TMI Blog2006 (6) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... f the petitioner-company having been granted registration as a small-scale industrial unit by a registration certificate, dated May 24, 1988 issued, in this regard, by the respondents/authorities concerned. In course of time, the petitioner-company was issued an eligibility certificate, dated January 23, 1990. This eligibility certificate assured to the petitioner, with effect from February 1, 1990 to July 19, 1993, exemption from payment of sales tax in terms of the notification dated December 25, 1986, aforementioned. (ii) By notifications, dated April 6, 1991 and July 1, 1992, the Government of Assam announced its Industrial Policy of 1991 with the object of encouraging growth and promotion of industries in Assam. With this object in view, the said Industrial Policy of 1991 offered, inter alia, incentives by way of full sales tax exemption for a period of seven years on the sale of finished products as well as on the purchase of raw materials to be used in the manufacture of finished products. This Industrial Policy of 1991 covered new industrial units as well as existing units undertaking expansion, modernisation or diversification in the same location or any other place in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame into force with effect from April 1, 1991. (v) In terms of the Scheme of 1995, the new industrial units, having their registered office within the State of Assam and which had completed the effective financial steps on the date of coming into force of this Scheme, were made eligible industrial units for the purpose of granting of sales tax exemption. In terms of clause B of paragraph 1 of the Scheme of 1995, an industrial unit, having its registered office within the State of Assam and which is or was being in production at any time prior to April 1, 1991 undertaking expansion, modernisation and diversification to the minimum extent of 25 per cent at the same location or at any other place of the State with an additional employment of, at least, 10 per cent and is, in compliance with the criteria of the industrial unit, employing the people of Assam, shall be treated as an eligible industrial unit for the purpose of the Scheme. An industrial unit, which has been declared as relief undertaking by the Government of Assam, had also been made eligible to the grant of sales tax exemption. Some industries were, however, excluded from the purview of the Scheme of 1995. The Scheme of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AGST Act, 1993, amending the Scheme of 1995 making certain industries ineligible to receive the benefits of sales tax exemption under the Scheme of 1995. The notification issued on November 5, 1999, aforementioned has been made effective from November 17, 1999 and this Scheme has been described as the Assam Industries (Sales Tax Concessions) Scheme, 1999 (in short, "the amended Scheme of 1999"). In the list of industries included as ineligible industry to receive the benefit of sales tax exemption, item 21 reads, "21. biscuits manufacturing units where products are not sold in own brand name". Since the petitioner-company has been selling its products in the brand name of some other company, the petitioner-company has been rendered ineligible to receive benefits under the Scheme of 1995 with effect from November 17, 1999. Claiming that the petitioner-company is entitled to full sales tax exemption up to April 30, 2005 in accordance with the eligibility certificate, dated July 5, 1994, aforementioned, which has been granted in terms of the Scheme of 1995 and that withdrawal of exemption by amended Scheme of 1999 is illegal and cannot be permitted, the petitioner-company has, now, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an override the requirements of the statute. Since the amended Scheme of 1999, issued under section 9(4) of the AGST Act, 1993, disqualified an industrial unit, which does not sell its product in its own brand name, the petitioner-company no longer remains eligible to receive the benefits of the Scheme of 1995. Since the amended Scheme of 1999 has been issued in exercise of powers under subsection (4) of section 9 of the AGST Act, 1993, the same is legal and valid. The doctrine of promissory estoppel is not attracted to the present case inasmuch as the appropriate authority for appropriate reasons decided not to extend the benefits of the said Industrial Policy of 1991 to, amongst others, an industrial unit, which does not sell its products in its own brand name. So long as the requisite notification under the AGST Act, 1993, is not issued, no legal or equitable right can be said to have accrued to the petitioner-company. Moreover, no relief, based on the doctrine of legitimate expectation, should be granted, when grant of such relief is likely to harm larger public interest. Since the State Government, in exercise of its statutory power, has decided to withdraw and/or not to gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uti Tea Industries v. State of Assam [2003] 129 STC 479 (Gauhati) (Civil Rule No. 1223 of 1997) and Shree Sanyeeji Ispat Pvt. Ltd. v. State of Assam [2006] 147 STC 146 (Gauhati) decided on October 7, 2005. In the light of the decisions, relied upon by Dr. Saraf, it is contended by Dr. Saraf that the impugned notification dated November 5, 1999 is bad in law, ultra vires and is liable to be struck down so far as the same relates to, at least, the petitioner-company's said industrial unit. It is also submitted by Dr. Saraf that the Industrial Policy of 1991 clearly held out a promise for grant of full sales tax exemption to the eligible industrial units and the petitioner-company having expanded its said industrial unit on the basis of the representations or promise made under the said industrial policy by spending huge amount of money and has thereby altered its position to its detriment by relying upon the representations made in the said industrial policy, the doctrine of promissory estoppel does not permit withdrawal of the promises made under the said industrial policy by issuing a notification, such as, the present one, by the Finance Department of the State Government. It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name, it has been, for good reasons, made ineligible to receive concessions promised under the Industrial Policy of 1991 or under the Scheme of 1995. It is further submitted by Mr. Saikia that laws are amended as per the needs of time and since it was deemed necessary by the