TMI Blog2005 (10) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... nment, seek enforcement of the promise against the Government? Is it necessary for the doctrine of promissory estoppel to be applicable that the promise shall not only be permissible under the law to be made by the Government but that the promise must have been made by the Government in terms of the procedure prescribed by the relevant statute? For application of the doctrine of promissory estoppel, whether existence of legal relationship between the promisor and the promisee is a condition precedent? Can, in the interest of public, the Government resile from the promise made by it under an industrial policy and if so, what are the limitations on the exercise of such a choice by the Government? Is it enough if the Government decides that in the interest of the public, the Government shall resile from the promise or is it the court, who has the ultimate responsibility to determine if the public interest is so overriding that such public interest shall prevail upon the promise made by the Government and shall permit the Government to withdraw from the promise that it had made? Can a mere plea that the overriding public interest permit the Government to resile from the promises made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e industrial unit being a re-rolling mill for manufacture of different steel rolled products. The petitioner-company was registered as a small-scale industry with the Department of Industries, Government of Assam, and was granted, in this regard, a provisional registration certificate, dated April 30, 1992, and a permanent registration certificate, on October 12, 1993, by the Director of Industries, Government of Assam, the first commercial production of the petitioner-company's new unit having been started, on September 17, 1993, in terms of the permanent registration certificate, dated October 12, 1993 aforementioned. The petitioner-company received sanction of power load to the tune of 300 KB by order dated August 10, 1992, issued by the Chief Engineer, Assam State Electricity Board; but before the commercial production of the petitioner-company's said new industrial unit was started on September 17, 1993, a notification was published, on February 18, 1993, by the Department of Industries, Government of Assam, making certain industries ineligible from receiving the said Government incentives promised under the said Industrial Policy of 1991, the withdrawal of the said incentives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim exemption from payment of sales tax in terms of the promises made under the said industrial policy. (v) In short, before the first commercial production of the said new industrial unit of the petitioner-company commenced on September 17, 1993, the incentives with regard to sales tax exemption promised under the said Industrial Policy of 1991 were withdrawn by notification, dated February 18, 1993, rendering the petitioner-company's re-rolling mill, established in the sub-division of Kamrup, ineligible to receive the incentives promised under the said Industrial Policy of 1991; but with the issuance of notification, dated April 26, 1994, aforementioned, the petitioner-company's industrial unit became eligible to receive the incentives aforementioned, for, the notification, dated April 26, 1994, aforementioned, had clarified that while the re-rolling mills, set up in the sub-division of Kamrup District, had become ineligible to receive the incentives being in the list of non-priority industries, such industrial units would remain eligible to receive the incentives if the commercial production of such an industrial unit had started before the publication of the non-priority list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notification, dated August 16, 1995, aforementioned, issued under the AGST Act, 1993, ineligible to receive the incentives promised under the said Industrial Policy of 1991. The application made by the petitionercompany to the Director of Industries, Government of Assam, to grant Eligibility Certificate was turned down by the State Level Udyog Sahayak Committee, on June 23, 1998, on the ground that as per para II of the Sales Tax Concessions Scheme, 1995, re-rolling mills of Kamrup, Jorhat, Dibrugarh, Bongaigaon, Cachar and Tinsukia District are not eligible for any benefit under the Scheme and since the petitioner-company's industrial unit is located in the Kamrup district, the committee could not approve the case, for, the petitioner-company's said unit is not eligible for sales tax exemption. Even the Sales Tax Department did not grant any exemption in respect of sales tax to the said industrial unit of the petitioner-company; rather, the sales tax was imposed on the petitioner-company. In such circumstances, the petitioner-company has approached this court, with the help of the present writ petition, seeking, inter alia, issuance of writ(s) commanding the respondents to decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax can be granted except in the manner laid down in the said enactment. Section 9(4) of the AGST Act, 1993, lays down the manner and method of granting of relief of exemption of sales tax to any class of industries by notification in the official Gazette and no executive order can override the requirements of the statute. Since the notification, dated August 16, 1995, issued under section 9(4) of the AGST Act, 1993, disqualified the steel rolling mills of Kamrup and a few other districts to which category the petitioner-company falls from availing the benefits embodied in the Industrial Policy of 1991, the authorities concerned had rightly decided not to issue the eligibility certificate to the petitionercompany. The doctrine of promissory estoppel is not attracted in 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, the re-rolling mills located in the subdivision of Kamrup. 