TMI Blog2016 (7) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... said decision was rendered in respect of a case where the benefit of exemption was withdrawn and would have no applicability to the facts of the present case which relates to change in the conditions for availment of the benefit of exemption. Moreover, the contention regarding lack of jurisdiction on the part of the Tribunal to invoke the principle of promissory estoppel was never raised before the Tribunal, and hence such question does not arise out of the impugned order. Having regard to the fact that there is no breach of any condition of Entry 255, the question of imposition of any penalty does not arise. - TAX APPEAL NO.136 of 2016 TAX APPEAL NO.137 of 2016 TAX APPEAL NO.140 of 2016 - - - Dated:- 6-5-2016 - Harsha Devani And G. R. Udhwani, JJ. For the Appellant : Mr PK Jani, Additional Advocate General For the Opponent : Mr Mihir Joshi, Sr. Advocate with Mr Keyur Gandhi, Advocate ORDER ( Per : Honourable Ms. Justice Harsha Devani ) 1. All these tax appeals arise out of a common order dated 29th January, 2015 passed by the Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as the Tribunal ) in Second Appeals No.420 to 423 of 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an eligible unit, the respondent was entitled to exemption under Entry 255 of the notification issued by the Government of Gujarat under section 49(2) of the Act. The respondent, in accordance with the eligibility certificate and exemption granted as aforesaid, availed of exemption from payment of purchase tax and sales tax. 3.2 Prior to 14th November, 2000, Condition No.6 of Entry 255 of the notification under section 49(2) of the Act required the eligible unit to actually use the goods purchased within the State of Gujarat as raw materials, processing materials, consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of goods so manufactured. Condition No.6 came to be amended with effect from 14th November, 2000 whereby it was provided that the goods were to be actually used by the eligible units as raw materials, processing materials, consumable stores in its industrial unit for which it had eligibility certificate. Thereafter, on 16th January, 2002, the notification was again amended to provide that the eligible unit could claim exemption from purchase tax on purchases of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs pursuant to the notice dated 30th June, 2002 were initiated. Thereafter, based on the above order, as also upon independent inquiry and verification, the Assessing Officer passed assessment orders in respect of Unit No.2 for assessment years 1995-96 to 1997-98 and 2000-01, holding inter alia that no tax was due and payable by the respondent on account of any purported breach of the conditions of exemption admissible under Entry 255 of the notification issued under section 49(2) of the Gujarat Sales Tax Act. 3.5 Subsequently, a notice dated 30th May, 2005 came to be issued by the Deputy Commissioner of Sales Tax for initiating proceedings for levy of purchase tax of ₹ 480.99 crores and levying penalty for the period 1995-96 to 2005-06 on the ground that the respondent had contravened the provisions of the Act. The notice was resisted by the respondent by filing written submissions. However, apprehending that the Deputy Commissioner would pass orders pursuant to the said notice and raise a demand, the respondent approached this court by way of a writ petition challenging the notice/orders of the Deputy Commissioner. In the said writ petition, this court by an order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, in the absence of any exemption notification under section 49(2) of the Act, the purchaser or seller would be required to pay tax at the rate prescribed under the statute. In the present case, so far as Unit No.2 is concerned, it had got exemption under the New Industrial Policy Scheme for special incentive to prestigious unit. In the absence of the Government of Gujarat s New Industrial Policy Scheme for special incentive to prestigious units 1990-1995 dated 16th October, 1990, the respondent would not have derived benefit of tax exemption. Referring to the incentive policy, it was pointed out that electricity generation falls within the list of industries not eligible for incentive under the Prestigious Units Scheme, 1990-95. It was submitted that under clause 4 of the Government of Gujarat s Industrial Policy, the benefit of the scheme would be available only to Unit No.2 of Essar Steel Limited. It was submitted that it was, therefore, clear, right from the beginning that the State Government did not intend to provide any incentive to the industry which is an electricity generating industry. No incentives in the form of sales tax deferment or exemption are availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries are not granted the benefit of the Scheme of the State Government. 