- (1.) THE sole controversy in this writ petition preferred under Articles 226 and 227 of the Constitution of India is whether through the impugned letter, Annexure P-7, dated 18th May, 1987, respondent No. I can amend, dilute or restrict the conditions of industrial licence (Annexure P-5) granted to the Petitioner-Company on May 19, 1986, for the manufacture of furfural and edible rice bran oil under the 100% Import-Export Policy April-March 1982-83, (Annexure P-2) (in the face of doctrine of promissory estoppel), as the Petitioner-Company was allowed to act and import machinery/capital goods, including two rice shelling plants of the value of Rs. 35. 5 crores equal to 28. 4 million U. S. $. 2 The factual matrix of the case is that the Government of India, Ministry of Commerce, formulated an Import and Export Policy for the year 1982-83 with a view to encourage foreign exchange. Para 172 of this policy envisaged setting up 100% Export Oriented Units. The Chief Controller of Imports and Exports issued an open general licence (Annexure P-3) dated 5th April 1982 giving statutory effect under Section 3 of the Import and Export (Control) Act, 1947 (hereinafter called the 'act') to the conditions which were to be made applicable to 100% Export Oriented Units Scheme. 3 The Punjab State Industrial Development Corporation Limited (hereinafter referred to as the 'corporation') a Government institutional enterpreneur engaged in the promotion of industry in the State of Punjab, submitted an application (Annexure P-1) along with relevant enclosures to respondent No 1, dated 22nd July, 1982, for the grant of industrial licence to set up a self composite project for the manufacture of furfural and edible rice bran oil as a 100% Export Oriented Unit under Section 3 of the Act and under the Industries (Development and Regulation) Act, 1951, (hereinafter referred to as the 'regulation Act' ). The Corporation had complied with and followed all the procedural conditions provided in Annexures P-2 and P-3. Respondent No. 1 after getting approval of Board of Approvals constituted under the Import and Export Policy issued to the Corporation a letter of Intent dated 20th October, 1982 (Annexure IM) stating inter alia that the Government is prepared to issue an Industrial licence under the Regulation Act for the establishment of 100 per cent Export Oriented Unit in the State of Punjab up to the capacity specified therein. The Corporation vide communication dated 12th November, 1982, accepted the terms of letter of intent. 4. It is averred that in the application Annexure P-1 the Corporation had made it specifically clear that for the manufacture of furfural and edible rice bran oil, they will require paddy and the total quantity of paddy which was required for the Unit will be made available by the Food Corporation of India or the other State Agencies for custom shelling. Thus, it is stated that the nee shelling units/rice mill was the heart of the whole project as without availability of the raw-material i. e. rice-husk there was no question of the production of the furfural and rice bran edible oil. Para 5 of covering letto to Annexure P1l giving the details of the project reads as under:in the proposed project, it is envisaged to put up a composite unit consisting of two paddy shelling units each with a shelling capacity of 30 tonnes/hr After shelling, the rice produced on custom basis would be returned back to the paddy suppliers i. e. FCI and other State Agencies The residual rice husk would be subjected to furfural extraction and edible of would be extracted from the rice bran obtained a by-product. The edible rice bran oil so obtained is 100%xort substitute, country being short of edible oil. The exhausted rice husk after extraction of furfural would be burnt in specially designed boilers and the steam produced would not only be sufficient for processing furfural 10% concentration to 99. 9% concentration and rather it would be utilised for the generation of power to the tune of 7 M. W. (only one M. W is required for captive use ). Thus, it was maintained that respondent No. 1 as well as the Board of Approval had given sanction to the project as a whole. This is evident from the letter of intent as well as in the Industrial licence (Annexure P-5 issued subsequently. The letter of intent also stipulates a minimum of 20 per cent value addition on the production of the unit. 5. It is further averred that in the application it had been 6. The Corporation having been involved in various tries in the State of Punjab incorporated a new Company by Punjab Agro Furane Limited on 7th April, 1983 for the" up this unit. The letter of intent was also approved in the n Agro Furane Limited on 11th May, 1983. Respondent No. 1 continue giving necessary extensions of the period of letter of intent from time to time. The Punjab Agro Furane Limited on 21st June, 1984 entered into a supply agreement with Messrs. Ballestra SPA Milano Italy for the import of capital of goods for the total value of 30 million U. S $. This was done because as per the terms of the import policy, 100 percent' Export Oriented Units are permitted to import capital goods as required by them. On 22. 2. 1985, Messrs. Punjab Agro Furane Limited executed a legal agreement with Deputy Chief Controller of Imports and Exports in terms of Appendix 42 of the hand book of Import-Export Procedure. This agreement clearly stated that the Unit shall earn foreign exchange by exporting 100% of their production furfural for a period of 10 years and also for the import of capital goods by the CIF value U. S. $ 30 million. This agreement was duly approved by the Government of India by their letter dated 26th February, 1985 for suppliers credit/buyers credit for the import of equipment and machinery from Italy under Italian suppliers credit. Acceptance of the legal agreement was duly conveyed to all the concerned, by the Punjab Agro Furane Limited 7 Messrs. Oswal Agro Mills Limited, Ludhiana, was selected by the Corporation out of many promoters for joining hands with the Corporation in establishing this unit. This selection of the Corporation was duly approved by the State Government. The Govt. of India vide letter dated 7th March, 1986, also approved collaboration agreement entered into between the Corporation and Oswal Agro Mills Limited. Thereafter, as the agreement with Messrs. Ballestra SPA. Milano, Italy had come to an end on 31st March, 1986, the Punjab Agro Furane Limited, on 14th April, 1986, entered into a supply contract for the capital goods with Messrs. Standard-Kessel Gesells-chaft Lentjes-Fasel Gmbh and Co. Kg Duisburg, West Germany. This fact was conveyed to the respondents vide letter dated 30th April, 1986. Subsequently, on 12th May, 1986, vide resolution passed at a meeting of the shareholders, the name of Punjab Agro Furane Limited was changed to Oswal Agro Furane Limited (the present petitioner ). It is pertinent to note that in this Company, the Corporation has 26 per cent shares; Messrs. Oswal Agro Mills Limited and its Associates 25 per cent and the remaining shares are owned by the public at large. 