Policy of justice

INDIRECT TAXES/ LAW OF THE LAND

Can a Budget policy be challenged in the courts?

In the context of the present Budget, it helps to know when exactly a certain Budget policy can be challenged in the courts. Already, the Association of Retail Shopkeepers "� affected by the imposition of service tax on the rental of the commercial premises (immovable property) "� are contemplating to move the Supreme Court.

According to them the power to tax immovable property is with the States. So by imposing service tax, the Centre is usurping the jurisdiction of the States. The Centre would take the legitimate plea that giving a property on rent is actually giving a service. The Supreme Court could as well decide this issue either way, most probably in favour of the Centre. However, if at all the Supreme Court entertains this plea, it should not lead anybody to believe that any budgetary issue can be taken to the Court.

The correct position is that it is only the constitutional issues, which can be taken to the court, but not any economic policy laid down in the Budget. Several times economic policies have been challenged in the Courts.

The decision, however, has been always that an economic policy "� envisaged in the Budget or in subsequent notifications issued by the ministry of finance or an economic policy laid down by the Reserve Bank of India "� cannot be challenged in the Court of Law. Economic Policies are not a justiceable issue unless it is proved that a particular policy is ultra vires the fundamental rights, or ultra vires any other provisions in the constitution.

In Kasinka Trading vs. UOI "� 1994(74) ELT 782(SC) and in Shrijee Sales Corporation vs. UOI "� 1997(89) ELT 452 (SC), the Supreme Court held that taxation policy cannot be pronounced upon by the Courts unless there is violation of the constitution.

Economic policies are enunciated either by notification or by legislation. If it is legislation there is no question of applicability of promissory estoppel. This principle says that if the government promises a certain policy and if the businessmen have acted upon it, then the policy cannot be changed all of a sudden putting the businessmen into jeopardy.

This principle is also known as the doctrine of legitimate expectation. That is, if an exemption notification is there and if a business man has acted upon it by ordering goods for importation or by starting a manufacture in factory, then sudden withdrawal will jeopardise business and, therefore, the government cannot be allowed to break its promise of a lower rate of duty. This amounts to saying that an economic policy cannot be changed.

The Government's argument is that such a situation would make the economic policy rigid and unsuitable for changing circumstances. Any change in Budget regarding duty could be hit by application of promissory estoppel. The Supreme Court, therefore, has given several judgements to the effect that the government can change economic policy only in the public interest.

The Court cannot judge whether the public interest has been exercised by government justly or not. If the government declares that the notification is in the public interest, it cannot be challenged in the court. Only the parliament can debate it. Economic policy is not justiceable unless it violates fundamental rights.

The writer is former member, Central Board of Excise & Customs