Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Devi Multiplex And Another Versus State of Gujarat And Others

2015 (5) TMI 729 - SUPREME COURT

Rejection of application for extension of time under Clause 10 of "New Package Scheme of Incentives for Tourism Projects, 1995-2000" - To make available all fiscal and non fiscal incentives, reliefs and concessions enjoyed by industries to ‘Tourism’ - Principles of Promissory Estoppel - Record indicates that the progress of the project of the appellants was greatly hampered as a result of major earth quake in the State on 26.01.2001 and large scale communal riots in the State in February 2002 - .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion "in the first instance" would be up to two years. If the unit was not in a position to start commercial operation during this initial validity period of two years, it would be entitled to apply with progress report to the State Level Committee for extension, which could be granted up to six months at a time or a total period of two years after examining the difficulties experienced in implementing the project. - This first level of extensions for a total period of two years could be gra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that no fresh application and TRCs could be granted after the period of operation but those who had crossed the threshold and were given TRC, could have the full benefit of the stages contemplated in Section 10. In our considered view, it would be incorrect to say that all the clauses including Clause 10 would cease to operate after the period of operation had come to an end. It being the clear intent that such stages and eventualities ought to survive even after the expiry of the Scheme, we rej .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

08 - SUPREME COURT ] and the superstructure of the doctrine, with its pre-conditions, strengths and limitations outlined in the decision in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of UP [1978 (12) TMI 45 - SUPREME Court]. This Court then dealt with the discordant note in Jit Ram Vs. State of Haryana [1980 (4) TMI 303 - SUPREME COURT] and how that was firmly disapproved in Union of India Vs. Godfrey Philips India Ltd. [1985 (9) TMI 90 - SUPREME COURT OF INDIA] by a bench of three judges. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

further period of two years subject to satisfactory progress to be found by the State Level Committee. Even thereafter, the Unit could still approach the State Government for further extension. This was part of the core of the Scheme, which invited investment in tourism units promising tax holiday as stated above. Based on such representation, various units including that of the appellants having come forward and altered their position, the State Government would certainly be bound by the princ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er the Scheme, the burden that the Government was well aware and thought that it could comfortably bear, only 19 or 20 units have been established and are functional. In any case, the impact of incentives so offered under the Scheme and the consequential burden must have been weighed carefully when such promise was made and the Scheme was formed. Furthermore, the Scheme as framed on 20.12.1995 formed the basis of a statutory notification under Section 29 of Act 16 of 1977 and as such the core co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ated 28.06.2000 could not in any way detract from or dilute the effect of the Scheme which had acquired statutory status. - We therefore hold that the appellants were entitled to have full benefit and advantage of Clause 10 of the Scheme and the curtailment of the period and opportunity available under said Clause 10 of the Scheme by subsequent G.R. dated 28.06.2000 was bad and ineffective. The record indicates that the progress of the project of the appellants was greatly hampered as a resu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

certainly persuaded the State Level Committee to find that the facts justified grant of further extension but it felt it had lost the power to grant such extension because of G. R. dated 28.06.2000. In the light of the view that we have taken, the State Level Committee was still competent to consider the request for grant of extension. - Decided in favour of appellants. - Civil Appeal No.6478 of 2009, Civil Appeal Nos.6479/2009, 6480/2009, 6481/2009, 6482/2009, 6483/2009, 6484/2009, 6485/2009, 6 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

use 10 of New Package Scheme of Incentives for Tourism Projects, 1995-2000. Similar challenge stands raised in other civil appeals against Orders rejecting their applications for extension of time. Since Civil Appeal No.6478 of 2009was taken as the lead matter, facts relating thereto are dealt with in detail hereafter. 2. On 20.12.1995 Government of Gujarat announced policy named "New Package Scheme of Incentives for Tourism Projects, 1995-2000" (hereafter referred to as the Scheme) wi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

it ought to be registered after 1.8.1995. Clause 4.7 dealt with effective steps which such unit was expected to undertake. Under Clause 5, after taking initial effective steps a tourism unit could apply to the Director of Tourism for registration. All projects had to conform to the specifications and requirements spelt out in Appendix B which Appendix dealt with various categories of tourism units and Item 22 thereof pertained to Entertainment Complexes including multi cinema theater complexes o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ntertainment Tax, upto 100% of capital investment. In clause 8.1 it was stated that the quantum of incentives would not exceed 100% of eligible capital investment and it further stated the period of eligibility in respect of Prestigious Tourism Unites, Large Scale Tourism Units, Small Scale Tourism Units and Tiny Tourism Units to be 10 years, 8 years, 6 years and 5 years respectively. Clause 9 dealt with composition of sanctioning authority whereunder State Level Committee was competent to issue .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

