TMI Blog1998 (4) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... n the sales of finished products as well as on the purchase of raw materials. The State Government, thereafter, introduced a new industrial policy whereby incentives were offered to the new industries established in the State as well as to the existing industries undertaking expansion, modernisation and diversification. The Assam Industries (Sales Tax Concessions) Act, 1986 was enacted in the year 1987 amending certain provision of the existing sales tax law and granting sales tax exemption to the new industries. According to the petitioners, the above Act was made applicable to the new industries established within October 15, 1982 to March 31, 1990 and therefore the said Act does not have bearing whatsoever to the industries set up after said period. In the year 1991 the Government of Assam announced a new industrial policy whereby incentives were offered by way of sales tax exemption for a period of 7 years to the new industries as well as the industries undertaking expansion, modernisation and diversification. The exemption was granted on the sale of finished products as well as on the purchase of raw materials. 4.. The State Government, thereafter, came with the Assam Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the policy was to remain in operation for a period of 5 years commencing from April 1, 1991 or till such time as was to be thought proper by the Government. Above policy provided with for the benefit of sales tax exemption on purchase of raw materials and on sale of finished products for a period of 7 years. The company undertook expansion work in its industrial unit and made additional investment in the industrial unit. The annual capacity of the industrial unit in respect of the petitioner-company was increased to 42 MT and in respect of the polythene bags, tube pouch, sheet, etc., of HDPE, LLDPE and LDPR, by 32 MT; and the General Manager, DIC, Kamrup, accordingly issued an annual assessment certificate on June 1, 1994. Similarly, the eligibility certificate under the Industrial Policy of 1991 dated April 28, 1994 was issued to the petitioner which reflected, amongst others, sales tax exemption from May 1, 1994 to April 30, 2001 (annexure VI to the writ petition). 6.. All the petitioners based their claims for sales tax exemption amongst others on such eligibility certificate issued by the competent authority in all the cases. 7.. According to the petitioners on the stren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded that the representations coupled with the conduct of the Government culminated into a promise of the Government assuring the company that it would not be liable to pay of sales tax on purchase of raw materials and finished products for a period of 7 years, on the strength of which the petitioners has acted upon all throughout and the respondents therefore are estopped in law to resile from its promise and to adopt any course contrary to their representation. The petitioners accordingly sought for writ of mandamus commanding the respondents to carry out the assurance and promise made to them to the effect that the petitioners industrial units would be entitled to sales tax exemption for a period of 7 years. 10.. The respondents denied and disputed the assertions made in the writ petitions. The respondents admitted that the petitioner is a dealer under the relevant taxation statute. The respondents referred to Sales Tax Concessions Act, 1986. The said Act was extended and made applicable to the new industrial units registered as industrial units in which cases effective steps were completed or taken after October 15, 1982 but before March 31, 1990. The respondent denied that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the State of Assam will be eligible for incentives under 1991 Scheme provided that: ........................ 4. Existing unit: A unit which is or was in commercial production at any time prior to April 1, 1991 will be considered as an existing unit for the purpose of the 1991 Scheme. 5.. Expansion/modernisation/diversification: Expansion/modernisation/diversification of an existing industrial unit will also be eligible for all incentives if the total capital investment on plant and machinery in the expansion/modernisation or diversification as the case may be, is more than 25 per cent of the total fixed capital investment of the existing unit. For the purpose of calculation, gross value of all the capital investments made on land, building, plant and machinery of an existing unit will be taken into consideration. Expansion, modernisation, diversification will imply an increase of at least 25 per cent in the existing installed capacity as well as increase of additional employment at least by 10 per cent. The fact that existing unit has availed itself of incentives will not disqualify the expansion/modernisation/diversification project to get incentives for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all the following have been achieved. Disbursement of term loan to the full extent. Completion of the installation of the plant and machinery. Receipt of all relevant approvals and clearances from the