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. The laudable objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18, 1993 aforementioned, the re-rolling mills, situated amongst others, in the sub-division of Kamrup, were made ineligible from receiving incentives under the said industrial policy. However, further points out Dr. Saraf, considering the genuine difficulties of the re-rolling mills, which had already started commercial production before taking of such a restrictive view by the Government, the Government itself, vide notification, dated April 26, 1994, made provisions for safeguarding the interest of such re-rolling mills by providing that the Government would extend the benefits of the Industrial Policy of 1991 to those re-rolling mills, which had started their commercial production prior to April 26, 1994, and that, thereafter, no such cases would be considered. Since the petitioner-company's industrial unit, set up as per the Industrial Policy of 1991, had, submits Dr. Saraf, started the commercial production on September 17, 1993, the petitioner-company's said unit became, by virtue of the notification, dated April 26, 1994, aforesaid, legally entitled to receive all the incentives and benefits announced under the Industrial Policy of 1991. The said policy decision taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd had altered its position to its detriment relying on the said representations and promises made in the industrial policy, the State Government and its instrumentalities are bound by the equitable doctrine of promissory estoppel to grant such benefits to the petitioner-company, which the Government had promised. It is further submitted by Dr. Saraf that if any statutory authority or an executive authority of the State, functioning on behalf of the State in exercise of its legally permissible powers, had held out any promise to a party, who, relying on the same, has changed his position to his detriment and if the said promise does not offend any provisions of law or does not fetter any legislative or quasi-judicial power inhering the promisor, then, on the principle of promissory estoppel, the promisor can be pinned down to abide by the promise offered by it by way of such representation. Only in the cases where, points out Dr. Saraf, there is supervening public interest, the Government would be allowed to change its stand and withdraw from the representation made by it, which had induced persons to take certain steps, which may go adverse to the interest of such persons on accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikia, lays down the manner and method of granting relief to any class of industries by notification in the official gazette and no executive order can override the requirements of the statute. Since the notification, dated August 16, 1995, issued under section 9(4) of the AGST Act, 1993, disqualified the Steel Rolling Mills of Kamrup and a few other districts to which category the petitioner-company falls from availing the benefits embodied in the Industrial Policy of 1991, the authorities had, contends Mr. Saikia, rightly decided not to issue the eligibility certificate to the petitioner-company. Relying on the decision of the Supreme Court in Sales Tax Officer v. Shree Durga Oil Mills [1998] 108 STC 274, it is submitted by Mr. Saikia that the Government can change its industrial policy if the situation so warrants. Merely because an Industrial Policy Resolution was announced for a particular period, it does not mean, contends Mr. Saikia, that the Government cannot amend or change the policy under any circumstances. When the petitioner set up its rolling mill, submits Mr. Saikia, it should have had known that the matter of sales tax exemption would have to be governed by the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax to a particular class of industries on the ground of public policy, the doctrine of promissory estoppel cannot be pressed into service to thwart such exercise of powers by the Government. Reliance has been placed, in this regard, by Mr. Saikia on Kasinka Trading v. Union of India [1995] 1 SCC 274. Mr. Saikia has further submitted that the contention of the petitionercompany that it had not collected sales tax on the sales of finished products from September 17, 1993 remains nebulous since the petitioner-company had failed to adduce any reliable evidence to show that the sale prices realised by the petitioner-company fell short of the quantum of tax amount compared to the sale prices realised by other dealers of goods, who paid taxes during the said period. There is, contends Mr. Saikia, no merit in the present writ petition and it is not a fit case at all for issuing any direction in favour of the petitionercompany and the writ petition may, therefore, be dismissed. Repelling the above submissions made on behalf of the respondents, Dr. Saraf has contended that the contention of the contesting respondents that exemption from payment of sales tax can be granted in the mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly, when the Staterespondents have not been able to show that any supervening public interest made it change the benefits given under the said industrial policy, while preparing the scheme of 1995 in exercise of its powers under subsection (4) of section 9 of the AGST Act, 1993. Before entering into the rival submissions made before me, on behalf of the parties, certain facts, which have not been made in dispute, may be noticed, once again, for clearly appreciating the issues involved in the present writ petition. These silent facts are: The Industrial Policy of 1991 was aimed at achieving speedy industrial development in the State as well as generation of adequate employment opportunity in industrial sector. The policy, in question, was announced under two