TMI Blog2016 (12) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... e the issuance of the later notifications, they could not operate to its detriment and it could not be denied the promised benefit. The petition deserves to succeed. We do not find any merit in the arguments on behalf of the State in justification of the rejection of the claim of the petitioner, namely the consensus at the Empowered Committee of State Finance Minister or that the State has the liberty to withdraw the promised incentive at any time. Nor, on the facts as they have emerged, is it possible to agree with the Ld. State Counsel the the petitioner has been lax or took no timely steps in proceeding to set up the unit - petition allowed. It is held and declared that the petitioner company would be entitled to the benefit of sales tax exemption as per the Industrial Policy 1996, Incentives Code, 1996 and the notification dated 30.4.2000 on the ground of promissory estoppel and the said benefit cannot be denied to the petitioner on the basis of the subsequent notifications dated 17.6.2002 and 12.9.2002. - The letters dated 24.9.2002 and 04.12.2002 rejecting the claim of the petitioner for sales tax exemption are quashed - The respondents are directed to re-consider the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4.1996. 5. Eligibility for incentives The Incentives shall be granted to the units set up in `A' and `B' category area, provided that no incentives shall be allowed in `B' category areas to the industrial units that are included in Annexure-II in `A' category areas to the Industrial Units that are included in Annexure-III. 5.1 Self financed units that are set up without mobilising funds from the Capital market through issue of shares, debentures, bonds, etc. shall not be eligible for any incentive. However, self financed units which only avail of working capital limits from a scheduled bank shall be eligible for incentives only if their project report is appraised by the bank and the fixed capital investment made by them is certified by it. 5.2 Those units which do not have their own land and building, incentive would be allowed, if such units have lease/rent deed for land/building occupied by them for a period not less than 10 years. 6.3 Interest Subsidy or Sales Tax Exemption or Sales Tax Deferment: Subject to the provisions of rule 5, a unit shall opt in form III(i) for availing either interest subsidy or Sales tax Exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registrar of Firms and Societies/Special Power of Attorney/copy of resolution by the Board, whichever is applicable. Certificate regarding FCI as appraised by the financial institution/scheduled bank. ii) General Manager, District Industries Centre or a Gazetted Officer nominated by him will receive the application. iii) The application would be checked then and there are deficiencies, if any, would be pointed out to the applicant in writing on the spot. The applicant would also be given a definite time period not exceeding eight weeks to rectify the deficiencies so pointed out. iv) In case the deficiencies are not removed within the specified time as mentioned above, the claim would be filed by the General Manager, under intimation to the party through a Registered AD, a copy of which would be sent to the Directorate. v) The District Officer, on verifying the complete application so submitted and satisfying himself regarding the genuineness of the claim, shall issue a certificate of the eligibility within 15 days in form T-II for claiming this benefit from the Department of Excise Taxation 7. Incentives to Large Medium Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The petitioner thereafter applied for loan to Oriental Bank of Commerce, Ludhiana on 31.1.2002 which was sanctioned vide letter dated 5.9.2002. Order for the supply of machinery was placed with M/s Laxmi Machine Works Ltd., Coimbatore in May 2001 and order for setting up for the plant was given to M/s Draft Air (India) Pvt. Ltd. New Delhi in Jan. 2002. Contract for construction of the building was given to M/s R.S. Builders and Engineers Ltd. of Ludhiana on 7.2.2002. Most of the construction work was completed in the Ist half of the year 2002. 8. The company applied for registration under the Central Sales Tax Act, 1956 (for short the Central Act ) and the Punjab General Sales Tax Act, 1948 (for short the State Act ) which was granted on 2.3.2002 and 21.3.2002, respectively. The validity of the letter of intent dated 10.7.1998 which was initially valid for three years was further extended by the Govt. of India Ministry of Textiles upto 31.12.2002. Deposit of `40,000/- was made with the Punjab Pollution Control Board for seeking clearance for setting up of industry on 6.2.2002. An amount of `1,42,500/- was deposited on 2.3.2002 as earnest money with the Punjab State Electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the grant of such industrial license by 30th April, 2000 will be considered sufficient collective step for the purpose of granting Sales Tax Exemption/ Deferment as above. (iv)Industrial units which have already been granted exemption/deferment under the Industrial Policy of the State Government will continue for the benefit till the expiry of the concession period. (v) Industrial units which have already gone into production are eligible for the same. The Exemption/ deferment in