Himachal Pradesh High Court
M/S Jaiprakash Associates Ltd vs State Of H.P. And Others on 4 December, 2023
Bench: Mamidanna Satya Ratna Sri Ramachandra Rao, Jyotsna Rewal Dua
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
CWP No.4599 of 2013 and
connected masters.
.
Reserved on: 08.11.2023.
Decided on: 4th December, 2023
______________________________________________________
1. CWP No.4599 of 2013
M/s Jaiprakash Associates Ltd. .....Petitioner
of
Versus
State of H.P. and others
rt ...Respondents
_______________________________________________________
2. CWP No.9131 of 2013
M/s Shiv Vani Electronics LLP .....Petitioner
Versus
State of H.P.
...Respondent
_______________________________________________________
M/s S.P.A. Soaps & Surfactants .....Petitioner
Versus
State of H.P.
...Respondent
_______________________________________________________
M/Anuspaa Heritage Pvt. Ltd. .....Petitioner
Versus
State of H.P.
...Respondent
_______________________________________________________
.
M/s Videotex International Pvt. Ltd. .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
of
M/S Ajanta Enterprises .....Petitioner
rt Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Bright Metal Works .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Anuja Foods International .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s New Pulkit Industries .....Petitioner
.
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Sai Refinery .....Petitioner
of
Versus
State of H.P. and others
...Respondents
_______________________________________________________
rt
M/s Rail Coach Engineers .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s New Pooja Steel Industries .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Orelia Refiners Pvt. Ltd. .....Petitioner
Versus
State of H.P. and others ...Respondents
_______________________________________________________
M/s R.S. Industries .....Petitioner
.
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Goyal Polymer .....Petitioner
of
Versus
State of H.P. and others
...Respondents
rt
_______________________________________________________
M/s Bright Moulding Works .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Anmol Industries .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Pulkit Fibers .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
.
M/s B.N. Enterprises .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
of
M/s Sunshine Packaging .....Petitioner
rt Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Sunrise Packaging .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
M/s Shivam Enterprises .....Petitioner
Versus
State of H.P. and others
...Respondents
_______________________________________________________
Coram
The Hon'ble Mr. Justice M. S. Ramachandra Rao, Chief Justice
.
The Hon'ble Ms. Justice Jyotsna Rewal Dua, Judge
Whether approved for reporting? Yes
_____________________________________________________
For the petitioner(s): Mr. Vishal Mohan, Sr. Advocate with Mr.
Praveen Sharma & Mr. Aditya Sood,
Advocates; Mr. Amar Pratap Singh,
of
Advocate & Mr. Goverdhan Lal Sharma,
Advocate and; Mr. Janesh Gupta,
Advocate, for the respective
rt petitioner(s), in the respective petitions.
For the respondent(s): Mr. Anup Rattan, Advocate General with
Mr. Rakesh Dhaulta & Mr. Pranay Pratap
Singh, Additional Advocate General,
Mr. Arsh Rattan & Mr. Sidharth Jalta,
Deputy Advocate General and Mr. Rakesh
Sharma, Assisting Counsel, for the
respondents-State.
Jyotsna Rewal Dua, Judge
All these petitions raise common questions of law and
facts, hence are being taken up together for decision. For
convenience, documents from CWP No. 9131 of 2013 are being
referred to hereinafter.
The core question around which all these petitions are
Whether reporters of Local Papers may be allowed to see the judgment? Yes
centered, is whether tax incentives granted to the petitioner-industrial
units under specific Rules and statutory Notifications framed & issued
.
pursuant to the State Industrial Policy, 2004, could be withdrawn
during the currency of the exemption period promised under the
Industrial Policy/ Rules/Notifications.
2. Brief reference to facts : -
of
2(i) The respondent-State notified Industrial Policy, 2004 on
30.12.2004 (Annexure P-1). The policy aimed to attract entrepreneurs
rt
to set up their projects, inter-alia, in backward areas of the State and
in return, promised off-setting to some extent capital cost for setting
up the units in remote and difficult areas due to locational
disadvantages in form of tax concessions.