4.1 It was urged that in the above manner, the Government of Gujarat s avowed beneficial scheme of tax exemption came to be diverted to the unit Essar Power Limited which was otherwise not eligible to derive benefit of the scheme. It was contended that in the State of Gujarat, other power generating units and power generation companies were not getting such benefits as was received by Essar Power Limited because of such arrangement on the part of Essar Steel Limited. Thus, what could not be achieved and what could not be derived by Essar Power Limited under the industrial policy of the State Government for getting tax benefit was achieved by Essar Power Limited because of the arrangement with the Unit No.2 of Essar Steel Limited which was contrary to the object and intention of the State Government s industrial policy. It was submitted that thus, there is a deliberate and calculated contravention of the conditions of the scheme by Unit No.2 of Essar Steel Limited. It was submitted that accordingly, after following due procedure in accordance with law as prescribed under the Gujarat Sales Tax Act, the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promissory estoppel. It was submitted that the effect of the impugned order is that the notification under section 49 of the Act is rendered non est. It was argued that no such power is conferred on the Tribunal under section 50 of the Act. It was pointed out that the appeal before the Tribunal was under section 65(2) of the Act and that all that the Tribunal was required to do was to examine whether the case falls under section 50 of the Act and decide the same accordingly. 4.4 Referring to the notification dated 19th March, 1992 it as pointed out that the same says that the petitioner would abide by the conditions as laid down from time to time. Reliance was placed upon the decision of the Supreme Court in the case of M/s Kothari Industrial Corporation Ltd. v. Tamil Nadu Electricity Board, AIR 2016 SC 637, for the proposition that an exemption is by definition a freedom from an obligation which the exemptee is otherwise liable to discharge. It is a privilege granting an advantage not available to others. An exemption granted under a statutory provision in a fiscal statute has been held to be a concession granted by the State Government so that the beneficiaries of such conces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-entry (2) of entry 255 and more particularly column 4 thereof which reads thus: (i) If the eligible unit furnishes to the selling dealer a certificate in Form 26 appended thereto declaring inter-alia that the goods are required for use by him within the State of Gujarat as raw, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or outside the State of Gujarat or as packing materials in the packing of goods so manufactured. (ii) If the eligible unit fulfills the conditions specified hereunder and further conditions as may be laid down from time to time. It was submitted that the assurance under the scheme is very clear, namely that, if a unit is set up and the same fulfills the conditions specified thereunder, they will be entitled to the benefit under the scheme. The State has accepted this position prior to 2000 and the contention that the amendment is clarificatory is now given up. Reference was made to the notification dated 14th November 2000 whereby condition No.1 in sub-entry (2) of the entry at serial No.255 has been substituted, to submit that a new condition has been introduced. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory notification . This finding of the High Court is erroneous. The doctrine of promissory estoppel has been repeatedly applied by this Court to statutory notifications. Reference may be made to Pournami Oil Mills v. State of Kerala, 1986 Supp SCC 728. In the said case the Government of Kerala by an order dated 11-4-1979 invited small-scale units to set up their industries in the State of Kerala and with a view to boost industrialisation, exemption from sales tax and purchase tax was extended as a concession for a period of five years, which was to run from the date of commencement of production. By a subsequent notification dated 29-9-1980, published in the gazette on 21-10-1980, the State of Kerala withdrew the exemption relating to the purchase tax and confined the exemption from sales tax to the limit specified in the proviso of the said notification. While quashing the subsequent notification, it was observed: If in response to such an order and in consideration of the concession made available, promoters of any smallscale concern have set up their industries within the State of Kerala, they would certainly be entitled to plead the rule of estoppel in their favour w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. They had spent large amounts of money for establishing the infrastructure, had entered into agreements with the Board for supply of electricity and, therefore, had necessarily altered their position relying on these representations thinking that they would be assured of at least three years period guaranteeing rebate of 10% on the total bill of electricity to be consumed by them as infancy benefit so that they could effectively compete with the old industries operating in the field and their products could effectively compete with their products. On these well-established facts the Board can certainly be pinned down to its promise on the doctrine of promissory estoppel. It was submitted that the above decision would be squarely applicable to the present case, inasmuch as the respondent relying upon the promise made by the appellants had changed its position irretrievably and had entered into an agreement with Essar Power Limited for supply of electricity relying upon the representations made by the appellants. Under the circumstances, the appellants can be pinned down to their promise on the doctrine of promissory estoppel and can be estopped from saying that the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1992 reads as under: (1) If the eligible unit