appropriate authority to amend the Scheme of 1995, the same was amended by the impugned notification, whereby the Scheme of 1999 has been introduced. Since the power to amend a notification issued under sub-section (4) of section 9 of the AGST Act, 1993, vests in the authority, which has, now, issued the impugned notification, the notification in question, cannot be said to be ultra vires or bad because of promissory estoppel. Reacting to the submissions made on behalf of the contesting respondents, Dr. Saraf has submitted that under the Industrial Policy of 1991, no such condition was imposed that biscuit manufacturing units, which manufacture biscuits under some other brand name, shall not be entitled to exemption. This apart, points out Dr. Saraf, the Department of Finance, which is a mere administrative wing of the Government of Assam, has no power and authority to curtail the benefits announced and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in its own brand name or sell its product not in its own brand name. The most important question, therefore, which falls for consideration, in the present writ petition, is this: when the Government of a State announces an industrial policy and invites investors to make investments in order to receive the benefits and incentives promised under an industrial policy, can another department of the Government, namely, Department of Finance, while preparing, in exercise of its powers under the relevant statute, a Scheme, such as, the Scheme of 1999, refuse to grant exemption from payment of sales tax to an industrial unit, which is, otherwise, eligible to receive benefits of the industrial policy announced by the Government or withdraw the exemption, which the industrial unit is, otherwise, entitled to receive under the relevant industrial policy? While considering the question, so posed, it is important to bear in mind that a Government, perceived under the Constitution of India, runs as an organised, harmonious, orderly, coherent, systematic and homogenous body and it functions on the principles of collective responsibility. Two different departments of a Government cannot adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... help of the impugned notification, the Department of Finance, Government of Assam, has opted the Scheme of 1999, which goes contrary to the scheme announced by the Department of Industries, Government of Assam, under its Industrial Policy of 1991. Can the Government of Assam do so, is the prime question. Whereas the Department of Finance, speaking on behalf of the respondent Nos. 2, 3 and 6, contends that it is possible for the Finance Department to do so, the petitioner disputes such proposition. These contesting respondents trace their powers to sub-section (4) of section 9 read with clause (f) of subsection (3) of section 74 of the AGST Act, 1993. There can be no doubt that in exercise of powers conferred on the Government under sub-section (4) of section 9 read with clause (f) of subsection (3) of section 74 of the AGST Act, 1993, the Government can frame scheme and grant relief in the form of total or partial exemption from sales tax. Can the power, so conferred, be unguided, uncanalised and leave room for complete arbitrariness? Since arbitrariness cuts at the root of the rule of law, no provisions of the Constitution and/or of any enactment can be read to confer on a Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed to survive. The reference made, in this regard, by Dr. Saraf to the case of State of Bihar v. Suprabhat Steel Ltd. reported in [1999] 112 STC 258 (SC); [1999] 1 SCC 31, is therefore, not misplaced. In Suprabhat Steel Ltd. [1999] 112 STC 258 (SC); [1999] 1 SCC 31, the State Government issued notification, on April 4, 1994 in exercise of the powers under section 7 of the Bihar Finance Act, 1987 whereunder the old industrial units, which had started production prior to April 1, 1993, but whose investments in the plants and machinery had not exceeded Rs. 15 crores on April 1, 1993 were denied the benefit of sales tax exemption on the purchase of raw materials. In other words, the industrial units, which were, otherwise, entitled to the sales tax exemption on the basis of the Industrial Policy of 1993, were denied the exemption on the basis of the fact that those industries had already taken some benefits under the prior industrial policy of 1986. The notification, dated April 4, 1994, aforementioned, issued by the State Government was challenged before the High Court and the High Court struck down the notification. The State of Bihar approached the apex court, and the apex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egality with the impugned judgment of the High Court in striking down a part of the notification dated April 4, 1994." The decision in Suprabhat Steel Ltd. [1999] 112 STC 258 (SC); [1999] 1 SCC 31, squarely applies to the facts of the present case. When the policy decision of the Government was, in terms of the Industrial Policy of 1991, as announced by notification, dated April 6, 1991 and July 1, 1992 issued in this regard, to grant sales tax exemption to the manufacturers of biscuits even if the manufacturers sell their products in the brand name of some other company and when this policy remained unchanged and unamended even under the Scheme of 1995 issued in exercise of powers under subsection (4) of section 9 read with clause (f) of sub-section (3) of section 74 of the AGST Act, 1993, another notification could not have been issued, in exercise of the powers under sub-section (4) of section 9 read with clause (f) of sub-section (3) of section 74 of the AGST Act, 1993, making the industries, such as, the present one, ineligible to receive sales tax exemption if they sell their products not in their brand name, but in the brand name of some other company. Thus, the extent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by article 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Every one is subject to the law as fully and completely as any other and the Government is no exception. . . It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. . . 