TMI Blog2011 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made available to cement units by the issuance of the notification dated 2.12.05 lated but for just about five months - Held that: Applicant Company cannot retain tax subsidy in excess of the provisions of the amended RIPS 2003 Regarding principles of promissory estoppel - The amending notification dtd.2.12.2005 nor the RIPS, 2003 itself sought initiation of effective steps just after such notification and the only condition imposed was that the option should be given within the stipulated period and commercial production should be commenced during the operative period of the Scheme and subject to investment being over ₹ 200 crores and employment provided to more than 100 persons, and all the conditions admittedly and undisputedly were satisfied by the petitioner company - Held that: The orders granting increased benefit of 75% rebate or subsidy against additional tax liability to the petitioner company were neither erroneous nor prejudicial to the interest of State in any manner - Decided in favor of the assessee - S.B. Civil Writ Petition No. 4790/2009 - - - Dated:- 11-10-2011 - Vineet Kothari, J. S. Ganesh, Sr. Adv. assisted by Ramit Mehta for the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment of over Rs.200 crores for setting up its 3rd, 4th and 5th Units at Bangur City, village Ras, Tehsil Jaitaran, Dist. Pali and another grinding unit at Kushkhera, Tehsil Bhiwadi, Dist. Alwar. Both the units had already commenced commercial production on 21.12.2005 at Pali and 26.3.2007 at Bhiwadi respectively. 6. The State of Rajasthan issued "Rajasthan Investment Promotion Scheme, 2003 (for short "RIPS, 2003)" vide notification dtd.28.7.2003 and operative period of the said Scheme was from 1.7.2003 till 31.3.2008 and inter alia sub-clause 7 of the said Scheme provided for grant of subsidy to the eligible units making new investment during operative period of the said scheme in the form of interest subsidy and wage subsidy subject to a maximum limit of 50% of the tax payable and deposited under the Rajasthan Sales Tax Act, 1994, the Central Sales Tax Act, 1956 and the Value Added Tax Act as and when introduced in the State, which Value Added Tax Act, 2003 came into force in the State of Rajasthan with effect from 1.4.2006. In case of investment made in Modernization/Expansion/Diversification, the amount of subsidy shall be subject to a maximum of 50% of the additional a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty; and (b) The remaining subsidy to the extent of 30% of Rajasthan Sales Tax or Value Added Tax and Central Sales Tax liability shall be allowed in form of interest subsidy, wage/employment subsidy out of which interest subsidy shall be limited to 5% of the documented rate of interest and the amount actually paid as interest shall not include penal interest, and wage/employment subsidy. A unit not claiming any interest subsidy can claim wage/employment subsidy to the extent of 30% subject to other conditions under this amendment. 4. The claim of subsidy shall be as per the provisions of this Scheme. (vii) Notwithstanding anything contained in sub clauses (i) to (v) above, in case of investments for expansion of existing cement unit having investment exceeding Rs. 200 crores and with a minimum regular employment of 100 persons, the amount of subsidy shall be subject to a maximum limit of 75% of the additional tax (calculated by taking the average of last 3 years) payable or deposited under Rajasthan Sales Tax Act, 1994 or Value Added Tax Act (as and when introduced in the State) and Central Sales Tax Act, 1956 for a period of 7 years from the date of commencement of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 31.10.2005 as against total project cost of Rs.490.41 crores. The said option for both the units was again reiterated vide Annex.13 communication dtd.9.2.2006 addressed to the Commissioner of Industries, Member Secretary of SLSC, Jaipur for clinker unit at village Ras, Tehsil Jaitaran, Dist. Pali and grinding unit of village Kushkheda, Tehsil Bhiwadi with total new investment of approximately Rs.450 crores. 9. By another notification Annex.15 dtd.28.4.2006 Clause (vi) and clause (vii) inserted in RIPS, 2003 by previous notification Annex.8 dtd.2.12.2005 were deleted after about 5 months of said clauses being inserted and this one liner amendment only says "Sub-clause (vi) and (vii) of clause 7 of the said Scheme shall be deleted." Neither any reason nor any preamble containing such reasons for such deletion of these clauses was brought on record and that seems to be turning point in the present case giving rise to this litigation. 10. That even though said deletion was made vide notification dtd.28.4.2006, a copy of which was addressed to all the concerned authorities including the Commissioner, Commercial Taxes Department, in the 10th meeting of SLSC on 29.7.2006 after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation dtd.28.4.2006, deleting Clauses (vi) and (vii) from clause 7, the said SLSC took a deliberate and conscious decision that since the petitioner company had exercised its option prior to deletion of clause 7(vii) vide notification dtd.28.4.2006, it would be covered by the previous amending notification dtd.2.12.2005 and would thus, be entitled to increased benefit of subsidy to the extent of 75% under the first amending notification dtd.2.12.2005 and fulfilling the conditions therein of having made investment of more than Rs.200 crores and employed more than 100 persons, the petitioner - company was held entitled to the benefit of 75% of subsidy for a period of 7 years. Again another Entitlement Certificate in prescribed form No. 6 under clause 9(B)(iii) was issued in favour of the petitioner - company for its Bhiwadi unit for a period of 7 years from 26.3.2007. 