furnishes to the selling dealer a certificate in Form 26 appended hereto declaring inter alia that the goods are required for use by him within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or as packing materials in packing of the goods so manufactured. (2) If the eligible unit fulfills the conditions specified hereunder and further conditions as may be laid down from time to time. 8.2 By the notification dated 14th November, 2000 in sub-entry (2), in column 4, for condition 1, the following came to be substituted: 1. If the eligible unit furnishes to the selling dealer a certificate in Form 26 appended hereto and obtained from the registering authority, declaring inter alia that the goods shall be used by it as raw materials, processing materials or consumable stores, in its industrial unit for which it has obtained the eligibility certificate, in the manufacture of goods for sale within the State of Gujarat or as packing materials in packing of the goods so purchased. Thus, prior to 14th November, 2000, Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Government to change the said condition, inasmuch as condition (2) of column 4 provides for imposition of further conditions in addition to the conditions prescribed thereunder, whereas condition (1) precedes condition (2) and is not a condition thereunder. Consequently, any change in condition (1) of column 4 of sub-entry (2) of entry 255 would not be applicable to the respondent, including any change in Form 26 appended thereto. Such, condition would be applicable prospectively to units set up after 14.11.2000. Therefore, the question of breach of the amended condition (1) in column 4 of Entry 255(2) would not arise. 9. In the context of the allegation of breach of Condition No.6 of the General Conditions as amended vide notification dated 14th November, 2000, it may be germane to refer to the original as well as the amended Condition No.6. Condition No.6 of the General Conditions stipulated under Entry No.255, as inserted on 5th March, 1992, reads thus: 6. The eligible unit shall actually use the goods purchased within the State of Gujarat as raw materials, processing materials or consumable stores in the manufacture of goods for sale within the State of Gujarat or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inserted vide notification dated 05.03.1992, contained the words within the State of Gujarat and not in the industrial unit for which the eligibility certificate has been obtained as amended vide notification dated 14.11.2000, and it was this unamended Form 26, which the respondent unit was required to furnish in terms of condition (1) stipulated in column 4 of sub-entry 2 to Entry 255. 9.5 On a conjoint reading of conditions (1) and (2) prescribed in column-4 of sub-entry (2) of Entry No.255, as existing at the relevant time, it appears that at the relevant time when the respondent was granted the benefit of the incentive scheme, it was required to satisfy the requirements of those conditions and other conditions prescribed thereunder at the relevant time and such further conditions as may be laid down from time to time. It is an admitted position that the respondent met with the conditions prescribed under Entry No.255 at the relevant time when it was granted the benefit of the scheme and consequently, in identical circumstances, no breach has been alleged in relation to the period prior to 14th November, 2000. However subsequently, condition No.6 came to be amended wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e laid down from time to time. Since Condition No.6 was in existence at the relevant time, it was the Condition No.6 in its original form which was required to be fulfilled by the respondent, inasmuch as, condition (2) in column 4 of sub-entry (2) of Entry 255, does not envisage the amended conditions to be applicable to a unit, but only further conditions as may be laid down from time to time would be required to be fulfilled by it. Thus, insofar as the respondent unit is concerned, Condition No.6 of the General Conditions as originally prescribed in Entry No.255 would be applicable to it and not the amended Condition No.6, inasmuch as, the amended Condition No.6 is not a further condition, but is an amended condition. On a plain reading of Entry 255, it appears that the incentive scheme does not envisage change of conditions stipulated at the time when the eligible unit is granted the benefit thereunder, but only imposition of further conditions. There is logic behind this. In the present case, the respondent was granted the benefit of the scheme despite the fact that it had not put up a captive power plant but was using the electricity generated by a sister concern by using naph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was diversion of any fuel to M/s Essar Power Ltd. It has been argued that the respondents are barred by the principle of promissory estoppel from changing Condition No.6, inasmuch as, the unit has crystallized rights for exemption for fourteen years and that the unit has been set up accordingly and that the condition which takes away such a benefit is hit by the doctrine of the promissory estoppel. It has been contended that the unit acted as per the assurance of the Government in entering into the power purchase agreement with M/s Essar Power Ltd. and supplied naphtha and natural gas obtained at a concessional rate to M/s Essar Power Ltd. and using the electricity generated thereby in the respondent unit. On the other hand, it is the case of the appellant that the original order having been passed under section 50 of the Act, the scope of powers of the Tribunal while exercising the appellate jurisdiction are circumscribed by the provisions thereof and hence, the Tribunal had no jurisdiction to invoke the doctrine of promissory estoppel. 