TMI Blog2008 (12) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... The impugned notifications dated March 31, 2006, by which the earlier notifications dated April 29, 1970 and April 1, 1992 have been rescinded, are hereby quashed and set aside in all these petitions and the original certificate at annexure G granting exemption for the period from December 1, 2005 to November 30, 2008 would remain in force till it expires. As the issue regarding grant of benefit of exemption under the newly substituted VAT Act would be either a legislative function by issuance of notification in exercise of power conferred under the statute, or it would be a matter of policy to be decided by the respondent-Government as to how the benefit of exemption should be extended, for which, while substituting the VAT Act, the entries have been deleted and some of the entries are specified, it may not be proper for this court to issue directions granting the reliefs as prayed for regarding the exemption under the newly substituted VAT Act. However, it will be open for the petitioners to apply to the respondent-Government by making a representation highlighting the fact that the industries are established under the KVIC Act and also the new scheme also has the same object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , briefly summarized, are as under: The petitioner No. 2 in Special Civil Application No. 23720 of 2006 and other petitioners are village industries established for the purpose of availing of the benefit of exemptions from sales tax granted under the Gujarat Sales Tax Act, 1969 (hereinafter referred to as, the Sales Tax Act ). It is averred that the petitioners are entitled to the protection of their fundamental rights guaranteed under the Constitution of India. It is averred that the petitioners are carrying on business of village industries as defined under the Rural Employment Generation Programme (for short, REGP ) as formulated under the Khadi and Village Industries Commission Act, 1956 (for short, the KVIC Act ) read with the provisions of the Sales Tax Act and the Rules made thereunder. The action of the respondents of not continuing and/or granting and/or extending the benefit of tax exemption to the petitioners has been challenged in the present group of petitions inasmuch as the petitioners were enjoying the benefit of sales tax exemption under the Sales Tax Act and when it has been substituted by bringing into force the Gujarat Value Added Tax Act, 2003 (hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the erstwhile Sales Tax Act would remain in operation till the expiry of the date or the period as the same cannot be rescinded once, on the basis of such promise of benefit of exemption under the Sales Tax Act, the petitioners have relied upon and acted on it and, therefore, the respondents are also not entitled to rescind or withdraw such benefit on the principle of promissory estoppel. It is contended that the petitioners who are similarly situated are, therefore, challenging the impugned action of rescinding or withdrawal of the benefit granted under the Sales Tax Act and in fact it ought to have been extended or continued under the VAT Act on the same footing like other industries under the khadi or village industries and such action is therefore challenged on the ground of promissory estoppel and legitimate expectation. It is averred that the industry of the petitioners is a village industry recognized by the Khadi and Village Industries Commission (for short, KVIC ) of which recognization has been issued, which have been produced on record. KVIC is a statutory body created under the KVIC Act for the purpose of promoting and developing khadi and village industries. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly cottage industries but it would also promote economic interest of the weaker sections of the country as a whole. It is, therefore, contended that the KVIC Act and the Gujarat Khadi and Village Industries Act, 2006 as well as the Directive Principles of State Policy clearly envisage that the policy of the respondents is to encourage such village industries in the rural areas, like the one carried out by the petitioners. It is therefore averred that village industries like the petitioners have enjoyed exemptions from sales tax for more than 40 years as incentive offered by the Government as and by way of encouragement for setting up such industries in villages or rural areas. It is also averred that for the petitioners, the promise of the respondents of granting exemption of sales tax, was one of the main reasons which persuaded them and other village people to take up such activity of setting up industries in far-flung village or rural areas, which otherwise lack adequate infrastructure, qualified manpower, etc. However, the Sales Tax Act was substituted with the VAT Act which are both essentially enacted for the same purpose, i.e., levy and collection of tax in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006. It has been contended that the effect of coming into force of the aforesaid Act has been that the Sales Tax Act stood repealed. However, section 100 of the VAT Act, which refers to repeal and saving clause, will have application. Further, it has been also contended that section 5 of the VAT Act contained a provision for granting exemption and the earlier exemption granted to khadi industries was continued under the VAT Act for which reference has been made to entry 36B of Schedule I of the VAT Act, which is also produced on record at annexure J in SCA No. 23720 of 2006. It is further contended that respondent No. 4, in exercise of power conferred by sub-section (2) of section 5 of the VAT Act, continued the tax exemptions granted to sale or purchase of goods by the industrial units or the deferment of tax to such industrial units under the earlier law though the petitioners have been meted out a different treatment, which is the bone of contention. Therefore, it has been contended that though the petitioners are similarly situated like other industrial units or khadi industries to whom the benefits have been extended in one form or other regarding exemption from payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners in Special Civil Application No. 23720 of 2006 in setting up the unit and similarly such benefit has been availed of by the other petitioners. It has been, therefore, contended that the benefits under the REGP have already been ensued in favour of the petitioners and they have availed of the same. It is also contended that the benefits or exemption granted under section 49 of the Sales Tax Act can always be withdrawn and the Government is entitled to modify or withdraw any such exemption. It