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TMI Blog2013 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... lead growth. The scheme was implemented through various notifications and circulars issued by the concerned ministries/departments from time to time. This system of issuing notifications and circulars resulted in certain practical problems and does not lend enough confidence among the investors. In order to overcome the problems of the present scheme and to give a long term and stable policy frame work the Central Act for Special Economic Zones had been found necessary. Accordingly the Special Economic Zone Bill was introduced in the parliament. The Bill was passed in the Loksabha on 09.05.2005 and in Rajyasabha on 11.05.2005. The President of India gave his assent to the Bill on 23.06.2005. Thus the Special Economic Zones Act, 2005 (for short 'SEZ Act') came into force. Section 7 of the SEZ Act specifies that any goods or services exported or imported from the domestic tariff area by any unit in a special economic zone shall be exempted from payment of taxes, duties or cess subject to prescribed terms, conditions and limitations. Section 26 of the SEZ Act specifies certain concessions under the Customs Act, Customs Tariff Act, Central Excise Act, Central Excise Tariff Act, Domesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted income was also exempt from tax under sub-section (34) of Section 10 of the IT Act. 3. Petitioners are SEZ developers/co-developers/units. The petitioners by taking necessary permissions and approvals under the SEZ Act and Rules are carrying on activities inside the SEZ. The petitioners contend by acting on the promises made under the provisions of SEZ Act, Rules and exemptions provided under various Acts including the Income Tax Act made huge investments in establishing the SEZ units. It is contended that petitioners borrowed massive loans from various financial institutions and investment on land, buildings, infrastructure facilities etc. Petitioners have commenced their projects on the basis that income accrued or arising from business carried on by them as SEZ developer or unit are exempted from applicability of Minimum Alternate Tax (MAT) as provided under sub-section 6 of Section 115 JB and sub-section 6 of Section 115-O of the Income Tax Act. 4. When the matter stood at that stage, the Union Finance Minister moved the Union Budget for 2011-2012 on the floor of Parliament and the Finance Bill, 2011 was introduced. In terms of this Finance Bill, 2011 a proviso was inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri A. Shankar and Sri K.K.Chaitanya, learned Advocates for petitioners contend that the impugned amendments under the Finance Act, 2011 are opposed to the Doctrine of Promissory Estoppel. It is contended that the Government by introducing sub-section 6 of Section 115-JB made an express promise exempting the petitioners from the applicability of payment of MAT and under sub-section 6 of Section 115-O the Payment of tax on dividend distribution. On the basis of this promise made by the Government the petitioners invested and established units by the borrowing massive loans. The proposed amendments are therefore opposed to Doctrine of Promissory Estoppel. It is contended that when the petitioners made investments, they legitimately expected that the exemptions provided under Section 115-JB and 115-O will be continued. Now abruptly, arbitrarily, unfairly and to the detriment of the petitioners the impugned amendments are brought in and as such the same is opposed to the Doctrine of Legitimate Expectation. The impugned amendments are opposed to the very object of SEZ Act. Therefore, the impugned amendments to the SEZ Act are unconstitutional, beyond the power and authority and administr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be violative of any Article of the Constitution the Supreme Court and the High Courts are empowered to strike down the said laws. In exercising the powers of judicial review, the courts do not and cannot go into the question of wisdom behind legislative measure. It is for the legislature to decide as to what laws they should enact. The task of the courts is to interpret the laws and to adjudicate about their validity. It is in this back ground the Supreme Court in State of A.P. vs. Mcdowell and Co. [AIR 1996 SC 1627] held that "a law made by the Parliament or the Legislature can be struck down by courts on two grounds and two grounds alone, viz., (1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in Part-III of the Constitution or of any other constitutional provision. There is no third ground." Further the Supreme Court in Government of A.P. vs. Smt. P.Lakshmidevi [AIR 2008 SC 1640] held that "the constitutional courts do have the power to declare a law to be invalid. Invalidating a statute is a grave step and must therefore be taken in very rare and exceptional circumstances. The court must not invalidate a statute lightly, for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India through a money bill. Therefore, it is contended that the impugned amendments to Schedule-II to the SEZ Act by the Ministry of Finance lacks legislative competency. I decline to accept this contention of learned counsel for the petitioners. Firstly, the Government of India (Allocation of Business) Rules relied on by the petitioners are not applicable to the proceedings and the business of parliament. These Rules are only applicable to the Government of India and not to the Parliament. The proceedings and the business of the parliament is governed by "Rules of Procedure and Conduct of Business in the Lok Sabha" (for short "Rules of Loksabha"). Chapter-I , Rule 2(1) of Rules of Loksabha defines "Finance Minister" includes any Minister. Further "Member incharge of the Bill" means the Member who has introduced the Bill and every Minister in the case of Government Bill. "Minister" means a member of the Council of Ministers and includes a member of the Cabinet, a Minister of State, a Deputy Minister or a Parliamentary Secretary. Further the Rules of Loksabha provides for Government bill and private members bill. A perusal of the Rules of Loksabha do not bar the Finance Minister f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cept this contention of learned counsel for the petitioners. It is settled position of law that every tax exemption and incentive shall have a sunset clause. Every fiscal legislation providing for tax exemption must have a life span fixed in the enactment. In the instant case by introducing sub-section 6 to Section 115JB and sub-section 6 to Section 115O of Income Tax Act a permanent exemption was given to SEZ establishments/units. It is settled principle that there can be no permanent tax exemption or incentive in fiscal legislation. Realizing this lapse on the part of the Government the impugned provisos were introduced restricting the exemption only for a particular period. In the impugned amendment it is made clear that it is prospective in nature. Therefore the impugned amendments can neither be said unreasonable or arbitrary. 14. The contention of learned counsel for the petitioners that even sunset clause must be a road map to end the tax exemption and not an abrupt end. In the instant case, the exemption was provided in the SEZ Act in the year 2005. The petitioners enjoyed this benefit for a period of five years. The impugned amendments are shown in the Finance Bill and pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y adhoc and experimental. Since the economic matters are extremely complicated, this inevitably entails special treatment for special situations. The State must, therefore, be left with wide latitude in devising ways and means of fiscal or regulatory measures, and the courts should not unless compelled by the statute or by the Constitution, encroach into this field or invalidate such law. Therefore I hold point No. 2 in negative. On point no.3 and 4 17. The concept of Promissory Estoppel and Legitimate Expectancy are not defined in any law. These two concepts are fashioned by the courts while reviewing the administrative acts in the field of administrative law. The judicial pronouncements defines "Promissory Estoppel" means 'where one party has by his words written or oral or by conduct made to other a clear and unequivocal promise which is intended to create legal relations or affect 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 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 would not be entitled to go back upon it, if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor can the Government or a public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. The doctrine of promissory estoppel being an equitable doctrine, it must yield when equity so require. If it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it. The Court would not raise an equity in favour of the person to whom the promise or representation was made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it. In Sales Tax Officer vs. Shree Durga Oil Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X
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