TMI Blog1995 (3) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner is registered both under the U.P. as well as the Central Sales Tax Act. The petitioner has taken factory premises including the land on lease and thereafter installed various machineries. It was alleged that it established and expanded its industry with the sole view to get exemption from payment of sales tax for a period of six years, from the date of its first sale in terms of notification dated August 27, 1984, as superseded/amended by notification dated January 29, 1985 and December 26, 1985. The petitioner has made all efforts and has invested huge amounts with the sole purpose of getting exemption from payment of sales tax. It was averred that had the petitioner been aware that the petitioner would not get the full benefit of sales tax exemption, then the petitioner would not have established and expanded its factory. It was averred that the petitioner had fulfilled all the requirements for the grant of eligibility/exemption certificate from payment of sales tax under section 4-A of the U.P. Sales Tax Act, 1948 (hereinafter referred to as "the Act "). The petitioner applied for registration with the Director of Industries as a smallscale industry. In the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the new unit of rupees three lacs should be completed on the date of starting production. The different periods of exemption relatable to investment came for the first time on August 27, 1984, with the issuance of notification dated August 27, 1984 and so the unit already in production required certain time to complete the investment to the tune of rupees three lacs or more, hence by no stretch of imagination, the investment of rupees three lacs could be taken to be complete on the date of starting production, especially in respect of the units which had already been established before the issuance of the aforementioned notification dated August 27, 1984. As the notification dated August 27, 1984, for the first time provided for different periods of exemption according to investment, hence the petitioner immediately took steps for increasing investment on machineries, etc., in the unit and that was subsequently enhanced to well over to rupees three lacs, and remained so for a very substantial period of exemption. It was submitted that respondent No. 2 acted illegally in exercise of its jurisdiction in not considering the case of the petitioner from that aspect of the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and December 26, 1985, which contemplated exemption from the date of first sale, if the sale took place within six months from the date of starting production, were issued. Notifications dated January 29, 1985 and December 26, 1985, will apply only to those units which were established from January 29, 1985 to December 26, 1985. It will not apply to those units, that were established prior to January 29, 1985, which was governed by notification dated August 27, 1984. The petitioner was, therefore, granted exemption for a period of four years from the date of starting production, which in the instant case was April 21, 1984, under notification dated August 27, 1984, hence the application of the petitioner for granting exemption from payment of sales tax for a period of six years, was rightly rejected by the Chairman, NOIDA. In the rejoinder-affidavit dated August 17, 1988, of Mr. R.K. Suri, Managing Director of the petitioner's company, it was averred that the State Government by G.O. No. 8244 dated September 30, 1982, has provided for exemption from payment of sales tax to all the units, which were situated in different districts as mentioned in annexures A and B to the said Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be established in the State of Uttar Pradesh, shall be entitled for exemption from payment of sales tax. Accordingly, the petitioner also established a new unit in pursuance of the Government Order No. 8244 dated September 30, 1982 and is entitled for exemption from payment of sales tax for a period of six years as provided in the said Government Order. The petitioner set up and established the industry on the basis of the clear representation made and held out by the State Government that the industry was entitled to exemption from payment of sales tax for a period of six years under G.O. No. 8244 of September 30, 1982. Subsequently, by means of the Notification No. 6468 of August 27, 1984, a condition was introduced for the first time that in case of a new unit in Tehsil Dadri, district Ghaziabad with capital investment not exceeding rupees three lacs, the period of exemption shall be four years from the date of starting production. The petitioner has set up its new industry on the basis of the representation made by the State Government under earlier notification dated September 30, 1982 and the State Government is estopped from withdrawing the said exemption to the detriment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 1985, had been put into two different categories: 1.. Whose investment was less than rupees three lacs but were registered under the Factories Act apart from being registered with the Director of Industries. 