is, therefore, contended that section 49 of the Sales Tax Act empowers the State Government to rescind or modify such exemption subject to the condition that the same has to be published in the official gazette. It is denied that sales tax as well as VAT are essentially the same. It is contended that the VAT is a multi-point sales tax and is collected on value addition only at each stage. The input-tax credit accumulated from the previous stage is adjusted against the output-tax paid in the return period. The sales tax is collected at one single stage of purchase or sale of goods while VAT is a multi-point taxation system. Further, under the VAT there is a provision for set-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise. It is denied that the representations of the petitioners have been ignored as alleged. It is contended that under the provisions of the VAT Act, respondent No. 1 had set up a high-powered cabinet sub-committee and the said committee has considered number of issues arising under the VAT Act including the advisability of continuing exemptions granted under the Sales Tax Act as well as granting of refund/remission under the VAT Act. The committee took into account the relevant facts and material, the scheme and provisions of the VAT Act and also considered visit reports of various aspects including the necessity of providing impetus to village industries after considering the development and potential of various activities undertaken by such industries. It was recommended not to extend the exemptions granted under the Sales Tax Act to all village industries and looking to the aforesaid factors and provisions of the VAT Act only certain industrial activities as specified in the notifications dated August 18, 2006 were considered and recommended for the purpose. Thus, while determining the aforesaid issues, the committee also considered the revenue implications as agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be effective from December 1, 2005 to November 30, 2008. It also provides that sale by holder of such certificate of the product of village industries and/or sale of khadi, etc., mentioned in the list shall be exempt from tax and also such sales by the dealer of these products purchased from the holder of this certificate shall be exempt from the tax. Learned Senior Counsel Mr. Shelat submitted that, but for this concession granted, it would have been difficult to set up such an industry. Learned Senior Counsel Mr. Shelat, therefore, submitted that it is only because of such policy and the promise held out by the Government that the industries of the petitioners would be exempt from sales tax, that they were set up and the element of tax was never counted as a part of the cost of the projects. It was submitted and emphasized that the petitioners cannot meet with the competition from other industries. It is on the basis of such policy and the promise held out by the Government regarding exemption from the sales tax that the petitioners had set up the industries. Learned Senior Counsel Mr. Shelat, therefore, submitted that, as it is evident from the certificate at ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding the exemption granted under the VAT Act. He also referred to page 138 and referred to the notifications dated March 31, 2006 issued under the VAT Act which also provide for the exemptions in exercise of powers under section 5 of the VAT Act. However, the exemption which has been granted as per the earlier notification dated April 1, 1992 granted to the petitioners, which was to remain effective till November 2008, has been withdrawn, which is the bone of contention. Learned Senior Counsel Mr. Shelat submitted that the moot question which is required to be considered is that when the VAT Act was brought into force in place of the erstwhile Sales Tax Act, can the Government withdraw the exemptions which have been granted under the erstwhile Sales Tax Act for a definite period, that is, from December 1, 2005 to November 30, 2008? Learned Senior Counsel Mr. Shelat submitted that, in fact, section 100 of the VAT Act, which is a repeal and saving clause, would apply, and emphasizing on section 100 of the VAT Act, it was strenuously submitted by him that the benefit which was granted under the erstwhile Sales Tax Act would be saved and he further emphasized that the repeal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oners have been withdrawn and, therefore, the moot question before the court is whether such a withdrawal of the benefit of exemption from the tax under the previous law could be valid when it has been replaced by the newly enacted VAT Act, which again has a provision for grant of exemptions. This issue also requires to be considered with reference to section 100 of the newly enacted VAT Act, which has reference to the repeal and saving clause, and as submitted above, clearly provides for the right, title, interest acquired or accrued and also the notification issued under the erstwhile Sales Tax Act. Learned Senior Counsel Mr. Shelat also emphasized and submitted that it will also have to be considered in light of the doctrine of promissory estoppel. Learned Senior Counsel Mr. Shelat also referred to the provisions of the KVIC Act. He also referred to the Government notification dated April 1, 2006 issued under the VAT Act at annexure L at page 140 and emphasized that it clearly provides that the Government of Gujarat continues the tax exemptions granted to the sales or purchases of goods by industrial units or the deferment of tax to such industrial units under the earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Counsel Mr. Shelat, referring to the scheme of both the Sales Tax Act and the VAT Act which was brought into force with effect from April 1, 2006, submitted that the new Act has replaced the erstwhile Sales Tax Act and the definition of sale is the same in both the Acts. Similarly, the provision for grant of exemption is also there in the newly enacted VAT Act. Therefore, the action of the respondent-Government in withdrawing the benefit of exemption from payment of sales tax on enactment of the substituted new VAT Act would not be justified till the expiry of the notification which has been granted in favour of the petitioners under the erstwhile Sales Tax Act to remain in effect till November, 2008. Learned Senior Counsel Mr. Shelat again referred to section 100 of the VAT Act, which refers to the repeal and saving clause, and emphasized referring to this provision. It also provides in detail the right, title, interest accrued and also has a reference to the notification issued earlier under the erstwhile Sales Tax Act and therefore it was strenuously submitted that the Legislature was conscious