encumbrances. ii) Registration in respect of company/Cooperative Society/Trust in respect of a partnership firm, evidence of execution of partnership deed and filling of requisite application with payment of necessary registration fees with the Registrar of Firms. iii) Submission of project report specifically mentioning the category of tourism activity (coverage) and the incentive that are proposed to be availed of by the eligible unit with all relevant details. iv) Copy of application duly ac .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

regarding expenditure on the project, including advances and pre-operative expenses paid, aggregating to at least 25 percent of the capital cost envisaged for the project. 10. PROCEDURE FOR REGISTRATION OF TOURISM UNITS FOR INCENTIVES: All tourism units eligible for the Scheme will apply to the Director of Tourism in a prescribed Form. The Directors of Tourism will scrutinizes the application and will issue temporary and permanent registration adopting the following procedure: a) Director of To .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ndividual unit in implementing the project and also record the reasons thereof in writing. c) The units which are unable to go into operation after it has been given extension under para (b) above will have to apply to Government the reasons for the delay. Such application will have to be forwarded by the director of tourism, who will carry out physical inspection of projects and report to government for decision. If the director of tourism is satisfied that the steps to implement the project ar .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l be registered permanently only after the commencement of commercial operation and completion of the project." 4. The State Government, in exercise of powers conferred upon it under Section 29 of the Gujarat Entertainment Tax Act, 1977 (Act 16 of 1977), issued Notification dated 14.02.1997 which was published in the Government Gazette of even date. The relevant part of the Notification was as under: "Whereas the Government of Gujarat has introduced a New Package Scheme of incentives f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

c. (1) of Section 29 of the Gujarat Entertainment Tax Act, 1977 (Guj. 16 of 1977), (hereinafter refrred to as "the said Act") and in supersession of Government Notification, Information, Broadcasting and Tourism Department No. (GHT.91.45) MNR-1391-285-E, dated the 24th December, 1991 the Government of Gujarat hereby exempt wholly the tax on the entertainment which fulfils the criteria laid down in Appendix-B of the said resolution (hereinafter referred to as the eligible entertainment) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

………………………………………….." Paragraph 17 of the Notification stated that the exemption under said Notification would be subject to all terms and conditions referred to in Government Resolution dated 20.12.1995 in the Scheme and further conditions stipulated in the Notification. 5. The appellants being desirous of setting up a multiplex and avail the incentives under the Scheme took effect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

overnment seeking to clarify incidental/ancillary aspects as regards treatment of certain cases covered under the Scheme. Clause A of the Resolution stated that an application for TRCs under the existing policy would be accepted till 31.07.2000 and TRCs would be issued provided initial effective steps were taken on or before 31.07.2000. Clause B of the said Resolution was as under: "B. ADHOC/FINAL ELIGIBILITY ERTIFICATE: (1) All the units to whom TRC has already been issued under the guidel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

7/2000 c) Prestigious Project 2 year w.e.f. 31.7.2000 d) Large project 2 year w.e.f. 31.7.2000 No further extension or relaxation shall be available to pipeline cases. (4) The unit falling under the pipeline cases who fails to complete the project as stipulated above shall not be eligible for any incentive Adhoc or Final as per tourism Policy 1995-2000. (5) No investment made after operative period or Scheme, i.e. 31.7.2000 shall be considered as eligible investment. However, in case of projects .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was extended upto 30.09.2000 and later upto 30.11.2000 vide Resolutions dated 31.07.2000 and 30.09.2000 respectively issued by the State Government. 7. On 26.01.2001 a massive earthquake took place in the State resulting in collapse of number of buildings and structures. This caused suspension of the process of issuing development permissions, for the purposes of maintaining structural safety standards in Development Control Regulations under the provisions of the Gujarat Town Planning and Urba .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

bility certificate. The approval was accorded by the Municipal Corporation in October 2001 and the appellants resumed construction work. Since more than a year was lost because of subsequent changes in building norms, the appellants applied on 11.12.2001 for grant of extension for completing the project pointing out the aforesaid difficulties. It was stated that as on the date, the appellants had incurred expenditure to the tune of ₹ 91.25 lakhs for which a certificate of the Chartered Acc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