12. The petitioner was accordingly given 75% subsidy under clause 7(vii) inserted vide amending notification dtd.2.12.2005 for a period of about 2 years, out of 7 years entitlement when on 22.5.2008 vide Annex.29, a clarification in RIPS, 2003 came to be issued by the Finance Department, Tax Division of Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 22.5.2008, the benefit already granted to the petitioner - unit; a vested right, cannot be withdrawn. However, the petitioner after the said clarification does not appear to have been paid any subsidy under the RIPS, 2003 even reduced quantum of 50% and that is why the relief in this respect has also been claimed in the present writ petition. 14. That two separate revision petitions under clause 13 of the RIPS, 2003 appear to have been filed by the Commissioner, Commercial Taxes Department before the Secretary to the Government, Finance Department on 18.7.2008 vide Annex.38 in which the concerned Secretary was requested to invoke revisional powers for setting aside SLSC decisions dtd.29.07.2006 and 27.06.2007 under clause 13 of the RIPS, 2003 which provision is akin to section 263 of the Income Tax Act and Clause 13 and 14 are reproduced hereinbelow for ready reference:- "13. Revision by the State Government:- (a) The State Government in Finance Department may suo motu or otherwise revise an order passed by any Screening Committee wherever it is found to be erroneous and prejudicial to the interest of the State revenue, after affording an opportunity of being hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers cannot be exercised by the Principal Secretary or any other officer of the State Government. vi. The Revisionist, i.e. the CCT has no locus standi to file the revision and the application is, therefore, liable to be dismissed. vii. The revisionist (CCT), though himself present at the Committee meeting as one of its members, has not disclosed any justifiable reason to impugn the decision of the SLSC, which has been implemented for the last two and a half years, except for nonmention of the order dated 28.4.06. The plea that the members of the SLSC were not aware of the order dated 28.4.06 is not sustainable in view of the fact that the SLSC, in its second decision dated 27.06.07 (also under revision), had found the expansion project as entitled to avail subsidy, even after noting the deletion/amendment order dated 28.4.06. viii. The decision of the SLSC was unanimous and the pleading that all the members were ignorant of the material fact of deletion is unwarranted. ix. No clarification can curtail the scope and applicability of the provisions of the Scheme. All the conditions of sub-clause (vii) of 7 of the Scheme have been fulfilled by the applicant, including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.224.25 crores by financial institutions. The strength of the employees as on 31.12.05 increased by 650 owing to expansion. Accordingly, the Applicant company became entitled to avail the subsidies as provided in sub-clause (vii) of Clause 7 of RIPS 2003. xix. The compliance report on the suggestions made in the meetings of the State Level Tax Advisory Committee held on 7.2.05 and three different meetings of 11.2.05, circulated by the Finance Department on 15.2.05, state that the special package for cement was announced on 2.12.05. Thereafter, the Applicant Company firmed up its investment plans for early implementation of the second phase of expansion. Accordingly, the company registered its option for setting up an expanded unit and a 30 MM Captive Power Plant with a proposed investment of Rs.450 crores for availing benefits under the notification dated 2.12.05. xx. The Company took steps for implementation of its project including placing orders for supply of plant and machinery, equipments etc. xxi. One more option for registration was submitted on 9.2.06 stating that fresh investment would be made for its expanded cement plant at Ras and for a grinding unit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itlement Certificate was issued to the Company on 10.7.2007 for the amount of subsidy subject to a maximum of 75% of additional tax for a period of seven years from 26.3.07. xxxiii. The SLSC granted the Entitlement Certificate after considering the provisions of RIPS 2003. xxxiv. The SLSC deemed it proper to mention in its order that despite the deletion of the sub-clause 7 (vi) and (vii), in view of the fact that option had been filed before such deletion, the Company was liable to be granted subsidy under the scheme. In this connection two citations were given:- a. Commissioner of Income Tax vs. Max India Limited reported in I.T.A. 39 of 2004 reported in 286 ITR page 128; and b. Malabar Industrial Co. vs. CIT (2000) 243 ITR page 83. xxxv. The Applicant company has filed the above options on the assurance given in Clause 7 (vii) of RIPS 2003 : even if the said clauses are deleted, the vested right of the company cannot be denied once it has commenced commercial production. Loans had been taken by the company to the tune of Rs.991 crores and repayment of Rs.184 crores has been made by utilizing the upfront subsidy, without which it would not have been possible t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t's claim for exemption of tax was rejected. The appellant's writ was dismissed in the High Court, but on appeal, the Supreme court held:- " ...during the period August 1996 to 16, December 1996, the appellant had invested huge amounts. By operation of the rule of estoppel, the promises/representations made in the Industrial Policy continued to operate in the field and the appellant had also taken steps which could be only taken for the purpose of setting up a new industrial unit. The State had accepted that equity operated in favour of entrepreneurs by making the amendment in the notification dated December 16 1996, whereby solvent extraction plant was for the first time inserted in the negative list. The amendment carried out in 1996 ... could not have taken away the rights of the appellant with retrospective effect." e. MRF Ltd. vs. Assistant Commissioner (Assessment) Sales Tax reported in 6 VAT Reporter 159:- "Promi ssory estoppel operates on equity and public interest. What is granted cannot be withdrawn by the government unless the Government is precluded from doing