10.1 Insofar as the doctrine of promissory estoppel is concerned, it is a rule of evidence as contained in section 115 of the Evidence Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id factual representation, the second party should alter his position. (iv) Fourthly, the instant altering of position, should be such, that it would be iniquitous to require him to revert back to the original position. Therefore, the doctrine of estoppel would apply only when, based on a representation by the first party, the second party alters his position, in such manner, that it would be unfair to restore the initial position. 10.2 In State of Rajasthan and others v. Bhatnagar Cement Co. (P) Ltd., (1999) 3 SCC 264, the Supreme Court held thus: 5. It will be seen that for the period from September 12, 1989 to February 22, 1990 the Tribunal found that the respondent was required to deposit sales tax which he was not required to collect and did not in fact collect. We are, therefore, in any event, not inclined to make any order contrary to that of the Tribunal for this period. 6. However, for the period subsequent to February 22, 1990, the Tribunal proceeded only upon the basis of promissory estoppel. Promissory estoppel has to be pleaded and established. We find nothing in the application made by the respondent to the Tribunal which can be said to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment, in its Energy and Petrochemicals Department, agreed to the demand of M/s Essar Power Ltd. to set up a generating station as a special case and to supply power generated by it to its sister concerns, that is, Essar Gujarat, Essar Steel Ltd. and Essar Oil, as a special case only. The fact that the availment of electricity from M/s Essar Power Ltd., by supplying naphtha and natural gas obtained by the respondent at concessional rates, has not been considered as a breach by the appellant prior to 14th November, 2000, that is, when the Condition No.6 of Entry No.255 came to be amended, goes to show that it was with the approval of the Government that the respondent was utilising electricity generated by Essar Power Limited from the naphtha and natural gas obtained by the respondent at concessional rates. Therefore, per se, the act of the respondent of supplying naphtha and natural gas obtained at concessional rates to M/s Essar Power Ltd. and availing of electricity generated thereby has not been considered as a breach of condition, prior to November, 2000. Under the circumstances, the contention raised by the learned Additional Advocate General that the State Government did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As can be seen from the impugned order, before the Tribunal, as many as fifteen objections had been raised on behalf of the appellant against the invocation of the doctrine of promissory estoppel. The Tribunal has dealt with each objection and has given detailed reasons in support of its finding that the principle of promissory estoppel is applicable to the facts of the present case. One of the findings recorded by the Tribunal is to the effect that the respondent intended to install a captive power plant and it was only because of the requirement of the State Government that a separate power generating company was formed. Secondly, fuel purchased against Form 26 was not diverted to the power generating company. The fuel was given to Essar Power Limited only for the limited purpose of converting it into electricity to be used by the respondent. Thus, the benefit of concession is retained by the respondent. The Tribunal clarified that to the extent electricity generated by Essar Power Limited by using fuel purchased by the respondent against Form-26, if any, was sold to GEB, the respondent had admitted purchase tax liability and paid purchase tax with the returns itself. The Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessional rate of tax against Form 26, it had been accepted as amounting to breach of declaration given in Form 26 for purchasing fuel at concessional rate of tax and applicable purchase tax under section 50 of the Act has been paid along with the returns. The Tribunal observed that the dispute in the appeals before it was restricted to the use of fuel purchased against declarations in Form 26 at a concessional rate of tax for generation of electricity by Essar Power Limited which is undisputedly used in Essar Steel Limited. Thus, there is no question of Essar Power Limited getting the benefit of concessional rate of tax which it is otherwise not entitled to get under the scheme. On a perusal of the Fuel Management Agreement entered into by and between Essar Steel Limited and Essar Power Limited, and more particularly clauses 5, 6 and 8 thereof, in the opinion of this court, Essar Power Limited could in no manner divert the fuel purchased by the respondent at a concessional rate, for its own use. Thus, the Tribunal, after appreciation of the material on record, has recorded findings of fact and has based its conclusion thereon. The learned counsel for the appellant has not been in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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