TMI Blog2014 (10) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of the sugar policy. Petitioner made a huge investment in the State of U.P. under a promise to it that it would be granted an exemption from payment of purchase tax, etc. under various statutes for a period of 10 years. The petitioner was granted an eligibility certificate. Exemption was also availed of by the petitioner. Consequently, it is not open for the State Government to resile from its promise and deprive the petitioner the benefit of the tax exemption in view of the substantial investments made by the petitioner. We find that the State Government was also benefited by the investment made by the petitioner in the form of industrial development in the State and increase in employment which is in the larger interest of the State. Consequently, the impugned action on the part of the respondents is patently unreasonable, arbitrary and violative of Article 14 of the Constitution. The exemption granted by the State Government was availed of by the petitioner. The State Government, at this stage, cannot resile and contend that since the policy has been discontinued, the exemption would no longer be made available to the petitioner. Having acted on the promise made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the quashing of the order dated 04.06.2007. The impugned demand notices demanding payment of sugarcane purchase tax from all the petitioner's existing units are quashed. The petitioners are entitled for the incentive/remission/exemption etc. as per the sugar policy and the notifications issued under the statutes for the remaining period. In so far as Maqsudapur unit is concerned, the petitioner will produce necessary documents before the State Government, in support of their claim which would be examined by the State Government or its Committee constituted for this purpose and pass appropriate orders for exemption/remission, etc. or otherwise within six weeks thereafter. - Decided in favour of assessee. - Civil Misc. Writ Petition No.1853 of 2009 - - - Dated:- 17-9-2014 - Hon.Tarun Agarwala And Hon. Dr. Satish Chandra,JJ. ORDER (Per: Tarun Agarwala,J.) The petitioner is a public limited company and is engaged in the manufacture and sale of sugar. The writ petitions have been filed for the quashing of the demand notices whereby the respondents are seeking to realise purchase tax on the purchase of sugarcane made by the petitioner. The facts leading to the filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting and encouraging further capital investment in this sector. The need of the hour was to pump in modern and state of the art technology in the sugar industry and to encourage entrepreneurs to invest the money in the sugar industry and bring new areas under sugarcane cultivation as well as to enhance the productivity of the existing area under cultivation by improving the developmental activities such as infrastructural development, bridges, culverts, provision of better seeds, better remuneration to farmers, etc. In this background the State of U.P. announced a Sugar Industry Promotion Policy,2004. The policy elaborates the circumstances and the economic factors which became necessary to exempt the new sugar industry that was to be established under the policy. The preamble of the policy indicates that it was in the best interest not only for the sugar industry but in public interest as well. The State Government announced the policy after considering the pros and cons of the policy and the policy was adopted not for any short term benefit but to keep the long term growth of the sugar sector and the economy of the State. The policy provides for various incentives to sugar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purpose. After due examination, the State Government would issue the company an eligibility certificate. While introducing the policy, the State Government envisaged that setting up of sugar mills and ancillary projects under the sugar policy would result in the increase in the crushing capacity, increase in the power generation and the present drawl capacity would increase from 40% to 60% and that new industry would provide direct employment to about 30,000 persons and indirect employment to about 1,00,000 persons. The sugar policy would also provide better livelihood to 8.0 lacs farmers. Apart from the above, there would be an increase of cultivation of the sugarcane and better price would be paid to the farmers. The State Government in its policy was of the opinion that the policy would benefit the State economy and the general public in the long run and even though the State may loose some revenue in the short term but, after the expiry of the exemption period, the revenue would increase considerably and that such investment would increase ancillary industries and create new job opportunities. With this background the sugar policy was introduced on 24.08.2004 by a Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders issued thereunder. By order, RAHUL BHATNAGAR Sachiv. The petitioner, upon the assurances and promises contained in the sugar industry promotion policy, 2004 and the steps taken by the government to provide employment and in furtherance to the notification issued under Section 14 of the Act, decided to make investment in the sugar industry in the State of Uttar