TMI Blog2023 (5) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... sales tax exemption. However, thereafter, the definition of manufacture as contained in Section 2(17) of the Act, 1994 came to be amended w.e.f. 01.08.2001 vide West Bengal Finance Act, 2001 and the activity of tea blending came to be excluded from the definition of manufacture . Consequently, the appellants ceased to be the manufacturers. Once the appellants ceased to be the manufacturers, the appellants shall not be entitled to the exemption from the payment of sales tax, which was available to the appellants as a manufacturer being in the activity of tea blending . Therefore, on and from 01.08.2001, tea blending activity ceased to be the manufacturing activity and the appellants ceased to be the manufacturers and therefore, on and from 01.08.2001, the appellants shall not be entitled to the exemption from payment of sales tax. The view taken by the learned Tribunal as well as the High Court agreed upon, that on and after 01.08.2001 and in view of the amendment to Section 2(17) of the Act, 1994, by which the definition of manufacture is amended and tea blending is excluded from the definition of manufacture , the appellants shall not be entitled to the exemption f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te expectation, created by the appropriate and competent authority, was broken when a subsequent amendment was brought in, wherein the words blending of tea was removed from the definition of manufacture . Such an amendment, by removing the said words, snatched away the legitimate expectation of a specific outcome, and ousted the appellants from claiming the tax holiday, to which they were promised by the original amendment. As can be seen, a reasonable legitimate expectation was created by the competent authority, which lured the appellants to act in a certain manner. Such a legitimate expectation was then snatched away, leaving the appellants without remedy, and in losses - In the present case at hand, while perusing through the subsequent amendment, it can be clearly seen that no such appropriate justification has been provided by the government. No appropriate reason for the enactment of the amendment, nor the considerations of the affected party have been discussed. A mere claim of change of policy is not sufficient to discharge the burden of proof vested in the government. The government must precisely show what the change of policy is, and why such a change of law is in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of appeals, all these appeals are being decided and disposed of together by this common judgment and order. For the sake of convenience, Civil Appeal No. 2297 of 2011 arising out of impugned judgment and order passed by the High Court in Writ Petition No. 479 of 2006 be treated as the lead matter. The facts leading to the present appeal in nutshell are as under:- 2.1 That Section 2(dd) of the erstwhile Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as Act, 1941 ) defined the term manufacture and blending of any goods was included within the said definition. That the Act, 1941 came to be replaced by the West Bengal Sales Tax Act, 1994 (hereinafter referred to as the Act, 1994 ) and in the month of April, 1998, the definition of manufacture provided under section 2(17) of the Act, 1994 was amended and as a result of which, blending of any goods was omitted from the definition of manufacture but blending of tea continued to be included in the said definition. 2.2 By virtue of the amendment made in the definition of manufacture provided under section 2(17) of the Act, 1994, tax holiday was granted to new small scale industrial units for a specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellants came to be stopped and even the eligibility certificate was required to be modified. 2.7 The aforesaid action / order was challenged before the Tribunal first and thereafter before the High Court. The Tribunal dismissed the application, which has been confirmed by the High Court by the impugned judgment and order. The impugned judgment and order passed by the High Court is the subject matter of present appeals, claiming the exemption from payment of sale tax as per earlier 1999 Scheme. 3. Ms. Kavita Jha, learned counsel has appeared on behalf of the appellants and Ms. Madhumita Bhattacharjee, learned counsel has appeared on behalf of the respondents - State. 4. Learned counsel appearing on behalf of the appellants had made the following submissions:- 4.1 That the appellants had been allured by the State of West Bengal Government to set up new industrial unit in expectation of getting benefit of tax for a period on fulfilment of certain requirements and once on the basis of such requirements such industrial unit is given such benefit, subsequently, by way of amendment such right cannot be taken away. 4.2 That the State authority has in a blanket manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006) 8 SCC 702 and Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh Ors., (1979) 2 SCC 409. 4.7 Learned counsel appearing on behalf of the appellants has also relied upon the decision of this Court in the case of State of Jharkhand Ors. Vs. Brahmputra Metallics Ltd., Ranchi Anr. [Civil Appeal Nos. 3860-3862 of 2020] and in the case of Dai-ichi Karkaria Ltd. Vs. Union of India Ors., (2000) 4 SCC 57 in support of the submission on the legitimate expectation. 