2.. The other units whose investment was more than rupees three lacs but were not registered under the Factories Act. On May 9, 1991 Sri A.K. Darbari, Additional Sales Tax Officer, Sector-I, NOIDA, District Ghaziabad, filed supplementary counter-affidavit, in which he stated that the issue that notification dated August 27, 1984, does not provide at what point of time the investment in the unit should be rupees three lacs or more, is settled by the U.P. Gazette Extraordinary dated April 3, 1991, U.P. Sarkar Vidhi Anubhag-7 No. 682(2)/XVII-V-1-2-(Ka)28/1991 dated Lucknow April 3, 1991. Clause 8(c), Explanation 1(e), of the above gazette notification clearly provides for fulfilment of all the conditions specified in this Act or Rules or notification made thereunder in regard to grant of facility under this section on the date from which such facility may be granted to him. The investment made by the petitioner on or before the date of starting production (May 23, 1984) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly fulfil the condition which could have been specified for him at the beginning and not to expect the impossible out of him by requiring him to fulfil the conditions which have been specified later. Hence, the emphasis laid down in the counter-affidavit, on any condition as may be required to be fulfilled on the date from which the facility was granted in view of the Explanation contained in U.P. Ordinance No. 26 of 1991 is incorrect. If it is presumed that the interpretation contained in the counter-affidavit regarding the necessity of the condition to be fulfilled on the date from which the facility may be granted to unit is correct, even then the amendment as per the Explanation has no relevance in the present writ petition. The purpose of the amendment at the best could be that in cases where the condition was specified but no specific date/time for its fulfilment was given in the Act or in the amendment, then, the confusion in this regard was sought to be set at rest by clearly specifying the point of time at which such specified condition was to be fulfilled by the unit. In the case of the petitioner, the condition regarding investment being over rupees three lacs as has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification dated August 27, 1984, the period of exemption could be reduced. The same question cropped up before this Court in the case of Bajaj Packwell v. State of Uttar Pradesh [1990] 76 STC 386 (Civil Misc. Writ Petition No. 49 of 1988 decided on November 24, 1988, by a Division Bench of this Court), wherein the facts were more or less identical. M/s. Packwell, which was a proprietorship concern was registered under the U.P. and Central Sales Tax Acts. In pursuance of Government Order No. 8244 dated September 30, 1982 it established a new smallscale industrial unit in the district of Meerut for the manufacture and sale of blended tea. The initial investment of the petitioner was less than rupees three lacs. The said concern was granted registration certificate by the Directorate of Industries on April 17/21, 1984. The petitioner was also registered under the Factories Act. On its application, the petitioner was granted eligibility certificate on November 9, 1984, for exemption from payment of sales tax for a period of five years with effect from January 1, 1984. On June 20, 1987, the petitioner was served with a notice dated June 20, 1987 to show cause why the period of exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Similar observations were made in Padam Polypack v. State of U.P. 1991 UPTC 1327 (All.), Wilson Electronics v. State of U.P. (Civil Misc. W.P. No. 48 of 1988 decided on November 24, 1992), Jyotsna Industries v. Commissioner of Sales Tax, U.P., Lucknow (S.T. Revision No. 1260 of 1988 decided on March 15, 1989) 1989 UPTC 759 (All.). In Jyotsna Industries (S.T.R. No. 1260 of 1988 decided on March 15, 1989-Allahabad High Court) 1989 UPTC 759 (All.), a revision was filed before the High Court under section 11 of the U.P. Sales Tax Act. According to the revisionist the unit was established on October 1, 1982. The Joint Director of Industries granted eligibility certificate on June 13, 1984, for a period of six years with effect from December 16, 1983. Subsequently the Commissioner of Sales Tax, U.P., on enquiry found that since the investment in the new unit was less than rupees three lacs, he reduced the period of exemption from six years to four years and also changed the effectiveness of eligibility certificate from December 16, 1983 to October 27, 1983. Feeling aggrieved against the said order passed by the Commissioner, Sales Tax, an appeal was preferred before Sales Tax Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat dismissal of the special leave petition by the honourable Supreme Court filed by the Commissioner of Sales Tax in Jyotsna Industries (S.T.R. No. 1260 of 1988 decided on March 15, 1989) 1989 UPTC 759 is not on merit, as no reason has been indicated in the said order. Hence, it is not binding precedent under article 141 of the Constitution of India. In that regard he formulated the following questions for consideration: 1.. Whether any relief can be granted in absence of specific pleadings and foundation required for promissory estoppel. 