appropriate authorities, viz., pollution control clearance, capital goods clearance, explosive substance clearance, municipal clearance, etc. Connection of power service. Allotment of raw materials, wherever applicable. Sanction of working capital. Commissioning of the plant. Compliance with the criteria on the industrial unit s employing the people of Assam. B. An industrial unit, having its registered office within the State of Assam, which is or was in production at any time prior to April 1, 1991 undertaking expansion/modernisation/diversification to the minimum extent of 25 per cent at the same location or at other place(s) of the State of Assam and with an additional employment at least by 10 per cent and is in compliance with the criteria on the industrial unit s employing the people of Assam shall be treated as an eligible industrial unit for the purpose of this scheme. For the purpose of getting benefit under this scheme, the minimum extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the certificate of authorisation. The refund shall be governed by the provision of section 30 of the Assam General Sales Tax Act, 1993 and Rules made thereunder. (ii) During the period from or after the date of issue of this notification dated the 16th August, 1995, the benefit of sales tax relief as entitled under this scheme in the purchase of permitted raw materials stated in the certificate of authorisation granted to any of the above mentioned eligible industrial units of category B under this para 11 shall be available to it in the same manner as laid down in sub-para (a) of para 10: Provided that until the determination of base year production or the annual production after the expansion/modernisation/diversification or both, the benefit under this scheme in respect of the raw materials shall not be admissible to an eligible industrial unit of the category B . After these are determined the benefit to the extent as entitled under this scheme in respect of the raw materials shall be allowed to the aforesaid eligible industrial unit under the category B by way of refund on application filed by it before the assessing officer of the area within 90 days from the date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide partial exemption to the industries undertaking expansion, etc., i.e., exemption in respect of expanded portion only is contrary to its promise and therefore impugned actions of the respondents are liable to be struck down. Mr. Goswami, in support of his contention relied on the doctrine of promissory estoppel which is founded as public policy and public interest. Mr. Goswami, learned Senior Counsel, pointed out that the State Government generated a genuine expectation in the petitioner by its promise on the basis of which the petitioners changed its position and without any valid reasons the respondents cannot resile from the same. The learned Senior Counsel pointed out the action of the authorities in issuing the eligibility certificate under the 1991 policy to each of the petitioners certifying the petitioners to be eligible for full sales tax exemption for a period of 7 years as well as the acceptance of returns submitted by the petitioners showing nil sales tax liability, all these factors read with the scheme create an estoppel against the State Government from adopting course of action contrary to the promise made. In 1995 Scheme seeking to grant partial exemptions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inasmuch as the sales tax benefit under the scheme have been linked up with the production of an industrial unit which cannot be said to be a reasonable criteria for the grant of sales tax exemption. Further, it is not necessary that by undertaking expansion, modernisation and diversification work the production must increase. Increase in production cannot be logical corollary to the expansion, modernisation and/or diversification of the industry. Further the Industrial Policy of 1991 only stipulated increase of capacity by 25 per cent which can never mean increase in production. Mr. Goswami, further criticised the provision for determination of increase in production taking the period of 365 days prior to expansion as the base year and the production after 365 days of expansion to be the actual production and to grant the benefit on the difference of actual production and base year production as arbitrary and impracticable so much so the production in the 365 days after expansion may not increase due to various factors like non-availability of raw materials, electricity problem, market situation, etc., and other like numerous causes. If the provisions of the scheme are applied, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st Circle [1997] 106 STC 138 (Ker), Shri Bakul Oil Industries v. State of Gujarat [1987] 64 STC 304 (SC); (1987) 1 SCC 31, etc. 17.. Mr. H.N. Sharma, the learned Additional Senior Government Advocate, appearing on behalf of the respondents excepting the Civil Rule No. 2672 of 1997 (Kamakhya Udyog Pvt. Ltd. v. State of Assam) in which case Mr. K.H. Choudhury, learned Additional Senior Government Advocate, Assam, appeared for the respondents. According to Sri Sharma, the learned counsel for