2(i)(a) Clauses 8.1, 8.3 and 8.4 pertaining to 'Package of
Incentives, Concessions and Facilities for Industries under the 2004
Policy' being relevant, are extracted hereinafter: -
"8.1 With a view to encourage investment in our State and to
offset the locational disadvantages the State Government has
been implementing various Incentive Schemes in tandem with
the changing needs and aspirations of Industry. Over a
period of time it has been realized that fiscal incentives have
invariably led to the creation of inefficient and uncompetitive
industry, which has not been able to sustain itself in the long
run. In addition, with changes and modifications being
introduced in the taxation policy and reforms initiatives like
.
introduction of VAT, incentives to industry need to be looked
at afresh. Thus it is imperative that we move towards a policy
of gradual phasing out of subsidies. Such initiatives coupled
with an increased stress on the provision of quality
infrastructure shall help create a conducive environment for
of
industrial growth and attract both foreign and domestic
investments.
8.3 A new set of Rules to govern incentives, concessions and
facilities will be announced as a part of this Policy which
rt
will remain operative till the next Rules governing the
incentives, concessions and facilities are announced or
these rules amended. It is a conscious attempt of the State
Government to phase out all tax-based and offer fiscal
incentives (deferrals/exemptions etc.) over a period of time
keeping in tune with the changing economic scenario of the
country and ground realities. While doing so, efforts will,
however, be made to enable existing units to avail of the
incentives they are already availing for the periods they are
entitled to.
8.4 In order to assure local industry with adequate back-up of
Government in international markets and to encourage
setting up of innovative industry based on local skills, local
raw materials and employing local people, the State
Government would give fiscal incentives to Companies set up
and having their registered offices in H.P. for patenting their
inventions and its commercialization, especially for activities
such as drafting the patent application, filing the patent
application In India, filing the patent application in Patent
Tribunals, prosecution of the patent application outside
.
India, maintenance fee of the granted patent application, and
obtaining non-infringement opinion. Fiscal Incentive by the
State Government would also be provided to such companies
so as to meet with the fees charged by the private
lawyers/law firms located within the country having a
of
reference from any Ministry/ Deptt. of Government of India
of having successfully assisted such Companies in the
country."
2(i)(b) Clause 18 of the 2004 Policy pertaining to State Taxes
rt
runs as under: -
"18 State Taxes:
"18.1. Introduction of VAT at the earliest to regulate,
administer and Improve collection of taxes to be paid by
Industry would be top priority of the Government. It would be
a conscious effort of the State Government to design the VAT
structure which is simple, based on floor rates agreed upon
by the adjoining States and which are broad based. The State
Government would make all out efforts to get the final draft
of the Act approved by the State Legislature within the FY
2004-2005 as also have the draft of the Rules to be made
under this Act finalized in advance before implementation so
as to enable Industry to get adequate time to adjust to the
new regime. For this adequate notice to allow a switchover
and adjust to the new VAT regime would be allowed to the
Industry. However, for selected Tiny Village industries as
- 10 -
may be notified by the State Government falling within the
ambit of Khadi and Village Industries, may be exempted from
the payment of Sales Tax as was the position prior to
.
10.03.1999."
2(i)(c) The concluding para of the policy expressing the State
intent reads as under
"24. CONCLUSION
of
This policy statement is an expression of Government's intent
and commitment to accelerate the growth of the industrial
sector. The State Government recognizes the crucial role it
has to play in terms of formulating and implementing policies
rt
relating to infrastructure development and accessibility such
as power and telecom, industrial incentives, simplification of
rules/procedures, annual inspections and labour reforms.
Current labour laws are therefore being made flexible
enough to allow levy where it is warranted and in public
interest. With respect to infrastructure, emphasis is being
laid on both quality and quantity aspects which are key for
industrial survival and growth. It is our firm belief that in
this era of Post-liberalisation, our economy can grow at a
faster rate as it has the potential. It is an established fact that
a balance between manufacturing, services and agriculture
and other allied sectors is key to economic growth. From the
perspective of our Government, all round growth and
especially of the manufacturing sector is a key area of
employment generation, contributing significantly to the
overall prosperity of our people living in rural and urban
areas besides contributing revenue to the exchequer. Clearly
- 11 -
this is an area, which our Government is giving the highest
importance. It is our belief that by adopting pro-active
policies it would not only spur economic growth in the State
.
but also contribute substantially to the overall economic
prosperity and welfare of our people. It is with this clear and
emphatic statement of intent that the State Government of
Himachal Pradesh sincerely extends an invitation to
entrepreneurs, from within and outside the country, to set up
of
their projects in the State. The Government of Himachal
Pradesh on behalf of its people assures investors in the State
of their whole hearted support."
