Wipro Limited And Anr. vs State Of Maharashtra And Ors.
2003 Latest Caselaw 800 Bom

JUDGMENT

B.H. Marlapalle J.

1. This petition filed under Article 226 of the Constitution of India takes exception to the circular dated February 1, 2000 issued by the respondent No. 2 purportedly clarifying the import of earlier circulars dated February 13, 1978, June 21, 1978, December 1, 1979, January 9, 1985 and January 14, 1988.

2. The petitioner No. 1 is a company incorporated under the Companies Act, 1956 and it is engaged in the manufacture and sale of consumer products like vanaspati and toilet soaps, etc., in its factories at Amalner in Jalgaon district in Maharashtra State and Tumkur in Karnataka State. It has been registered under the Bombay Sales Tax Act, 1959 (for short, "the State Act") as well as the Central Sales Tax Act, 1956 (for short, "the Central Act"). The said products manufactured in the State of Maharashtra are sold not only in the State of Maharashtra but in other States as well and the raw materials required are also procured from Maharashtra as well as other States.

3. The dealers in the State of Maharashtra used to effect purchases by giving declaration in form No. 15 to the Bombay Sales Tax Rules, 1959 (for short, "the State Rules") for the raw material requirements. It was necessary that the raw materials so purchased were utilised for the manufacture of goods which were sold in Maharashtra. If the goods were exported out of Maharashtra State the concessions for purchase of raw material on furnishing form No. 15 invited penal action as set out in Section 14 of the State Act. Section 13AA was introduced by Maharashtra Act No. 28 of 1982 in the State Act with effect from July 1, 1982. As per the said new provision a dealer shall be liable to pay, in addition to the sales tax paid or payable, if any, or, as the case may be, the purchase tax levied or leviable, if any, under the other provisions of this Act if the goods manufactured on the basis of raw material procured by furnishing form No. 15 were totally or partly exported out of State of Maharashtra. This amendment perhaps was the fallout of the decision of this Court in the case of Commissioner of Sales Tax v. Berar Oil Industries [19751 36 STC 473. Subsequent to the said decision, the State Government had issued a circular on February 13, 1978 granting concessions on furnishing form No. 15 and diluting the principles set out in the case of Berar Oil Industries [1975] 36 STC 473 (Bom).

4. The constitutional validity of Section 13AA of the State Act came to be challenged by the petitioner. By the judgment dated July 19, 1988, Wipro Products Limited v. State of Maharashtra [1989] 72 STC 69, the petition came to be dismissed by this Court. The Supreme Court by judgment dated October 19, 1989, Reported in as Goodyear India Ltd. v. State of Haryana was pleased to set aside the judgment of this Court and upheld the challenge to the validity of Section 13AA of the State Act. The State of Maharashtra, by Ordinance No. 9 of 1989, introduced a new Section 13AA with effect from July 1, 1982 and it was replaced by Maharashtra Act No. 2 of 1990 with effect from July 1, 1982. The said new provision also came to be challenged by the petitioners and other dealers before this Court and more so, the retrospective introduction of the said provision with effect from July 1, 1982. This Court, by order dated August 28, 1990, was pleased to declare that the newly added provision was unconstitutional [1990] 79 STC 255, Reported as Hindustan Lever Ltd. v. State of Maharashtra. However, the Supreme Court in the case of Hotel Balaji [1993] 88 STC 98 was pleased to uphold the validity of similar provision found in other statutes. Subsequently, in the case of Devi Dass Gopal Krishan Pvt. Ltd. v. State of Punjab [1994] 95 STC 170, the Supreme Court was pleased to hold that Section 13AA was valid and competent piece of legislation. The said section was once again substituted by Maharashtra Act No. 24 of 1990 with effect from October 1, 1990 and further substituted by Maharashtra Act No. 16 of 1995 with effect from October 1, 1995.

5. Notwithstanding the incorporation of Section 13AA in the State Act, at no point of time the State Government had withdrawn the concessions granted vide circular dated February 13, 1978.

6. The Maharashtra Sales Tax Tribunal by order dated December 21, 1996 disposed of Appeal No. 727 of 1989 filed by the petitioner for the assessment period from July 1, 1982 to June 30, 1983 and it was pleased to send back the same to the lower authorities to rework the petitioner's liability on the basis of the circular dated February 13, 1978 by holding that the administrative concessions granted by the said circular were available to the petitioners in respect of the purchases covered under Section 13A of the State Act. This order was followed by the Assistant Commissioner of Sales Tax who by his order dated February 24, 2000 reduced the purchase tax from Rs. 27,28,172 to Rs. 9,93,150. For the assessment periods from July 1, 1984 to June 30, 1985, July 1, 1985 to June 30, 1986, July 1, 1986 to June 30, 1989, April 1, 1987 to March 31, 1990, April 1, 1990 to March 31, 1991, April 1, 1991 to March 31, 1992, April 1, 1992 to March 31, 1993, April 1, 1993 to March 31, 1994, April 1, 1994 to March 31, 1995 and April 1, 1995 to March 31, 1996, the petitioners appeals were pending and therefore, the petitioners filed Writ Petition No. 5034 of 1999 seeking directions to dispose of the said appeals on the basis of the Tribunal's order dated December 21, 1996 in Second Appeal No. 727 of 1989. The said petition was disposed of by order dated September 27, 1999 with the directions to the lower appellate authority to dispose of the pending appeals within a period of six months. However, respondent No. 2 issued the impugned circular dated February 1, 2000 withdrawing the administrative concessions with retrospective effect from July 1, 1981 granted earlier by the earlier circulars including the circular dated February 13, 1978 and therefore, the pending appeals came to be rejected on the basis of the impugned circular,