the respondents, the policy of sales tax exemption was formulated on the strength of the industrial policy of 1982-86. The above benefit was statutorily recognised in the Tax Concessions Act, 1986 amending Sales Tax Act, 1947 and by inserting a new section therein. As per the Concessions Act, tax concessions provided to the new industrial unit were available for a period of 5 years from the date of commencement of the production. Industries of all the petitioners having been set up within the period between October 15, 1982 to March 31, 1990, these units cannot take advantage of exemption in payment of sales tax beyond the period of 5 years. The exemption as per the industrial policy were alr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate referred to the following decisions: Kasinka Trading v. Union of India reported in AIR 1995 SC 874; (1995) 2 SCC 274, Union Territory, Chandigarh Administration v. Managing Society, Goswami, GDSDC reported in (1996) 7 SCC 665 and Shirjee Sales Corporation v. Union of India reported in (1997) 3 SCC 398. 19.. In Civil Rule No. 1224 of 1997 (S.M. Ispat Ltd. v. State of Assam) the writ petition is directed against the withdrawal of the benefit of this scheme in the matter of manufacture of galvanised or corrugated sheets units. The petitioner in the above civil rule is a company which was at all relevant time was engaged in galvanised sheets and corrugated sheets. Pursuance to the earlier scheme the petitioners were provided with the benefit. The same was taken away from the scheme without any valid reason. 20.. Mr. R. Gogoi, learned counsel appearing on behalf of the petitioner, also adopted the same plea that was taken by Mr. Goswami. 21.. Mr. H.N. Sharma, learned Additional Senior Government Advocate, on the other hand pointed out that the authority in its wisdom excluded the 13 other industries from the scheme in conformity with the statutory provision and therefore same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the various notices and orders as alleged arbitrary in addition to the other grounds raised in the case of Manjushree Extrusions v. State of Assam. 23.. Mr. H.N. Sharma, learned Additional Senior Government Advocate, on the other hand submitted that the petitioners were wrongly granted full concession for the entire unit on the basis of irregular authorisation certificate. Since the above certificate was wrongly issued notice for necessary correction was issued to the petitioner to show cause for reassessment and irregularities were detected later on regarding the period ending March 31, 1996 and the petitioner prayed time for reply to the notice. The eligibility certificate was issued only for the expanded period portion and not for whole unit. The oil unit of the petitioner was already granted an exemption of tax amounting to Rs. 58,56,102 on sales turnover amounting to Rs. 37,36,01,279 for the period from April 29, 1988 to March 31, 1993. The learned counsel for the respondents submitted that the petitioner cannot take advantage on the aforesaid eligibility certificate which was wrongly granted. The petitioner cannot take advantage more than his legal dues. Taxing author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the petitioner-company wrote to the authorities of the State for the grant of an eligibility certificate treating the water storage unit as a new unit which has been refused by communication dated May 31, 1997. Hence, this writ petition. In the letter of Superintendent of Taxes dated July 18, 1996 it was stated that the water storage unit of the petitioner was treated as a new unit. The petitioner contends that the decision contained in the communication dated May 31, 1997 is liable to be quashed since the petitioner took all requisite steps in respect of water storage unit for being treated as new unit on the strength of the decision reported in [1997] 104 STC 470 (All.) (Gorakhpur Oxygen Private Limited v. State of U.P.). 26.. The respondents on the other hand contended that under the Industrial Policy Act, 1991 all incentives including sales tax exemption were made for new units started on or after April 1, 1991 and not before April 1, 1991 as has been mentioned. The unit of the petitioner was registered with the Industries Department (District Industries Centre, Kamrup, Guwahati), Government of Assam, under Registration No. 02/05/02240/PMT/SST dated August 20, 1983 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the diversification project for manufacture of rotomoulded water tank not to the M/s. Kamakhya Udyog Pvt. Ltd., Unit II. The necessary steps to modify the registration certificate issued on July 4, 1996 have been initiated. It was further submitted that the construction of a new factory building arrangement of term loan and procurement and installation of a new machinery are not sufficient aspects for categorisation of new unit. For diversification of an existing unit all the above steps are necessary. The fact that same cash book and same power connection was being shared by original as well as diversified unit negates the categorisation of water tank unit as a new unit. Moreover for a new unit, the first step should be the registration with the District Industries Centre as a SSI unit after which only all facilities, namely, sanction of loan from bank and financial institutions, power sanction, etc., follow. 