2(ii)
rt
In tune with the Industrial Policy, 2004, the respondents
notified "Rules, Regarding Grant of Incentives, Concessions and
Facilities to Industrial Units in Himachal Pradesh, 2004"
(Annexure P-2). The Rules came into force w.e.f. 31.12.2004.
2(ii)(a) Under the Incentive Rules, 2004, area of the State was
categorized into three categories i.e. 'A', 'B' and 'C'. Category 'C'
areas (Tax Free Zone) included all Tribal Development Blocks as also
the Development Blocks under this category and all the Backward
Panchayats located in Blocks under 'A' and 'B' category areas. The
categorization as done under Rule 5 is as under: -
"5. CATEGORISATION OF THE STATE:
- 12 -
a) The State is being now classified into three categories
of Areas as "A", "B", C as per Annexure I of these Rules or
as may be specified from time to time by the Government for
.
the purpose of Incentives, depending upon its location;
distance from the border of adjoining States; extent of
industrial development; extent of overall backwardness of the
block; resource availability and potential for employment
generation for local people. The categorization into three
of
Categories is as per Annexure-1 of these Rules.
b) Category "A" Areas are areas under the Kanungo Circles
falling within the respective development blocks but excludes
any Backward Panchayats which may fall under the
rt
specifically mentioned Kanungo Circles listed as Category
"A" Areas. Category "B" Areas includes the entire area
falling under the Development Blocks indicated in the list
and includes any left out areas of the Development Blocks
Indicated under Category 'A' Areas but excludes any
Backward Panchayat. Category "C" Area (Tax Free Zones)
includes all Tribal Development Blocks and Development
Blocks mentioned under this category and includes all
Backward Panchayats located in Blocks under the "A" and
"B" Category Area."
2(ii)(b) Under the definition Clause, Rule 3(bb) defined 'Tax
Free Zone' as all tribal areas notified by the competent authority of
the State Government and included all Tribal Development Blocks
and Development Blocks mentioned under this category in the Rules.
- 13 -
All Backward Panchayats categorized as 'C' Category areas under the
Rules which may be located in Blocks categorized 'A' and 'B'
.
Category area of the Rules were also included in this zone.
2(ii)(c) Rule 10 pertained to Sales Tax Concessions. Rule 10.1,
inter-alia, provided Sales Tax Incentives i.e. exemption from the
payment of Central Sales Tax/General Sales Tax (CST/GST) for ten
of
years from the date of commencement of commercial production in
Tax Free Zone to the new industrial units and or existing units as on
rt
07.01.2003 which undertake substantial expansion after 07.01.2003,
located in backward areas (category 'C').
In the backward areas (Tax Free Zone) tax incentives
were thus admissible to new industrial units being set up and also to
the industrial units existing as on 07.01.2003, which would undertake
substantial expansion after 07.01.2003. The incentives were made
available to all eligible units listed in the negative list also. The
negative list framed by the State was not applicable in Tax Free Zone
for the purpose of Sales Tax incentive. The relevant Rules 10.1 and
10.4 read as under: -
"10.1 The following Sales Tax Incentives would be provided subject
- 14 -
to their fulfilling the eligibility conditions as laid down
elsewhere under these Rules:
(1) Sales Tax incentives, that is, exemption from
.
payment of C.S.T/G.S.T. for 10 years from the date
of their commencement of production in the Tax
Free Zone (now classified as Category 'C' areas
under these Rules) shall be continued, as provided
for under the 1999 Incentive Rules. This incentive
will be admissible to New Industrial Units and or
of
existing industrial units as on 7/01/2003 (for the
purpose of this incentive only) which undertake
substantial expansion after 7/01/2003. This incentive
rt will be available to all eligible units listed in the
negative List (Annexure-111) also. In other words,
no Negative List will be applicable in Tax Free
Zones for the purpose of this incentive.
10.4 The concessions provided under this rule will commence
from the date of commencement of commercial production or
from the date of notification issued by the Department of
Excise and Taxation (wherever required), whichever is
later."