8. Finally respondent No. 1 granted an Industrial Licence (Annexure P-5) dated 19th May, 1986, to the petitioners. The terms and conditions appended to the licence are identical to the terms and conditions which have been annexed to the letter of intent. The Petitioner-Company again entered into an agreement with the Deputy Chief Controller of Imports and Exports vide letter dated 13th June, 1986, which was duly accepted by the Chief Controller, vide his letter dated 50th June, 1986 (Annexure P-6) The petitioners also obtained further financial assistance from the Industrial Development Bank of India, a Government of India enterprise, to the tune of Rs. 31. 25 crores in June, 1986 and the petitioners opened irrevocable confirmed letter of credits through the Industrial Development Bank of India/other Banks to the tune of U. S. Dollars 28. 4 million as per the agreement for the import of capital goods already entered into with Messrs. Standard-Kessel of West Germany. Thereafter vide letter dated 25th July, 1986, respondent No. 3 sought certain clarifications from the petitioners about their project The petitioners vide their letter dated 30th July, 1986, sent a detailed reply giving clarification to all the points raised by the said respondents. The petitioners thereafter sent various representations giving details of the working of their units which bad been duly approved and sanctioned as per the terms and conditions of the Industrial licence issued after incorporating in the licence, the letter of intent and the applications made for the issue of Industrial Licence. 9. It is further averred that the capital goods for which the above referred irrevocable confirmed letters of credit had been opened have started arriving in February, 1987 at various ports in India. The Collector of Customs at Kandla has already cleared several consignments of the capital goods which arrived into India for transportation and installation at site. Presently several other part consignments arc under clearance at Bombay and Kandla ports. The capital goods after their release from customs at Port will be transported at site in Sangrur District where they will be installed in (he custom bonded factory being a 100 per cent Export Oriented Unit. It is further averred that all the necessary formalities with regard to bonding of the capital goods at site have already been completed by the petitioners. The petitioners have further entered into various contracts/agreements for the supply of indigenous equipments for implementation of their project which have also started arriving at site and the work at site is in full swing. Apart from this the petitioners have also entered into an agreement with foreign technicians for the erection and commissioning of the plant and the foreign technicians are expected to arrive in India for doing the needful in the last week of June 1987. It is also necessary for the petitioners' Unit to come up by September, 1987 because, the paddy which is to be procured from various Government Agencies will be available in the months of October-November which is the season for this crop. It is further maintained that the petitioners till today have incurred/opened irrevocable confirmed letters of credit of U. S. Dollars 28. 4 million equivalent to Rs. 35. 5 crores and further confirmed irrevocable commitments for indigenous supply of equipments/construction work for approximately 7 crores. It is also contended that because of the implementation of the work at site the petitioners are incurring daily interest on the money borrowed from All India Financial Institutions to the tune of more than Rs. 1 lakh per day. 10. It is further alleged that the petitioners' unit involving finances to the tune of Rs 51 crores is almost ready to be commissioned. It is a prestigious industry in the State of Punjab, as at this juncture the State needs more industry for the benefit and prosperity of the Punjabis, but, strange enough, respondent No. 1 had issued a letter dated 18th May, 1987 (Annexure P-7) imposing illegal restrictions on the operation of the Industrial Licence as well as on the Unit. Vide Clause (ii) of para 1 of the impugned letter Annexure P-7 respondent No. 1 has arbitrarily curtailed the import of capital goods to the tune of Rs. 26. 44 crores, which on the face of it is arbitrary, discriminatory and violative of the provisions of Article 14 of the Constitution of India, under the Act, Regulation Act, Open General Licence, Industrial Licence granted to the petitioners and the Import and Export Policy of the Government of India. The petitioners are entitled to import capital goods in the shape of plant and machinery without any restriction for the purpose of setting up of 100 per cent Export Oriented Units. 11. It is further maintained that Sub-clause (iii) of para 1 of impugned letter Annexure P-7 stating that the rice shelling plant will not be a part of 100 per cent Export Oriented Project is also bad in law on the similar grounds. Para 2 of the impugned letter which increases value additions was also contended to be wholly arbitrary and violative of Article 14 of the Constitution of India It is further maintained that on the basis of letter of intent which was subsequently incorporated in the industrial licence the petitioners have invested Rs 51 crores and the country has already spent foreign exchange to the tune of Rs. 28. 4 million U. S. Dollars The petitioners have materially changed their position to their detriment on the representations by act and conduct of respondent No. 1 in issuing the letter of intent covering the entire project proposed to be set up by the petitioners detailed in Annexure P-1 and thus the respondents are estopped in law from acting contrary to their earlier commitment in the shape of letter of intent and the industrial licence on the ground of equitable estoppel. Under the circumstances, it is maintained that respondent No. 1 while issuing the impugned letter Annexure P-7 has acted in an arbitrary and illegal manner. The terms and conditions agreed to and clearly specified in the licence amounts to the clear representation made by the Government of India and the Government of India is not exempted from its liability to carry out the representation made by it as to its future conduct and taking on some undefined and undisclosed grounds of necessity or expediency failed to carry out the promise solemnly made by it nor claimed to be the judge of its own application to the citizen on an ex parte appraisement of the circumstances in which the application has arisen. In the instant case, the conditions of licence after full agreement and on detailed study of the petitioners application for grant of licence are clearly representations made by the Government and any change or alterations in this condition will clearly amount to imposition of unreasonable restriction in the petitioners' trade and business and this will be clearly violative of Article 19 (l) (g) of the Constitution of India. It is further averred that on the basis of definite and clear promise made by the respondents to the petitioners and the petitioners having altered their position by acting upon the same and having suffered prejudice, the respondents cannot now go back on the same. 12. In the return filed by Shri T. S. Vijayaraghavan, Joint Secretary, Ministry of Commerce, Government of India, it is, inter alia, contended that vide impugned letter Annexure P-7, the Central Government has not withdrawn any approval earlier granted under the Industrial Licence and that it is simply issued for reminding the petitioners to remain within the parameters of the above referred scheme 1982-83 and custom notification of February 9, I98j, as amended from time to time. It is also maintained that in fact, this letter allows the petitioners to import capital goods whereas without this letter, the petitioners could not have imported the capital goods because the period up to which the same could have been imported had long lapsed since 20. 