There is a standing grievance amongst the people, not only taxpayers, but, also those facing the Company Law Board, the SEBI or any other branch of the government, that they do not get any written clarification when they ask for it.
While it is a valid complaint, here I am discussing how good a clarification given to one person or a notice given to the general public , (known also as trade notice), is in the legal sense.
The reason why the government departments do not want to give individual clarification or public notice is that, if found wrong, the clarification or the public notice is likely to be produced in the court to claim that it was a promise binding the government, that is, to invoke the theory of promissory estoppel.
The legal position is however, that public notice is for the guidance of the people but, if in a critical analysis it is found that it is against the law, the law prevails and not the public notice.
A very recent pronouncement by the Supreme Court has made the position clear that a trade notice or public notice cannot be made to prevail against what is otherwise wrong statutorily.
In the case of CC vs Tullow India Operations Ltd, decided by the Supreme Court as recently as on 28th October 2005, 2005 (189) ELT 401 (401), the principle laid down is that a public notice cannot nullify the statutory requirement. There is no estoppel against the statute, is a well-accepted principle endorsed by many judgments.
In the case of classification of goods, the issue is not strictly one of statute but of interpretation of the entries. In such cases, the applicability of estoppel is far more than in a typical legal issue. In a case of classification of rock phosphate in pebble form, the choice in a customs classification in the tariff in 1980 was between items 35 and 87.
The Bombay high court in this case of Star Chemicals vs UOI , 1980 (6) ELT 133 (Bom), decided that there being a trade notice to the effect that the goods fall under item 35, it would be binding on the Revenue. But we must also observe that the court here first judged the appropriateness of item 35 before ruling that the trade notice would be binding.
Had its independent judgment been that the goods fall more properly under 87, then probably it would not say so. The court usually goes into the merit first. If the classification on merit coincides with the classification as given in the trade notice, then the court accepts the trade notice.
In fact, the Supreme Court has clearly laid down that wrong clarification is not an estoppel against making correct classification in the case of Rishav Kumar vs State of UP,1987 (1966)STC 222 (SC).
In this case, the clarification with regard to sales tax in UP was that weights and measures were included in the expression "mill-stores and hardware" but the Allahabad High Court ruled otherwise. The party came to the Supreme Court arguing that the clarification was binding because it should act as a promissory estoppel. The Supreme Court held that "the legal position is abundantly certain that estoppel is not available to be pleaded against an Act."
So, the conclusion is that while the government departments issue clarifications or trade notices for the sake of smooth functioning of the departments, in some cases where the clarifications may be eventually found to be against the correct classification on merit or against the statute, the clarifications are of no avail.
They cannot be cited as promise made by the government and the rule of promissory estoppel cannot be invoked. In the largest majority of cases it so happens that the clarifications agree with the correct legal position. It is only in a small number of cases that they contradict the statute.