4.8 Making above submissions and relying upon the above decisions, it is prayed to allow the present appeals. 5. Learned counsel appearing on behalf of the State while opposing the present appeals has vehemently submitted that in the facts and circumstances of the case, the appellants shall not be entitled to the exemption as claimed. 5.1 It is submitted that in the year 1999, the appellants were granted a certificate of eligibility for Tax Holiday under Section 39 of the Act, 1994 for a period of seven years from the date of first sale of the manufactured product, i.e., 18.05.1999, since at that point of time the definition of manufacture in Section 2(17) of the Act, 1994 included 'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not is a policy decision and nobody can claim the exemption as a matter of right. It is submitted that therefore, both the learned Tribunal as well as the High Court have rightly refused to grant the appellants any exemption from payment of sales tax which the appellants were being granted prior to 01.08.2001 being the manufacturers of tea blending . 5.7 It is further submitted that this is not the case of retrospective operation, but it is a case of prospective withdrawal of an existing continuing right to get exemption of sales tax. It is submitted that when the legislature in its wisdom amended the definition of manufacture contained in Section 2(17) and the tea blending came to be excluded from the definition of manufacture and which resulted in withdrawing the exemption, which the appellants were availing prior to 01.08.2001 as manufacturer, being a policy decision, the same is not subject to judicial review. Reliance is placed on the decision of this Court in the case of Directorate of Film Festivals Ors. Vs. Gaurav Ashwin Jain Ors., (2007) 4 SCC 737. 5.8 Making above submissions, it is prayed to dismiss the present appeals. 6. Heard the learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the definition of manufacture as contained in Section 2(17) of the Act, 1994 came to be amended w.e.f. 01.08.2001 vide West Bengal Finance Act, 2001 and the activity of tea blending came to be excluded from the definition of manufacture . Consequently, the appellants ceased to be the manufacturers. Once the appellants ceased to be the manufacturers, the appellants shall not be entitled to the exemption from the payment of sales tax, which was available to the appellants as a manufacturer being in the activity of tea blending . Therefore, on and from 01.08.2001, tea blending activity ceased to be the manufacturing activity and the appellants ceased to be the manufacturers and therefore, on and from 01.08.2001, the appellants shall not be entitled to the exemption from payment of sales tax. Thus, the withdrawal of exemption from payment of sales tax would be prospective and not retrospective. So long as the appellants continue to be the manufacturers as per Section 2(17) of the Act, 1994 prevailing prior to 01.08.2001, the appellants can be said to be entitled to the benefit of exemption from payment of sales tax as manufacturers being in the activity of tea blending . The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XXXXXXXXXXXXXXX 8.5 Under the circumstances, the decisions relied on behalf of the appellants referred to hereinabove, shall not be applicable to the facts of the case on hand. 9. In view of the above and for the reasons stated above, I am in complete agreement with the view taken by the learned Tribunal as well as the High Court that on and after 01.08.2001 and in view of the amendment to Section 2(17) of the Act, 1994, by which the definition of manufacture is amended and tea blending is excluded from the definition of manufacture , the appellants shall not be entitled to the exemption from payment of sales tax. Under the circumstances, all these appeals fail and the same deserve to be dismissed and are accordingly dismissed. However, in the facts and circumstances of the case, there shall be no order as to costs. CIVIL APPEAL NO. 2297 OF 2011 KRISHNA MURARI, J. JUDGMENT KRISHNA MURARI, J. 1. I have had the advantage of reading the judgment proposed by my esteemed brother, Hon ble Mr. Justice M.R. Shah. However, I am unable to agree with the reasoning as well as the result arrived at by my esteemed brother, and thus separately pen do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first issue, and hence, my dissent is limited only to the second question posed before this Court. RULE OF LAW 9. The doctrine of rule of law, as an ideal, denotes that a state must be governed, not by men, but by law. This concept finds its origins in the work of Aristotle, where he remarks that in a state that functions on the principles of justice and equality, rule of law must be supreme, and the state as an institution must not be subject to the whims and fancies of its ruler. 10. While the origins of rule of law date back to ancient Greece, the modern conception of rule of law, which is the bedrock for most democratic constitutions across the world, finds its roots in the book The Law of the Constitution authored by professor A.V. Dicey. 