7. The impugned circular issued by respondent No. 2 on February 1, 2000 (circular No. 4-T of 2000) refers to the judgment of this Court in the case of Berar Oil Industries [1975] 36 STC 473 as well as the five circulars referred to hereinabove including the circular dated February 13, 1978 and to clarify the same stated as under :

"(i) In the case, where period of assessment involved is prior to 1st July, 1981 but appeals are pending for decision, in any of the proceedings under the Act, the administrative concessions granted under circular dated June 21, 1978 is required to be extended.

(ii) In the case where the period of assessment involved is after 1st July, 1981 but appeals are pending for decision in any of the proceedings under the Act, the administrative concessions granted under circular dated June 21, 1978 need not be granted.

(iii) In the case where administrative concessions have already been granted for any period of assessment (even falling after July 1, 1981) by following the instructions issued under circulars dated June 21, 1978, the assessment need not be reopened for withdrawal of the said concession."

8. It appears that the first appellate authority, i.e., the Commissioner of Sales Tax (Appeals) relied on the clarification at (ii) above and held that the administrative concessions granted on

June 21, 1978 vide Circular No. 20 of 1978 were withdrawn retrospectively and therefore, the appeals failed.

9. It is contended by the petitioners that the State Government has unchallenged powers to modify its policy in granting concessions introduced by way of administrative circulars but the said withdrawal cannot be retrospective and it has to be necessarily prospective. In support of these contentions, it has been submitted that as the concessions have been granted by way of State policy, the entrepreneurs changed their position over a period of time by investing huge money and thus, the doctrine of promissory estoppel would operate against the State Government. At the same time, the concessions already availed of on the basis of such policy cannot be directed to be recovered. Such an action would hit the guarantee under Article 14 of the Constitution of India. In support of these contentions, the petitioners have relied on the following decisions :

(i) Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh .

(ii) Union of India v. Godfrey Philips India Ltd. .

(iii) Deputy Commissioner of Commercial Taxes v. Kirloskar Ferrous Industries Limited .

(iv) Harshendu Upendre Kaka v. Income-tax Officer [2001] 249 ITR 612 (Bom), Reported as Unit Trust of India v. P.K. Unny.

10. By following its earlier decision in the case of Motilal Padampat Sugar Mills , the apex Court in the case of Godfrey Philips India Limited unanimously held that the doctrine of promissory estoppel is applicable against the Government in exercise of Government, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel and the withdrawal of concessions granted in payment of excise duty has to be prospective. Retrospective withdrawal of such concessions has been declared to be invalid and unconstitutional.

11. On the face of the law laid down by the apex Court, the withdrawal of concessions granted by the State of Maharashtra and continued even after the introduction of Section 13AA of the State Act, could not have been effected retrospectively and it ought to be prospective and therefore, the challenge to the impugned circular dated February 1, 2000 issued by respondent No. 2 is required to be upheld.

12. In addition to the above, it is pertinent to note that the five circulars referred to in the impugned circular dated February 1, 2000 and which were purportedly clarified by the said circular were issued by way of Government policy decision and the administrative concessions granted by these circulars, more particularly the circular dated February 13, 1978 and the circular dated June 21, 1978 were never withdrawn. They were in force even after the impugned circular dated February 1, 2000 was issued. The impugned circular attempts to give clarifications but in the process proceeds to withdraw the concessions retrospectively from July 1, 1981. Such a course of action is not permissible in view of the law laid down by the apex Court in Godfrey Philips India Limited . At the same time, the impugned circular by no stretch of imagination could be termed as translation of the Government decision. The clarifications have been issued by respondent No. 2 and he could not have proceeded to alter the Government policy under the garb of setting-out the clarifications of the administrative concessions granted by the State Government. Any alteration in the policy of administrative concessions could be done by the State Government alone and the impugned circular is not and cannot be called as a government decision. Therefore, at the threshold the impugned circular is required to be declared invalid as having been issued without competence on the part of the respondent No. 2. An administrative clarification cannot be allowed to alter a Government policy and if the Government policy is required to be changed, such a change must necessarily be done by the State Government only and not by the department concerned. The entrepreneurs having enjoyed the concessions on the basis of the said policy did alter their position and enjoyed the benefits of such concessions. In the case of the present petitioners, the order passed by the Tribunal on December 21, 1996 in Appeal No. 727 of 1989 came to be implemented by the Assistant Commissioner of Sales Tax by his order dated April 20, 2000 on the basis of circular No. 2 of February 13, 1978 and the purchase tax liability was reduced almost to one-third. The impugned administrative circular was in fact void ab initio and it was not required to be considered while deciding the pending appeals pursuant to the directions issued by this Court in Writ Petition No. 5034 of 1999 and they were required to be decided by following the law laid down by the Tribunal in Second Appeal No. 727 of 1989.

13. In the result, we allow the petition and quash and set aside the impugned circular to the extent of clarifications in respect of explanation in Clauses (ii) and (iii) as shown above. Rule is made absolute in terms of prayer Clauses (A) and (B). No order as to costs.