Amrit Banaspati Co. Ltd. v.

Union of India

Presented by
Hatif Khan and Gunjeeta Jangra
PROMISSORY ESTOPPEL

 Promissory estoppel is a doctrine in contract law which enforces

a promise whether executed as a contract or not. The doctrine
seeks to protect the rights of a promisee or aggrieved party
against the promisor.
 Promissory estoppel applies when the promisor has made a
promise to the promisee. The promisee must have relied on the
promise and suffered a loss due to non-performance of the
contract. The doctrine prevents the promisor or enterprise from
going back on their word or promise.
In the Hon’ble Punjab & Haryana High Court
Citation: 1990 ECR P&H 436
Petitioner: Amrit Banaspati Co. Ltd.
Respondent: Union of India
Date of Judgement: Jan 22, 1990
Hon’ble Bench: Acting Chief Justice J.V. Gupta, Justice M.S.
Liberhan
FACTS
 The central govt. introduced a scheme granting concession on the use of non-
traditional oils in the manufacturing of Vanaspati and other excisable articles on
March 1st 1987 specifying the items.
 Notification was issued under Rule 57-K of the Central Excise Rules, 1944.
 Under the Scheme the manufacturer of the final product of Vanaspati earned credit
of money at the rates specified, for concession in the excise duty, for the use of
input i.e., non-traditional oils. The manufacturers were entitled to the stipulated
credit subject to the conditions-
1. The credit was to be taken only in respect of the quantity of oil subjected to
hydrogenation on or after March 1, 1987, for the manufacture of the final product.
2. The credit was to be taken only on the date on which the specified oils entitled to
concession were so hydrogenated.
3. The accounting period for such credit was a month.
 FACTS
 The Central Excise Ist Amendment Rules, 1987 (hereinafter referred to as the 1987 Rules) were
promulgated. The Notification was issued specifying the rates of concession in conformity with the
amended Rules of 1987.
 The order referred to the parliament speeches of ministers to contend that the use of non-traditional
oils for the manufacturing of Vanaspati before/after the notification was issued amounted to an offer
of credit.
 The petitioners keeping in view, the notification, speeches made in parliament, and implied
assurances by the central govt. used the specified oils which were entitled to the concession and they
earned the credit.
 Before the petitioners could utilize the earned credit, the respondents rescinded the notification vide a
new notification dated 25th August, 1989.
 To implement the new notification, the authorities disallowed the utilization of credit standing in
their account for payment of duty on the final product.
 Hence, the petitioners filed civil writ petition no. 11654 of 198 and set up the plea of promissory or
equitable estoppel.
ISSUES
Among other, there were three main issues dealt by the court in the
present case:

 Does the notification of rescission take away the right of the

petitioners to utilize the credit earned by them prior to August 25,
1989 towards the payment of duty on Vanaspati in terms of
Notification, dated March 1, 1987?
 Whether the respondents can be relieved from performing their
promise based on executive necessity or expediency?
 Whether the principles of promissory estoppel can be invoked in
taxation?
ARGUMENTS BY PETITIONER

 Petitioner claimed that the respondents are estopped from denying them the utilization of the credit
earned by them in terms of the scheme as they irreversibly changed their position by acting in good
faith on the promise as well as the notification.
 The rescinding of their earlier notification is prospective and delegated authority of the central govt.
cannot deprive the petitioner of the their vested rights and the property, and the legislature alone
could have taken away these rights.
 They pointed out that there was no public interest or grounds for rescinding the scheme and that the
rescinding of the notification for a short period is arbitrary and unconscientious-able against the
principle of equity, justice and fair play.
 The petitioner acted in a particular way, changed their position to their detriment and could not be
placed in the same position in which they were before acting on the assurance.
 They contented that the respondent withdrew their assurance and refused to comply with their part
of the promise, and therefore, the respondent could not be allowed to act inconsistently with their
implied and express conduct on which the petitioners have acted.
 ARGUMENTS BY RESPONDENT
 The petitioners could have utilized the concession as long as the respondents permitted or the
Notification granting the concession was in operation. The products became excisable the moment the
Notification granting the concession was rescinded. Therefore, the petitioners are not entitled to the
utilization of the money on account of the credit already earned by them.
 The doctrine of promissory estoppel or concept of equity and justice has no relevance to the law of
taxation.
 They further contented that taxation is not a contract, it is a unilateral will of the legislature and is an
exaction by the state in the exercise of its sovereign power and there can neither be any promissory
estoppel nor any contractual obligation which can be enforced in a court of law. Therefore, the question
of representations or assurances is irrelevant in the case of taxation.
 Respondents contented that the following things:
1. Date of manufacturing
2. It was not excisable earlier.
3. Intention of the manufacturer, having manufactured with the belief of the product not being excisable in
view of earlier scheme or policy.
Were of no consequence and therefore, the state cannot be deprived of its right to impose the excise.
ARGUMENTS BY RESPONDENT

 The right to concessions was the existing rights and not the vested rights. For the
existing rights, the State was at liberty to take them away at any time.
 Also, the Central Government was satisfied that it was necessary in the public interest
to withdraw the exemption from duty under the circumstances prevailing.
 REASONING
 The court cited Pournami Oil Mills etc. v. State of Kerala in which it was held that:
“When the govt. in order to boost industrialization gives concession in sales tax. The government cannot
subsequently curtail the concession granted. The industry would be entitled to plead the principle of
estoppel and get the concession once granted.”
 In Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, the court recognized the
principle of promissory estoppel to the effect that the promise would be binding on the party making it if
the party by words or conduct has made a clear and unequivocal promise intending to create a legal
relationship and the party cannot go back upon it as it would be inequitable to do so.
 Exercise of the executive authority of the State does not release the Government from its obligation to
fulfill the promise made by it if the citizen altered his position acting in reliance on the promise.
 A party who has, in reliance on a promise made by the Government altered his position, is entitled to
enforce the promise against the Government, even though the promise is not in the form of a formal
contract as required by Article 299 of the Constitution of India.
 The Government cannot be relieved to perform its part of the promise solely on the ground of some
undefined and undisclosed necessity or expediency and it would have to prove that it would not be in
the public interest to be bound by its promise.
OTHER CASE LAWS REFERRED
BY THE COURT
 Jit Ram Shiv Kumar Case
 London Star Diamond Co. Pvt. Ltd. Case
 Ceat Tyres of India Ltd. Case
 Bombay Conductors and Electrical Ltd. C ase
 JUDGEMENT
 Nothing has been placed on the record to show that it was either in the public interest or it was necessary to rescind
the Notification between August 25, 1989, and October 11, 1989. No expediency for the State or the Executive was
pointed out, to justify the withdrawal of concessions for one month only, much less declining the utilization after credit
already earned.
 The material on which the rescinding of the Notification was based is subject to judicial review when it had adversely
affected the interest of a party who depending on the Notification and the background of the facts, speeches, and
circumstances had already acted adversely to his interest and changed his position treating them to be the assurances of
the authority.
 Once a person has been able to show prima facie that the power has been exercised by the executive authority or
delegated authority in an unreasonable way and contrary to the promise either expressly or impliedly made when a
person honestly believing had acted on it, it is for the State to show that it would be inequitable to force the State to
fulfill its promise or doing so would be against the public interest and the exercise of executive power is bona fide and is
in the public interest.
 Notification granted the concession on the use of the input of non-traditional oils, the petitioner did act bonafide and on
the belief that they would be entitled to the concession enumerated in the Notification. They will have a right to utilize
the credit earned in terms of the said Notification.
THANK YOU !!