2.. Government order dated September 30, 1982, has to be read with rules made by the Government. Sales Tax Officers have no right to issue clarificatory letters and on the basis of those clarificatory letters, the petitioner cannot stake his claim for exemption. 3.. Section 4-A, since beginning provided grant of exemption by the State Government through notification meaning thereby that as the Government Order dated September 30, 1982, was not notified or published in official gazette, it cannot be relied upon by the petitioner. 4.. Notification dated August 27, 1984, was issued in pursuance of the legislative amendment introduced by U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the basis of clear representation made in Government Order No. 8244 dated September 30, 1982, wherein no such condition existed, which was for the first time introduced by Notification No. 6468 dated August 27, 1984 that in the case of a new unit in Tehsil Dadri, district Ghaziabad, the exemption from payment of sales tax will be limited for four years in those units, the investment of which has not exceeded rupees three lacs. Regarding the plea of promissory estoppel raised by the petitioner, in para 4 of the writ petition, the respondents in their counter-affidavit filed by S.R. Singh on July 29, 1980, did not say a word about it. In para 6 of the counter-affidavit a cryptic reply was given that the contents of para 4 of the writ petition needed no comments. In all the counter-affidavits, either filed by Dr. Ravindra Sharma, R.P. Singh or Darbari Lal, the plea of promissory estoppel set up by the petitioner was not denied. It was vehemently argued that the plea, which has not been raised in the writ petition and subsequently raised in the rejoinder-affidavits or supplementary affidavits, cannot be read. This is not a case where the respondents have been taken in surprise b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reate legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted upon. In such cases the courts have said that the promise must be honoured. As I have said they are not cases of estoppel in the strict sense. They are really promises intended to be binding, intended to be acted on, and in fact acted on. The logical consequence is that a promise to act at a smaller sum in discharge of a larger sum, if acted upon, is binding notwithstanding the absence of consideration, and if the fusion of law and equity leads to this result, so much the better." Subsequently, it was applied to a case where the representation consisted of conduct in Charles Rickwards Ltd. v. Oppenhaim [1950] 1 KB 616. In India, the honourable Supreme Court in Union of India v. Anglo-Afhan Agencies AIR 1968 SC 718, the doctrine was applied. It was expanded in the case of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 44 STC 42 (SC); AIR 1979 SC 621. In the said case a news item was published in certain newspapers in October, 1968 to the effect that the State of U.P. had decided to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of 'honesty and good faith'? ........There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but, let it be said to the eternal glory of this Court, that this doctrine was emphatically negatived in the Indo-Afghan Agencies' case [1968] 2 SCR 366; AIR 1968 SC 718 and the supremacy of the rule of law was established. It was laid down by this Court that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d contained in the Act, the Government could legitimately be held bound by its promise. No distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government so far as the doctrine of promissory estoppel is concerned." The doctrine of promissory estoppel received a set back in Jit Ram Shiv Kumar v. State of Haryana AIR 1980 SC 1285. In the case of Jit Ram Shiv Kumar AIR 1980 SC 1285 the Municipal Committee decided that Fatehpur Mandi shall remain immune from octroi duty. This was, of course, not within the powers of the committee under the Punjab Municipal Act. The said resolution was, however, confirmed by the State Government of Punjab. The committee subsequently changed its mind and decided to levy octroi on goods brought into the mandi. That resolution of the committee was annulled by the Government of Punjab. Later on reorganisation of the State of Punjab, the State of Haryana chose to approve the resolution of the committee bringing the mandi within the purview of octroi duty. Thereupon, the committee started charging octroi on goods brought into the Mandi which was challenged before the honourable Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in that decision on this point." In the light of the facts and circumstances of the case, the aforesaid observations were made in Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574 (SC); AIR 1986 SC 806, in which on a representation made by the Central Board of Excise and Customs, approved and accepted by the Government that the cost of corrugated fibre board containers would not be includible in the value of the cigarettes for the purpose of assessment to excise duty. The company acting upon the said representation, continued