passed on the appellants' application for stay of recovery of the difference in duty; if they found the conditions unacceptable, they could have applied to be relieved of the undertaking and sold at a higher price, paying duty at 92.5%. Acting upon the interim order created no equity. Second, an undertaking given to court is not an obligation imposed by the court but a promise voluntarily made to the court; acting upon one's own undertaking creates no equity or special circumstance. Third, the passage from Jhangir Bhatusha did not assist the appellants. Fourth, the Court emphasized that if an exemption is arbitrary, discriminatory or violative of Article 14, the court may strike it down, but it cannot widen its scope to cover those who have been discriminated against. Reference was made to State of M.P. v. Mohan Singh, (1995) 6 SCC 321, where it was held that the High Court could quash an improper exercise of power but could not grant a general remission. The Court also noted that the appeal had once been allowed, but that judgment and order was set aside on a review petition filed by the first respondent. In the result, the Supreme Court dismissed the appeal with costs, quantifying costs at Rs.25,000 payable to the first and second respondents and Rs.5,000 payable to the third respondent.
Headnote
A) Customs Law - Exemption Notification - Scope of Judicial Review - Customs Act, 1962, Section 25(2) - Appellants, private importers of caustic soda, sought the same exemption granted to State Chemicals and Pharmaceuticals Corporation of India Ltd., which paid 10% duty instead of 98.5%. The Supreme Court held that the case was covered by M. Jhangir Bhatusha v. Union of India, which upheld the exemption as validly issued in public interest. The Court reiterated that it cannot widen an exemption notification to include those allegedly discriminated against; the only remedy would be to strike down the exemption if arbitrary or discriminatory. Held that no discrimination was established and appeal was dismissed. (Paras Not mentioned) B) Constitutional Law - Article 14 Equality - Discriminatory Exemption - Constitution of India, 1950, Article 14 - The Court considered whether differential duty exemption violated Article 14. It noted that if an exemption is found arbitrary or discriminatory, it may be struck down, but the court cannot extend its benefit to others. Reference was made to State of M.P. v. Mohan Singh, (1995) 6 SCC 321, where it was held that the High Court could quash an improper exercise of power but could not grant a general remission. Held that the proper course was not to expand the exemption. (Paras Not mentioned) C) Equity - Interim Orders and Undertakings - No Equity from Voluntary Undertaking - General Principles of Equity - Appellants argued that an interim order of the Supreme Court dated 23.04.1980, which recorded their undertaking not to sell caustic soda above Rs.5132 per metric tonne, created an equity in their favour to pay only 10% duty. The Court held that an undertaking given to court is a voluntary promise, not an obligation imposed by the court, and acting upon it creates no equity. The appellants could have applied to be relieved of the undertaking if they found it unacceptable. Held that no special or peculiar circumstances arose. (Paras Not mentioned)
Issue of Consideration
Whether appellants were entitled to the same exemption from customs duty granted to State Chemicals and Pharmaceuticals Corporation of India Ltd., or whether the exemption should be struck down; whether special circumstances arising from the Supreme Court's interim order dated 23.04.1980 created an equity in favour of the appellants to pay duty at 10%
Final Decision
Appeal dismissed with costs; appellants to pay Rs.25,000 to first and second respondents and Rs.5,000 to third respondent; exemption not extended; no equity found in favour of appellants
Law Points
- Court cannot widen exemption notification
- if exemption is arbitrary or discriminatory
- it may be struck down but not extended
- an undertaking given to court is a voluntary promise
- not an obligation imposed by the court
- acting on an interim order creates no equity
- court should not sit in judgment on sufficiency of reasons for exemption under Section 25(2) of Customs Act
- 1962