10. 1984. It is averred that para 7 (i) of Appendix 33 of the Import and Export Policy for the year 1982-83, industrial units approved as 100 per cent Export Oriented Units are eligible to import their requirements of capital goods, etc, subject to the condition that the entire production shall be exported except permissible level of rejects. It is also maintained that even according to the Import Policy for the year 1985-86 which is operative now, the requirements are the same, though the corresponding appendix to this policy is Annexure P-1 to Appendix 23. Even according to the open general licence contained in Appendix 23 to the Import and Export Policy, the general permission granted to approved 100 per cent Export Oriented Units are subject, inter alia, to the condition that the entire production of the 100 per cent Export-Oriented Unit except rejects up to 5 per cent or as approved by the Board of Approvals have to be exported. If the rice shelling plant is to be treated as part of the 100 per cent Export Oriented project, then the rice obtained after husking paddy which forms more than 50 per cent by value of the entire production of the project will be sent to the Food Corporation of India and other State Agencies. This is clearly in violation of the conditions of the open general licence, referred to above. In this context, it was also maintained that in the original application Annexure P-1, the petitioners had undertaken to procure rice husk from the domestic tariff area and thus the permission to import the rice shelling plant could not have been given even by implication as part of 100 per cent Export Oriented Project. It was also stressed that in fact, respondent No. 1 could not grant and had not granted the import of rice shelling plants under 100 per cent Export Oriented Project or under any other provisions of law. 13. It was further maintained that in order to import capital goods after the expiry of period of two years from the date of issue of the letter of approval (which in this case was issued on 20. 10. 1982), the petitioners were required to obtain permission as per press note of the Ministry of Commerce dated 24th May, 1987, Annexure P-1. The petitioners did not obtain any such permission, but on the other hand, by suppressing material facts managed to arrange with the financial institutions the opening of letter of credit for the import of capital goods. Thus it was maintained that it is a case of suppressing of facts as well as violation of the import policy and the custom notification of February 9, 1981, as amended from lime to time. 14. The conduct of the petitioners in not indicating the specific items proposed to be imported in the formal application as required in para 172 (3) of the Import Policy, for setting up the project was also stressed in support of the proposition that respondent No. 1 had not made an implied representation to the petitioners to import rice shelling plants or to set up the rice shelling plants within the custom bonded area under the 100 per cent Export Oriented Scheme. It was also maintained that the simple mentioning of the facts of the rice shelling in Annexure to the application does not necessarily mean that the project contained imported rice shelling plants also. 15. Regarding the stipulation of mimimum value addition of 20 per cent it was maintained that this was the standard practice to do so initially. Enhancement of this value addition in para 2 of the impugned letter is perfectly valid especially when the petitioners in column No. 14 of their application had offered 100 per cent value addition. 16. Regarding the generation of 6 MW of surplus power, it was maintained that the petitioners had not so indicated in their application. However, in para No. 5 of the covering letter forwarding the application, the petitioners had stated that by burning of exhausted rice husk they would generate power to the tune of 7 MW, of which one MW was intended for captive plant itself. It was further stressed that in Annexure E to the application pertaining to Column No. 22 of the application the petitioners had mentioned that they would utilise 30 per cent of energy for captive consumption and the remaining 70 per cent would be supplied to the local net-work. Although against Column No. 17 of the application relating to the break-up of requirement of power, it has been indicated that the entire requirement of power for the proposed project ranging from load of 2500 KW to 3500 KW shall be procured from the State Electricity Board and at the outset only one generating set was to be installed by way of stand-by arrangement. Thus, it was maintained that various statements made in the covering letter as well as Annexure 'e' containing the brief description of the process are being entirely contrary to the particulars given by the petitioners in the original application clearly belies the stand of the petitioners that respondent No. 1 had agreed to the supply of 6 MW of electricity to the State Grid. In this regard, the proceedings of the meeting convened in the Ministry of Commerce on September 22, 1986 which was attended amongst others by the Secretary Industries, Punjab Government, who also happened to be the Chairman of the Petitioner Company, were referred, which reads as under: It was made clear by the representative from the Customs Department that the power plant proposed to be imported as part of the project should cater only to the power needs of the plant itself, as supply of surplus power to the State Electricity Board would pose problems of bondings, etc. Secretary (Industries), Government of Punjab stated that if this was so, the unit would undertake to utilise all the power produced and no supply to the State Electricity grid would be made. A copy of the minutes of this meeting is placed as Annexure Rule 2 with the reply. The said minutes were placed before the Board of Approvals at its meeting held on 5th December, 1986. The request of the petitioners to import capital goods was considered by the Board of Approvals for 100% Export Oriented Units in its meeting held on 23rd December, 1986, when it recommended that power generation will be for captive use only. With regard to the entering into agreement with Messrs. Standard Kessel of West Germany, for supply of capital goods, it was contended that as the agreement with Italy party had elapsed on 31st March, 1986, the approval granted to the petitioners on 26. 2. 1985 by the answering respondent does not automatically transfer itself to the agreement with the West German Company. It was also maintained that the procedural approvals by the agency of the Government cannot extend beyond the validity of the principal approval given by the respondents under the scheme of 100 per cent Export Oriented Units for implementing the project and for import of machinery, which are subject to terms of the Press Note of May 1984. The legal agreement executed by Messrs. Punjab Agro Furane Limited with the Deputy Chief Controller of Imports and Exports on 22. 