TMI Blog2005 (1) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment of section 39 was made by inserting the sub-section (4) along with the Explanation by Act, 3 of 2003 with the effect from April 1, 2003 which is stated hereunder: (4) Notwithstanding the provisions contained in sub-section (1), but subject to the provisions of sub-section (3), every dealer who has been enjoying, or has been entitled to enjoy, the benefit of exemption from payment of tax under sub-section (1), shall cease to enjoy such benefit of exemption on expiry of (a) Five years from the date of his first sale of the goods manufactured in his newly set up small-scale industrial unit if such unit is situated within the areas of the Kolkata Metropolitan Planning Area as described in the First Schedule to the West Bengal Town and Country (Planning and Development) Act, 1979 (West Ben. Act 13 of 1979); or (b) seven years from the date of his first sale of the goods manufactured in his newly set up small-scale industrial unit if such unit is situated in any areas other than the areas referred to in clause (a): provided that the dealer shall not be entitled to enjoy the benefit of exemption for the full period as referred to in clause (a), or clause (b), as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l known, is a rule of evidence which prevents one party from denying the existence of fact which he represented as existing and upon which representation another person has been induced to act to his detriment. In Sales Tax Officer v. Kanhaiya Lal Makund Lal Saraf [1958] 9 STC 747 (SC); AIR 1959 SC 135 their Lordship observed (page 760 of STC): ...Estoppel arises only when the plaintiff by his acts or conduct makes a representation to the defendant of a certain state of facts which is acted upon by the defendant to his detriment; it is only then that the plaintiff is estopped from setting up a different state of facts... The doctrine of promissory estoppel, is in fact, an extension of the principle of estoppel and before it comes into play it must, as in the case of estoppel, be proved that the other side has acted upon the representation in question to its prejudice. The said doctrine has been formulated with characteristic lucidity in Halsbury's Law of England, third Edition, volume 15 page 175 in the following terms: Promissory estoppel, when one party has, by his words or conduct made to the other a promise or assurance which was intended to affect the legal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a case the principle of promissory estoppel did not apply. Arvind Industries v. State of Gujarat [1995] 99 STC 333 (SC); [1995] 6 SCC 53 the honourable Supreme Court similarly held after considering the application of the principle of promissory estoppel that the Government since could grant exemption to the industries in view of its industrial policy, it was equally free to modify its policy by withdrawing the fiscal benefits as and when required. In State of Rajasthan v. Mahaveer Oil Industries [1999] 115 STC 29 (SC); AIR 1999 SC 2302 the honourable court held that in public interest the incentive scheme could be withdrawn prospectively. The supervening public interest would prevail upon any promissory estoppel even when the party acted on the promise made by the State. Thus, the State is not prevented from withdrawing the exemption scheme granted on the basis of its industrial policy. Now, the question comes for consideration if the respondents could make out a case of public interest so as to withdraw the exemption of tax benefit. On behalf of the petitioners, Dr. Pal, submits that the Government has to disclose that the public interest will be prejudiced if the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk for the welfare of citizen. On going through the affidavit-in-opposition, we find from the relevant paragraph that the respondents have disclosed that the Government is passing through severe financial crisis and therefore, has taken steps to check on the growth of non-plan expenditure. The sales tax is the main source of revenue of the State Government and development expenditures and welfare of the citizens would only be possible if there is increase in the State revenue. The amendment as such was made to protect the public interest. In several cases, it was also held, in public interest, sales tax is imposed so that the State may discharge its obligation of development. It is, therefore, within the competence of the State Government to alter or modify any provision in public interest. We also find that the sovereign dues was given preference to other charges only for the reason that State requires money for the development of the State. The legal maxim quando jus domini regis et subditi concurrunt, jus regis prae ferri debet i.e., where the title of the king and that of a subject concur the King's title must be preferred has already been recognised. The apex court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be taken away without the consent of the owner. Vested rights can arise from contracts, from statute and from operation of law... The expression vested right has been explained in Black's Law Dictionary as quoted below: In Constitutional law, rights which have so completely and definitely accrued to or settled in a person that they are not subject to be defeated or cancelled by the act of any other private person, and which it is right and equitable that the Government should recognise and protect, as being lawful in themselves, and settled according to the then current rules of law, and of which the individual could not be deprived arbitrarily without injustice, or of which he could not justly be deprived otherwise than by the established methods of procedure and for the public welfare. ... Immediate or fixed right to present or future enjoyment and one that does not depend on an event that is uncertain. A right complete and consummated, and of such character that it cannot be divested without the consent of the person to whom it belongs, and fixed or established, and no longer open to controversy. In several decided cases, Mohd. Rashid Ahmad v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant and machineries being limited to 35 lakhs. Thus, according to learned lawyer, two different classes of EC holders have been created by amendment of the statute. It is, therefore, argued that had it been known to such EC holders regarding change of the concept of capital assets, they could have invested maximum amount in order to get maximum tax relief as would be enjoyed by other class of EC holders. On behalf of the respondents, it is submitted that since the amendment has prospective effect, the EC holders can enjoy the benefit of 200 per cent on investment in the plant and machinery even after April 1, 2003. There is no bar if the EC holders' investment is more on the land, factories, etc., after April 1, 2003. Such dealers may also be entitled to get the benefit of 200 per cent. The prospective operation of the amended provision has thus been admitted by the respondents, since the principle about the retrospectivity of the statutes affecting rights appears to be well-settled. The statutory provisions creating substantive right are ordinarily prospective, they are retrospective only if by express words or by necessary implications the Legislature