about this and, therefore, while enacting the newly substituted VAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. v. Spl. Chief Secretary reported in [2006] 145 STC 1 (SC) with particular reference to paras 14, 15, 41, 46, 72 and 73 in the judgment. He also referred to the judgment of the honourable apex court in the case of MRF Ltd. v. Assistant Commissioner (Assessment), Sales Tax reported in [2006] 148 STC 225; [2006] 8 SCC 702. Learned Senior Counsel Mr. Shelat also referred to the judgment of the honourable apex court in the case of Mahabir Vegetable Oils Pvt. Ltd. v. State of Haryana reported in [2006] 145 STC 350; [2006] 3 SCC 620, and emphasized that the doctrine of promissory estoppel even operates in the legislative field. For that purpose he referred to this judgment and submitted that in that case also the State Government issued notification with retrospective effect omitting Note 2 to Schedule III of the Rules and also amending the rule, thereby disentitling the appellant therein to the benefit of exemption. The doctrine of promissory estoppel was attracted. It has been observed by the honourable apex court, to which the learned Senior Counsel has emphasized, referring to para 25 (para 24 in STC), as under: It is beyond any cavil that the doctrine of promisso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it should be given only a limited application by way of defence. There is no reason in logic or principle why promissory estoppel should also not be available as a cause of action, if necessary to satisfy the equity. It is not necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that the promisee should have altered his position in reliance on the promise. But if by detriment we mean injustice to the promisee which would result if the promiser were to recede from his promise, then detriment would certainly come in as a necessary ingredient.... It has been further observed: (page 43 of STC) The doctrine of promissory estoppel has also been applied against the Government and the defence based on executive necessity has been categorically negatived. Where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion which was already granted were sought to be withdrawn, which has been challenged. The learned Senior Counsel also submitted that the benefit was sought to be withdrawn without giving an opportunity of hearing, and in the facts of the case reported in Bannari Amman Sugars Ltd. case [2005] 139 STC 86 (SC); [2004] Lawsuit 1382 (SC) also, even on that count it was examined referring to article 14 of the Constitution of India. Learned Senior Counsel Mr. Shelat also referred to the observations made in para 15 of the said judgment referring to the doctrine of legitimate expectation also as under: (page 97 of STC) ...If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting article 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles... In the facts of the present case, learned Senior Counsel Mr. Shelat, referring to the details in the pleadings emphasized that the petitioners, which are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that it has been so elaborately drafted which takes care of the acts done under the prevalent Sales Tax Act. He therefore supported the contentions raised by learned Senior Counsel Mr. Shelat that section 100 of the VAT Act is a complete answer to the contentions raised. Learned Counsel Mr. Shah also referred to the KVIC Act and the scheme and submitted that as referred to in the pleadings, the basic purpose or object of such an Act was to promote industries in rural areas which in turn would have the effect of promoting local areas which is in consonance with the Directive Principles of State Policy enshrined in the Constitution. It is for achieving such purpose, the benefit of exemption of the schemes is made and the notification dated April 1, 2006 granting exemption from sales tax has been issued, which is at annexure L. Learned counsel Mr. Shah, therefore, submitted that the submissions made by the learned Government Pleader referring to the legislative domain and the policy matter and also the scope of judicial review have to be considered in background of the factual scenario and the fact that the KVIC Act itself is enacted for promotion of such policy or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tensively referred to here. He has also referred to the judgment in the case of Motilal Padampat Sugar Mills Co., Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCC 409 and also in the case of Mahabir Vegetable Oils Pvt. Ltd. [2006] 145 STC 350 (SC); [2006] 3 SCC 620. Mr. Sunit Shah, learned Government Pleader, at the outset submitted that he would summarize broadly, the points before elaborating them further. For that purpose, he submitted that the submissions made by the learned advocates for the petitioners are that the rights are accrued in favour of the petitioners by virtue of entry 95 made in exercise of power under section 49(2) of the Sales Tax Act and the same can never be withdrawn or it should remain perpetual. For that purpose, learned Government Pleader Mr. Shah submitted that the submissions are two-fold that while introducing the VAT Act the erstwhile Sales Tax Act has been repealed and therefore the repealed Act has to be considered as if it never existed and whatever the benefit of exemptions are granted would be treated to have gone with the repealed Act. Further, before the repeal of the Sales Tax Act in exercise of the same power under section 49(2) of the Sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsh or has not provided for something, it cannot be substituted by the opinion of the court as it will not be within the domain of the judiciary. He, therefore, emphasized and strenuously submitted that the scope of judicial review is very limited and once it is accepted or established that the law has been made validly by the Legislature, the court has to only interpret, but cannot substitute its opinion. Learned Government Pleader Mr. Shah submitted that the submissions have been made on the presumption that notification under section 49(2) of the erstwhile Sales Tax Act for exemption is continued when the newly substituted VAT Act came into force. However, Mr. Shah, learned Government Pleader, pointedly invited the attention of the court that before the VAT Act was substituted and was brought into force, the earlier notification issued under the Sales Tax Act was rescinded or cancelled and thereafter when the VAT Act came into force, the exemptions have been granted by the Legislature considering the policy and the requirements which the Legislature has in its wisdom thought fit and desirable. Therefore, again, learned Government Pleader Mr. Shah submitted