28.. The matter was discussed in detail in the 3rd State Level Committee held on March 15, 1997 and the Committee, after examining the papers, did not consider the petitioner s plea of treating the water tank part as a new unit as valid. The relevant extract of the proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts contended that the petitioner s water tank unit has never been accepted by the Directorate as a new unit as it was not a new unit for such activity was included as additional item in its original registration certificate. Once the activity of manufacturing of water tank of the petitionerunit having been included in the original registration certificate as an additional item as early as in February, 1993 after due consideration, there was no case for issuance of another SSI registration for the same activity in the same unit having same power connection situated in the same plot of land owned by the petitioner-unit. Moreover, the subsequent departmental enquiry proved that the water tank unit, claimed to be a new unit by the petitioner, is nothing but a part of the original unit owned by the petitioner. 31.. Proposal of the eligibility certificate of the said unit, according to Mr. K.H. Choudhury, was placed before the State Level Committee which was the apex expert committee for granting eligibility certificate and considering other technical aspect. After considering all aspects of the matter the said State Level Committee held that there was no merit in the application of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and thereupon the said Schedule shall be deemed to have been amended accordingly. (3) The State Government may by notification in the official gazette make an exemption or reduction in rate in respect of any tax or interest payable under this Act on the sale or purchase of any class of goods specified therein- (i) at all or any specified point or points of sale in a series of sales by successive dealers; or (ii) by any specified class of persons in regard to the whole or any part of their turnover: Provided that any exemption or reduction may extend to the whole of the State or to any specified area or areas therein and be subject to such restrictions and conditions as may be specified in the notification: Provided further that validity of any notification issued under this sub-section shall not exceed a period of three years from the date of its issue. (4) The State Government may, from time to time by notification in the official gazette frame one or more schemes for the grant of relief to any class of industries within the State or within any specified part of the State on or after such date as may be specified in such scheme and producing such goods as may be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day; (e) any tax relating to any period ending before the appointed day which is refundable on or after the appointed day; (f) any exemption of tax by way of grant of relief from any day prior to the appointed day. 35.. By section 9 of the Act, the Legislature authorised the State Government to provide for exemption or reduction in respect of any tax or interest payable under the Act on the sales of goods specified therein by notification in the official gazette, subject to the conditions and exceptions if any. The validity of the notification issued under sub-section (3) shall not exceed a period of three years from the date of its issue. Sub-section (4) of section 9, authorised the State Government to frame one or more scheme for the grant of relief to any class of industries within any specified part of the State on or after such date as may be specified in such scheme and producing such goods as may be specified therein by way of full or partial exemption of any tax payable under the Act on the raw materials or other input purchased by them within the State or on the manufactured goods sold by them within the State or in the course of inter-State trade or commerce for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were also included under item No. 18 of the said notification. By another notification dated April 26, 1994 (annexure IV-A to the writ petition), the Government of Assam in supersession of its earlier notification dated February 18, 1993 declared certain industries to be non-priority industries for availing the incentives of the State Government under the 1991 industrial policy with effect from March 11, 1994. Galvanised sheet and corrugated unit was also included under item 14 of the said notification. The notification dated April 26, 1994 contained that industries specified in the said notification would avail incentives under the 1991 industrial policy on the terms and conditions that the Government of Assam would extend the benefits to the industries specified by the Government of Assam in the said notification. According to the petitioner, the company completed its expansion and diversification programme much earlier to the issuance of the notification dated April 26, 1994 and started commencement of the