the use of corrugated fibre board containers for packing cigarettes and did not recover from the wholesale dealers the amounts of excise duty attributed to the cost of the corrugated fibre board containers during the period in question. In these circumstances, it was held that it would be inequitable to allow the excise authorities to assess excise duty on the basis that the value of cigarette should include the cost of corrugated fibre board containers. In Pournami Oil Mills v. State of Kerala [1987] 65 STC 1 (SC); AIR 1987 SC 590 which also pertains to representation of the State Government for sales tax holiday, the Government of Kerala ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case of Pournami Oil Mills [1987] 65 STC 1 (SC); AIR 1987 SC 590 is in tune with the decisions of the honourable Supreme Court in M.P. Sugar Mills [1979] 44 STC 42; AIR 1979 SC 621 and Godfrey Philips India Ltd. AIR 1986 SC 806. From the perusal of the precedents mentioned hereinabove, it is evident that the plea of promissory estoppel is available with respect to Government orders and notifications if the same has been issued in exercise of powers conferred by statute. In M.P. Sugar Mills' case [1979] 44 STC 42 (SC); AIR 1979 SC 621 the representation of U.P. Government related to the power of exemption as provided by section 4-A of the U.P. Sales Tax Act. In Pournami Oil Mills [1987] 65 STC 1 (SC); AIR 1987 SC 590 representation of the Government of Kerala related to the power of exemption as provided under section 10 of the Kerala General Sales Tax Act. The present case also relates to the power of exemption as provided by section 4-A of the U.P. Sales Tax Act. Hence, the law laid down by the honourable Supreme Court in M.P. Sugar Mills [1979] 44 STC 42; AIR 1979 SC 621 and Pournami Oil Mills [1987] 65 STC 1; AIR 1987 SC 590 is fully applicable to the facts of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) The petitioner's unit was set up in April, 1984 and the date of starting production as per the definition contained under section 4-A is May 23, 1984. The reasons for the date of commencement of production being May 23, 1984, have been given in the supplementary affidavit dated April 30, 1991. (ii) That accordingly, the case of the petitioner is covered by G.O. No. 8244 dated September 30, 1982. (iii) That as per the said Government order the small-scale industries set up after October 1, 1982, in the State of U.P., district Ghaziabad, Tehsil Dadri (in which the units set up at NOIDA fall), were entitled for the exemption for a period of six years from the date of commencement of production. The said G.O. dated September 30, 1982, also provided for framing rules in respect of prestige and pioneer units. However under the niyamawali made under the Government Order dated September 30, 1982, though paragraph 1 stated that those units which were established between October 1, 1982 and May 31, 1985 and were either registered under the Factories Act or whose investment in land and building, machinery and equipment is more than Rs. 3 lacs would be entitled to the exemption from pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame has been dismissed by the honourable Supreme Court vide order dated January 29, 1990. In other words, the decision of the honourable Allahabad High Court has already been affirmed by the honourable Supreme Court of India. It is evident that the units which were set up prior to August 27, 1984, did not carry any condition whatsoever regarding the limitation of its investment, provided the unit was registered under the Factories Act and also under the Directorate of Industries. Since no condition in this regard had ever been prescribed for the units set up prior to August 27, 1984, there can be no question of the unit being required to fulfil such non-existing condition at any point of time. In fact, this point has been acknowledged and accepted under the amendment Act itself namely, that the investment of Rs. 3 lacs was not a condition necessary for availment of exemption under section 4-A of the U.P. Sales Tax Act in respect of units which were set up before August 27, 1984, since after the said Explanation referred to in the counter-affidavit the second proviso states that"In relation to a new unit whose date of starting production falls before August 27, 1984 and the capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an rupees three lacs. Director of Industries registered the said small-scale industrial unit on July 24, 1984. In the said registration certificate date of commencement of production was mentioned as May 23, 1984. The petitioner was also granted registration under the Factories Act with effect from April 2, 1984. As the petitioner has completed formalities, he was entitled for exemption from payment of sales tax for six years in pursuance of Government Order No. 8244 dated September 30, 1982. Said Government order was issued in the name of the Governor of Uttar Pradesh and was signed by the Secretary (Industries), Government of U.P. meaning thereby that it was issued under article 166 of the Constitution and hence, it cannot be called in question on the ground that it was not made or executed by the