notifications, namely, notifications dated April 6, 1991 and July 1, 1992, the incentives, covered by the said industrial policy, were made available for a period of seven years to the new industrial units to be set up in the State of Assam on or after April 1, 1991. One of the promises made under the said industrial policy was exemption from payment of sales tax for a period of seven years. The sales tax exemption, so a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a period of seven years. The fact that with the publication of the notification, dated April 26, 1994, the said unit of the petitioner-company had become eligible to receive the incentives promised under the Industrial Policy of 1991 is not, in fact, in dispute. It is also not in dispute that but for the Assam Industries Sales Tax Scheme, 1995 (hereinafter referred to as "the scheme of 1995"), which came into force on August 16, 1995, the petitioner-company would have remained, in terms of the notification, dated April 26, 1994, aforementioned, entitled to receive exemption from payment of sales tax as indicated hereinbefore. The question, therefore, which falls for consideration 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 the 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 1995, refuse to grant exemption from sales tax to an industrial unit, which is, otherwise, eligible to receive benefits of the indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thers, in the sub-division of Kamrup, ineligible to receive the benefits under the said Scheme. This Scheme, thus, made the petitioner-company's industrial unit, which was, otherwise, eligible to receive sales tax exemption under the notification, dated April 26, 1994, aforementioned ineligible. The department of Finance, Government of Assam, has, thus, adopted the scheme of 1995, 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, 9 and 10, contends that it is possible for the Finance Department to do so, the petitioner disputes the same. The contesting respondents trace their powers to sub-section (4) of section 9 read with clause (f) of sub-section (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 exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it can be shown otherwise, the impugned notification, dated August 16, 1995 aforementioned to the extent that it takes away the benefits of sales tax exemption granted under the Industrial Policy of 1991 in terms of the notification, dated April 26, 1994, aforementioned cannot be 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, 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 benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sub-section (3) of section 7 of the Bihar Finance Act will not authorise the State Government to negate the incentives and benefits which any industrial unit would be otherwise entitled to under the general policy resolution itself. In this view of the matter, we see no illegality 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 notification, dated April 26, 1994 aforementioned to grant sales tax exemption to the re-rolling mills located even in the sub-division of Kamrup if the commercial production of such a unit had started before March 11, 1994 and when this policy remained unchanged and unamended, the Scheme of 1995 could not have been prepared, even in exercise of 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 one described hereinbefore, ineligible from receiving the sales tax exemption. Thus, the extent to which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of their existing industries and have received the benefits with promise till end of seven years. Hence, in our view, when the appellants are in receipt of the benefits as per the Scheme 1991 it cannot be curtailed by another scheme. 48(1) I have seen the judgment written by my sister Mrs. M. Sarma, J. I fully agree to the principles of law as discussed by her. There is no controversy that the State cannot resile from the promise it makes through its industrial policy for extending benefits like exemption of payment of taxes, rebate in rent for land and subsidies in different forms when the investors in pursuance of the said promise set up industrial units. Promise once held by the State cannot be withdrawn, except in certain exceptional circumstances, to the detriment of the investors. Therefore, I fully agree to the conclusion arrived at by my sister Mrs. Sharma, J., that the incentives proposed in the Industrial Policy of Assam, 1991 cannot be taken away or abridged in any manner before the expiry of the period of concession promised to the industrial units. On this context, it has to be seen whether the Assam Industries (Sales Tax Concessions) Scheme, 1995 in any ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et up on the basis of the Industrial Policy Resolution of 1991, cannot be denied the benefit of sales tax exemption by taking recourse to the Scheme of 1995 and the said industrial unit was held to be entitled to sales tax exemption on the purchase of raw material, namely, "black tea" for a period of 7 years as per the Industrial Policy of 1991. Put shortly, when a person, acting upon the representation made by another, alters his position, the doctrine of promissory estoppel estops the person making the representation from going back on his words to the detriment of the one, who has altered his position. The doctrine of promissory estoppel was evolved, in England, as a principle of equity to mitigate the rigours of strict law and to prevent injustice taking place from strict adherence to law. The development and expansion of this doctrine, particularly, in the realm of its application against Governments, in India, in the post-independence era of this country, makes a fascinating reading. (1) Reported in [2003] 129 STC 479 (Gauhati). The earlier English decisions, which involved the