2. 1985 merely contains against Col. No. 1 denoting plant and machinery and equipments to be imported the words 'furfural production plant 6000 T. Yr. of CIF value U. S. $30 million plus Rs. 45 lakhs'. No details have been indicated of the said plant and machinery. The letter dated 30th April, 1986, referred to in this para, is in fact dated the 18th May, 1986, and not 30th April, 1986. In this letter the petitioners were intimated that an agreement had been entered into with Messrs. Standard Kessel, West Germany, for the supply of the machinery. The petitioners had requested for (i) cancellation of the collaboration agreement with the Italian machinery suppliers; (ii) taking on record the agreement with West German firm; and (iii) for approval of the proposal to import machinery from the West Germany concern as required in para 4 (b) of Appendix 23 to the Import Export Policy (Vol. 1), 1985-88. This request 18th May, of 1986 by the petitioners to respondent No. 3 was in pursuance of the directions issued to respondent No. 2in April, 1986 to obtain permission for the import of capital goods. The request after being considered by the Government culminated in the issue of the letter dated 18th May, 1987 by respondent No. 1. Before the issue of the letter of 18th May, 1987 the petitioners were given various opportunities to present their case. Respondents admitted the conversion of letter of intent into industrial licence on the same terms and conditions. It was also maintained that even as late as May, 1986, respondents No. 2 and 3 were under the belief that the project would be implemented only within the scope of the original approvals in regard to costs and products to be exported. Subsequent developments indicated the radical departure which the petitioners made from the original approvals, particularly in the area of project costs and content. Thus, it was maintained that these respondents are not bound by the transformation which the petitioners had made to the content and cost of the project. 17. Regarding reduction in the amount of capital goods required to be imposed, it was maintained that the petitioners have themselves reduced the value of plant and machinery to be imported to 28. 4 million U. S. $ from 30 million U. S. $ in the legal agreement (Annexure P-6) entered into between the Deputy Chief Controller, Export and Import, Amritsar. It was also maintained that the letter of 18th May, 1987 (Annexure P-7) enables the petitioners to import capital goods worth Rs. 26 crores 44 lakhs, rightly as the petitioners cannot import rice shelling plant as part of 100 per cent Export Oriented project. 18. The procuring of financial help from the institutions was contended to be irrelevant in the face of non-obtaining fresh approval of the import of capital goods after the expiry of original approval as intimated to the petitioners vide letter dated 11th April, 1986, of respondent No. 2. Thus, it was maintained that the action of the petitioners for opening of irrevocable confirmed letter of credit through the financial institutions has been done by suppression of the material facts and with mala fide intention. 19. Even this mention is the reiteration of the provisions of the Import Policy and no new restrictions have been imposed. The petitioners were not entitled to import rice shelling plant earlier and the letter Annexure P-7 only makes this position clear. The cost of rice shelling plant was deducted from the cost of import of capital goods and thus in the letter Annexure P-7 it was rightly reduced to Rs. 26. 44 crores. 20. It was further maintained that the petitioners incurred an expenditure in foreign exchange to the tune of US $ 28. 4 million in complete violation of provisions of para 4 (b) of Appendix 23 to the Import Policy 1985-88 as also the customs notification of 9th February, 1981, as amended from time to time. This conduct of the petitioners was with mala fide intentions of depriving the country of previous foreign exchange. Thus, it was maintained that since the petitioners were not entitled to import capital goods in December, 1986 because of the above referred provisions of para 4 (b) in the meeting of the Board of Approvals dated December 23, 1986, the Finance Director of the petitioners was given a full opportunity to put forth the views of the petitioners and after informing him the infirmities of the project vis-avis the Scheme of 100 per cent Export oriented unit, the Board conveyed to the Finance Director of the petitioners that it will be permitted to import the capital goods, the functioning of which will not violate the provisions of the Scheme of 100 per cent Export Oriented Units. After this meeting the petitioners gave a letter dated 25th December, 1986 (Annexure R-3) to the respondents containing four statements. The petitioners had calculated the value addition on the basis of rice shelling plant being kept outside 100 per cent export oriented project. This letter clearly shows that the petitioners themselves were convinced that the project as now proposed by them will vitiate the provisions of the Scheme of 100 per cent export-oriented units. Thus, it was maintained that the petitioners are bound by the principle of promissory estoppel which they are seeking against the respondents. The action of the petitioners to seek reference to this Court for amendment of the conditions for the import of capital goods which they are not allowed under the Scheme was contended to be mala fide and not in good faith. 21. We have heard the learned Counsel for the parties, besides perusing all the relevant documents attached with the file. 22. There is no dispute between the parties that the Corporation had submitted a self-contained project for the production of furfural and edible rice bran oil under the scheme of 100 per cent Export Oriented Units as envisaged by para 172 of the Import Export Policy 1982-83 issued by the Ministry of commerce vide resolution dated March 31, 1980. This para of the policy reads as under: 172 (1) A copy of the Ministry of Commerce Resolution dated the 31st December, 1980 regarding 100 per cent export-oriented units appears in Appendix 33. (2) Industrial units approved by the Board set up for the purpose will alone be eligible for import of capital goods, raw materials, components and spares, required by them for export production under the scheme. (3) While applying for approval, the applicant-unit should also furnish the list of items including capital goods, it will need to import. In respect of raw materials, components and spares, the requirements covering a period of 12 months in respect of each item should be given. In respect of each item, the quantity should be mentioned but not item-wise value. The value to be mentioned should be aggregated separately of (i) capital goods and (ii) raw materials, components and spares. The list of items should also include those which have been placed on OGL under the normal import policy. (4) While giving its approval, the Board will also decide the percentage of value addition in the product