so on the ground of promissory estoppel ... The action of the State Government in depriving the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e government is entitled to withdraw benefits under such scheme, but that authority is operative only prospectively and does not affect the rights already vested in the entrepreneurs to claim the benefits of the scheme." e. In TF Jose vs. General Manager, District Industries Centre (1995) 97 STC 484, the High Court of Kerala pronounced judgment in the mater of coconut oil mills which were declared ineligible for the incentives under sales tax exemption subsequent to the announcement of the scheme. The Court held that:- " ...oil mills which have been set up before March, 31 1991 and which were existing as on that date cannot be deprived of benefits which they were enjoying." f. As reported in 16 Tax world page 222 (RHC) M/s Mohnot Stainless Steels Ind. Pvt. Ltd. vs. State of Rajasthan which was decided in DB 392 of 1992 and DB CWP 468 of 1992, the Rajasthan High Court held that for:- " ...those persons who started making fixed capital investment on the basis of earlier annexure C appended to Incentive Scheme, 1987 ... Sales Tax Incentive will be available to the extent of eligible fixed capital investment and it will not be restricted." g. The clarification as issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sation as provided under Clause 7 and existing prior to the amendment made on 2.12.2005 shall continue to be enjoyed by the petitioner company and the assessing authority shall make a reassessment of the tax liability of the petitioner company and make necessary steps to recover tax in excess of its eligibility in terms of new eligibility certificates to be issued by the SLSC. Reasons and Finding of Principal Secretary in the impugned Order dtd.31.3.2009:- The relevant extracts from the impugned revisional order dtd.31.3.2009 to understand the reasons given therein are quoted below for ready reference:- "25. Substantial Issue A:- Now, I come to the first of the substantial issues involved in this revision, namely whether the Applicant Company has been adversely affected in financial terms as a result of the order dated 28.4.06, whereby clauses 7 9 (vi) and (vii) of RIPS 2003 deleted. To answer this question we have to examine two related questions, namely:- (i) the effective rate of tax payable to the State Government and; (ii) the quantum of tax subsidy retained by the Applicant Company. (A) Effective rate of tax:- When RIPS 2003 was originally introduced o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government realized the significance of the change in the effective tax rate, a trifle belatedly, and, four weeks later, on 28.4.06, withdrew the notification dated 2.12.05, thus deleting Clause 7 (vi) and (vii) from RIPS 2003. The benefit of Clause 7 (vi) and (vii), therefore, becomes unavailable henceforth. As a result, the special dispensation granted to cement companies came to an end, although the original provisions of RIPS 2003 for investment beyond certain levels of investment continued to get the benefit of 50% tax exemption. As a consequence, for the Applicant Company, the effective tax rate became 6.25%, i.e. 50% of 12.5%. It may thus be seen that there have been fluctuating levels of tax exemption benefits for the Applicant Company, namely, 6.25% (after 1.4.06) and 6.25% (post 28.4.06). It is in this context that we have to examine whether the Applicant Company has lost any financial advantage as a result of the withdrawal of the notification dated 2.12.05 along with the Clauses 7 (vi) and (vii) of RIPS 2003. 28. As already stated, the said advantage for cement companies, introduced on 2.12.05 by specifying a maximum of 75% tax exemption, had brought down the effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o enjoy an effective lower tax rate of 6.25%. 30. (B) The quantum of tax subsidy:- In the above paragraphs we have looked at the declining rate of effective tax. We also must examine the quantum of tax subsidy enjoyed by the Applicant Company. Prior to 2.12.05, and the insertion of two clauses 7 (vi) and (vii) in RIPS 2003, the quantum of tax retained or retainable was 50% of the then rate on cement i.e. 19%. However, with the insertion of the two above stated clauses into the Scheme, w.e.f. 2.12.05 and the simultaneous increase in the tax rate on cement from 19% to 28%, the maximum quantum of tax subsidy rose to 75% of 28% i.e. 21%. This leads us to an important point of law, namely that the quantum of tax payable is directly related to the rate of tax leviable. As and when the rate of tax on cement undergoes change, the quantum of tax subsidy must also necessarily vary. The scheme of things does not contemplate of a principle of a fixed quantum of subsidy irrespective of, or independent of, the tax rate on cement. Once this principle is accepted, then it also stands to reason that as and when the tax rate on cement further changes, the quantum of tax subsidy would also change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 145 STC 350 (SC), Birla Jute and Industries Ltd. vs. State of MP (reported in 19 STC page 14 (SC), Madras High Court case of Commissioner of Income Tax vs. Kumdam Endowments reported in 242 ITR page 159, Pournami Oil Mills vs. State of Kerala (1987) 65 STC 1 etc. 32. According to the legal definition of the term promissory estoppl, section 115 of the Indian Evidence Act 1872 reads as follows. When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe such a thing to be true and act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing. 33. The true principle of promissory estoppel is where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that if would be acted upon by the other party to whom the promise is made, and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... propel a decision to invest. Projects which have already begun construction and merely commences production after the announcement of an incentive scheme, does not make such a project qualified for the incentives. This has been very strongly held by Supreme court in its judgment in the case of Bakul Oil Industries vs. State of Gujarat (SC 1987 (1) 31). The view of Supreme Court is directly applicable in the referred cases. Para 11 of the said judgment states:- "It is not sufficient to rely on the commissioning of an industry after completion of construction which had been commenced long before the notification was made by the government. In respect of such an industry as the present one, the issuance of a notification granting tax exemption would only fortuitous circumstances and by no stretch of imagination can it ever be said that the commissioning of the industry was directly the outcome of the government's notification granting tax exemption." 