Governor. Under article 162 of the Constitution, the executive power of the State is also extended to the matters with respect to which the Legislature of the State has the power to make laws, meaning thereby that the executive powers of the Here italicised. State are co-terminous with the legislative power of the State, which is subject to other provisions of the Constitution It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve made it very clear that no exemption from the payment of tax due under the Act, could be granted except by the issue of a notification. It is hazardous to depend on one's memory while construing a statutory provision and this case serves as a good illustration of this statement. Having held, that it was not necessary to issue a notification for granting an exemption, the High Court misled itself into thinking that the issue of a notification for the purpose of withdrawing the concession already granted was also unnecessary. The reason given by the High Court for rejecting this contention of the appellant, is, therefore, wholly untenable. Under section 9(2) of the Act, it was provided: "Any notification issued under sub-section (1) shall be laid, as soon as may be after it is issued, on the table of the Legislative Assembly of the State while it is in session for a total period of fourteen days which may be comprised in one session or in two successive sessions." In the instant case, section 4-A of the U.P. Sales Tax Act does not provide that the notification for granting exemption from payment of sales tax should be laid on the table of the Legislative Assembly of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government order as invalid, for the reason of the fact that it was given effect to and the benefit was availed by several small-scale industrial units. The said Government order was reiterated and clarified by the letter dated March 16, 1983, issued by the Directorate of Industries in explicit terms that all the industries which were set up in the State prior to August 27, 1984 and which were registered with the Directorate of Industries or other specified authorities and also under the Factories Act, would be entitled for exemption under Government Order No. 8244 dated September 30, 1982, for certain specified period and in the case of the petitioner-unit situate at Dadri, district Ghaziabad, for a period of six years. Due to non-notification and non-publication of the said Government order in gazette, another view might have been taken that as the exemption as provided in the said Government order was against law, the promissory estoppel would not be applicable, but as we have stated above, it was not only given effect to, but numerous units availed of that benefit and in pursuance of the said Government order, several writ petitions were allowed and at least in one case the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reduce its total investment far below Rs. 3 lacs for exemption for a higher period as per the department. On the other hand, an entrepreneur, who though having started small, decides to expand his unit by bringing fresh investment or ploughing back the profits so as to increase the capital investment beyond rupees three lacs over a period of time, would be disentitled to exemptions for a higher period. This could not have been the intention of the said Government notification. In the case of Bajaj Tempo Ltd., Bombay v. Commissioner of Income-tax [1992] 196 ITR 188; 1992 UPTC 857, in Civil Appeals Nos. 1211, 1257 to 1260(NT) of 1982, honourable Mr. Justice R.M. Sahai, speaking on behalf of a Division Bench of the honourable Supreme Court, indicated: "A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally." In Broach Distt. Co-operative Cotton Sales, Ginning and Pressing Society Ltd. v. Commissioner of Income-tax, Ahmedabad [1989] 177 ITR 418 (SC); 1989 UPTC 1222, the a co-operative society claimed that the receipts from the ginning and pressing activities was exempt under section 81 of the Income-tax Act. The ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f not construed liberally, would defeat and frustrate the objective behind section 4-A of the U.P. Sales Tax Act. A similar view was taken by the honourable Supreme Court in Commissioner of Income-tax, Amritsar v. Strawboard Manufacturing Co. Ltd. (Civil Appeals Nos. 519 to 521 of 1975 decided on April 28, 1989, reported in [1989] 177 ITR 431 (SC); 1989 UPTC 1300, wherein honourable Mr. Justice R.S. Pathak, C.J., (as he then was) speaking for the Bench indicated in para 5 of the report (at page 434 of ITR); "It is necessary to remember that when a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute." In view of the aforesaid dictum of the honourable Supreme Court we are of the view that the restriction imposed by section 4-A of the U.P. Sales Tax Act, that the exemption can be granted by notification, would not come in the way before the executive authority to grant exemption from payment of sales tax to new industrial units in backward areas of the State for specified periods and if such an exemption has been granted by an e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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