Pradesh. Accordingly, the petitioner established sugar units at Bilai (District Bijnor), Gangnauli (District Saharanpur), Thanabhawan Budhana (District Muzaffarnagar), Kinauni (District Meerut), Khambarkhera (District Lakhimpur Kheri) and Barkhera (District Pilibhit) in the State of Uttar Pradesh which are running since 2004-05. The petitioner also set up and established the sugar unit at Maqsudapur, District Shahjahanpur by investing ₹ 294.00 crores which started commercial production on 19.12.2007. The petitioner, in this way, by setting up these sugar units invested more than ₹ 3000.00 crores. The investment so made was acknowledged and approved by the State Government vide its letter dated 31.10.2005. Since the petitioner fulfilled the prescribed conditions laid down in the sugarcane polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1853 of 2009 relates to the demand notices of the petitioner's unit at Maqsudapur and writ petition no. 1854 of 2009 relates to the demand notices for the remaining units. During the pendency of the writ petitions, the petitioner moved an amended application, which was allowed by an order of the Court dated 04.09.2014, pursuant to which an additional relief was incorporated namely, that the order of the State Government dated 04.06.2007 rescinding the sugar policy should also be quashed. In this background, we have heard Sri Bharat Ji Agrawal, the learned senior counsel assisted by Sri Ashish Mishra, Sri Rajesh Tewari, Sri Sanjeev Kumar Singh and Ms. Sanyukta Singh for the petitioner and Sri Avinash Chandra Tripathi, the learned standing for the State of U.P. Sri Bharat Ji Agrawal, the learned senior counsel contended that the State government issued a sugar policy, which was given wide publicity through which Government induced the entrepreneurs including the petitioner to invest and set up sugar units in the State of Uttar Pradesh. The petitioner accepted the offer and acted upon the policy by making a huge investment. The petitioner raised funds and set up 08 sugar f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase tax to those entrepreneurs who were eligible under the sugar policy and would still be available to the petitioner since the notification under the Act has not been rescinded or withdrawn and, therefore, the action of the respondents in issuing the notices was per se illegal and without jurisdiction. The learned counsel further submitted that initially when the sugar policy was announced, the said policy was challenged by a number of existing sugar mills in which the State Government filed a counter affidavit indicating therein the benefits of the policy which would be derived not only by the entrepreneurs but also by a large number of farmers, workers and that the policy would also benefit the State Government in the long run. The learned counsel contended that the State Government could not resile from the admission made in the counter affidavit nor a contradictory stand could now be taken, and that, the respondents were bound by their actions and could not withdraw on the ground that the exemption so granted by the State Government was bringing a loss to the State exchequer or that it was not in public interest. In support of his submissions he has cited various judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment should not be compelled to make good such promise like any other individual. The doctrine of promissory estoppel is well established in the administrative law. It represents a principle evolved by equity to avoid injustice. The basis of this doctrine is the interposition of equity stepped in to mitigate the rigour of strict law. In Motilal Madampat Sugar Mill Vs. State of U.P. 1979 (3) SCC 409 the Supreme Court explained the principles of promissory estoppel and held: The law may, therefore, now be taken to be settled as a result of this decision that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentation which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon by the other party, the promise or representation would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. and again held: There can therefore be no doubt that the doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel. In Southern Petrochemical Industries Co. Ltd. Vs. Electricity Inspector ETIO and others, (2007) 5 Supreme Court Cases 477 the Supreme Court held: Unlike an ordinary estoppel, promissory estoppel gives rise to a cause of action. It indisputably creates a right. It also acts on equity. However, its appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyment which is in the larger interest of the State. Consequently, the impugned action on the part of the respondents is patently unreasonable, arbitrary and violative of Article 14 of the Constitution. Similar view was held by the Supreme Court in MRF Ltd. Kottayam Vs. Asstt. Commissioner (Assessment) Sales Tax and others, (2006) 8 SCC 702. We are of the opinion that the attempt of the respondents in taking away the benefit of exemption with effect from 04.06.2007 and thereby deprive the benefit of the exemption for the remaining period is wholly arbitrary and unreasonable. The petitioner entered into a solemn exercise and discharged its performance pursuant to a promise made by the State Government. The petitioner acted upon the promise. The respondents cannot be