38. As investment predates the issue of notification dated 2.12.05, and particularly in one of the two cases the production commenced only 19 days after 2.12.05, therefore, be no doubt at all that the Applicant Company had started ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, a claim of estoppel against its legislative power was not allowed by the court. So is the case with tax laws. If the law requires that a certain tax be collected, it cannot be given up, and any assurances by the Government that the taxes would not be collected would not bind the Government, when it chooses to collect the taxes. Thus it was held that when there was a clear and unambiguous provision of law that provides for a certain level of taxation, (even though lowered to a reasonable level by the device of subordinate legislation through the notification), no question of estoppel arises. The sovereign authority of the State to levy taxes cannot be abridged on the principle of promissory estoppel since the levy of tax is for the purposes of the governance and the development of the State, which is greater than the rights of any individual person or entity. " ...it is clear that there can be no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law." In other words, when applied to the case in hand, when the State Government is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be broken detrimental to the interest of the promisee. (c) Doctrine of promissory estoppel should be tested against public interest if a promise is made based on public money. (d) An incentive scheme having an enabling provision to modify and amend any clause cannot create an unmodified right. (e) A project should qualify for promised benefits if the project comes into existence in consequence to promise made. (f) There cannot be any estoppel against law/state. 44. Examination of two cases under consideration here reveal that, neither the insertion of Clause 7 (vi) and (vii) in RIPS 2003 on 2.12.2005 nor its subsequent deletion on 28.4.2006 were iniquitous in any manner. Rather, making an exception by continuing the benefits, despite deletion of enabling clauses and despite reduction of net incidence of tax from 7% to 6.25%, will actually be iniquitous. 45. This principle of equity in administering an incentive scheme has actually concertized in case of Motilal Padmapat Sugar Mills (AIR) 1979 SC 621. In this case, Supreme Court has also pronounced clearly that if public interest suffers, the promise cannot be enforced; however, Government cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yog Ltd. [(2004) 137 STC 433 (SC)] has observed that the:- "State Government is competent to modify or revoke an exemption in the public interest using the same power under which it was granted. Thus, what is granted can be withdrawn unless the Government is precluded from doing so on the ground the promissory estoppel. The principle itself is subject to consideration of equity and public interest." Further, Supreme Court observed that the 'exemption being a creature of the scheme is subject to the scheme. If any right under the scheme is held to be unmodified it would be contrary to the scheme itself'. 48. The above observation of Supreme Court is not only unambiguous and cogent but also makes it fundamentally clear that a scheme cannot create a right which is unmodifiable. In RIPS 2003, Clause 14 empowers the Government to modify and amend the scheme at any point of time. 49. The question of public interest:- Yet again it has been held that when the Government is able to show that facts have transpired subsequent to the promise being made, public interest would be prejudiced should Government carry out the promise made, then it would be necessary to balance the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme stands justified as a prerogative of the State for the purposes of the governance and development of the State. Indeed it can be rightfully argued that the State has maintained its promise of effective tax rate of 7% introduced by the incentive package of 2.12.05 because despite the withdrawal of the scheme on 28.4.06, the effective tax rate on cement as far as the Applicant Company is concerned, remains at 6.25%. 51. Clarification sought by CCT:- It is a matter of some concern as to why the SLSC granted such benefits when the notification withdrawing the benefits of Clause 7 (vi) and (vii) had already been withdrawn earlier on 28.4.06. Indeed in the proceedings of the SLSC dated 29.7.2006, there is not even a mention of the order dated 28.4.06 whereby the benefits announced on 2.12.05 had been withdrawn. In the order of the SLSC dated 27.6.2007, there is mention of the rescinding notification dated 28.4.06, but the SLSC nevertheless decided to grant the benefit of such tax exemption. Since several applications were filed and were pending for disposal or were disposed of as pointed out above, the issuance of grant of benefits under the deleted clause 7 (vi) and (vii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed because of, the new tax exemption package and the clauses 7 (vi) and (vii). As far as the second unit at Khushkhera and the captive power plants are concerned, the effective tax rate of 7% has not been enhanced by the withdrawal of the notification dated 2.12.05, but has indeed resulted in a lowering of the effective tax rate to 6.25% w.e.f. 1.4.06 because of the promulgation of the Rajasthan Value Added Tax Act and the determination of the basic tax rate on cement at 12.5%. The Applicant Company cannot retain tax subsidy in excess of the provisions of the amended RIPS 2003. Accordingly, I hold that the principle estoppel has not been violated by the State Government. 