application of this doctrine, particularly, the decisions in Hughes v. Metropolitan Railway C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The facts giving rise to this case were, in brief, thus: In the year 1865, the Government of Bombay called upon the predecessor-in-title of the Municipal Corporation of Bombay to remove old markets from a certain site and vacate the same. On the application of the Municipal Commissioner, the Government passed a resolution approving and authorising the grant of another site to the Municipality. The resolution adopted by the Government further stated, "the Government do not consider that any rent should be charged to the Municipality as the markets will be, like other public buildings, for the benefit of the whole community". Although possession of the site was made over to the then Municipal Commissioner, no formal grant was, in fact, executed as required by the relevant statute. Acting, however, on this resolution, the Municipal Corporation gave up the site on which the old markets were situated and spent a sum of Rs. 17 lakhs in erecting and maintaining markets on the new site. In 1940, the Collector of Bombay assessed the new site to Land Revenue and the Municipal Corporation, thereupon, filed a suit for a declaration that the order of assessment was ultra vires and it was enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the Corporation which can be said to have rendered the representation about non-liability to assessment of no legal effect or consequence. The invalidity of the grant does not lead to the obliteration of the representation. 22.. Can the Government be now allowed to go back on the representation, and, if we do so, would it not amount to our countenancing the perpetration of what can be compendiously described as legal fraud which a court of equity must prevent being committed? If the resolution can be read as meaning that the grant was of rentfree land, the case would come strictly within the doctrine of estoppel enunciated in section 115, Evidence Act. But even otherwise, that is, if there was merely the holding out of a promise that no rent will be charged in the future, the Government must be deemed in the circumstances of this case to have bound themselves to fulfil it. Whether it is the equity recognised in Ramsden's case [1866] L. R. 1 H. L. 129; 14 W. R. 926, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power. As pointed out by Jenkins, C. J. in Dadoba Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the representation sought to be enforced against the Government was not strictly in accordance with the statute in the sense that the representation was made in a manner, which was not in conformity with the procedure prescribed by the statute. I may also hasten to point out that though the observations of Chandrasekhara Aiyar, J., that "the invalidity of the grant does not lead to the obliteration of the representation" do not stricto senso, form the ratio of the decision in Municipal Corporation of the City of Bombay AIR 1951 SC 469 , yet these observations contained the seed and, in fact, laid the foundation for the subsequent development of the scope and ambit of the doctrine of promissory estoppel, in India, particularly, in its application to the promises made by the Government. Disagreeing with the contrary views expressed by Patanjali Shastri, J. in Municipal Corporation of the City of Bombay AIR 1951 SC 469, that the expressed provisions of the statute cannot be overridden by considerations of the equity and, at the same time, approving the views expressed by Chandrasekhara Aiyar, J., in Municipal Corporation of the City of Bombay AIR 1951 SC 469 , that courts must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed by the Government for the purpose of enabling it to keep to its promises, law is not powerless, in appropriate cases, to compel the Government to act in such a manner as would be necessary to enforce the contract. Logically, therefore, when the statute does not bar making of a promise or the statute does not bar the Government from granting exemption from sales tax, the Government must, acting upon its industrial policy, bring out a notification in terms of the taxing statute in order to keep to its promises rather than resile therefrom on the pretext that unless exemption is granted in the manner in which the statute has prescribed for granting of exemption, no enforceable contract can be made out. In other words, a careful reading of the decision in Century Spinning Mfg. Co. Ltd. [1970] 1 SCC 582, shows that if the conditions precedent for application of the doctrine exist, the court may compel the Government to act in terms of its promises by forcing it to act in accordance with law, that it to say, if the law permits or does not prohibit act of granting of exemption of sales tax or if the law does not prohibit the Government from acting upon the representation that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 439, and Birmingham District Land Co. v. London North Western Rly Co., [1888] 40 Ch. D. 268, lay down that the doctrine of promissory estoppel cannot itself be the basis of a cause of action and it cannot found a cause of action; it can only be used as a shield and not a sword, the court reacted, in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh reported in [1979] 44 STC 42 (SC); [1979] 2 SCC 409, by observing as follows: "This narrow approach to a doctrine which is otherwise full of great potentialities is largely the result of an assumption, encouraged by its rather misleading nomenclature, that the doctrine is a branch of the law of estoppel. Since estoppel has always been traditionally a principle invoked by way of defence, the doctrine of promissory estoppel has also come to be identified as a measure of defence." Making it explicit that the doctrine of promissory estoppel can form a