to be exported and the description of the product to be exported. (5) Based on the approval, the unit concerned will be allowed to import capital goods, raw materials components and spares under Open General Licence pertaining to 100 per cent export-oriented units, subject to the conditions laid down therein. A copy of the relevant OGL appears in Appendix 33. The import shall be subject to the following conditions inter alia: (a) The entire production and operations shall be under customs bonded factory. (b) The normal procedure that is applicable for customs bonding will be followed, including transit bond for the purpose of goods being taken from the port of importation to the factory. (c) The entire production shall be exported except rejects upto 5 per cent or such percentage as may be fixed by the Board. (d) At the end of each financial year, the unit concerned shall give an account of the items and their CIF value imported and the products and their F. O. B. value exported during the year, to the licensing authority concerned. Those returns to the licensing authority will be sent through the customs officers attached to the industrial unit concerned. (e) Failure to discharge the export obligation will render the unit liable to the payment of customs duty on the materials imported at the value at the time of import and at rates in force at the time of clearance, without prejudice to any other action that may be taken under the Customs Act, 1962 and the Imports and Exports (Control) Act, 1947 and the orders issued thereunder. (6) Exports made under this scheme will not be eligible for import replenishment licences. 23. To give statutory effect to the above referred 100 per cent Export-Oriented Policy contained in Para 172 (supra), the Ministry of Commerce, appended an Appendix 33 to this policy laying down the conditions of Open General Licence referred to as 'ogl' on Appendix 33 reads as under: In exercise of powers conferred by Section 3 of Imports and Exports (Control) Act, 1947 (18 of 1947), the Central Government gives general permission, till further orders, to the Actual Users approved by Government as 100% export oriented units, for the import of (i) capital goods, (ii) raw materials, (iii) components (iv) spares, subject to the following conditions: (1) The importer should be manufacturer approved by Government as 100% export oriented unit. (2) Import shall be subject to Actual User condition. (3) The goods shall be imported in customs bended factory. (4) The entire production and operations shall be under customs bonded factory. (5) The procedure applicable for customs bonding shall be followed, including transit bond for the purpose of goods being taken from the port of importation to the factory. (6) The entire production shall be exported, except rejects up to 5% or such percentage as may be fixed by the Board set up by Government for according approval for selling up 100% export oriented units, (7) A minimum value added of 20% shall be necessary for production. Domestically procured raw materials shall be treated as imports for computation of minimum value added. (8) At the end of each financial year industrial unit concerned shall give an account of the items and their C1f value imported and the products and their FOB value exported during the year, to the licensing authority concerned. These returns shall be sent to the licensing authority through the Customs Officer attached to the industrial unit concerned. (9) The unit shall comply with all the conditions subject to which payment of customs duty on the imported materials is exempted in its case. (10) Exports made by the unit under the provision shall not be eligible for import replenishment licences. A conjoint reading of para 172 of the Policy and Appendix 33 leave no doubt that the Industrial Units approved by the Board set up for this purpose will alone be eligible for importing capital goods, raw materials, components and spares required by them for export production under the Scheme i. e. 100% export oriented scheme. It is also provided that the applicant unit shall furnish the list of items including capital goods it will need to import, but in respect of each item the quantity should be mentioned but not item-wise. It also envisages that while giving approval the Board will also decide the percentage of value addition in the product to be exported and the description of the product to be exported. Further conditions have been laid down regarding the entire production and operation being under customs bonded area, the following up the procedure applicable to the customs bonding including the transit bond for the purpose of goods being taken from port of importation to the factory; the export of entire production except rejects to the extent of 5% or such percentage as may be fixed by the Board, the giving of CIF value imported and the products and their FOB value during the year to the licensing authority concerned, at the end of every financial year and penalty for failure to discharge these obligations. It is further provided that a minimum value added of 20 per cent shall be necessary for production. Domestically procured raw materials shall be treated as imports for computation of minimum value added. 24. In the case in hand, it is not disputed that the entire procedural formalities of para 172 and Appendix 33 were complied with the petitioners well before the letter of intent and the Industrial Licence were issued by the respondents. The only objection of the respondents in this regard is that in the application, the petitioners have given that the entire raw material, i. e. rice husk shall be procured from the domestic tariff area and that simply mentioning of the rice shelling plant in enclosures or covering letter forwarding the application Annexure P-1 is of no consequence in coming to the conclusion that the Board of Approvals or respondents No. 1 while issuing the letter of intent or industrial Hence had accorded approval to the setting up of two rice shelling plant in the customs bonded area or the import of these plants by necessary implication. We find no force in the contention of Mr. H. S. Brar, learned Counsel appearing on behalf of the respondents, as the formal application Annexure P-1 as well as the enclosures appended thereto has to be read together especially when there is reference of Annexure 'c (now appended as Annexure P-8) against column No. 11 and Annexure E, against column No. 22 of the formal application. This application was forwarded through covering letter dated July 9/22, 1982, by the Managing Director of the Corporation. In para 5 of the covering letter, it is clearly mentioned that the Corporation envisages to put up a composite unit consisting of. two paddy shelling units each with a shelling capacity of 30 tonnes. After shelling, rice produced on custom basis would be returned back to the paddy suppliers i. e. FCI and other State Agencies. The residual rice husk would be subjected to furfural extraction and edible oil would be extracted from the rice bran obtained as a by-product. The edible rice bran oil so obtained is 100% import substitute, country being short of edible oil. The exhausted rice husk after extraction of furfural would be burnt in specially designed boilers and the steam produced would not only be sufficient for processing furfural from 10 per cent concentration to 99. 