terms of the Rules 6.3 and 7.5 of the Punjab Industrial Incentive Code un- der the Industrial Policy, 1999. Such calls and those units which may go into production by 30th April, 2000 shall be granted Sales Tax Exemption/ Deferment, if otherwise eligible. This notification shall be effective from 1st May, 2000. sd/- R.I.Singh Secretary to Government, Punjab Department of Industries and Commerce 10. The petitioner addressed a letter dated 22.6.2000 to the General Manager, District Industries Centre, Ludhiana enquiring as to whether it was eligible for sales tax exemption as per the Industrial Policy, 1996 and Incentives Code, 1996. After repeated reminders the Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any new industrial unit or existing unit undertaking expansion except the unit which had taken the following effective steps by 30th April, 2000. (a) Registration with the Department of Industries and Commerce or with any other designated Department including, in the case of licensed items, the obtainment of such industrial license, (b) Purchase of land for the project; (c) Submit loan application with the financial institu- tion. Provided such units had come into production by 30th June, 2002. ii) Industrial units, which have already been granted Exemption/ Deferment under the Industrial Policy of the State Government, will continue to get this benefit till the expiry of the concession period. iii) Only those industrial units which have already gone into production by 30th June 2002 shall be granted Sales Tax Exemption/ Deferment, if otherwise eligible. By this amendment a new Sub-Rule (3) was added, which was a non obstante provision. As per this, notwithstanding anything contained in any provision of the Punjab General Sales Tax (Deferment and Exemption) Rules, 1991 (for short the Deferment and Exemption Rules, 1991 ), no sales tax inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery and also substantially completing the construction. It had already spent about `7 to 8 crores. In the light of these, it was requested that the petitioner s case be treated separately and the time for commencement of production for availing the incentive, in its case, be extended till 31.12.2002. This representation was rejected on 24.9.2002 stating that the petitioner was not eligible for sales tax exemption in terms of notification dated 17.06.2002 wherein the cut off-date for start of production was 30.06.2002. 17. Yet another representation submitted by the petitioner for extension of date for starting production to 31.12.2002 was rejected vide letter dated 4/5.12.2002 (Annexure P-21) of the Joint Secretary Government of Punjab, Department of Excise Taxation. In justification of the rejection it was mentioned that as per the National Consensus arrived at in the meeting of the Empowered Committee of State Finance Ministers, no sales tax related incentives were to be granted after 30.4.2000 except to units in pipe line. As per government notification dated 12.9.2002 no sales tax based incentives were to be granted to units which came into production after 30.6.2002. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production before a particular date. The industry could apply for the incentives within six months of the date of starting commercial production. It was only vide the notification dated 24.6.2000 that it was specified that the sales tax exemption or sales tax deferment would be available in the case of units, which took the following three effective steps, before 30.4.2000 namely (a) registration with the department of Industry and Commerce (b) purchase of land for the project and (c) submission of loan application with the financial institution. For units for which industrial licence is required, the grant of industrial licence by 30.4.2000 would be considered sufficient step for the purpose of granting sales tax exemption or deferment. 23. After the issuance of the aforesaid notification, on the petitioner's query the General Manager, District Industries Centre, Ludhiana vide his letter dated 7.5.2001 confirmed to the petitioner, that as it fulfilled the terms and conditions of the notification dated 26.4.2000, it would be eligible for sales tax exemption under the Industrial Policy 1996. Being thus assured the petitioner went ahead with his project. Order for supply of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the petitioner placed order for the supply of machinery and other steps regarding construction were taken after January, 2002. Moreover, it submitted its application for grant of credit/loan facility to Oriental Bank of Commerce OBC on 31.1.2002, which was sanctioned on 5.9.2002. He further stated that as the unit started production on 21.10.2002 i.e., after the notifications dated 17.6.2002 and 12.9.2002, its case would be governed by these notifications. 26. Heard Ld. Counsel for the parties and perused the record. 27. The law on the doctrine of promissory estoppel is well settled. In Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409 Hon'ble the Supreme Court explained the doctrine as under: 24......