TMI Blog2011 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ation cannot stop the State to amend the policy and withdraw the exemption if the same is deemed necessary and expedient in the Public Interest. The High Court has gone on the premise that once the Appellant have themselves extended the benefit to the Respondent they cannot further classify the benefit of investment up to the date of amendment, putting the unit in the negative list. It appears that the High Court while arriving at the said finding has failed to appreciate the fact that the case of the Respondent was considered for exemption in the light of the judgment passed by this Court in the Mahabir Vegetable case (supra) reported at (2006 -TMI - 66491 - Supreme Court) wherein it was held that the Respondent is entitled to exemption. However, the issue of quantum was kept open. The High Court while giving the said finding has altogether closed itself in considering the said issue and on the contrary has held that only because the Respondent has been considered for grant of exemption, there is no issue of quantum and the Respondent is entitled to entire exemption. In our opinion the said finding is not in line with the observations made by this Court in the Mahabir Vegetable c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28-A occurring in Chapter IV-A of the Rules provide for the class of industries, period and other conditions for exemption/deferment from payment of tax as envisaged both under Sections 13-B and 25-A of the Act. "Operative period" has been defined in sub-rule (2)(a) of Rule 28-A of the Rules to mean "the period starting from the 1st day of April, 1988 and ending on the 31st day of March, 1997". Sub-rule (2)(c) thereof defines "New industrial unit" to mean: "A unit which is or has been set up in the State of Haryana and comes or has come into commercial production for the first time during the operative period and has not been or is not formed as a result of purchase or transfer of old machinery except when purchased in the course of import into the territory of India, or when the cost of old machinery does not exceed 25% of the total cost of machinery re-establishment, amalgamation, change of lease, change of ownership, change in constitution, transfer of business, reconstruction or revival of the existing unit". 6. "Negative list" has been defined in sub-rule (2)(o) to mean "a list of class of industries as specified in Schedule III appended to these Rules". 7. The State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Act and the Central Sales Tax Act, 1956 on 6-9-1996. On 13-8-1996 it applied for a no-objection certificate from the Haryana State Pollution Control Board which is a condition precedent for setting up a solvent extraction plant. On 15-8-1996, the appellant entered into an agreement with M/s Saratech Consultants and Engineers, Karnal for supply and erection of the plant for a sum of Rs.55,55,000.00 and Rs 22,75,000 respectively and advances were paid on different dates. Furthermore, on 6-9-1996, civil construction work started at site. Plans submitted by the appellant for getting permission for storage of hexane were sanctioned by the Explosives Department on 19-9-1996 and licence was finally given on 11-3-1997. On 26-9-1996, process of installation of the plant started at the site. On or about 18-11-1996, a 250 kVA power-generating set costing Rs 9,91,000 was installed, no-objection certificate wherefor was granted on 22-11-1996. The appellant applied to the Haryana State Electricity Board for release of the power connection vide application dated 12-12-1996 and also deposited the security of Rs.68,700 for the same. On 26-3-1997, the appellant started the trial producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st. There is no challenge to the decision or proceedings of such Committee on any ground indicating arbitrariness, bias, mala fide or any such like reason. (iii) In view of certain decisions of this Court, the benefit of exemption can be withdrawn in public interest. (iv) There is no allegation of exercise of such power to include solvent extraction plant which is actuated by any mala fides, fraud or lack of bona fides. It is a matter of fiscal policy of the State Government as to which industries should be granted exemption. (v) Mahabir Vegetable Oils (P) Ltd. only invested Rs.4,44,000 in the land and purchased machinery worth Rs.16,90,000 on 14-12-1996. (vi) Thus, we hold that there is no representation on behalf of the State Government that the scheme of granting incentives by way of exemption or deferment will not be modified, amended or varied during the operative period. There cannot be any restraint on the State Government to exercise the delegated legislative functions within the parameters laid down by the statute." 14. Against the said dismissal the Respondent approached this Court by filing Special Leave Petition which was converted into Civil Appeal 1635 of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contained in Schedule III and Note 2 formed part of subordinate legislation. By reason of the said note, the State did not deviate from its professed object. It was in conformity with the purport for which original Rule 28-A was enacted. 