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Union of India & Ors. v. M/s Unicorn Industries (with connected appeals)

Civil Appeal · 2019 INSC 1055Decided 19 Sept 2019
Civil Appeal No. 7432 of 2019
Justice Arun Mishra · Justice M.R. Shah · Justice B.R. Gavai

Background

The Union of India had granted excise duty exemptions to industries in Sikkim and Assam to promote industrial growth, but later amended the notifications to exclude tobacco products and pan masala from the exemption on public-interest (health) grounds. Unicorn Industries (a pan masala manufacturer in Sikkim) and, in a connected case, Dharampal Satyapal Ltd. (a pan masala-with-tobacco manufacturer in Assam) challenged the withdrawal of their exemptions, arguing the government should be bound by its earlier promise under the doctrine of promissory estoppel. The High Court of Sikkim and the Appellate Bench of the Gauhati High Court had ruled in the manufacturers' favour, prompting the Union of India to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that the doctrine of promissory estoppel cannot be invoked to compel the government to continue a tax exemption when the government is satisfied, on legitimate public-interest grounds (here, the well-known health hazards of tobacco and pan masala), that the exemption should be withdrawn. It found the Gauhati High Court's reasoning that withdrawing the tobacco exemption was "not in the public interest" to be unsustainable, noting that the retrospective withdrawal of such exemptions via Section 154 of the Finance Act, 2003 had already been upheld by the Supreme Court in an earlier case (R.C. Tobacco (P) Ltd. v. Union of India). The Court allowed all the Union of India's appeals, set aside both High Court judgments in favour of the manufacturers, and upheld the original single-judge order dismissing the Gauhati writ petition.

Lesson Learnt

A government's prior promise of a tax or duty exemption does not bind it forever: promissory estoppel gives way when the government later decides, on genuine public-interest grounds such as public health, that the exemption must be withdrawn, even if businesses had relied on the earlier notification.

Official source (sci.gov.in)View Judgment (PDF)

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