9% concentration and rather it would be utilised for the generation of power to the tune of 7 M. W. (only one M. W. is required for captive use. ). In para 6 of the covering letter, it is mentioned that Messrs. Ballestra SPA Milano, Italy is willing to offer the requisite technology through their Indian Associates and Messrs. Ballestra are themselves interested to participate in the equity capital to an extent of 25 per cent. The total requirement of paddy for the proposed project was envisaged to the tune of Rs. 2. 88 lakhs per annum. It is further mentioned that the requisite quantity of the paddy would be easily available from different districts of the State of Punjab which are primarily the rice growing areas. The spirit and substance of the covering letter is reflected in the formal application Annexure P-1 in the matter of collaboration with Messrs. Ballestra SPA Milano, Italy and the proposed production of 6000 metric tonnes per annum of furfural at the rate of 20 tonnes per day and that 3000 metric tonnes per annum would be edible rice bran oil as by-product and the surplus power will be generated to the extent of 6 M. W. In the relevant column pertaining to raw material, the details of the indigenous raw material have been mentioned along with its quantity in metric tonnes and value in rupees. It is pertinent to note that the requirement of the paddy to the extent of 2,88,000 metric tonnes to be arranged on custom shelling basis from FCI and other State Procurement Agencies specifically figures in this project. Thus, there is considerable force in the contention of Mr. Sibal, learned Senior Advocate, counsel for the petitioners, that the customs shelling of above referred paddy from FCI and other State Agencies clearly shows that rice shelling plants were to be installed and operated in the custom bonded area The matter does not rest here as the cost of imported capital goods is given in the formal application at Rs. 2235 lakhs. In Annexure E to this application, the details of the organic formula regarding the production of the furfural from rice husk has been mentioned besides giving the requirement of rice mill, rice bran solvent extraction plant, etc. The relevant portion of this enclosure for the setting up of different plants runs as under: (a) Furfural production plant: with a nominal production capacity of 20 t/d which corresponds to 6000 t/yr (on the basis of 7200 operating t/hr.) The furfural is extracted from the rice husk, part of which is collected from the rice mill (about 12 t/hr) and part is transported to the factory site from outside. A total of about 470 t/d of rice husk are necessary for the plant to achieve the normal production capacity. Furfural production requires also a certain amount of superheated, high pressure steam (about 30 kg. of steam per one kg of furfural produced) which is supplied by the steam/power generation unit. The furfural obtained as a final product will have a 99. 6% purity, in compliance with what generally is required for commercial uses on the international market. (b) Steam/power production Unit: (7200 operating hrs. /year), which utilising the husk discharged from the furfural extraction process, generates at normal operating conditions, as such as 50 t/hr. of high pressure, high temperature steam used to drive a turbogenerator set. Part of the steam flowing through the turbine is bled to feed the hydrolysis reactors, while the remaining part keeps driving the turbine wheels up-to the end of the energy conversion process. After leaving the turbine, it is condensed and re-cycled. The steam/power production unit, besides supplying the steam necessary to the furfural extraction process, is also capable of producing about 7 MW, part of which (about 30%) will be utilised by the plant itself, and the remaining 70% will be supplied to the local network. The total efficiency of the steam and power generation process is above 60%. (c) Rice Mill: (4800 operating hrs/yr) (200 days) capable of processing 60 t/hr of raw grain which will supply part of the rice husk necessary for furfural production. (d) Rice bran solvent extraction plant: capable of processing 26,000 tonnes of rice bran obtained in the milling unit. The yield of refined rice bran oil would be 3000 tonnes per annum. "the plant (based on bagassee) has a capacity of 6000 tonnes per annum. But this unit has not been performing satisfactorily and has been affected by serious financial difficulties. Several other letters of intent for a total capacity over 50,000 tonnes have been issued but not much progress has been reported on any of them. Most of the holders have export commitments to the extent of 80 per cent. The scheme envisages for the proposed project is a comprehensive one designed to ensure maximum efficiency. The proposed unit would: (a) Produce valuable furfural from agricultural wastes. (b) Provide rice milling capacity that can be utilised by the Food Corpn. of India to obtain white rice, while at the same time meeting part of the rice husk requirements of the project. (c) Generate enough steam and power (based on exhausted rice husk) to meet entire internal requirements and supply surplus to neighbouring units. (d) Utilise rice bran obtained in the manufacture of edible rice bran oil. Manufacture of edible rice bran oil. Paddy | _______________________________ | | | | White Rice Rice flour Rice Husk Rice Bran | | | | | | | | ----------------------Furrufal Rice Bran Oil | Extraction extraction | | | | | | Exhausted | rice husk-------- ------------- Edible rice | | | bran oil | | | | | | Boiler | | | | | | | | | | | Steam | | | | | | | | | | | | Steam and Power Futfural Turbo Generator | | | | Surplus power to State Grid. 25. Para II of formal application Annexure P-1 refers to Annexure C (now Annexure P-8 ). It is the legal agreement of collaboration between the Corporation and Ballestra SPA Milano Italy. Para 2nd of this agreement deals with the technical collaboration; Para 3rd of this part pertains to the foreign firm agreeing to supply the know-how to the petitioners for the manufacture of furfural out of the rice husk in the territory of Ind; Para 4 of this agreement pertains to supplying complete plan machinery and equipments and set up the project on turn key basis consisting of the following disciplines: complete plant and equipment for production of 6000 tonnes per annum of furfural from rice husk. " 1,000 tonnes per day of white rice. 7,000 KW of electric power. Solvent Extraction Plant from rice bran-100 TPD. Continuous Bleaching, Deodorising and Filteration Plant. All off site facilities required for the above plants. Plant lay out and foundation details. This agreement was accepted by the Deputy Chief Controller of imports and exports, Amritsar, as is apparent from the letter, Annexure P-6, dated 30th June, 1986, vide which such acceptance was conveyed to the petitioners. 26. Thus, it cannot be said by any stretch of imagination that the (petitioners have not given the details of the project including the setting up of two rice mills and generating power plant to the capacity of 7 M. W. It is not specifically denied by the respondents that the above referred project envisaged by the petitioners in the application along with its enclosures was considered by the respondents or by the Board of Approvals. 