that once the notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 2006 at page 142 which refers to the eligibility criteria under the VAT Act and submitted that it provides for eligibility criteria for the benefit of exemption under the VAT Act. Similarly, another notification dated August 18, 2006 was also referred to by the learned Government Pleader in support of his submission that if the benefit was intended to be given to the petitioners, the notification would have been issued under the newly substituted VAT Act. Learned Government Pleader Mr. Shah further emphasized that before the VAT Act was brought into force, all the exemptions granted under the erstwhile Sales Tax Act were withdrawn and thereafter, while bringing into force the newly substituted VAT Act, entries have been revised and considered and the benefit of exemption under the VAT Act has been granted to some of the units, meaning thereby the Legislature has not thought it fit to continue the same benefit to many such units. Learned Government Pleader Mr. Shah also referred to the scheme of the VAT Act and submitted that there is a difference between the scheme of the Sales Tax Act and the VAT Act. Sales tax refers to the taxation at one stage which would be passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pel the Government or the public authority 'to carry out a representation or a promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make'. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. In our opinion, the doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must forever be present to the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e officer of the Government or of the public authority to make. Further, the learned Government Pleader also submitted, referring to the scheme of the newly substituted VAT Act, that it is incompatible and, therefore, the observations which have been made in this para are required to be appreciated to which he has pointedly focused, We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired it would be inequitable to hold the Government or public authority to the promise or representation made by it, the court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The learned Government Pleader has referred to and relied upon the judgment in the case of State of Rajasthan v. J.K. Udaipur Udyog Ltd. reported in [2004] 137 STC 438 (SC); [2004] 7 SCC 673 and referring to para 25, which is again a matter relating to sales tax exemption, he submitted that, an exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of exemption under the newly substituted VAT Act, which is a legislative function. Further, the learned Government Pleader also submitted that the exemption which was granted under the erstwhile Sales Tax Act, on the basis of which the claim is made on the ground of promissory estoppel, is also misconceived as, in light of the observations of the honourable apex court, the doctrine of promissory estoppel will not be attracted and there cannot be any promissory estoppel against the Legislature. Therefore, he repeated and emphasized that the benefit of exemption was granted under the erstwhile Sales Tax Act, and which having been repealed, the matter ends there and the newly substituted VAT Act, though having a power to grant exemptions, has thought it fit not to grant such benefit of exemption to a number of such industries, as stated above, limiting or restricting the grant of such benefit of exemption by removing such exemption for more than 60 entries, hence the doctrine of promissory estoppel has no application. It was submitted that, before this doctrine of promissory estoppel has applicability, there has to be a foundation for that and the precondition has to be satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the facts of the case before the honourable Supreme Court and the present case are different and therefore it will not have any application. The learned Government Pleader then referred to the national policy and submitted that the ultimate object of giving promotion or benefit of exemption is the economic development and if companies have fulfilled the criteria by making investments which are eligible, they should be granted the benefit of exemptions and the petitioners who are not covered by such criteria would not be entitled for such exemption. He, therefore, submitted that the comments and the submissions made referring to fact that benefit of exemption is granted to certain industrial groups or units which could afford and which could have made higher investment are sought to be conferred with such benefit of exemption, whereas the units like the petitioners which have set up industries under the KVIC Act with the basic object of promoting the industries in village areas are sought to be denied such benefit and therefore it is contrary to the very basis or the basic policy cannot be accepted and such arguments deserve to be rejected. He also referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT Act. He also referred to the Gujarat Sales Tax Act and submitted that what has been provided in the Gujarat Sales Tax Act is not provided or covered in the newly substituted Gujarat VAT Act. For that purpose he referred to section 15 of both the Acts and submitted that the purchase tax is not covered in the newly substituted VAT Act. Similarly, he referred to section 5(1)(b) and submitted that it has to be read and the judgments or observations made in the judgment referred to and relied upon by learned counsel for the petitioners have to be read with the provisions of the statute and therefore the applicability of the erstwhile Sales Tax Act itself would arise and he has strenuously submitted that promissory estoppel would not apply to the legislative field and therefore the court may not interfere in the domain of the Legislature as it has to confine itself only to the interpretation part of the statute, more particularly so in case of the fiscal law. The learned Government Pleader also referred to the scheme of the VAT Act and tried to submit that it is different from the Sales Tax Act and withdrawal of the notification granting benefit of exemption to the petitioners wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, that the certificate of exemption cannot be construed as a promise. Further, it was submitted that it does not lay down any period of validity and therefore, in exercise of the same power, it was withdrawn or rescinded by the Government. It was also submitted that the notification is issued by the Commissioner of Sales Tax and not by the Government and the promise has to be by the Government, which is not made out. Lastly, the learned Government Pleader submitted that in any case it is a