40. We, in this case, are not concerned with the quantum of exemption to which the appellants may be entitled to, but only with the interpretation of the relevant provisions which arise for consideration before us. 41. We may at this stage consider the effect of omission of the said note. It is beyond any cavil that a subordinate legislation can be given a retrospective effect and retroactive operation, if any power in this behalf is contained in the main Act. The rule-making power is a species of delegated legislation. A delegatee therefore can make rules only within the four corners thereof. 42. It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. (See West v. Gwynne14.) 43. A retrospective effect to an amendment by way of a delegated legislation could be given, thus, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit in the negative list. The relevant paras of the impugned judgment are follows:- "13. Admittedly, on the date of commercial production and also on the date of issue of entitlement/exemption certificate, the petitioner was in negative list and could not be considered to be eligible unless applicability of notification dated 16.12.1996 was confined to units which started investment before the said date. 14. The respondents themselves have extended the benefit by not treating the notification dated 16.12.1996 to be applicable to the petitioner. Once the petitioner has been treated to be eligible, there was no valid reason to further classify the benefit of investment up to the date of amendment, putting the unit in the negative list. 14. In view of above, we allow this petition and quash the impugned orders to the extent of restricting the benefit to the date of notification i.e. 16.12.1996. 15. The Appellate Authority may now pass a fresh order in accordance with law, within four months from the date of certified copy of this order." 18. It is against the said judgment that the appellants have approached this Court. We heard the learned Senior Counsel for the parties. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said judgment had only held that the amendment to Rule 28A could not have any retrospective effect, in the sense that it could not affect an assessee's pre-existing rights. It is also important to note that the said judgment clearly clarified that the question of quantum of exemption to which the appellants may be entitled to was not considered. It may also be pointed out that this Court did not go into the challenge made to the validity of the Amendments made which was challenged by the Respondent by way of a Writ Petition. The reliance placed on the said Judgment is therefore misplaced. The issue that falls for our consideration in this appeal is on the quantum of exemption to which the Respondent is entitled and that too for the period subsequent to the date of the amendment. In other words, the question before us pertains to whether the Respondent is entitled to the benefit of Sales Tax exemption on the entire investment made by them in setting up the industrial unit i.e. Solvent Extraction Plant, made prospectively after 16.12.1996. 23. It has been urged on behalf of the Respondents that benefit of the exemption is required to be advanced to them on the principle of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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, this doctrine was emphatically negatived in the Indo-Afghan Agencies case 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 to make good such promise like any other private individual. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge of policy would not be sufficient to exonerate the Government from the liability: the Government would have to show what precisely is the changed policy and also its reason and justification so that the Court can judge for itself which way the public interest lies and what the equity of the case demands. It is only if the Court is satisfied, on proper and adequate material placed by the Government, that overriding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the Government. The Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. But even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The beneficiary of a concession has no legally enforceable right against the government to grant a concession except to enjoy the benefits of the concession during the period of its grant. The right to exemption or concession is a right that can be taken away under the very power in exercise of which the exemption was granted. 27. Furthermore, in the fact of the instant case, it cannot be said that the Respondent had altered its position relying on the promise in as much as even before steps were taken by the Respondent for laying the Solvent Extraction Plant, the Petitioner had made its intention clear through its notice dated 3.1.1996 that it was likely to amend the law/rules in respect whereof a draft was circulated for information of persons likely to be affected thereby so as to enable them to file objections and suggestions thereto. Amendments in the terms of the said draft rules were notified on 16-12-1996 substituting Schedule III appended to the Rules whereby and where under the solvent extraction plant was included therein. 28. It cannot be denied that an investment was made by the Respondent in the said area of the State of Haryana, probably on the belief that it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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