55. Another peripheral issue would also require to be addressed in this decision. The passing reference to the notification dated No. F.12 (20) FD/Tax/2005 on 30.9.08 whereby a proviso was added under Clause 7 (iii) pertaining to investments made or committed before 22.05.08 or under MOU signed during the Rajasthan Resurgent Summit. It is correct that by a notification No. F(12) (20) FD/Tax/2005 dated 22.05.08, the cement industry was placed in the negative list for the purposes of available benefits under RIPS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directed to consider these two cases afresh and issue new eligibility certificates to the extent that only the original dispensation as provided under Clause 7, and existing prior to the amendment made on 2.12.05, shall continue to be enjoyed by the Applicant Company. The Assessing Authority shall make a re-assessment of the tax liability of the Applicant Company as mentioned above and take necessary steps to recover tax in excess of its eligibility in terms of the new eligibility certificates to be issued by the SLSC. Pronounced on 31.3.09. Sd/- C.K. Mathew Principal Secretary, Finance Government of Rajasthan 17. Being aggrieved by the said order, against which, apparently, no alternative remedy is available to the petitioner company, the petitioner company has invoked the writ jurisdiction of this Court under Article 226 of the Constitution of India. Contentions of Petitioner before this Court:- 18. Mr. S. Ganesh, Sr. Advocate assisted by Mr. Ramit Mehta submitted that the impugned order passed by the Principal Secretary is liable to be quashed by this Court for following reasons:- i) The impugned order of Principal Secretary quashes the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduction of VAT Act in the State of Rajasthan in harmony with uniform national rate on sale of cement, is misconceived and not tenable because with the reduction in rate of tax on cement, the quantum of incentive which was relatable to the total additional tax liability over and above average tax liability of base years was also bound to go down with the reduction of rate of tax and therefore, the quantum of subsidy was never and could not be relatable to the rate of tax applicable on the sale of cement. Moreover, when the rate of subsidy for other commodities also having gone down with the introduction of VAT w.e.f. 1.4.2006, their subsidy was not reduced from 50% to further down below percentage, therefore, the reduction in rate of sales tax on cement cannot be a reason for reduction of percentage of subsidy from 75% to 50% in case of cement industries. vi) Higher incentive to the cement industries of 75% of subsidy of the total additional tax liability due to higher turn over due to expansion made by it was only to give competitive edge to such new units making investment within the State of Rajasthan, which has large deposits of lime stone, the basic raw material for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deletion of sub-clauses (vi) and (vii) of Clause 7 made on 28.04.2006 did not and could not in law have any retrospective effect and the same did not and could not, in any way affect the rights and entitlements of Cement Units which had already come into existence before 28.04.2006 and exercised the option for availing benefits under Notification dated 2.12.2005, as in the first case and also in respect of second expansion where after registering options, the Petitioners had taken effective steps to implement the same and obtained even concession towards stamp duty before the purported deletion on 28.4.2006 as in the present case. This issue is directly and squarely covered in favour of the Petitioner by the Judgments of the Hon'ble Supreme Court in the cases of MRF Ltd. Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and Ors. reported in 2006 (8) SCC 702 and S.L. Srinivasa Jute Twine Mills (P) Ltd. vs. UOI and Anr. reported in 2006 (2) SCC 740. (b) In any event, Clause 13 of RIPS, which is identical to Section 263 of the Income tax Act, does not authorise a revision of the SLSC's Orders if the issue is debatable or if the SLSC has adopted one of the two possible v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alcutta High Court in Bagsu Devi Bafna vs. Commissioner of Income Tax and Ors. reported in 1966 (62) ITR 506. (d) If any one of the above mentioned three submissions of the Petitioner is upheld, then the impugned Revisional Order dated 31.3.2009 would necessarily have to be struck down and quashed by this Court irrespective of whether there was or was not valid economic justification for the withdrawal of the additional 25% subsidy by the said Order dated 28.4.2006, by deletion of sub-clauses (vi) and (vii) of Clause 7 of RIPS. (e) Without prejudice to the above and in the alternative, it is also submitted on a demurer, that in any event, the said so-called economic justification for reduction in the rate of subsidy from 75% to 50% on the ground of reduction in the rates of Sales-tax leviable on cement, is devoid of any substance or merit and the said ground or reason, it is respectfully submitted, is only a red herring which is meant to obscure and confuse the real issue which arises for consideration in the present case. This is so inter alia, for the following reasons. (f a) At the outset it needs to be clearly understood that Sales- Tax, at whatever rate, was applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The rates of subsidy were not linked in any way to the current prevailing rates of Sales-tax. (f b) A perusal of the provisions of RIPS shows clearly that the rate of subsidy granted was dependant only upon the quantum of capital investment made in the new industrial undertaking or for the expansion