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 legit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute, but since section 4 of the U.P. Sales Tax Act, 1948, confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government, so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from its liability; the Government would have to show what precisely is its 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. The court would not act on the mere ipse dixit of the Government, for, the Government cannot be the judge of its own cause and it is the court, which has to decide and not the Government, whether the Government should be held exempt from liability. This is, as Bhagwati, J., in Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCC 409 observes, "the essence of the rule of law". However, when the relevant statute does not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute; but if the statute confers power on the Government to grant the exemption, the Government can legitimately be held bound by its promise to exempt the promisee from payment of sales tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409; [1979] SCC (Tax) 144. If the Bench of two Judges in Jit Ram's case [1980] 3 SCR 698; [1981] 1 SCC 11; AIR 1980 SC 1285, found themselves unable to agree with the law laid down in Motilal Sugar Mills case [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409; [1979] SCC (Tax) 144, they could have referred Jit Ram's case [1980] 3 SCR 698; [1981] 1 SCC 11; AIR 1980 SC 1285, to a larger Bench, but we do not think it was right on their part to express their disagreement with the enunciation of the law by co-ordinate Bench of the same court in Motilal Sugar Mills case [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409; [1979] SCC (Tax) 144. 13.. We have carefully considered both the decisions in Motilal Sugar Mills case [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409; [1979] SCC (Tax) 144 and Jit Ram's case [1980] 3 SCR 698; [1981] 1 SCC 11; AIR 1980 SC 1285, and we are clearly of the view that what has been laid down in Motilal Sugar Mills case [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409; [1979] SCC (Tax) 144, represents the correct law in regard to the doctrine of promissory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the notification, which makes no reference to the provisions of the relevant statute, while making the announcement, would still be treated as a notification under the relevant provisions of the statute and the doctrine of promissory estoppel would force the Government not to deny the incentive of exemption from payment of sales tax promised by it provided, of course, that the other conditions for application of the doctrine exist. I may also pause here to point that in Assistant Commissioner of Commercial Taxes (Asst.) v. Dharmendra Trading Company reported in [1988] 70 STC 59 (SC); [1988] 3 SCC 570, it was contended that the impugned order was of no legal effect as there was no statutory provision whereunder such concession could have been granted. Heavily deprecating the practice of the Assistant Commissioner or the Deputy Commissioner of Sales Tax raising such contention, the court, in Dharmendra Trading Company [1988] 70 STC 59 (SC); [1988] 3 SCC 570 observed: "The next submission of learned counsel for the appellants was that the concessions granted by the said order dated 30th June, 1969 were of no legal effect as there is no statutory provision under which such conces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced the Government not to carry out the representation that it has made, and if, on balancing between the two competing equities, that is, the commitment made to the promisee, on the one hand, and the public interest, on the other, the court finds that the public interest has the overriding effect, the promise would not be enforced, for, the doctrine of promissory estoppel, being an equitable relief, must yield, when so required [see Assistant Commissioner of Commercial Taxes (Asst.) v. Dharmendra Trading Company reported in [1988] 70 STC 59 (SC); [1988] 3 SCC 570, Pine Chemicals Ltd. v. Assessing Authority reported in [1992] 85 STC 432 (SC); [1992] 2 SCC 683 and Pournami Oil Mills v. State of Kerala reported in [1987] 65 STC 1 (SC); [1986] Suppl. SCC 728]. In the case at hand, the respondents have not been able to disclose and establish any overriding public interest, which would make it inequitable to enforce the doctrine of estoppel against the State Government. Thus, the Government cannot resile from the promises that it had made in its Industrial Policy of 1991 as well as in the Scheme of 1995 notified, on August 16, 1995, in terms of its said industrial policy. Coupled wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to carry out the promise or that the public interest would suffer if the Government were required to honour its promise. If the Government wants to resist the liability, it will have to disclose to the court what are the facts and circumstances on account of which the Government claims to be exempted from the liability and it would be for the court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change 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. The court would not act on the mere ipse dixit of the Government, for, the Government cannot be the judge of its own cause and it is the court, which has to, ultimately decide and not the Government whether the Government should be held exempt from liability. The doctrine of promissory estoppel would apply even when the promise would, if acted upon, give rise to a legal relationship i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be enforced against the Government. In a given case, however, even when the promise is not barred by law and there is no supervening public interest permitting the Government to resile from the promise, it will be still permissible for the Government to resile from the promise made by it. It is possible for the promisee to resume its original position or to restore status quo ante if, on a reasonable opportunity being given to the promisee, the promisee can resume his original position. If the status quo ante cannot be restored, the promise would become irrevocable and can be enforced against the Government. It will be no defence for the Government to say that the promisee ought to have known the position of law that without issuance or publication of the requisite notification under the relevant statute, the promise would not be binding. What crystallises from the discussions held, as a whole, above is that the Finance Department has miserably failed to justify the withdrawal of the promise of exemption of sales tax made under its Industrial Policy of 1991 and/or under the Scheme of 1995 notified, on August 16, 1995, by issuing the impugned notification, dated November 5, 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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