policy decision and also, as submitted hereinabove, whether to grant exemption under the newly substituted VAT Act is a legislative function and, therefore, the court may not interfere and may not grant any relief as prayed for and the petitions may be dismissed. Learned Senior Counsel Mr. S.N. Shelat for the petitioners, again, referred to the Government notification dated March 31, 2006 issued by the Finance Department under the Sales Tax Act and submitted that it is by this notification the earlier notifications dated April 29, 1970 and April 1, 1992 have been rescinded and, therefore, it has been challenged. He also referred to the certificate of exemption under entry 74 of Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to come, but at least till the expiry of the period of the certificate issued, i.e., up to November 30, 2008. It is observed in the same para that permanence would mean unless altered by statute. Thus, when a right is accrued or vested, the same can be taken away only by reason of a statute and not otherwise. Thus, a notification which was duly issued would continue to govern unless the same is repealed. He also referred to the observations made in paras 89-93 to substantiate and support the contention that the earlier certificate of exemption issued under the erstwhile Sales Tax Act would remain in force and it would be saved by virtue of section 100 of the newly substituted VAT Act. For that he referred to section 100 of the VAT Act and pointedly referred to the observations in paras 89-93 and submitted that the court is required to consider what would be the effect when the statute is repealed and another statute is brought into force with such repeal and saving clause and how it should be interpreted. He, therefore, emphasized the submission made regarding section 6 of the General Clauses Act that unless a different intention appears, it has to be read in the context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In view of the rival submissions, it is required to be considered whether the doctrine of promissory estoppel would be applicable or attracted. Again, whether it would have application to the legislative field. Further, it is also to be considered in light of the submissions made with much emphasis about the scope of judicial review and the contentions that since the grant of exemption and withdrawal or rescinding of the notification issued under the earlier Sales Tax Act and substitution thereof by another law, i.e., VAT Act, not providing for similar benefit of exemptions and therefore it is a legislative domain where the court cannot interfere, is required to be examined. Another facet of the argument, which both the sides have advanced, referring to the scheme of the Sales Tax Act as well as the VAT Act, in particular section 100 of the VAT Act providing for repeal and saving, and the submissions made for the interpretation of section 100 of the VAT Act, is required to be appreciated. Scope of judicial review The first aspect about the scope of judicial review and interference which has been emphasized referring to the legislative domain is required to be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized referring to the fact that the scope of interference or judicial review when it is a fiscal statute, again, it is a matter of sound discretion normally exercised by the courts and, therefore, it cannot be argued or accepted as a principle that the scheme or the fiscal law is immune from judicial review, or it is beyond the scope of judicial review, particularly when judicial review has been accepted as a basic feature of the Constitution. Even the law or the validity of the law could be examined when it has been challenged or attacked in light of the constitutional provisions, particularly articles 14, 19 and 21. Therefore, there is no gainsaying that normally the court should not intervene or should be very slow and cautious while examining or interfering with a fiscal law in exercise of judicial review. But, it is required to be examined in context of reasonableness and fairness and also in background and light of the constitutional provisions itself, that is, article 14 as well as even the Directive Principles of State Policy enshrined in the Constitution, which has, again, a reference to the basis for the scheme for such exemption and/or grant of such benefits like exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituted VAT Act to several other units by deleting the entries, is required to be examined. Both have the central theme of promoting industries for the purpose of development in the rural areas. Again, for the purpose of development or promotion of rural areas, what schemes are to be evolved, what benefit or how the benefits like exemptions from fiscal measures to be taken, etc., are again a matter of policy which is left to the discretion of the Government. However, the emphasis on the aspect that in spite of similar provision in the VAT Act empowering the grant of exemption and in spite of having entry 36B for similar products at annexure J, units like the petitioners are still not extended such benefit, it would stare in the face when it is compared with other units having the same benefits established by other industrial groups. However, the eligibility criteria and other ingredients or considerations which are referred to may not be the only aspect and the court is not required to go into the details for the purpose of these petitions once it is accepted that the doctrine of promissory estoppel would be attracted apart from the submissions or arguments with regard to discrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit under the statute, i.e., the Sales Tax Act and thereafter a newly substituted law, i.e., VAT Act, has been introduced which does not confer the same benefit of exemption. The submissions have been made that if the newly substituted law, i.e., VAT Act does not confer the same benefit of exemption under the Act, a grievance could not be made and the petitioners cannot make a grievance that discretion had to be exercised for grant of such benefit of exemption under the new Act, when the Legislature has thought it fit not to grant any such benefit of exemption under the new law. Further, the submissions have emphasized that the court would also not go into this while undertaking judicial review inasmuch as, when the Legislature has not thought it desirable to grant or continue such benefit of exemption, the court cannot interfere substituting its own opinion and thereby add or amend the law, which would be a legislative function and an interference in the legislative domain. At first blush, this argument may sound a little appealing, but a close scrutiny would reveal that, in