has made them retros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3). It is argued that since the section 39 does not authorise the rule-making authority to prescribe the time-limit within which such informations are to be furnished, the rule 101A of the West Bengal Sales Tax Rules, 1995 is ultra vires. On behalf of the respondents, it is submitted that section 104 of the West Bengal Sales Tax Act, 1994 has empowered the State Government to make rules by notification in the matter of carrying out the purpose and object of this Act. Hence, rule 101A is not ultra vires. Section 104 of the Act, 1994 may be quoted hereunder to decide the issue properly. Power of State Government to make rules (1) The State Government may, by notification, make rules, with prospective or retrospective effect, for carrying out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the matters which under any provision of this Act are required to be prescribed, or to be provided for by rules. (3) In making any rules under this section, the State Government may direct that a breach thereof shall be punishable with fine not exceeding five hundred rupees and, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried to different places within and outside West Bengal. Imposition of tax in such circumstances, according to the learned lawyer, would directly restrict the freedom of his small business which is violative of articles 301 and 304(b) of the Constitution, since it would create financial hardship to transport the goods to the different places for the purpose of business. The learned lawyer for the petitioner relied on the principles laid down in Atiabari Tea Co. Ltd. v. State of Assam AIR 1961 SC 232. On behalf of the respondents, the learned State Representative Mr. Goswami submits that withdrawal of exemption of tax does not attract articles 301 and 304(b) of the Constitution, inasmuch as, the Legislature has authority to withdraw exemption which was granted in view of its industrial policy. It is the settled principle of law that there will be violation of the freedom guaranteed by article 301 only where a legislative or executive Act operates to restrict trade, commerce or intercourse directly or immediately as distinct from creating some indirect or inconsequential impediment which may be regarded as remote [Krishnan (G.K.) v. State of Tamil Nadu AIR 1975 SC 583]. In bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the party invoking the doctrine and bald expression without supporting material to the effect that the doctrine is attracted because the party invoking the doctrine had altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The Government can change its industrial policy if the situation so warranted and merely because an assurance was given for a particular period, it does not mean that the Government cannot amend and change the policy under any circumstances. If the party claiming application of the doctrine acted on the basis of a notification, it should have known that such notification was liable to be amended or rescinded at any point of time, if the Government felt that it is necessary to do so in the public interest. Therefore, it is the supervening public interest which will prevail upon all circumstances and the Government has the power to change its stand and to withdraw the representation made by it which induced persons to take certain steps which might have gone adverse to the interest of such persons and to the account of such withdrawal. Thus the Government is competent to resile from the promis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of fiscal policy is, therefore, absurd. The doctrine of promissory estoppel is certainly valid when a benefit is retrospectively withdrawn. But section 39 has been amended prospectively as 200 per centum of the gross value of the fixed assets would be computed from the day of coming into force of the amendment. So no right that had accrued ad personam prior to the day on which the impugned amendment became law, has been curtailed. I revert to the superior equity of legislation overriding individual equity. Here the superior equity relates to, as I have already observed, the fiscal policy of the Government. Salus populi est suprema lex . Regard for the public welfare is the highest law. In a cause celebre which is a landmark of Anglo-Saxon law (Per lord Camden in Entick v. Carrington 19 Howell St. Tr. 1030 at 1066) it has been laid down that on this principle depends the right of the State to interfere with and place a limit to rights of property for the purposes of revenue and the support of the Government. Section 39 has been amended precisely ...for the purposes of revenue and the support of the Government . The impugned amendment evidently reveals that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been codified and reflected in sub-section (4) and the Explanation appended thereto. Therefore rule 101A cannot be unconstitutional. In this respect the judgment of the honourable Supreme Court (Three-Judges Bench) in the case of Khambhalia Municipality v. State of Gujarat reported in AIR 1967 SC 1048 is crucial. The point raised in respect of rule 101A won't, therefore, wash. Now about (3) or the consonance of section 39(4) with the fundamental rights. Apropos of article 19(l)(g): The Government of a State may give incentives to lure industrialists of other States into it or to entice industry from one area of the State to another. But it is economically a commonplace that an industrial unit must pave its way without any incentive. If the unit is not viable without the incentive and folds up following the withdrawal of the incentive under section 39(4), as claimed by some petitioners, then the petitioner is certainly cheating the State. A tax on sales is an indirect tax and it is paid mainly by the consumers, the paltry part incident on the producer being determined by what economists call the elasticities of demand and supply of the product. So the producer whos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the State in respect of that unit. So a dealer belonging to the abovementioned category (b) who, according to the counsel, was discriminated against might have derived vastly greater benefit than a dealer belonging to category (a). The tax forgone by the State in the case of any industrial unit depends on its turnover and not by any manner of means on the period of holiday enjoyed by it. So the favour shown by the State to the dealers does vary inter se but not on the basis of the categories (a) and (b) that the counsel talks about. The inescapable conclusion is that the time of tax holiday does not define a right or a privilege; it only indicates the duration of a legislative policy. It is evidently a non sequitur that the curtailment of the period of tax holiday is a curtailment of a privilege or a vested right. So the contention that section 39(4) is not in consonance with article 14 won't wash. All the counsel for petitioners marshalled their specious arguments in a masterly manner. But they appeared to sing from the same hymn-book, some piano and some fortissimo. The hymn-book seems to be based on what is lightly called Matthew principle, unto every one that hath sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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