Larger Public Interest: SC Upholds Withdrawal Of Excise Duty Exemption For Pan Masala [Read Judgment]

The Supreme Court, on Thursday, upheld the withdrawal of the exemption from payment of Excise Duty to the pan masala with tobacco and pan masala sans tobacco by the Central Government observing that the same is in the larger public interest.

The three judge bench comprising of Justice Arun Mishra, Justice MR Shah and Justice BR Gavai termed the judgment of the Division bench of Sikkim High Court 'totally erroneous' and 'shocking'.

The High Court, while allowing writ appeals challenging the withdrawal, had observed that the withdrawal of exemption for tobacco products was not in the public interest. The Central Government then approached the Apex Court.

In Union of India vs. Unicorn Industries, the bench was considering a legal issue whether by invoking the doctrine of promissory estoppel, can the Union of India be estopped from withdrawing the exemption from payment of Excise Duty in respect of certain products, which exemption is granted by an earlier notification; when the Union of India finds that such a withdrawal is necessary in the public interest.?

Larger public interest would outweigh the individual interest

The bench referred to various earlier judgments that had held that where public interest warrants, the principle of promissory estoppel cannot be invoked. It said:

"The exemption granted, even when the notification granting exemption prescribes a particular period till which it is available, can be withdrawn by the State, if it is found that such a withdrawal is in the public interest. In such a case, the larger public interest would outweigh the individual interest, if any. In such a case, even the doctrine of promissory estoppel would not come to the rescue of the persons claiming exemptions and compel the State not to resile from its promise, if the act of the State is found to be in public interest to do so."

Upholding the withdrawal of exemption the bench observed that the doctrine of promissory estoppel could not have been invoked in the present matter. It added:

"The State could not be compelled to continue the exemption, though it was satisfied that it was not in the public interest to do so. The larger public interest would outweigh an individual loss, if any. In that view of the matter we find that the appeals deserve to be allowed."

Consumption of pan masala with tobacco as well as pan masala sans tobacco is hazardous to health

The Court also took judicial notice that by various scientific studies on betel quid and substitutes, tobacco and their substitutes, i.e., pan masala with tobacco and without tobacco, these products have been found to be one of the main causes for oral cancer. It also referred to a detailed study by three Experts, namely, Urmila Nair, Helmut Bartsch and Jagadeesan Nair in the Division of Toxicology and Cancer Risk Factors, German Cancer Research Centre (DKFZ), Heidelberg, Germany, titled as "Alert for an epidemic of oral cancer due to use of the betel quid substitutes gutkha and pan masala: a review of agents and causative mechanisms". Also referring to various other reports by experts in medical field, Justice Gavai observed:

It could thus be seen that, by a scientific research conducted by Experts in the field, it has been found that the consumption of pan masala with tobacco as well as pan masala sans tobacco is hazardous to health. It has further been found that, the percentage of teenagers consuming the hazardous product was very high and as such exposing a large chunk of young population of this Country to the risk of oral cancer. Taking into consideration this aspect, if the State has decided to withdraw the exemption granted for manufacture of such products, we fail to understand as to how it can be said to be not in the public interest.

'Shocking' Observation By HC

While setting aside the judgment of Division bench of the High Court, the bench further observed.

We are unable to appreciate as to how the Appellate Bench of the Gauhati High Court finds that withdrawal of exemption in respect of 'pan masala with tobacco' is not in the public interest. The legislative policy as reflected in Section 154 of the Finance Act was to withdraw the exemption granted to the manufacturers of cigarettes as well as pan masala with tobacco and that too with retrospective effect. Apart from the fact that, it is a common knowledge that tobacco is highly hazardous, the legislative intent was also unambiguous. In these circumstances, the finding of the High Court that the withdrawal of exemption for tobacco products was not in the public interest, to say the least is shocking. We find that the approach of the Appellate Bench of the High Court was totally unsustainable. 

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