11. Professor Dicey, in his conception of the doctrine of rule of law, while echoing the thoughts of Aristotle, states that all individuals and entities must be subject to law, and that no one, not even the government or its officials, are above the law. For such a functioning of the law, Dicey points out that the law must be clear, unambiguous, and must apply to all equally. To further such a conception and bring clarity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem. DOCTRINE OF LEGITIMATE EXPECTATION 15. The doctrine of legitimate expectation, in simple terms, is a legal principle that arises when a public authority makes a promise or acts in a manner that leads an individual or a group to expect a particular outcome. This doctrine , which flows from the doctrine of rule of law, is based on the idea of fairness and consistency in the decision-making processes of public authorities. 16. When a legitimate expectation of a specific outcome is created by a public authority, the said public authority is required to take into account such expectation created by it when making a decision that affects the interests of the individual or group concerned. If the public authority fails to do so, the individual or group has a right to challenge the decision and seek a remedy, such as an order to enforce the legitimate expectation, as is the situation in the case at hand. 17. In Halsbury's Laws of England, Fourth Edition, Volume I(I) 151,the concept of legitimate expectation has been elucidated on, and for the sake of convenience, the same is being extracted herein: Legitimate expectations . A person may have a legitimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the doctrine were further elaborated upon. Notwithstanding efforts of the Courts, some ambiguity as to when legitimate expectations arise persisted, and in response, Lord Justice of Appeal, John Laws proposed the aspiration of good administration as a justification for the protection of legitimate expectations in the case of Nadarajah v. Secretary of State for the Home Department [2005] EWCA Civ 1363 . 21. The doctrine of legitimate expectation was first introduced to Indian jurisprudence in the case of State Of Kerala Ors. vs. K.G. Madhavan Pillai Ors. (1988) 4 SCC 669 . In the aforesaid case, the government had issued a sanction in favour of the respondent therein to open a new school and to upgrade certain already existing schools. However, subsequent to the abovementioned sanction, a new direction was given by the government to keep the said sanction in abeyance. This Court, while deciding the said issue, was of the opinion that the original sanction given by the government gave rise to a legitimate expectation in the minds of the respondents. This legitimate expectation was however breached by the subsequent direction for abeyance, and hence there was a violat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment, for a ready reference, are being reproduced hereunder:- It also appears to us that in any event the new policy decision as contained in the impugned memorandum of January 20, 1990 should not have been implemented without making such change in the existing criterion for allotment known to the Group Housing Societies if necessary by way of a public notice so that they might make proper representation to the concerned authorities for consideration of their viewpoints. Even assuming that in the absence of any explanation of the expression first come first served in Rule 6(vi) of Nazul Rules there was no statutory requirement to make allotment with reference to date of registration, it has been rightly held, as a matter of fact, by the High Court that prior to the new guideline contained in the memo of January 20, 1990 the principle for allotment had always been on the basis of date of registration and not the date of approval of the list of members. In the brochure issued in 1982 by the DDA even after Gazette notification of Nazul Rules on September 26, 1981 the policy of allotment on the basis of seniority in registration was clearly indicated. In the aforesaid facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introducing or implementing any change in the guideline for allotment, an opportunity to make representations against the proposed change in the guideline should have been given to the registered Group Housing Societies, if necessary, by way of a public notice. 23. The doctrine of legitimate expectation was then further elaborated upon in the case of Food Corporation Of India vs. Kamdhenu Cattle Feed Industries (1993) 1 SCC 71 , wherein, this Court held that the duty of public authorities to act in a reasonable manner, entitles every person to have a legitimate expectation to be treated in such a reasonable manner. This legitimate expectation imposed on public authorities to act in a fair manner, as has been held, is imperative to ensure non-arbitrariness of state action. It was further held by this Court that while such a legitimate expectation might not by itself be an enforceable right, however, the failure to take into account such expectation may deem a decision of the public authority to be arbitrary. It is my opinion, that the above said decision rendered by this Court, remarkably weaves in the doctrine of rule of law, the doctrine of legitimate expectation, and the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review. 