2(ii)(d) Rule 19 laid down that all new industrial units set up in
category 'C' areas shall be exempted from payment of any State
Taxes and Duties (excluding levies in the shape of cess, fees, royalties
etc.) for a period of ten years from the date of commencement of
commercial production or the date of notification by the concerned
- 15 -
department, whichever is later. The Rule runs as under: -
"19. TAX INCENTIVES AVAILABLE TO UNITS IN
.
CATEGORY "C" BLOCKS (TAX FREE ZONE)
19.1 All new industrial unit(s) set up in the Category "C"
areas of the State, as notified from time to time, shall be
exempted from payment of any State taxes and duties
(excluding levies in the shape of cess, fees, royalties etc.) for
a period of 10 years from the date of commencement of
of
commercial production or the date of notification by the
concerned Department(s), whichever is later."
2(iii) In furtherance of the Industrial Policy, 2004 and the
rt
Rules notified thereunder, the State Excise & Taxation Department
issued statutory notifications granting exemption from GST/CST: -
(a) Notification dated 30.03.2005 was issued under
the Himachal Pradesh General Sales Tax Act, 1968.
Under this notification, no tax was to be levied under
Section 6 of the Act on sales of goods manufactured by
new industrial units and or existing industrial units as on
07.01.2003 located in Tax Free Industrial Zone for a
period of ten years from the date of commencement of
commercial production or from the date of exemption
notification, whichever was later.
- 16 -
(b) Another notification was issued on 30.03.2005
under the Central Sales Tax Act, 1956, directing that
.
no tax under this Act would be payable on sales of
goods manufactured by the dealers running any new
industrial units and existing industrial units (in existence
on 07.01.2003) located in tax free industrial zone.
of
(c) Upon promulgation of the H.P. Value Added
Tax Act, 2005 (VAT in short), the respondents on
rt
19.01.2006, issued a notification granting exemption
from payment of VAT to new industrial units and or
existing industrial units located in Tax Free Zone for a
period of ten years from the date of commencement of
commercial production.
2(iv) All the petitioners have set up their new industries in Tax
Free Zone pursuant to the above notified Industrial Policy, the
Incentive Rules and the statutory Notifications issued to give effect to
the Policy/the Rules. The petitioner-industrial units are covered by the
exemption notifications referred to above from the dates of
commencement of commercial production by them tabulated as
- 17 -
under: -
Writ Petition No. Name of the Date of
Petitioner Commercial
.
Production
CWP No.4599 of 2013 M/s Date of
Jaiprakash commencement of
Associates Commercial
Ltd. Production is
Clinker is
24.02.2010
Cement is
16.01.2012.
of
CWP No.9131 of 2013 Ms. Shiv Vani 25.03.2010.
Electronics
LLP
CWP No.24 of 2014 Ms. S.P.A. 25.03.2010.
rt and
Surfactants
CWP No.30 of 2014 MS 16.10.2009.
Manuspaa
heritage
Pvt.Ltd
CWP No.62 of 2014 MS Videotex 25.03.2010.
International
Pvt.
CWP No.63 of 2014 Ms. Ajanta 16.10.2009.
Enterprises
CWP No. 64 of 2014 Bright Metal 25.03.2010.
Works
CWP No.75 of 2014 Ms. Anuja 16.10.2009.
Foods
International
CWP No.7537 of 2014 MS New 31.03.2010.
Pulkit
Industries
CWP No.2577 of 2015 Ms. Sai 30.03.2010.
Refinery
CWP No.4802 of 2015 MKS Rail 23.03.2010.
Coach
Engineers
CWP No.911 of 2016 Ms. New In the year, 2012
Pooja Steel
Industries.
CWP No.997 of 2016 Ms. Orelia 17.09.2008.
Refiners Pvt.
- 18 -
Ltd.
CWP No.101 of 2019 M/S R.S. 25.03.2010.
Industries
CWP No.1547 of 2019 M/S Goyal 30.03.2012.
.
Polymer
CWP No.1548 of 2019 M/S Bright 27.03.2010.
Moulding
Works
CWP No.1549 of 2019 M/S Anmol 30.03.2012.
Industries
CWP No.3237 of 2019 M/s Pulkit 30.03.2012.
Fibers
CWP No.7984 of 2021 M/S B.N. 14.07.2008.
of
Enterprises
CWP No.7320 of 2022 M/S Sunshine 31.03.2010.