considered the application dated 11.12.2001 preferred by the appellants. It clarified that the date of TRC in case of the appellants shall be 4.11.1999. Keeping in view the delay in continuation of operation due to earthquake and so also the progress made by the appellants, the Committee granted extension in validity period of TRC by six months which decision was communicated on 15.04.2002. The appellant wrote on 24.02.2002 stating that though the extension was granted by the State Level Committ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and the electrification was complete and the ducting and air-conditioning work was on the verge of completion. The status of investment as on that date was said to be more than ₹ 3.21 crores, as supported by the certificate from the Chartered Accountant. The appellants then requested for extension of six months instead of four months as was prayed earlier vide request dated 29.04.2002. 9. The State Level Committee in its 13th meeting held on 21.09.2002 discussed the provisions of extensio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as satisfactory. However, it took the view that extending the validity period would result in extension beyond 31.07.2002 and as such the matter was required to be deferred till the Government took a decision on modification of GR dated 28.06.2000. 10. The appellants vide letter dated 30.10.2002 reiterated their request for extension which was repeated by letters dated 13.12.2002 and 22.04.2003. On 20.06.2003 the Commissioner of Tourism informed that a proposal for amendment of GR dated 28.06.20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

directions for grant of eligibility certificate to its members. The High Court by its order dated 22.06.2004 directed the State Government to decide the applications/representations for extension of time. Thereafter, on 22.07.2004 the Commissioner of Tourism issued a show cause notice calling upon the appellants why their application dated 04.11.2003 for grant of eligibility certificate should not be rejected. Relying on the GR dated 28.06.2000, it was stated that the project was not completed b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd the requirement in the State." 12. The aforesaid order dated 20.07.2005 was challenged by the appellants by filing Special Civil Application No.18692 of 2005 in the High Court seeking declaration that period for starting commercial operation as envisaged in the Scheme stood extended upto 11.07.2003 and that the appellants were entitled to be issued eligibility certificate and to all incentives under the Scheme. The High Court while rejecting the submissions observed that the operative pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o further extension of time limit and that since the commercial operations had not commenced even within such extended time period, the claim of the appellants was rightly rejected. It observed that in the facts and circumstances of the case there could be no application of the principles of Promisory Estoppel. The present appeal by Special Leave seeks to challenge the view so taken by the High Court. During the pendency of the matter this Court had directed the appellants and similarly situated .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s including that of the appellants had altered their position and made huge investments in Large Scale Tourism Units. He submitted that such units could not now be told that the non fiscal benefits of extension of validity period would not be granted to them despite they have been fulfilled the conditions of satisfactory progress. It was further submitted that Clause 10(b) and more particularly the expressions "in the first instance" and "initial validity period" in said Clau .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

his submission, G.R. dated 28.06.2000 was a mere resolution not being translated into similar notification under Section 29, and therefore said GR dated 28.06.2000 could not detract or derogate from statutory notification dated 14.2.1997. On merits, it was submitted that the reasons in the letter of rejection dated 20.07.2005 were incorrect and irrelevant. He stated that out of 108 TRCs issued under the Scheme, only in 22 or 23 cases the projects were completed and commercial operations had star .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the Scheme was to remain in force up to 31.07.2000 which period was further extended up to 30.11.2000 and that the Scheme including Clause 10 in its entirety ceased to be operative thereafter. In the submission of the learned counsel, the right to seek an extension of the validity period beyond the cut off date would survive only if such right was an accrued right, which was not so in the present case. He further submitted that GR dated 28.06.2000, rather than detracting from the Scheme gran .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cate in rejoinder submitted that incentives under Clause 8 which span beyond 5 years and up to 10 years, were designed to survive even after expiry of the Scheme. He further submitted that in a case where TRC was granted towards the end of the operative period of the Scheme, the final effective steps would necessarily have to be taken after the expiry of the Scheme and thus the Scheme itself contemplated that the actions under various clauses would continue to be undertaken even after the expiry .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Reading of the Scheme shows that to be eligible for the incentives under the Scheme, a new project ought to have obtained registration after 1.8.1995 and taken initial effective steps under Clause 4.7(a) which inter alia included effective possession of land free from all encumbrances and submission of Project Report. It is only thereafter that an intending unit could apply and be given provisional registration under Clause 10(a). Said clause indicates that such provisional registration " .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the State Level Committee and even if a unit was unable to go into operation after availing such extensions, it could still apply to the Government for further extension. Clauses 8 and 8.1 dealt with incentives and period of eligibility which would go up to ten years after a unit was found to be fully eligible. These clauses clearly show that such stages or eventualities would survive even after the expiry of period of the operation of the Scheme. The reading of the Scheme further shows that no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