allowed to act arbitrarily so as to cause harm and injury following from such unreasonable conduct which in the instant case is writ large and is apparent. In such a situation, the Court is not powerless in directing the respondents to keep its promise. The Court has the power to issue a writ directing the respondents to enforce its promise and perform its obligation. We may also notice the doctrine of legitimate expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its doing so. In a case of 'legitimate expectation' if the authority proposes to defeat a person's 'legitimate expectation' it should afford him an opportunity to make representations in the manner In Food Corpn. Of India Vs. Kamdhenu Cattle Feed Industries, (1993) 1 SCC 71, the Supreme Court held: The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient. Something more was required to be stated to justify its stand which in the instant case was totally lacking. The contention of the State that the Government can change the policy in public interest cannot be doubted. Their contention that the Government cannot be compelled to do something, which is not allowed by law or prohibited by law, again cannot be doubted. The doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law because none can be compelled to act against the statute, as held by the Supreme Court in Shree Sidhbali Steels Limited and others Vs. State of Uttar Pradesh and others, (2011) 3 SCC 193. However, this contention is patently unwarranted as nothing has been brought on record to indicate that the policy was withdrawn on account of public interest or that the policy was contrary to law. In fact, according to us, the policy was issued and implemented in public interest, which has benefited not only the entrepreneurs but the public at large as well as to the State Government. In Dhampur Sugar (Kashipur) Ltd. Vs. State of Uttaranchal and others, (2007) 8 SCC 418, the Supreme Court held that public authorities have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t another place, the State Government stated: (b) In short, the SIPP aims to gear up investment climate in U.P. and to provide a fillip to sugar industry in the State, which in turn will contribute to growth of rural economy and generate employment in the State. (c.)Thus the SIPP aims to provide new climate for entrepreneurs in the State and growth of sugar industry. The benefits of the policy shall be available to any person or company investing the requisite amount in the sugar industry in the State of U.P. At another place, the State Government stated: So far as revenue is concerned the State may loose some benefit in the short term but after the expiry of exemption period the revenue will increase considerably. Even in present revenue increase will result from downstream industries. In addition the investments under the policy have created new job opportunities. Thus the policy should be examined on the whole and comprehensively for judging the impact. The State Government further stated: When policy was made no sugar factory had made the investment envisaged by the policy, while now already 10 new sugar factories have been set up and 18 Sugar Mills are u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order Act or other Source 1. Entry Tax on Sale of Sugar Notification dated 20.5.05 Section 4-B of the U.P.Tax on Entry of Goods Act, 2000 2 Purchase Tax on purchase of Sugarcane Notification dated 16.5.06 Section 14 of the U.P. Sugarcane (Purchase Tax) Act, 1961 3. Trade Tax on Sale of Molasses Notification dated 24/6/05 Section 4(c) of U.P. Trade Tax Act, 1948 (Now under Section 42 of the UP VAT, 2008) 4. Central Sales Tax on Sale of Molasses Notification dated 24/6/05 Section 8(5) of CST, 1956 5. Administrative charges on Sale of Molasses Notification dated 22/11/05 Section 8(4) of U.P.Sheera Niyantran Adhiniyam Act 1964 read with Section 21 of the U.P. General Clauses Act 6 Remissions Remission of Stamp duty chargeable on instruments of conveyance Notification da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notification and raising a demand for payment of sugarcane purchase tax is wholly illegal. So long as a statutory notification exists, the same cannot be annulled by an executive order. In the light of the aforesaid, on the principle of promissory estoppel and legitimate expectation, the actiion of the respondents in denying the benefits under the sugar policy and the notifications issued under various Acts is deplorable, unreasonable and arbitrary which cannot be sustained. The petitioners are liable to be given the benefits under various notifications issued in pursuance of the sugar policy on the units established by it. The contention that the petitioner is not entitled to receive the benefits since the commercial production started in 19.12.2007 after the withdrawal of the policy is patently erroneous. The petitioner acted on the policy and established a unit which came into production on 19.12.2007 when the crushing season started for the year 2007-2008. The respondents are bound by their promise. The petitioner has a legitimate expectation that the State Government and its department would honour their commitments as per the sugar policy. The doctrine of legitimate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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