Packaging
CWP No.7335 of 2022 M/S Sunrise 12.07.2009.
rt Packaging
CWP No.1927 of 2023 M/S Shivam 12.06.2009.
enterprises
All the petitioners availed benefits of exemption notifications
issued under the Industrial Policy, 2004 and the Incentive Rules
framed in furtherance thereof.
2(v) On 30.03.2013, the respondents issued notification,
whereby the areas/Panchayats where the petitioners had set up their
new industrial units were de-notified as backward areas/Panchayats.
This was followed by an office letter dated 26.04.2013 from the office
of Principal Secretary (Excise & Taxation), directing the Excise &
Taxation Commissioners to realize the tax under the relevant statutes
from the industrial units established in the areas, now de-notified as
- 19 -
backward areas or re-notified as non-backward areas. Consequently,
notices were issued to the petitioners by the Excise & Taxation
.
Department that on account of withdrawal of the status of backward
Panchayats where they had established their industrial units, they
were liable to deposit VAT and CST with effect from 01.04.2013 and
were directed accordingly.
of
2(vi) The developments of the year 2013 led the petitioners to
institute these writ petitions, seeking directions to the respondents to
rt
fulfill their commitments in entirety as per the Industrial Policy 2004,
the Incentive Rules framed thereunder & the consequent statutory
notifications and to allow exemption to the petitioners from payment
of VAT/CST as promised to them. Prayer has also been made for
quashing the notifications withdrawing backward area status of the
Panchayats where the petitioners had set up their industrial units and
the office letter dated 26.04.2013, directing the petitioners to pay
VAT/CST.
2(vii) Additional Facts in CWP No. 4599 of 2013.
2(vii)(a) The petitioner unit was set up in 'Mangal' Panchayat, a
notified backward Panchayat. On 30.03.2013, this Panchayat was
- 20 -
denuded of its backward status. However, by this time, petitioner unit
was not only established in this Panchayat but had also started its
.
production as would be apparent from the table. Petitioner unit was
eligible and was being allowed tax exemption in terms of Industrial
Policy, 2004, the Incentive Rules, 2004 and the exemption
notifications dated 30.03.2005 and 19.01.2006. After the withdrawal
of
of backward status from 'Mangal' Panchayat, petitioner unit was
directed to deposit CST/VAT etc.
rt
2(vii)(b) Petitioner filed CWP No.4599 of 2013 assailing actions
of the State, the demand raised by the State Excise & Taxation
Department and also laid challenge to the Notification dated
30.03.2013 withdrawing backward status from 'Mangal' Panchayat.
During pendency of the petition, the impugned 'de-notification' dated
30.03.2013 was withdrawn by the State vide notification dated
26.11.2014 with 'immediate effect'. Another notification was issued
on 27.02.2015, de-notifying backward status of 'Mangal Panchayat',
and re-notifying it as non-backward Panchayat with immediate effect.
This was followed by yet another notification issued on 24.03.2015
deleting the words 'with immediate effect' from the notification dated
- 21 -
27.02.2015 and clarifying that 26.11.2014 notification would be
deemed to be effective from 30.03.2013.
.
The action of the respondents in going back and forth
defies even common sense logic. Having realized that the impugned
notification dated 30.03.2013, withdrawing backward status from
'Mangal' Panchayat, had not been issued in accordance with law, the
of
respondents had withdrawn the same on 26.11.2014 with immediate
effect. On 27.02.2015, respondents issued a fresh notification
rt
withdrawing backward status from 'Mangal' Panchayat with
immediate effect. On 24.03.2015, a corrigendum was issued that
notification dated 26.11.2014 would be deemed to be effective from
30.03.2013 itself. This kind of time travel is not admissible even to
the State. Petitioner feeling aggrieved against notification dated
27.02.2015, de-notifying 'Mangal' Panchayat's backward status was
allowed to amend its writ petition, inter-alia, laying challenge to
notifications issued during the pendency of the writ petition and also
to the directions issued to the petitioner to deposit tax during the
exempted period.
