That said, the SC still interfered to strike down the excessive tax on newsprint as it came to the conclusion that the imposition of a high tax was violative of the fundamental right of freedom of speech under Article 19(1)(a) of the Constitution. However, on the mere ground of unreasonableness, an imposition of tax even by the amendment of a notification cannot be challenged, the court said. Thus, economic policy is not justiciable unless it violates fundamental rights.
There were many judgments after that. The Kaniska Trading vs Union of India – 1994(74) ELT 782 (SC) and Shrijee Sales Corporation vs Union of India – 1997(89) ELT 452 (SC) held that taxation policy cannot be pronounced upon by the courts unless there is violation of the Constitution.
Later a two-judge bench of the apex court, in the case of Dai-Ichi Karkaria Ltd. vs. Union of India – 2000(119) ELT 516(SC) decided that “the mere fact that a notification under the Customs Act is required to be laid before Parliament” does not make it a legislative action. However, the court struck down the notification, which had reduced the extent of exemption to oil in public interest, by holding that the professed public interest was really not in public interest. Thus, the SC considered that public interest declared in a notification was justiciable.
This decision was directly contrary to the conclusion arrived at in the Indian Express case, which had been delivered by a bench of three judges. Therefore, the decision in the Karkaria case has gone completely contrary to all other SC judgments on the topic. However, other judgments such as Union of India vs Godhawani Brothers – 2000(141)ELT16(SC), Union of India vs Bharat Commerce & Industry - 2002-TIOL-603-SC-CUS, and Bannari Amman Sugars Ltd vs Commercial Tax Officer-2005 (1) SCC 625 delivered after the Karkaria judgment, are all contrary to the Karkaria judgment. As a result, the Karkaria judgment cannot be taken as effective any longer.
Economic policy can be laid down either by legislation or by notification. About legislation, there is no doubt that the theory of promissory estoppel is not applicable. In fact, the SC came to a detailed conclusion in the Indian Express case, that economic policy contained in a notification is not justiciable if a notification is legislative in nature. In such a case, it can be challenged only on the ground of violation of fundamental rights. Hence, the essential question is whether a notification is legislative or executive. If in fact, it is executive in nature, then interference by the SC is permissible.
The conclusion is the following:
(a) In the case of an ordinary fiscal levy, mere excessiveness of tax is not justiciable.
(b) If the petitioner is able to prove that the excessiveness of tax has created discrimination vis-a-vis his competitors or has otherwise completely ruined his business such that it has gone against his fundamental right to trade or business, then it becomes justiciable.
(c) So far, no such case has succeeded on this ground before the high courts or the Supreme Court.
(d) Only in the case of newsprint, the challenge to a levy which was found to be burdensome, has been entertained by the Supreme Court as justiciable on the ground that it violated the fundamental right to freedom of speech and expression under the Constitution and was a threat to democracy.
The writer is retired member of the Central Board of Excise & Customs.