cause of action against the Government, the Supreme Court in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh reported in [1979] 44 STC 42; [1979] 2 SCC 409, justified such an approach in the following words: "13(1). . . . . . It is true that to allow pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 SCC 409, the case was that acting on the basis of the representations made by the Government that the sugar factories, if set up, would be exempted from payment of sales tax for a period of three years from the date of commencement of the production, the petitioners had set up their sugar factories. When the State Government refused to honour its representation and wanted to force the petitioners to pay sales tax for the period for which the Government had made such a promise, the petitioners approached the court. The plea taken by the Government for not keeping to its promises were, to a great extent, same as in the present case. The pleas were as follows: (1) in the absence of notification under section 4-A, the State Government could not be prevented from enforcing the liability to sales tax imposed on the petitioners under the provisions of the Sales Tax Act; (2) that the petitioners had waived their right to claim exemption; and (3) that there could be no promissory estoppel against the State Government so as to inhibit it from formulating and implementing its policies in public interest. The apex Court, in Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42 (SC); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that, in view of the facts which have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt observed, "The appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. De Smet (India) Pvt. Ltd., Bombay, and setting up a vanaspati plant, in the belief induced by the representation of the Government that sales tax exemption would be granted for a period of three years from the date of commencement of the production. The Government was, therefore, bound on the principle of promissory estoppel to make good the representation made by it. Of course, it may be pointed out that if the U.P. Sales Tax Act, 1948, did 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 decide and not the Government, whether the Government should be held exempt from liability. This is, as Bhagawati, 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". Elaborately dealing with the various facets of the decision in Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCC 409, a two-Judge Bench in State of Punjab v. Nestle India Ltd. reported in [2004] 136 STC 35 (SC); [2004] 6 SCC 465, has pointed out that the court, in Motilal Padampat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment, 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.'' What emerges from the above discussion is that when the 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. It may, now, be noted that it was in Jit Ram Shiv Kumar v. State of Haryana [1981] 1 SCC 11, that a two-Judge Bench took the view that the plea of estoppel is not available against the Government in exercise of its legislative or statutory functions. Jit Ram Shiv Kumar [1981] 1 SCC 11, is, of course, a case in which the representation was made by a person, who had no authority to make the representation. The note of disagreement, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not think it was right on their part to express their disagreement with the enunciation of the law by a 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 case [1980] 3 SCR 689; [1981] 1 SCC 11; AIR 1980 SC 1285, and we are clearly of the view of 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, represent the correct law in regard to the doctrine of promissory estoppel and we express our disagreement with the observations in Jit Ram's case [1980] 3 SCR 689; [1981] 1 SCC 11; AIR 1980 SC 1285, to the extent that they conflict with the statement of the law in Motilal Sugar Mills' case [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409; [1979] SCC (Tax) 144, and introduce reservation cutting down the full width and amplitude of the propositions of law laid down in that case." The limitations to the doctrine of promiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment not keep itself within the bounds of the promise made by it. In short, as long as, by asking the Government to keep to its promise, the court does not force the Government to act contrary to law or against supervening public interest, the court will not be doing anything wrong. When a statute prohibits or bars enforcement of the representation made by the Government, the court would not enforce the representation against the Government, for, the Government cannot be compelled to act contrary to the statute. Logically, therefore, when a sales tax enactment contains provisions enabling the Government to grant exemption from payment of sales tax, the court can, in an appropriate case, force the Government to act in terms of this representation and it would be no defence for the Government to say that necessary notification, in terms of the taxing statute, has not been brought out or published, for, the Government, in such a case, can be bound by its promise to exempt person(s) from payment of sales tax. Closely following the decision in Godfrey Philips India Ltd. [1985] 4 SCC 369, a two-Judge Bench of the Supreme Court, in Pournami Oil Mills v. State of Kerala reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, we are of the view that both the orders are covered by the provisions of section 10 of the Act, though in the earlier order there is no reference to section 10. It is a wellsettled principle of law that where the authority making an order has power conferred upon it by statute to make an order made by it and an order is made without indicating the provision under which it is made, the order would be