of the old undertaking, and the additional employment generated by it. The rate of subsidy was thus not in any manner dependent on or linked to the rate of Sales tax charged from time to time on the product in question. In the entire Scheme, there is no mention of "rate of sales tax" having any relevance to the quantum or percentage of incentives. (f c) Para 3 of RIPS states that the Scheme shall be applicable not only to all new investments; but also investments made by existing units and enterprises for modernisation/expansion/diversifications, subject to the condition that such unit shall commence commercial production and operation owing to such investments during the operative period of the Scheme (2003-2008), which was later on extended till 31.3.2011. The applicability of or eligibility to the benefit of the Scheme is nowhere dependant on the rates of Sales Tax charged fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Entitlement Certificate so issued would remain valid and operative for the entire period of 7 years, irrespective of the changes that take place in the rate of Sales Tax during the said period of 7 years. (f f) It is also very important to note that neither in the proceedings of SLSC nor in the so called Order dated 28.04.2006 or the Clarification dated 22.05.2008 (at page 244) nor in the Departmental letters dated 27.01.2009 (Page 267); 09.02.2009 (page 269) and 13.03.2009 (P 316-319) nor in the applications for revision (at pages 272 to 275), is there any reference made to or reliance placed on general reduction in the Sales- Tax for the purpose of denying the additional 25% subsidy to the Petitioner. This clearly shows the contemporaneous understanding of the provisions of RIPS in the minds of the most highly placed officials in the Industries Department and also the Commercial Tax Department of the State Government, that the amount of subsidy has nothing to do with the prevailing rate of Sales-tax. The rates of subsidy were not linked in any way to the current prevailing rates of Sales-tax. There has been a significant reduction in the VAT w.e.f. 1.4.2006 as compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed subsidy of 75% which was given on 2.12.2005 at the point of time when the rate of sales tax on sale of Cement was increased to 28% and therefore, effective rate of tax for the petitioner company was maintained at 7% (25% of 28%). iii) That since RIPS, 2003 was notified without any sanction from the Governor under Article 166 of the Constitution of India and the same is not a statutory scheme, therefore, the amendment of 28.4.2006 which is statutory amendment will prevail and principles of promissory estoppel cannot be invoked against such statutory exercise of powers. iv) That as far as unit 1 at Ras, Tehsil Jaitaran, Dist. Pali of the petitioner company is concerned, the same commenced commercial production on 17.12.2005, only 15 days after the notification dtd.2.12.2005, giving increased subsidy of 75% and it is not possible for any cement unit to claim promissory estoppel on the ground that it set up such expansion unit on the faith/promise of increased subsidy of 75% within a short period of 15 days and as far as 2nd unit at Bhiwadi is concerned, except taking the land on lease from RIICO for its expansion unit there, the petitioner company did not take any effectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surcharge of 15% i.e. 16.5.%. 28.7.2003:- The Rajasthan Investment Promotion Policy, 2003 (for short the RIPS, 2003) introduced as policy statement and not by any statutory notification under any enactment. The operative period of the Scheme was 1.7.2003 till 31.3.2008 and the Scheme was applicable on all new investment and investment made by existing units for modernization/expansion/diversification subject to the condition that they shall commence commercial production during the operative period of the Scheme. 2.12.2005:- Clause 7(vi) and 7(vii) inserted in RIPS, 2003 increasing the quantum of subsidy for cement manufacturing units to 75% subject to stipulated conditions which inter alia require the option to be exercised within 180 days and that unit shall start commercial production within 5 years of filing such option and such 75% of subsidy to comprise of (i) 45% upfront subsidy on the basis of actual tax liability, 5% interest subsidy and 25 % wage/employment subsidy. 2.12.2005:- The rate of sales tax on cement increased to 28%. 10.12.2005 The option of the petitioner company for cement expansiuon unit at Ras, Tehsil Jaitaran, Dist. Pali. 17.12.2005:- The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed prior to that. Six categories of cases covered by this, in which, petitioner's case fell in category No.2. 18.7.2008:- The Commissioner, Commercial Taxes filed two revision petitions under Clause 13 of RIPS 2003 to the State Government for withdrawal of two orders of SLSC dated 29.7.06 and 27.06.07 for issuing entitlement certificate. 31.3.2009:- The impugned revisional order passed by the Principal Secretary, Finance Department quashing the two orders of SLSC. 5.5.2009:- The present writ petition filed in this Court. Findings and Reasons of Judgment:- 23. Having heard the learned counsel for the parties and given my thoughtful consideration to the rival submissions and the judgments cited at the Bar, this Court is of the considered and firm opinion that not only the principle of promissory estoppel and legitimate expectation are attracted in the present case, but also the petitioner got a sort of vested right in receiving incentive in the form of increased rebate/subsidy under the amending notification dtd.2.12.2005 inserting clause 7(vi) and (vii) in RIPS, 2003 which despite deletion of these clauses (vi) and (vii) w.e.f. 28.4.2006 could not deprive the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing; (iii), for claiming wage/employment subsidy, the unit shall provide direct employment to at least 10 persons in case of a new unit; and twenty five percent additional direct employment subject to a minimum of ten persons in case of