submission advanced on behalf of the State. 17. Clause 7 of the Scheme classifies projects in different categories and for a Large Scale Tourism Unit, with which we are presently concerned, fixed capital investment was required to be more than ₹ 90 lakhs. The Scheme definitely promised an initial period for completion of the project under Clause 10 (a) as two years after the initial effective steps were under taken by the concerned unit. Clause 10 (b) further promised an extension for two .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e based on which eligible units were invited to make capital investment of more than ₹ 90 Lakhs with a promise of incentives under Clause 8. Having given such promise, based on which the appellants incurred capital expenditure, the question now arises as regards applicability of doctrine of Promissory Estoppel. 18. The law on the subject of Promissory Estoppel was recapitulated and succinctly dealt with by this Court in State of Punjab Vs. Nestle India Ltd. 2004(6) SCC 465. It found the fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd how that was firmly disapproved in Union of India Vs. Godfrey Philips India Ltd. 1985(4) SCC 369 by a bench of three judges. We deem it appropriate to quote paras 27, 28, 29, 34, 35 and 36 from the decision in State of Punjab Vs. Nestle India Ltd. (Supra):- "27. However, the superstructure of the doctrine with its preconditions, strengths and limitations has been outlined in the decision of Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. 1979(2)SCC 409. Briefly stated: the case re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

took the pleas: (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. 28. This Court rejected all the three .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tionship between the parties. The principle would be applied even when the promise is intended to create legal relations or affect a legal relationship which would arise in future. The Government was held to be equally susceptible to the operation of the doctrine in whatever area or field the promise is made - contractual, administrative or statutory. To put it in the words of the Court: "The law may, therefore, now be taken to be settled as a result of this decision, that where the Governm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

* * [E]quity will, in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights, even where they arise, not under any contract, but on his own title deeds or under statute. (SCC p. 425, para 8) * * * Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

utive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel." 35. It was held that irrespective of the nature of power wielded the Government is bound to wield that power provided it possessed such power and has promised to do so knowing and intending that the promisee would act on such promise and the promisee has done so: (SCC p. 389, para 14) "We think that the Central Government had power under Rule 8 sub-rule (1) of the Rules to issue a notifi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ade by the Cigarette Manufacturers Association, there were circumstances of an exceptional nature which required the exercise of the power under sub-rule (2) of Rule 8. The Central Government and the Central Board of Excise and Customs were therefore clearly bound by promissory estoppel to exclude the cost of corrugated fibreboard containers from the value of the goods for the purpose of assessment of excise duty for the period 24-5-1976 to 2-11-1982." 36. The limitations to the doctrine de .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n or 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. 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a new unit was registered after 1.8.1995 and appropriate investment in fixed capital assets was made. It also promised an initial period of two years for going operational in the first instance, extendable by further period of two years subject to satisfactory progress to be found by the State Level Committee. Even thereafter, the Unit could still approach the State Government for further extension. This was part of the core of the Scheme, which invited investment in tourism units promising tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Scheme. We find nothing in the present case on the basis of which there could possibly be room to say that it would be inequitable to hold the State Government to its promise. Out of 108 TRCs issued under the Scheme, the burden that the Government was well aware and thought that it could comfortably bear, only 19 or 20 units have been established and are functional. In any case, the impact of incentives so offered under the Scheme and the consequential burden must have been weighed carefully whe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s, the State should not give any assurance, not only because that would be in violation of the principles of promissory estoppel but it would be unfair and immoral on the part of the State not to act as per its promise." 20. Furthermore, the Scheme as framed on 20.12.1995 formed the basis of a statutory notification under Section 29 of Act 16 of 1977 and as such the core components of the Scheme had acquired a statutory status. By virtue of said Section 29, the notification dated 14.2.1997 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. 21. We therefore hold that the appellants were entitled to have full benefit and advantage of Clause 10 of the Scheme and the curtailment of the period and opportunity available under said Clause 10 of the Scheme by subsequent G.R. dated 28.06.2000 was bad and ineffective. 22. The record indicates that the progress of the project of the appellants was greatly hampered as a result of major earth quake in the State on 26.01.2001 and large scale communal riots in the State in February 2002. The .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version