- 22 -
3. Submissions
3(i) Learned counsel for the petitioners contended that
.
there was no quantifiable data with the State to withdraw the status of
the backward area from the Panchayats where petitioner industrial
units had been set up. The de-notification of the backward areas was
illegal. It was submitted that even though the backward Panchayats,
of
where the petitioners' units had been set up, were illegally de-notified,
yet this would not in any way affect the tax exemptions granted to the
rt
petitioners as petitioner industrial units had commenced commercial
production much before the date of de-notification of the areas.
Therefore, the impugned communications issued by the Industries
Department and on that basis, the impugned directions issued by the
Excise & Taxation Department requiring the petitioners to deposit
otherwise exempted tax, are not sustainable. Placing reliance upon
several decisions of the Hon'ble Apex Court, doctrine of promissory
estoppel was invoked by the petitioners to argue that based upon
State's promise of tax incentives for a period of ten years in lieu of
setting up industrial units in backward areas of the State called as Tax
Free Zone, the petitioners had altered their positions and set up
- 23 -
industrial units in such areas. Petitioners were eligible and were being
allowed the promised incentives in form of specified tax exemptions.
.
The incentives being granted to them could not be withdrawn during
the validity/promised period. Further contention was raised that the
impugned directions of the respondents to the petitioners to pay
VAT/CST are without any legal force as no notification withdrawing
of
the exemptions granted to the petitioner units from payment of
VAT/CST was ever issued. The exemption notifications had not been
rt
withdrawn by the State for the units which had already commenced
production prior to the date of de-notification. The impugned
communications, directing the petitioners to pay VAT/CST, were in
contradiction to the Industrial Policy, 2004, the Incentive Rules, 2004
framed thereunder and the consequent notifications which granted
them 100% exemption from such payment for ten years. The
petitioners are entitled to enjoy the tax incentives till the enforcement
of GST regime in the year, 2017.
3(ii) On behalf of the respondents-State, the factual position
of individual cases as put forth in the petitions was not disputed by the
learned Advocate General. The stand taken, however, was that the
- 24 -
Panchayat areas where the petitioners had established their new
industrial units had been de-notified as backward Panchayats. After
.
the de-notification, the status of such Panchayats was no more that of
backward areas. The areas in question having lost the status of
backward Panchayats after the de-notification did not fall in the Tax
Free Zone. Therefore, the petitioners were not entitled to any tax
of
concessions. It was asserted that the impugned notifications and
directions issued by the respondents to the petitioners to deposit
rt
VAT/CST after the de-notification of the Panchayats where the
petitioners had set up their industrial units, were in order. The
respondents urged that it is the prerogative of the Government to
declare a Panchayat as backward area and de-notify the same if it does
not fulfill the criteria laid down for being declared as backward area.
Therefore, tax concessions earlier granted to the petitioners in lieu of
theirs' setting up industrial units in the said Panchayats could be taken
away after the de-notification of the areas. The Panchayats where the
petitioners had set up their industrial units pursuant to the Industrial
Policy, 2004 were backward areas at the time of setting up of
industrial units. The petitioners-units were accordingly allowed
- 25 -
exemptions from payment of VAT/CST. Later, on finding that these
Panchayats no more satisfied the criteria laid down by the State to
.
continue to enjoy backward area status, they were de-notified as such.
After the de-notification of the Panchayats, the petitioners cannot be
held entitled to tax concessions.
Learned Advocate General further contended that in
of
sequel to the Industrial Policy, 2004, the Incentive Rules, 2004 were
framed by the State granting tax concessions to the eligible industrial
rt
units. In terms of following Rule 4.2 of the Incentives Rules, 2004,
incentives were provided under the discretionary power of the State
Government. Grant of such incentives cannot create any claim
against the State Government and are not enforceable in any court of
law: -
"4.2. The incentives under these rules are provided under the
discretionary powers of the State Government. They do not
create any claim against the Himachal Pradesh Government
enforceable in any court of law. The state Government in its
wisdom may decide to amend, alter, delete or revise any or
all the incentives notified under these rules and no claim on
account of such a decision will be entertained."
Placing reliance upon (2020) 20 SCC 59, Union of India
- 26 -
and another vs. V.V.F. Limited and another with Barak Valley
Cement Limited Versus Union of India and others; (2022) 5 SCC
.