diversification, modernization or expansion; (iv) the unit shall be eligible for interest subsidy and/or Wage/Employment Subsidy only if it commences first commercial production/operation during the operative period of the Scheme and there has been no default in repayment of dues against term loan of the concerned financial institution(s) and/or Bank(s) etc. 26. Clause 7 of the RIPS, 2003 providing for subsidies in for the form of interest subsidy and wage/employment subsidy provides that a maximal limit of 50% of the tax payable and deposited under the Rajasthan Sales Tax, 1994, the Central Sales Tax Act, 1956 and Value Added Tax Act as and when introduced in the State. Same amount of 50% of subsidy was made available in case of investment made in modernization/expansion/diversification though provided that maximum limit of 50% may be raised by BIDI (Board of Infrastructure Development and Investment Promotion, Government of Rajasthan) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a copy of the representation made to the Chief Minister, Government of Rajasthan on 15.5.2004, a copy of which is placed as Annex.2. It begins with the averments "We have been exploring the possibility of putting up new cement plant at Ras, Tehsil Jaitaran, District Pali. For this purpose, we had requested State Government to allow us required sales tax incentives and other incentives so that the new cement project can be viable. Considering our various requests, the State Government had looked into the matter and thereafter they had granted sales tax exemption to the extent of 35% only. Since our project was not becoming economically viable at 35% incentive, we had again requested for 75% sales tax incentive." In the same representation, the petitioner - unit had given out its plan of investing more than Rs.200 crores in its expansion unit. In the meeting of the State Level Advisory Committee on 7.2.2005 under the Chairmanship of Hon'ble Chief Minister, the Rajasthan Cement Manufacturing Association suggested inter alia for 75% incentives for 11 years to new cement plants to be given vide Annex. 4. It would again appear from the representation of the petitioner - company to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 28.4.2006 deleting clauses (vi) and (vii) from clause 7 of RIPS, 2003 and under the garb of this purported clarification issued on 22.5.2008, it was clarified that in all the six categories specified in this clarification, the increased benefit of 75% of tax payable would not be available, namely:- (i) where the option was submitted before 28.4.2006 and benefits were also granted by SLSC before 28.4.2006; (ii) where the option was submitted before 28.4.2006 and benefits were granted by SLSC after 27.4.2006; (iii) where the option was submitted before 28.4.2006 and benefits have not been granted by SLSC; (iv) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and benefits has not been granted by SLSC; (v) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and the case has not been considered by SLSC; and (vi) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and the unit has still not applied for the benefits. By this clarification, it was therefore, directed that for all these aforesaid six categories, none of the categories enumerated would qualify for benefits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not open to or permissible for the State Government to seek to deprive MRF of the benefit of tax exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by MRF in the form of industrial development in the State, contribution to labour and employment and also a huge benefits to the State exchequer in the form of State's share i.e. 40% of the Central Excise duty paid on compound rubber of Rs.177 crores within the State of Kerala. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and therefore, violative of Article 14 of the Constitution. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of "justice and fair play". The attempt to take away the said benefit of exemption with effect from 15.1.1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years is highly arbitrary, unjust and unreasonable and deserves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to them prior to amendment of 1997. The relevant extract is quoted below for ready reference:- "The appellants herein were establishments entitled to exemption from the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 for the infancy period in terms of Section 16(1)(d) thereof. Section 16(1)(d) was, during the currency of the infancy period of the appellants, omitted w.e.f. 22.9.1997 by an ordinance which was followed by two other ordinances and ultimately by Act 10 of 1998. The appellants filed writ petitions before the A.P. High Court for a declaration that the omission of Section 16(1)(d) would not affect their right to exemption for the balance of their infancy period in terms of the erstwhile Section 16(1)(d). The High Court dismissed the writ petitions. The appellants, then filed the present appeals." Allowing the appeals, the Supreme Court held:- "In terms of Section 6(c) of the General Clauses Act, 1897, unless a different intention appears the repeal would not affect any right, privilege or liability acquired, accrued or incurred under the repealed enactment. The effect of the amendment in the instant case is the same. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in reliance on the promise.But if by detriment we mean injustice to he promise which would result if the promisor were to recede from his promise, then detriment would certain come in as a necessary ingredient. The detriment in such a case is not some prejudice suffered by the promise by acting on the promise, but the prejudice which would be caused to the promisee, if the promisor were allowed to go back on the promise." Case Laws cited by Respondent-State Discussed:- 34. On the other hand, the arguments of learned Advocate General Sh. G.S. Bafna that the principle of promissory estoppel and legitimate expectation could not be invoked by the petitioner - company in the present case and reliance placed by him on the case of Shree Sidhbali Steels Limited and Ors. vs. State of Uttar Pradesh and Ors., reported in (2011) 3 SCC 193 and the decision of Hon'ble Supreme Court in the case of Shree Bakul Oil Industries vs. State of Gujarat and Ors. reported in 1987 (6) SCC 31 do not demolish the case of the present petitioner-company in any manner. 