fact, the argument is devoid of merits. If the submission or the contention raised by the learned Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute like the Sales Tax Act, though the benefit of exemption by virtue of the certificate or the notification was for the period from December 1, 2005 to November 30, 2008. Thereafter, when the newly substituted VAT Act has been brought into force deleting the entries by which the benefit of exemption has been curtailed, it would be a different matter which the court may not go into for the present controversy. The only aspect is the justification for rescinding the earlier notification before the expiry of the period and the only justification, as it has been argued, is that the newly substituted VAT Act was to be brought into force. Doctrine of promissory estoppel The point for consideration by the court would be only limited focusing on this issue that whether there was any justification for rescinding the earlier benefit of exemption granted in exercise of power under section 49(2) of the Sales Tax Act which was to remain in force for the period from December 1, 2005 to November 30, 2008. If there is no justification or public interest or any other valid reason, it would be hit by the doctrine of promissory estoppel. If the argument is that before the newly substit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Senior Counsel Mr. Shelat referring to the Notification dated April 1, 2006 issued under the VAT Act which itself clearly provides in no uncertain terms that the Government of Gujarat continues the tax exemption granted to sale or purchase of goods by industrial units under the earlier law and to whom the eligibility certificate has been granted by the Industries Commissioner (emphasis Here italicised.supplied) and the exemption certificate granted by the Commissioner of Sales Tax subject to the provisions of Chapter IVA of the Gujarat Value Added Tax Rules, 2006. Therefore, these aspects read with section 100 of the VAT Act clearly suggest that the Legislature was, on the contrary, conscious that such a situation may take place and therefore provided for it. Moreover, even if the erstwhile Sales Tax Act was to be repealed and substituted by VAT Act, the said benefit or the certificate granting benefit of exemption for the period from December 1, 2005 to November 30, 2008 would have sustained and remained in force as per section 100 of the VAT Act. Section 100 of the VAT Act refers to the repeal and saving provision which has been elaborately provided. If the argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales Tax Act. It is in this context, when there is no explanation or justification coming forth, for rescinding the benefit of exemption granted earlier for a period from December 1, 2005 to November 30, 2008 before the expiry then, it would certainly attract the doctrine of promissory estoppel irrespective of the fact that it has been rescinded in exercise of the same statutory power under the Sales Tax Act. A useful reference can be made to the observations made in the judgment of the honourable apex court in the case of Mahabir Vegetable Oils Pvt. Ltd. [2006] 145 STC 350; [2006] 3 SCC 620, wherein, referring to the applicability of the doctrine of promissory estoppel, the honourable apex court has observed in para 25, which has also been emphasized by learned Senior Counsel Mr. S.N. Shelat for the petitioners, that the doctrine of promissory estoppel operates even in the legislative field and observed that there was no overriding pubic interest which would make it inequitable to enforce the estoppel against the State as it was well within the power of the State to grant such exemption. It is required to be noted, in the facts of the present case, that it is not even a case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Anglo Afghan Agencies [1968] 2 SCR 366; AIR 1968 SC 718 it is observed: (page 72 of 44 STC) ...There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but, let it be said to the eternal glory of this court, that this doctrine was emphatically negatived in the Anglo Afghan Agencies' case [1968] 2 SCR 366; AIR 1968 SC 718, and the supremacy of the rule of law was established. It was laid down by this court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. 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... Further, it has been observed: (page 73 of 44 STC) ...If the Government wants to resist the liability, it will have to disclose to the court what are the subsequent events on account of which the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be mentioned that though it has been much emphasized by the learned Government Pleader referring to the judgment in the case of State of Punjab v. Nestle India Ltd. [2004] 136 STC 35 (SC); [2004] 6 SCC 465 that it must be first proved that there was a promise made or position was altered because of any such promise. Further, though the emphasis has been made by the learned Government Pleader referring to the observations of the honourable apex court in the case of Ashok Kumar Maheshwari [1998] 2 SCC 502 that plea of estoppel cannot be raised to defeat the provisions of a statute, the same are misconceived in light of the discussion and settled position of law that the doctrine of promissory estoppel has a reference to equity and once it has been clearly observed in the case of MRF Ltd. v. Assistant Commissioner (Assessment), Sales Tax [2006] 148 STC 225 (SC); [2006] 8 SCC 702 that exemption from tax for a fixed period is an accrual of the right, the withdrawal of the exemption cannot affect the right. Further, though it has not been referred to, but even if on the ground of executive exigencies unless such exigencies or public interest is shown, such arguments are misconcei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exure G by which the benefit of exemption from sales tax has been granted for a period from December 1, 2005 to November 30, 2008, there is no justification shown for premature rescinding of such certificate. Therefore, it is not that the court has indulged in directing the Government to grant the benefit, which is a misconception. The only aspect which is examined or which is required to be focused is, can the Government rescind and take away the benefit of exemption granted earlier under the erstwhile Sales Tax Act which exemption was to remain in force from December 1, 2005 to November 30, 2008? Even assuming that for a change of policy or for executive necessity or whatever reasons, it was rescinded, then, it was incumbent upon the respondent-Government to justify such action for premature termination of such benefit which has been granted by the Government itself in exercise of powers