27. On the other hand, respondents had accepted the project as a whole even though letter of intent Annexure P-4 and the Industrial Licence Annexure P-5 issued by the respondents is silent regarding the setting up of rice shelling mill or the production of power as by-product and supplying the same to the electric grid. As a matter of fact, the Industrial Licence of setting up of 100 per cent Export Oriented Unit, clearly provides the manufacture of 3000 tonnes of furfural and 7000 tonnes of edible rice bran oil as by-product. It is pertinent to note that initially the petitioner had submitted an application for granting licence for the manufacture of 6000 tonnes of furfural and 3000 tonnes of rice bran edible oil. Thus, it appears that after, full application of mind by the respondents and the Board of Approvals, the above referred quantity in the production of furfural and rice bran edible oil was worked out and the industrial licence was issued. Annexure-1 to this licence lays down that the entire manufacture custom bound area imposes certain other obligations upon the petitioners for period of manufacture and 100 per cent production to be exported except 5 per cent rejects. It also elucidates the concession given to such 100 per cent Export-Oriented Units like the import of all the capital goods, raw material or components for production to be exempted from custom duty and the finish goods authorise to manufacture under the scheme being exempted from excise and other central levies. 28. The acceptance of legal agreement with Ballestra of Italy for the import of Capital Goods and thereafter M/s. Kessel of Germany and Deputy Chief Controller of Exports and Imports Ltd. and the extention of the period of the letter of intent from time to time clearly shows that at different stages various agencies of respondent No. 1 had the opportunity to impose restrictions regarding the import of rice shelling plants or not setting up rice shelling plants in the bonded area and regarding supplying of surplus electric power to the State grid before issuing the industrial licence Annexure P-5. However, they did not consciously chose to do so. Under these circumstances, there is no escape but to conclude from the consistent conduct of the respondents that they had accorded sanction for the import of the rice shelling plant, setting up such plant in the customs bonded area, procuring the rice huse from shelling paddy on behalf of FCI and other State Agencies and for supplying the surplus power to the State Grid Having done that, they cannot now turn round and introduce altogether new amendments and conditions, vide Annexure P-7. There is absolutely no doubt that the petitioners acting upon the representation of respondent No. 1 had (considerably changed its position to its prejudice by importing two rice shelling plants, power generating plants etc. worth Rs. 35. 5 crores equal to 28. 4 IU. S. dollars. Thus, it is a clear case of the application of doctrine of promissory estoppel or equitable estoppel. 29. The Apex Court in M. P. Sugar Mills v. State of U. P. MANU/sc/0336/1978 , AIR1979 SC 621 , [1979 ]118 ITR326 (SC ), (1979 )2 SCC409 , [1979 ]2 SCR641 , [1979 ]44 STC42 (SC ) has in detail discussed the application of doctrine promissory estoppel to the extent by saying that it can itself provide the cause of action as under: Doctrine of promissory estoppel has been variously called promissory estoppel, requisite estoppel, quasi estoppel and new estoppel It is a principle evolved by equity to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. The true principle of promissory estoppel seems to be that where one party has by his words or conduct made to the other a clear and unequivocal premise which is intended to create legal relations or effect 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 is made and it is in fact so acted upon by the other party 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 of whether there is any me existing relationship between the parties or not. The doctrine of promissory estoppel need not 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. 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 It is not necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee, actine 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 But if by detriment we mean injustice to the promisee which would re suit if the promisor were to recede from his promise, then detriment would certainly come in as a necessary ingredient. The detriment m such a case is not some prejudice suffered by the promisee by acting on the promise, but the prejudice which would be caused to the promisee, if the promisor were allowed to go back on the promise 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 promisor to go back upon his promise In India not only has the doctrine of promissory estoppel been adopted in its fullness but it has been recognised 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 negatived. Where the Government makes a promise knowing or intending that it would be acted on by the promises and, in fact, the promisee, 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 bound by the promise the promise would be enforceable against the Government at the instance of the promisee, 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 Article 289 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the W 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. The Government cannot claim to be immune from the applicability of the rule of 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. But 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 an enquiry 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 the facts which have transpired since the making of 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 alter 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 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 exparte 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 account 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 that 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 would become final and irrevocable Where the Govt. owes a duty to the public to act in the particular manner and here obviously duty means a course of conduct enjoined by law the doctrine of promissory estoppel cannot be invoked for pre venting the Govt. 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. It may also be noted that promissory estoppel cannot be invoked to compel the Govt. or even private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The legislator can never be precluded from exercising its legislative function by resorting to the doctrine of promissory estoppel. 