production with effect from January 7, 1994 and was granted eligibility certificate by the appropriate authority dated May 30, 1995 thereby granting exemption from sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted to the Kamrup Industries (Assam) and not granted to the petitioner-company and it was valid up to January 6, 1996. The respondents denied the entitlement of the petitioner-company to claim exemption from payment of sales tax on raw materials and finished products for the period of 7 years. In the affidavit the respondents also stated that in respect of any unit undergoing expansion, the concession of sales tax exemption under the 1991 scheme was extended only for the expanded portion of unit and not for the entire unit, the original unit having already availed necessary benefit of sales tax exemption and subsidies. 39.. From the narration of facts as indicated above, it appears that the writ petition contains serious disputed facts. The materials on record do not disclose any breach of promise. Doctrine of promissory estoppel has emanated from equity to avoid injustice. Granting of exemption on recision of tax emanates from legislative power which is to be used for the general good of the people. Exemption of tax can legitimately be granted in the public interest and it is in the public interest that it can be rescinded. All these aspects depend on the economic trend as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking expansion, modernisation or diversification at the same location or at any other place in the State of Assam were made eligible for incentives under the 1991 scheme on the conditions specified in clauses 2.1, 2.2 and 2.3. The Scheme defined new units as well as existing units . Clause 5 under Part II of the 1991 scheme indicated that expansion/modernisation/diversification of an existing industrial unit, such unit would be eligible for all incentives if the total capital investment on plant and machinery in the expansion, modernisation or diversification, as the case may be was more than 25 per cent of the total fixed capital investment of the existing unit. The gross value of all the capital investments made on land, building, plant and machinery of an existing unit was to be taken into consideration for the purpose of calculation. Expansion, modernisation and diversification would imply an increase of at least 25 per cent in the existing installed capacity as well as increase of additional employment at least by 10 per cent. An existing unit that has availed itself of the incentives was not to be disqualified for expansion, modernisation or diversification project to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of the said notification dated August 16, 1995 but from or after April 1, 1991. The 1991 policy which is referred to in extenso envisaged for incentives to the existing units to the extent of expansion/modernisation/diversification. The 1991 policy gives full incentives only to the new units and sales tax exemption for 7 years. The 1991 scheme was not meant for the existing industrial unit in its entirety but it conferred the benefit only to the extent of expanded portion. The 1991 policy therefore cannot be treated as a promise held out by the State Government not to realize sales tax for a period of 7 years for the entire industrial unit. No such promise as such can be spelt out from the 1991 policy. The 1991 incentive policy taken care of the units to the extent of expansion/modernisation and diversification so far the existing units are concerned. The 1995 Sales Tax Concession Scheme was introduced by the State Government on the authority of sub-section (4) of section 9 of the Sales Tax Act, 1993. It empowered the State Government to frame one or more schemes for grant of relief to any class of industry within the State or within the specified part of the State by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncessions Scheme of 1995 they are entitled to full incentives. 43.. In view of the foregoing discussions, the principle of promissory estoppel does not come into play. The principle of promissory estoppel is a principle of equity. In the instant case, the petitioner-companies had already availed of the full concession and in such a situation there is no scope for applying the equitable principle of requisite estoppel. In the absence of any entitlement of the petitioners for full benefit of sales tax concession under the scheme, the said benefit cannot be provided on the strength of eligibility certificate alone. The Sales Tax Concessions Scheme of 1995 took care of the 1991 Policy. As a matter of fact there is no substantial difference between the 1991 Scheme and the 1995 sales tax concessions scheme in content. Therefore, the 1995 Sales Tax Concessions Scheme cannot be said to be retrospective in effect. The Sales Tax Concessions Scheme, 1995 cannot be read as retrospective. The Legislature gave full mandate to the executive authority to frame one or more scheme/schemes to grant relief to any class of industry from time to time by notification. In formulating its policy, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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