deemed to have been made under the provision enabling the making of it. We accordingly hold that both the orders are under section 10 of the Act. 7.. Under the order dated April 11, 1979, new small-scale units were invited to set up their industries in the State of Kerala and with a view to boosting of industrialisation, exemption from sales tax and purchase tax for a period of five years was extended as a concession and the five-year period was to run from the date of commencement of production. If in response to such an order and in consideration of the concession made available, promoters of any small-scale concern have set up their industries within the State of Kerala, they would certainly be entitled to plead the rule of estoppel in their favour when the State of Kerala pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, 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 June 30, 1969 were of no legal effect as there is no statutory provision under which such concessions could be granted and the order of June 30, 1969 was ultra vires and bad in law. We totally fail to see how an Assistant Commissioner or Deputy Commissioner of Sales Tax who are functionaries of a State can say that a concession granted by the State itself was beyond the powers of the State or how the State can say so either. Moreover, if the said argument of learned counsel is correct, the result would be that even the second order of January 12, 1977 would be equally invalid as it also grants concessions by way of refunds, although in a more limited manner and that is not even the case of the appellants." In the case at hand too, the affidavit, on behalf of the contesting respondents, has been sworn by a Joint Commissioner of Taxes, who is a functionary of the State. In tune with the decision in Dharmendra Trading Company [1988] 70 STC 59 (SC); [1988] 3 SCC 570, I am bound to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s detriment. The facts of the present case fit into the facts of the case, which the apex Court had considered in Dharmendra Trading Company [1988] 70 STC 59 (SC); [1988] 3 SCC 570. When this decision is applied to the factual matrix of the present case, there remains no escape from the conclusion that when the Government had announced sales tax exemption under the Industrial Policy of 1991 and repeated its assurance by notification, dated April 26, 1994, aforementioned and when the Government does have the power under the relevant sales tax enactment to grant such exemption, it will be no defence for the Government to say that until the notification is issued under the relevant statute, promise made by the Government cannot be enforced, for, enforcing of such promise would not amount to directing the Government to act contrary to law. Had the relevant statute not provided for such exemption, the matter would have been different. Pine Chemicals Ltd. v. Assessing Authority reported in [1992] 85 STC 432 (SC); [1992] 2 SCC 683, is a case, decided by a Bench of three-Judge, which did notice the decisions rendered in Pournami Oil Mills [1987] 65 STC 1 (SC); [1986] Supp SCC 728 and Dha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision, then even if that provision is not specifically referred to, the act or order shall be deemed to have been done or made under the enabling provision. Thus the Government orders satisfy all the requirements of the provisions of section 5 of the local Act. The section also does not talk of any notification; it only talks of a Government order exempting in whole or in part from payment of tax. This is very significant, if contrasted with sections 4(1) and 4(5) of the local Act relating to the fixation of the taxable point refers to a notification by the Government. The Act itself thus makes a distinction requiring a notification to be made for certain purposes and the making of a Government order in respect of certain other purposes. Moreover, since there is no form prescribed in this behalf if the particular order in effect is an exemption order, whether it takes the form of an order or notification makes no difference. But we may note from the various orders produced before us that normally in the case of grant of tax exemptions as an incentive to industry the exemption orders have generally taken the form of Government order rather than a notification. But in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e act done by the Government is invalid and ineffective for non-compliance with the mandatory requirements of law, it would be rather curious if it is held that notwithstanding such non-compliance, it yet constitutes a 'promise' or a 'representation' for the purpose of invoking the rule of promissory/ equitable estoppel. Accepting such a plea would amount to nullifying the mandatory requirements of law besides providing a licence to the (1) See para 25 of [1998] 110 STC. Government or other body to act ignoring the binding provisions of law. Such a course would render the mandatory provisions of the enactment meaningless and superfluous. Where the field is occupied by an enactment, the executive has to act in accordance therewith, particularly where the provisions are mandatory in nature. There is no room for any administrative action or for doing the thing ordained by the statute otherwise than in accordance therewith. Where, of course, the matter is not governed by a law made by a competent Legislature, the executive can act in its executive capacity since the executive power of the State extends to matters with respect to which the Legislature of a State has the power to make la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1944 required exemption to be granted by notification. Of course, the Government cannot rely on a representation made without complying with the procedure prescribed by the relevant statute, but a citizen may and can compel the Government to do so if the factors necessary for founding a plea of promissory estoppel are established. Such a proposition would not 'fall foul of our constitutional scheme and public interest'. On the other hand, as was observed in Motilal Padampat Sugar Mills' case [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409, and approved in the subsequent decisions: " 'It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned: the former is equally bound as the latter. 