30. The principle of promissory estoppel was also upheld by the Supreme Court in The Union of India and Ors. v. Messrs Anglo Afghan Agencies etc. AIR 1968 S. C. 718; Union of India and Ors. v. Godfrey Philips India Ltd. MANU/sc/0193/1985 , AIR1986 SC 806 , (1986 )1 Complj46 (SC ), 1985 (22 )ELT306 (SC ), [1986 ]158 ITR574 (SC ), 1985 (2 )SCALE619 , (1985 )4 SCC369 and Pournami Oil Mills, etc. v. State of Kerala and Anr. MANU/sc/0424/1986. , AIR1987 SC 590 , 1987 (27 )ELT594 (SC ), [1987 ]165 ITR57 (SC ), 1987 (1 )KLT283 (SC ), 1986 (2 )SCALE1225 , 1986 Supp (1 )SCC728 , [1987 ]1 SCR654 , [1987 ]65 STC1 (SC ), 1987 (1 )UJ249 (SC ). In Messrs Anglo Afghan Agencies' case (supra) the representation on the part of the Government related to the concession given to the exporters of woollen goods to import raw materials of the total amount equal to 100% of the FOB value of the exports through a scheme called "export Promotion Scheme" published on October 10, 1962 by the Textile Commissioner. Messrs Indo Afghan Agencies exported to Afghanistan in September 1963, woollen goods of the F. O. B. value of Rs. 5,03,471. 73 NP. The Deputy Director in the office of the Textile Commissioner Bombay issued to the respondents an Import Entitlement Certificate for Rs. 1,99,459 only. Under these circumstances, it was held by the Supreme Court that the Government was bound by the doctrine of promissory estoppel even though a formal contract as required under Article 299 of the Constitution of India was not entered into by the parties. In Godfrey Philips case (supra) the representation on the basis of which the doctrine of promissory estoppel was upheld related to the representation made by the Central Board of Excise and Custom and approved and accepted by the Central Government that the cost of corrugated fibre board containers for packing the cartons or outers of cigarettes cannot be included while determining the value of the cigarettes for the purpose of assessment of excise duty. The respondent acting upon this representation continued using the corrugated fibre board containers for packing the cartons or outers of cigarettes and did not recover from the wholesale dealer the amount of excise duty attributable to the cost of such containers during the period 24th May, 1976 to 2nd November, 1982. Under these circumstances, it was held that the doctrine of promissory estoppel would be applicable. 31. In Pournami Oil Mill's case supra the State of Kerala had exempted the Small Scale Industries from the payment of sales-tax for a certain period, in order to boost industrialisation in the State. This concession was curtailed subsequently. Under these circumstances, it was held that small scale units set up in response to first order and before the passing of the subsequent order are entitled to plead estoppel. 32. The question then arises whether the Shelling of paddy on behalf of the Food Corporation of India, or, the other State Agencies for procuring raw material, i. e. , rice husk or the setting up of rice shelling plant for that purpose in custom bonded scheme or the import of such machinery is beyond the scope of this policy or open general licence. This query has to be answered in the negative as this 100 per cent Export Oriented Policy does not impose any restriction for the import of raw material or other capital goods, like machinery etc. for the setting up a 100 per cent Export Oriented Unit. In the present case admittedly this unit is meant for 100% export of 3000 tonnes of furfural. Thus a policy which is so liberal as to provide the import of all the raw materials without payment of custom duty, cannot be said to be restrictive in the matter of import or setting up rice shelling plant for the manufacture of the raw material i. e. rice husk from shelling paddy belonging to the Food Corporation of India or different State Agencies because in procuring an indigenous raw material, the unit will not only be saving foreign exchange, but also helping the State or the Central owned agencies in shelling rice from the paddy. In view of these circumstances, the entire stress of the respondents that they could not possibly sanction the import of rice mills or installing a rice sheller in the custom bonded area because it is not envisaged by the import export policy, is futile as the 100 per cent export of its project pertained to the export of furfural and the shelling of rice for procuring rice husk would not by any stretch of imagination amount to a production of the Unit as envisaged except to the extent of producing raw material. 33. The other most vital leg of the controversy pertains to the production and utilization of 6 M. W. of surplus power as by-product by burning the used rice husk in steam boilers. It is noteworthy that the Corporation or Company had already imported the boilers and generating sets to produce power of 7 M. W. and it would be a national loss if the generating power is not utilized by the State Grid. Moreover, in case, the spent up rice husk is discarded as a waste without burning it for producing steam etc. for running, the turbine, it would still amount to disposing of the by-product or waste of the used rice husk in the domestic tariff area. If that is so, then the proper utilization of the used rice husk to produce electric power cannot be said to be against the spirit or the object of the above referred 100 per cent Export-Oriented Policy. 34. Mr. Brar tried to make out a case invoking the doctrine of waiver of the right to impose promissory estoppel on the part of the petitioners regarding the production of 6 M. W. of surplus power on the plea that Secretary, Industries, State of Punjab, who happened to be the Chairman of the Corporation having agreed to utilize the entire power for captive use, with the Secretary Commerce and Secretary Industries of the Government of India. The minutes of the meeting have been annexed as enclosure R-2. The relevant portion of the minutes of this meeting reads as under: It was explained that the Board of Approvals in its last meeting, had decided that certain aspects of the case needed further examination in consultation with the concerned Departments of Food, Chemicals and Petro-Chemicals as well as customs hence the meeting. Also some representations have also been received on the matter.
(2.) THE representative of Deptt. of Food stated that there were two points for examination as far as his Department was concerned: (i) Indigenous availability of rice milling equipment. (ii) Conclusion of satisfactory arrangements with the FCI for hulling of paddy and off take of rice. He also stated that the present international market price abroad of rice bran oil was Rs. 10,000/- and the domestic market price Rs. 16,000/- per tone.
(3.) SHRI Chatha, representing the PSIDC stated that the paddy would be procured from the Food Corporation of India and other State Agencies. The Food Corporation has already indicated its willingness to accept the arrangements subject to the usual terms on which they get the rice shelled by the small scale unit. He stated that since the rice shelling industry fell within the purview of the State Govt. the Punjab Govt. have already satisfied themselves that the interests of the small scale shelling units have been fully protected. As far as the indigenous angle was concerned, the rice shelling plant to be imported not only gives a much higher yield, of shelled rice, but the rice bran resulting from the shelling would be absolutely free of rice particles and hence very suitable for extraction of rice bran oil of edible quality. The indigenous machinery not only gave a lower yield but also was not able to effectively separate the rice from the bran/husk. Joint Secretary, Ministry of Commerce also stated that the indigenous angle was not relevant in the case of 100% Export Oriented Units.;