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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it can be shown by the Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promisee and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case because, on the facts, equity would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts as have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmal notice, giving the promisee a reasonable opportunity of resuming his position provided of course it is possible for the promisee to restore status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. Vide Emmanuel Avodeji Ajaye v. Briscoe. Recently, this view was reiterated by Hon'ble the Supreme Court in Manuelsons Hotels's case (supra) , as under: 19. In fact, we must never forget that the doctrine of promissory estoppel is a doctrine whose foundation is that an unconscionable departure by one party from the subject-matter of an assumption which may be of fact or law, present or future, and which has been adopted by the other party as the basis of some course of conduct, act or omission, should not be allowed to pass muster. And the relief to be given in cases involving the doctrine of promissory estoppels contains a degree of flexibility which would ultimately render justice to the aggrieved party. The entire basis of this doctrine has been well put in a judgment of the Australian High Court in Commonwealth of Australia v. Verwayen [Commonwealth of Australia v.Verwayen, (1990) 170 CLR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion whether departure from the assumption would be unconscionable must be resolved not by reference to some preconceived formula framed to serve as a universal yardstick but by reference to all the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted. In cases falling within Category (a), a critical consideration will commonly be that the allegedly estopped party knew or intended or clearly ought to have known that the other party would be induced by his conduct to adopt, and act on the basis of, the assumption. Particularly in cases falling within Category (b), actual belief in the correctness of the fact or state of affairs assumed may not be necessary. Obviously, the facts of a particular case may be such that it falls within more than one of the above categories.\ 5. The assumption may be of fact or law, present or future. That is to say, it may be about the present or future existence of a fact or state of affairs (including the state of the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the doctrine of promissory estoppel-one, that the central principle of the doctrine is that the law will not permit an unconscionable departure by one party from the subject-matter of an assumption which has been adopted by the other party as the basis of a course of conduct which would affect the other party if the assumption be not adhered to. The assumption may be of fact or law, present or future. And two, that the relief that may be given on the facts of a given case is flexible enough to remedy injustice wherever it is found. And this would include the relief of acting on the basis that a future assumption either as to fact or law will be deemed to have taken place so as to afford relief to the wronged party. 28. In the present case, it is clear from the record that acting on the promise of incentives incorporated in the Industrial Policy, 1996 and the Incentives Code, 1996, the petitioner undertook a series of steps to set up the unit commencing with the purchase of 43,600 square yards of land on 24.10.1997 and 28.10.1997 at approximate cost of `20,50,000/-. It purchased additional 1,100 square yards of land in the year 2001. It obtained Industrial Licence under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solvent extraction plants. The State of Haryana had announced an Industrial Policy for the period from April 1, 1988 to March 31, 1997 wherein, besides other in- centives, sales tax exemption was to be given to the industries set up in backward areas in the State. Rules 28A to 28C to the Haryana General Sales Tax Rules, 1975 (for short the Rules ) specified the class of industries, period and other conditions for exemption/deferment from payment of tax. As per these Rules the operative period was from 1st April, 1988 to 31st March, 1997. Schedule III contained a negative list of industries. Solvent extraction plant was not included in this list. On 3-1-1996, the State notified its intention to amend the Rules and circulated the draft Rules for information of persons likely to be affected thereby so as to enable them to file objections and suggestions thereto. Amendments in the terms of the said draft Rules were notified on 16-12-1996 and solvent extraction plant was included in Schedule III. Note 2 was appended to Schedule III as per which industrial units in which investment had been made up to 25% of the anticipated cost of the project and which had been included in the negativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial unit. An entrepreneur who sets up an industry in a backward area unless otherwise prohibited, is entitled to alter his position pursuant to or in furtherance of the promises or representations made by the State. The State accepted that equity operated in favour of the entrepreneurs by issuing Note 2 to the notification dated 16-12-1996 whereby and where under solvent extraction plant was for the first time inserted in Schedule III i.e. in the negative list. 39. Both the provisions contained in Schedule III and Note 2 formed part of subordinate legislation. By reason of the said note, the State did not deviate from its professed object. It was in conformity with the purport for which original Rule 28-A was enacted. 