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'. None of these decisions has been considered in ITC Bhadrachalam Paperboards v. Mandal Revenue Officer, A.P. [1998] 110 STC 590 (SC); [1996] 6 SCC 634, except for a brief reference to Chandrasekhara Aiyar, J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riding effect, the promise would not be enforced, for, the doctrine of promissory estoppel, being an equitable relief, must yield, when so required. Though Mr. Saikia, appearing on behalf of the contesting respondents, has referred to, and relied upon, Shree Durga Oil Mills [1998] 108 STC 274 (SC); [1998] 1 SCC 573 to show that the Government can change its industrial policy or the promises made thereunder. What is of utmost importance to note is that in the case at hand, the industrial policy of the Government has not changed. Without changing the Industrial Policy of 1991 and/or the ambit of the notification, dated April 26, 1994, aforementioned, the Department of Finance, in exercise of its powers granted under the AGST Act, 1993, has sought to deny the benefit of sales tax exemption, which even the notification, dated April 26, 1994 aforementioned makes available. In such a scenario, the case of Shree Durga Oil Mills [1998] 108 STC 274 (SC); [1998] 1 SCC 573 has no application, particularly, when I notice that in Shree Durga Oil Mills [1998] 108 STC 274 (SC); [1998] 1 SCC 573, the industrial policy was amended and the vires of the second Industrial Resolution was not challeng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eep its promises and if it fails to keep its promises, the law may force it not to resile from the promises made by it. In no uncertain words, made it clear the Supreme Court, in Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409, that the court would not act on the ipse dixit of the Government, for, it is the court, which has to decide and not the Government, whether the Government should be held exempt from the liability. In the case at hand, an industrial unit, such as the petitioner-company, was made ineligible from receiving the benefit of sales tax exemption by issuing notification, dated March 18, 1993. This was, however, changed by notification, dated April 26, 1994, aforementioned, and the industrial units, such as the one at hand, was made eligible. The reason for making industrial units, so eligible, was obviously to avoid hardship to the persons concerned, who had, acting upon the promises made by the Government, already set up the industries. No supervening public interest could be brought out on the record, on behalf of the respondents, to show that the Government should be allowed to resile from the promises that it had ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing [1995] 1 SCC 274, was that the Government had presented sufficient materials before the court to show that it was, in the larger public interest, that the exemption be withdrawn. It was, thus, on the basis of twin factors, namely, that there was no promise held out by the notification, in question, and also that larger public interest justified the withdrawal of exemption that the decision in Kasinka Trading [1995] 1 SCC 274, was rendered. The decision in Shrijee Sales Corporation v. Union of India [1997] 3 SCC 398, relied upon by Mr. Saikia, is a case in which the correctness of the decision in Kasinka Trading [1995] 1 SCC 274, came to be re-examined by a Bench of three Judges of the apex Court and the decision reached in Kasinka Trading [1995] 1 SCC 274, came to be affirmed therein. In Shrijee Sales Corporation [1997] 3 SCC 398, too, the specific finding of the court was that "there is a supervening public interest and hence it should not be mandatory for the Government to give a notice before withdrawing the exemption" and it was, in these circumstances, that the court, in Shrijee Sales Corporation [1997] 3 SCC 398, declared that the decision in Kasinka Trading [1995] 1 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by taking resort to its statutory powers. If the granting of sales tax exemption to the re-rolling mills set up in the sub-divisions of Kamrup is not in public interest, nothing stops the Government from modifying its own industrial policy and/or withdraw the incentives. When the State Government does not change its policy, which it has announced, its Finance Department cannot, in exercise of its statutory powers, act in a manner, which would run contrary to the Government's own policy. The decisions in Kasinka Trading [1995] 1 SCC 274 and Shrijee Sales Corporation [1997] 3 SCC 398, were considered by the apex Court in the case of Pawan Alloys Casting Pvt. Ltd. v. U.P. State Electricity Board [1997] 7 SCC 251, and the court has held that the notifications, impugned therein, were not designed or issued to induce the appellants to import PVC resin and, strictly speaking, therefore, the notifications could not have been said to have extended any "representation", much less a "promise", to anyone enabling him to invoke the doctrine of promissory estoppel against the State. It must, therefore, be held, in the light of the decision in Pawan Alloys Casting Pvt. Ltd. [1997] 7 SCC 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government to resile from the promise, which it has made, yet, if on giving reasonable opportunity to the promisee, it is possible for the promisee, to restore status quo ante, the Government