under the same statute, i.e., section 49(2) of the Sales Tax Act. Therefore, once the notification has been issued in favour of the party in exercise of powers under the statute, an equity is created and thereafter it is no longer a legislative function, but it would be an executive function o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication and the purpose or the idea of issuing the impugned notification rescinding the benefit of exemption already granted for the period from December 1, 2005 to November 30, 2008 is that the Sales Tax Act is to be repealed and substituted by the VAT Act. However, this argument itself is misconceived as this could not be a logical argument that when an Act is to be repealed, every notification should be rescinded prematurely. Therefore, the doctrine of promissory estoppel will be attracted. Further, as stated above, the newly substituted law like the VAT Act provides for a repeal and saving clause which would take care of such a situation and therefore there is no justification or the justification offered is misconceived. Further, even if it is assumed that the court may not substitute its opinion with regard to grant of exemption under the newly substituted VAT Act for future exercise of power contained in the newly substituted VAT Act for a similar grant of exemption, but the action of rescinding the benefit of exemption by the impugned notification by which the benefit, which was granted and a right, has accrued and correspondingly the liability was incurred by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09, has observed: The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government 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. Moreover, in that case, the exemption from electricity consumption tax was granted by a notification under the previous Act which was repealed by subsequent Tamil Nadu Tax on Consumption or Sale of Electricity Act, 2003, which is a situation rather similar to the facts of the present case, and the same argument that exemption from payment of tax in favour of the appellant was a concession and not a vested right which could be claimed was negatived observing that, where the right has accrued under an exemption granted by the authority not giving rise to accrued and vested right, it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n exercise of legitimate power by the State. However, there has to be justification. The honourable apex court, in this very judgment, referring to the judgment in the case of Kasinka Trading v. Union of India [1995] 1 SCC 274, which has been distinguished in subsequent judgment in the case of State of Punjab v. Nestle India Ltd. [2004] 136 STC 35 (SC); [2004] 6 SCC 465, and referring to the MRF Ltd. v. Assistant Commissioner (Assessment), Sales Tax [2006] 148 STC 225 (SC); [2006] 8 SCC 702, observed that: the doctrine would be inapplicable where a right has already accrued; for instance, in a case where the right to exemption of tax for a fixed period accrues and the conditions for that exemption have also been fulfilled, the withdrawal of that exemption cannot affect the already accrued right. (emphasis Here italicised.supplied) The honourable apex court in its judgment in the case of Bannari Amman Sugars Ltd. [2005] 139 STC 86 (SC); [2004] Lawsuit 1382 (SC); [2005] 1 SCC 625, considering on the aspect of legitimate expectation, has observed: (page 94 of STC) A person may have a 'legitimate expectation' of being treated in a certain way by an administrative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slative function by way of delegated legislation, nevertheless it could also be viewed as an action by the respondent-Government, which is required to be tested on the aforesaid principles. When the statute confers a power for grant of exemption and exemption has been granted, rescinding of the earlier notification in exercise of the same power by a subsequent notification under the repealed Act without any justification, would surely call for scrutiny under judicial review. The observations made by the honourable apex court in para 20 of its judgment in the case of U.P. Power Corpn. Ltd. AIR 2008 SC 693, which has been emphasized by learned Senior Counsel Mr. Shelat, are also required to be appreciated. Learned Government Pleader Mr. Shah, referring to para 19 of the said judgment, however, submitted that there cannot be any estoppel against a statute. However, the honourable Supreme Court has drawn a distinction by observing: ...We have stated above that there cannot be estoppel against a statute. Since such benefits have not been recognized by the Act of 1999, therefore, up to the date of coming into force of the Act of 1999, all the benefits which were being given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation some of the entries are deleted and/or where the notification for the units like the petitioners has not been issued may be either a legislative function or it could be purely an executive function. The statute has provided for the grant of benefit of exemption and also entry like entry 36B for similar items, but when the notification has not been issued qua the petitioners, it could be a matter of policy or merely an executive function and not necessarily a legislative function. It is required to be appreciated that in the aforesaid discussions the honourable apex court like in case of Southern Petrochemical Industries Co. Ltd. [2007] 5 SCC 447 has considered and referred to, while discussing about the doctrine of promissory estoppel, the doctrine of legitimate expectation. This, in our opinion, is further expansion or other side of the same coin like the doctrine of promissory estoppel. As the phrases or the language used in the phrases of both the doctrines suggest, the doctrine of promissory estoppel has reference to stopping the respondent-Government or the authority from undoing or withdrawing what has been already in existence, meaning thereby, estopping from alter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erates different groups of activities or industries. The purview of khadi and village industries group has referred to clause (C) which provides khadi and polyvastra and any project producing yarn and cloth under khadi certification Rules . Therefore, he submitted that the khadi industry as referred to in this provides that khadi means any cloth woven on hand looms in India from cotton silk woollen yarn hand spun in India or from a mixture of any two or all of such yarns. To appreciate this submission, it would be necessary to have a reference to the Bombay Khadi and Village Industries Act, 1960, which provides in the preamble to provide for the encouragement, organisation, development and regulation of