24. Further, in the case of M.P.Oil Extraction Anr. vs. State Of M.P. Ors. (1997) 7 SCC 592 ,this Court held that the doctrine of legitimate expectation operates in the sphere of public law and as such, is a substantive and enforceable right depending on the facts and circumstances of the case. The relevant paragraph from the said judgment is being extracted hereunder:- The renewal clause in the impugned agreements executed in favour of the respondents does not also appear to be unjust or improper. Whether protection by way of supply of sal seeds under the terms of agreement requires to be continued for a further period, is a matter for decision by the State Government and unless such decision is patently arbitrary, interference by the Court is not called for. In the facts of the case, the decision of the State Government to extend the protection for further period cannot be held to be per se irrational, arbitrary or capricious warranting jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the Court to apply for judicial review. It is generally agreed that 'legitimate expectation' gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightway from the administrative authorities as no crystallized right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, where a person's legitimate expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , arbitrary and, therefore, the same is violative of Article 14 of the Constitution of India. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. This Court in E.P. Royappa Vs. State of Tamil Nadu (1974) 4 SCC 3 , observed that where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of Article 14. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of justice and fair play . The attempt to take away the said benefit of exemption with effect from 15.1.1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event the State Government has no power to make a retrospective amendment to SRO 1729/93 affecting rights already accrued to MRF there under. 27. Further, in the case of Howrah Municipal Corporation Ors. vs. Ganges Rope Company Ltd. Ors. (2004) 1 SCC 663 , it was held by this Court that no right can be claimed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c interest, rescind the same. Such a scenario, if allowed to manifest into reality, would remove any and all certainty of the legal system, and directly become an antithesis to the rule of law. Further, if a blanket bar of the doctrine of legitimate expectation against a statute is to be allowed, no domestic or foreign investor would ever invest in local business and ventures, as any legitimate expectation by way of a statute would translate only to a fa ade, as such a benefit could be snatched away arbitrarily at any point in time. Hence, any contrary interpretation of the doctrine of legitimate expectation, would cause great havoc, and only cause detriment to the rights of individuals and the society at large. 32. Further, it must be borne in mind that the doctrine of legitimate expectation and the doctrine of promissory estoppel are two separate principles, and as such, the blanket ban on promissory estoppel against a statute cannot be applicable to the doctrine of legitimate expectation. 33. The doctrine of promissory estoppel and the doctrine of legitimate expectation, while they share a common root and a similar theme, by way of going through the rigours of common law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual or group. It must not be based on any vested interest or personal gain. VIII. The expectation must be protected : Once a legitimate expectation is created, it must be protected and not arbitrarily or capriciously withdrawn by the public authority. The public authority must provide a reasonable opportunity for the individual or group to be heard before any decision is taken to withdraw or modify the expectation. APPLICATION OF LEGITIMATE EXPECTATION IN THE PRESENT FACTUAL MATRIX 36. A tax holiday was granted to new small scale industrial units involved in the manufacture of tea for a specified period of time under Section 39 of the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as the 1941 Act ) read with Section 17(3)(1)(xi) of the said Act with Rule 52 of the West Bengal Sales Tax Rules, 1995. 37. It is important to note that at this period, statutorily, blending of tea was read under the definition of manufacture , and as such, the tax holiday was also applicable to small scale industrial units involved in the blending of tea. 38. Subsequent to such a tax holiday being granted, the appellants herein, relying upon the assurance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sufficient to discharge the burden of proof vested in the government. The government must precisely show what the change of policy is, and why such a change of law is in furtherance of public policy, and the public good. 43. In light of the factual matrix herein and the abovementioned discussions, it can be clearly seen that a legitimate expectation was created by the public authority, and such an expectation, accrued in the favour of the appellants herein, was rescinded by the said authority without any demonstration of public interest. No appropriate explanation has been provided as to why a shift was made in Law, and why such a shift, in spite of the loss which would occur to the appellants and similarly situated persons, was necessary to advance public interest. In such a circumstance, the legitimate expectation created in the minds of the appellants, must be protected, and the benefits given originally must be made applicable to the appellants herein for the period promised by the respondent authority. CONCLUSION 44. The doctrine of legitimate expectation, as has been mentioned above, is a facet of Article 14, and is essential to maintain the rule of law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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