may resile from the promise made by it. If, however, the promisee cannot resume his position, the promise would become final and irrevocable and, thereafter, it would be impermissible for the Government to resile from the promise made by it except if it can plead and prove to the satisfaction of the court that overriding public interest constrains it to withdraw the incentives promised. In the light of the above position of law, the court, in Pawan Alloys Casting Pvt. Ltd. [1997] 7 SCC 251, examined if the promisee could resume the status quo ante and found, on such examination, that it was not possible for the person, who had acted upon the promises made by the Government, to restore the status quo ante. The court, therefore, in Pawan Alloys Casting Pvt. Ltd. [1997] 7 SCC 251, held, by invoking the doctrine of promissory estoppel, the Government bound by the promises that it had made. What follows from a close and combined reading of the decisions in Kasinka Trading [1995] 1 SCC 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision rendered upon the validity of the withdrawal of the previous policy and introduction of a new policy. In the present case, there is no change in policy and the industrial policy remains intact and, hence, the decision in P. T. R. Exports (Madras) Pvt. Ltd. [1996] 5 SCC 268, is not applicable to the case at hand. The decision reached in Hira Tikkoo v. Union Territory of Chandigarh [2004] 6 SCC 765, relied upon by the respondents, is also of no assistance to the respondents inasmuch as no larger public interest enabling the Government to resile from the promises made by it could be shown. In fact, the averments made in the writ petition, which have remained wholly undisputed, is that the petitioner-company has been granted transport subsidy as well as subsidy on electricity. If the larger public interest required the Government to resile from its commitment, I fail to see as to how the Government continued to grant transport and electricity subsidised. In fact, no record has been produced by the contesting respondents to even remotely indicate that any exercise was carried out to determine if the public interest required withdrawal of the incentives given under the relevant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing like implied collection of taxes in a taxing statute and, in any case, the petitionercompany had not, according to Dr. Saraf, collected any tax either impliedly or explicitly. From the decision in Pine Chemicals [1992] 85 STC 432 (SC); [1992] 2 SCC 683, it is clear that the determination of the question as to whether the impugned notification is or is not legally valid has nothing to do with the collection, if any, of sales tax by the petitioner-company. If the petitioner-company has collected any sales tax, remedy for recovery thereof lies within the relevant statute and this fact will not create any impediment in the way of this court granting such relief(s) as the parties may be entitled to. It has been contended by Mr. Saikia that the ignorance of law can be of no avail to the petitioners, for, the petitioners ought to have known, contends Mr. Saikia, that until a notification was issued under the relevant provisions of the AGST Act, 1993, the exemption from payment of sales tax promised by the Government under the Industrial Policy of 1991 would not be available to them. While dealing with this contention, it is necessary to point out that in a similar situation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the State Government." In the face of the above golden words used, in Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCR 641; [1979] 2 SCC 409, showing that there is no such principle of law that "every person must be presumed to know the law", it is no longer open to the respondents to contend, as contended by Mr. Saikia, that the petitioner-company ought to have known that in the absence of appropriate notification under the relevant statute, the promise for exemption from payment of sales tax made under the relevant industrial policy and/or the notification, dated April 26, 1994, would not be made available to the petitioner-company. In short, this plea, raised on behalf of the respondents, is wholly untenable in law. The true meaning and scope of the doctrine of promissory estoppel, in the realm of governmental promises, may be summarised thus: Where the Government makes a promise knowing or intending that it would be acted upon by the promisee and, in fact, the promisee, acting upon the promise, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e promise itself is not contrary to law, the Government would be required to abide by the promise. The Government has to function as a cohesive body and its different organs or departments have to act in tandem with each other and in harmony with each other on the principles of collective responsibility. The constitutional scheme of governance of the Government does not permit the Government to work in violation of the principles of collective responsibility. It will, therefore, be no defence for the Finance Department, in a case of the present nature, to merely contend that until the time, requisite notification, in terms of the relevant statute, is published, the promise for tax exemption made by the Government under its industrial policy cannot force the Government to grant such exemption, for, there is no estoppel against the statute. In a case of this nature, if the promise made by the Government is not barred by law, though the same might not have been made strictly in accordance with the relevant statute, yet it will be the duty of the court to trace out the source of power of the Government and if the power is found to exist with the Government, the Government cannot be all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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