Khadi and Village Industries in the State of Bombay and to constitute one or more Boards to carry out the said objects. The functions of the Board set up under this Act are referred to in section 11, Chapter III, which are similar in nature to the Khadi and Village Industries Commission Act, which is a Central Act. Thus, it would clearly suggest that in order to advise the Government on the role of KVIC in promoting the development and growth of khadi and village indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which reliance has been placed by the learned Government Pleader, in fact, it has to be in furtherance and for promotion of the objects set out in the statute and, therefore, reference to the village industries specifying the investment or the negative list of activities has to be considered in light of the objects of the statute itself as the scheme cannot run counter to the object of the statute under which or for promotion of the objects of the statute which has been made. The scheme only refers to the aspect of rural development and the object of the Act particularly, as noted and referred to in the KVIC Act, refers to broad base and also providing encouragement and assistance to such industries in the rural area in changing the industrialization with a view to lend assistance to such industries. Therefore, the submissions made by the learned Government Pleader referring to the scheme are misconceived. It is in these circumstances, in the present case, if one looks at the basic object or the goal, for grant of exemption to an industry set up under the KVIC Act, again with reference to the object under the said Act as well as under the scheme referred to by the learned Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Government as to why the benefit has not been extended under the newly substituted VAT Act when there is similar power reserved for grant of exemption. It is also required to be mentioned that by making such provision, the Legislature has been conscious and has provided for exercise of such power for grant of exemption to the Government or the executive. Entry 36B also refers to this very aspect. Therefore, in light of the discussion made hereinabove, it is evident that the impugned notifications at annexure I, by which the earlier certificate of exemption has been rescinded, is bad in law and is not justified and the respondent-Government authorities are estopped from withdrawing such benefit of exemption already granted in exercise of powers under section 49(2) of the Sales Tax Act, which created an equity, if not right, in favour of the petitioners during the validity of the said notifications for the period from December 1, 2005 to November 30, 2008 and, therefore, the aforesaid Government notifications dated March 31, 2006 rescinding earlier notifications dated April 29, 1970 and April 1, 1992, are hereby quashed and set aside. Therefore, the original certificate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... newly substituted VAT Act providing for repeal and saving clause read with the notification as issued under the VAT Act itself dated April 1, 2006 clarifying that the benefit of exemption would remain. Therefore, the impugned notifications rescinding the earlier benefit of exemption from the sales tax has been held to be bad in law and if it is allowed to remain in force or effective for its period from December 1, 2005 to November 30, 2008 it will not be inconsistent with the newly substituted VAT Act. However, it is interlinked inasmuch as, as discussed hereinabove, once the doctrine of promissory estoppel is invoked and held to be applicable or attracted, the impugned notifications at annexure I, by which the earlier certificate granting benefit of exemption has been rescinded, is held to be bad and is set aside, the notification granting benefit of exemption for a period from December 1, 2005 to November 30, 2008 would remain in force. Therefore, once the notification is held to be operative during its full tenure, that is, from December 1, 2005 to November 30, 2008, during which the erstwhile Sales Tax Act has been repealed and the newly substituted VAT Act has been brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then also it would be inconsistent with objects and reasons of the Act. It is required to be mentioned that in the changing scenario of globalization and the economic development, on one hand, special economic zones are sought to be created to provide benefits for encouragement and development of the industries by providing various concessions, exemptions and other benefits and, on the other hand, the khadi and village industries which have been set up under the aforesaid statutes and which have been getting the benefit of exemption throughout are now sought to be deprived of similar exemption or the benefit which will affect their competitiveness and by depriving such benefit, it will give a blow to their existence which in turn will frustrate the very object of the aforesaid statutes like KVIC Act. As observed in the aforesaid judgment of the honourable apex court in the case of Union of India v. Parameswaran Match Works AIR 1974 SC 2349, on the basis of which, subsequently, as observed in the judgment of the honourable apex court in the case of Supdt. of Central of Excise v. Ayyangar Match Works reported in AIR 1976 SC 1003, referring to the functions of the Commission under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation in exercise of power conferred under the statute, or it would be a matter of policy to be decided by the respondent-Government as to how the benefit of exemption should be extended, for which, while substituting the VAT Act, the entries have been deleted and some of the entries are specified, it may not be proper for this court to issue directions granting the reliefs as prayed for regarding the exemption under the newly substituted VAT Act. However, it will be open for the petitioners to apply to the respondent-Government by making a representation highlighting the fact that the industries are established under the KVIC Act and also the new scheme also has the same object of development and therefore the core idea remains the same for which the benefit of exemption granted earlier should also continue and it will be for the respondent-Government to decide it afresh in accordance with law. Rule is made absolute accordingly to the above extent with no order as to costs. In view of disposal of the main petitions, the civil applications would not survive and they are disposed of accordingly. Registry is directed to keep a copy of this order in each matter. On pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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