35. In the case of Shree Sidhbali Steels Ltd. (supra), the petitioner industrial units, which were located in hill area in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e doctrine of promissory estoppel and reiterating the well settled principles that the same cannot be invoked against the legislations, Hon'ble Supreme Court further observed in para 33 as under:- "Normally, the doctrine of promissory estoppel is applied against the Government and defence based on executive necessity would not be accepted by the Court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. 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 (including delegated or subordinate legislation which is deemed to be a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to rural areas and to provide fillip and accelerate the development of industries in the State of Gujarat. The relevant extract from paras 8 to 11 of the said judgment are as under:- "Since the first notification did not prescribe any period or time limit for operation of the tax exemption, the benefit thereunder could be claimed only for such period as the exemption was in force before being withdrawn by the subsequent notification. The second notification providing for a period of five years' operation of the exemption was prospective in operation. That notification was, therefore, to apply only to those new industries which were commissioned subsequent to issuance thereof and not to those commissioned prior to its issuance. Moreover, the State Government was under no legal obligation to grant the tax exemption. What was granted by the first notification was only by way of a concession for encouraging entrepreneurs to start industries in rural and undeveloped areas. A concession can be withdrawn at any time and no time limit can be insisted upon before the concession is withdrawn. It was, therefore, fully within the power of the Government to withdraw or revoke the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PS 2003 providing for 75% of rebate against additional (increased) tax liability also has to be noticed vis-a-vis the fixed quantum of eligible investment, provided as an incentive under the Sales Tax Exemption Scheme of 1987, 1989 and 1998. Here the quantum of relief and incentive is only depending upon additional revenue generated by the company in the form of additional tax liability by increasing its turnover of additional production of cement by its expansion units. That is why the argument of State that increased subsidy and its reduction consequent upon increase and fall in rate of sales tax is misconceived and without any substance. Had it been so, subsidy for all other sectors manufacturing different items had also been reduced, when rates of tax had been reduced across the board for all such goods with the introduction of VAT in the State w.e.f. 01.04.2006. But, it was not to be and only petitioner's unit was chosen to be hit by notification dated 28.04.2006. The said argument, therefore, is liable to be rejected and is accordingly rejected. 41. As far as factual foundation for invoking principles of promissory estoppel is concerned, this Court is of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various plant and machinery and irrevocable letter of credit obtained in favour of foreign suppliers in para 37 of the writ petitioner and which has not been disputed by respondents, and investment to the extent of Rs.165.51 crores was made during the period from 2.12.2005 to 28.4.2006 in the said unit. Therefore, it cannot be said that no effective steps were taken during the period when the increased benefit of subsidy was alive on the statute book under the RIPS, 2003. The fact that both the units commenced production from operative period of the Scheme is not even disputed by the respondent - State. 43. Consequently, this Court is of the firm and clear opinion that the petitioner company satisfied all the conditions for binding down the respondent - State by the assurance and promise of increased subsidy of 75% of additional tax liability for entire period of 7 years especially in view of the fact that SLSC after being duly aware of the withdrawal of notification dtd.28.4.2006 granted such benefit and even the Entitlement Certificates issued for a period of 7 years for availing subsidy at the increased rate of 75%. Therefore, the question is whether the withdrawal notifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against its additional tax liability which was allowed to it for almost 2 and years out of 7 years until the clarification dtd.22.5.2008 was issued. If the withdrawal notification dtd.28.4.2006 itself was to be immediately applied though it uses the words "clause (vi) and (vii) of clause 7 shall be deleted" and no other statutory notification was thereafter issued really deleting these clause (vi) and (vii), but even assuming for argument's sake that the words "shall be deleted" were to be considered to mean "are hereby deleted" also, the fact remains that increased benefit continued for 2 more years upto 22.5.2008, when under the purported clarification in all the six contingencies of exercise of option and consideration by SLSC, the Finance Department chose to deny such benefit of increased subsidy to only a single large scale manufacturing unit, that of the petitioner - company in the State. This Court is at loss to understand why for adversely affecting the single large scale manufacturing cement unit, such withdrawal of clauses (vi) and (vii) was even considered necessary by the State. No overriding public interest has been shown behind that much-less established. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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