40. We, in this case, are not concerned with the quantum of exemption to which the appellants may be entitled to, but only with the interpretation of the relevant provisions which arise for consideration before us. 44. By reason of Note 2, certain rights were conferred. Although there lies a distinction between vested rights and accrued rights as by reason of a delegated legislation, a right cannot be taken away. The amendments carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rialisation, exemption from sales tax and purchase tax for a period of five years was extended as a concession and the fiveyear period was to run from the date of commencement of production. If in response to such an order and in consideration of the concession made available, promoters of any small-scale concern have set up their industries within the State of Kerala, they would certainly be entitled to plead the rule of estoppel in their favour when the State of Kerala purports to act differently. Several decisions of this Court were cited in support of the stand of the appellants that in similar circumstances the plea of estoppel can be and has been applied and the leading authority on this point is the case of M.P. Sugar Mills. On the other hand, reliance has been placed on behalf of the State on a judgment of this Court in Bakul Cashew Co. v. STO. In Bakul Cashew Co. case this Court found that there was no clear material to show any definite or certain promise had been made by the Minister to the persons concerned and there was no clear material also in support of the stand that the parties had altered their position by acting upon the representations and suffered any prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax exemptions w.e.f., 1.1.2000 could not have affected the rights of the respondent company under the Industrial Policy, 1995. It was observed as under: 79. We are also unable to accept the submission that the decisions dated 6-1-2001 and 5-3-2001 had been taken due to the change in the national policy. This was sought to be justified by Dr. Dhavan on the basis of the Conferences of Chief Ministers/Finance Ministers. It is settled law as noticed by Bhagwati, J. in Motilal Padampat that the Government cannot claim to be exempt from the liability to carry out the promise on some indefinite and undisclosed ground of necessity or expediency. The Government is required to place before the Court the entire material on account of which it claims to be exempt from liability. Thereafter, it would be for the Court to decide whether those facts and circumstances are such as to render it inequitable to enforce the liability against the Government. Mere claim of change of policy would not be sufficient to exonerate the Government from liability. It is only when the Court is satisfied that the Court would decline to enforce the promise against the Government. However, the burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess which culminated in passing of the Orders dated 6-1-2001 and 5-3- 2001 is seriously flawed, therefore, the same have been justifiably quashed by the High Court. 39. In MRF Ltd. v. CST, (2006) 8 SCC 702 , the action of the State Government to withdraw the benefit of tax exemption granted in terms of the Industrial policy was held to be arbitrary and unreasonable. : 39. MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibility certificate. The exemption order had also been passed. It is not open to or permissible for the State Government to seek to deprive MRF of the benefit of tax exemption in respect of its substantial investment in expansion in respect of compound rubber when the State Government had enjoyed the benefit from the investment made by MRF in the form of industrial development in the State, contribution to labour and employment and also a huge benefit to the State exchequer in the form of the State s share i.e. 40% of the Central excise duty paid on compound rubber of ₹ 177 crores within the State of Kerala. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Kerala and possibly for that reason industries which depended much upon electricity as a source of power were not inclined to establish new industries in the State of Kerala. Before setting up an industry, the entrepreneur or the industrialist considers several factors and thereupon takes several decisions like place of business, capacity at which production should be made, type of raw material, etc. After considering all these factors, a final decision is taken with regard to setting up of an industry. For a new entrepreneur, such a decision is of vital importance because if he fails in his estimates or in consideration of all the relevant factors, there are all chances that he would fail not only in his business but he would completely ruin himself. Thus, one can very well appreciate that the appellants must have thought about all relevant factors, including the incentives offered by the respondent State and might have decided to set up their industries in the respondent State. While deciding this case, this Court would invariably keep in mind the circumstances in which the appellants had set up their industries in the State of Kerala. 32. In view of the incentives an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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