62, Krishi Upja Mandi Samiti, New Mandi Yard, Alwar Versus
Commissioner of Central Excise and Service Tax, Alwar and;
2019 (10) SCC 575, Union of India and others Versus Unicorn
Industries, it was contended that promissory estoppel is an equitable
of
doctrine, which can be moulded to suit a particular situation. That
there is primacy of public interest over promissory estoppel.
rt
Withdrawal of exemptions in public interest is permissible. Hence,
prayer was made for dismissing the writ petitions.
4. Consideration
We have heard learned counsel on both sides and
considered the case files.
The pivotal question that needs to be adjudicated in
these writ petitions is whether the respondents are estopped from
directing the petitioners to pay VAT/CST during the currency of
the exemption period promised to them under the Industrial
Policy, 2004, the Incentive Rules, 2004 framed in furtherance of
the Industrial Policy, 2004 and the statutory exemption
- 27 -
notifications dated 30.03.2005 (HPGST), 30.03.2005 (CST) and
19.01.2006 (VAT) or in other words, whether in the given facts, the
.
petitioners can successfully invoke the doctrine of promissory
estoppel against the State for continuing to avail the tax
concessions.
4(i) The contention raised on behalf of the State that Rule
of
4.2 of the Incentive Rules, 2004 debars the petitioners from laying any
claim against the State is an unsustainable argument. The self-serving
rt
Rule framed by the State debarring the petitioners from enforcing the
tax concession in a Court of law, cannot be held against the
petitioners.
In AIR 1968 SC 718, Union of India Vs. Indo-Afgan
Agencies Ltd., holding supremacy of rule of law, it was laid down by
Hon'ble Supreme Court that the government cannot claim to be
immune from the applicability of the rule of promissory estoppel and
repudiate a promise made by it on the ground that such promise may
fetter its future executive action.
In (1979)2 Supreme Court Cases 409, M/s Motilal
Padampat Sugar Mills Vs. State of Uttar Pradesh and others,
- 28 -
Hon'ble Apex Court reiterated that in a republic governed by rule of
law, no one, howsoever high or low, is above the law. Everyone is
.
subject to law as fully and completely as any other and the
government is no exception. It is indeed the pride of constitutional
democracy & rule of law that the Government stands on the same
footing as a private individual so far as obligation of law is concerned.
of
The government cannot claim immunity from the doctrine of
promissory estoppel. If essential ingredients of this rule are satisfied,
rt
the government can be compelled to carry out the promise made by it.
In (2016) 6 SCC 766, Manuelsons Hotels (P) Ltd. Vs.
State of Kerala, after referring to several earlier decisions, the Apex
Court reiterated the observations from Motilal Padampat Sugar Mills
supra that the Courts could not possibly have intended to lay down as
absolute proposition that there can be no promissory estoppel against
the government in exercise of its governmental, public or executive
powers. Relevant paras from the judgment is as under:-
"33. This very passage was referred to in M/S Motilal
Padampat Sugar Mills and was explained thus:
- 29 -
"29 The next decision to which we must refer is that in
Excise Commissioner U.P. Allahabad v. Ram Kumar This
was also a decision on which strong reliance was placed on
behalf of the State. It is true that, in this case, the Court
.
observed that
"19......it is now well settled by a catena of decisions that
there can be no question of estoppel against the
Government in the exercise of its legislative, sovereign or
executive powers."
But for reasons which we shall presently state, we do not think
this observation can persuade us to take a different view of the
law than that enunciated in the Indo-Afghan Agencies case. ...
of
It will thus be seen from the decisions relied upon in the
judgment that the Court could not possibly have intended to
lay down an absolute proposition that there can be no
promissory estoppel against the Government in the exercise of
rt its governmental, public or executive powers. That would have
been in complete contradiction of the decisions of this Court in
the Indo-Afghan Agencies case, Century Spinning and
Manufacturing Co. case and Turner Morrison case and we
find it difficult to believe that the Court could have ever
intended to lay down any such proposition without expressly
referring to these earlier decisions and overruling them. We
are, therefore, of the opinion that the observation made by the
Court in Ram Kumar case does not militate against the view
we are taking on the basis of the decisions in the Indo-Afghan
Agencies case, Century Spinning & Manufacturing Co.
case and Turner Morrison case in regard to the applicability
of the doctrine of promissory estoppel against the
Government."
Therefore, notwithstanding Rule 4.2, the petitioners can
maintain writ petitions which are primarily based upon doctrine of
promissory estoppel. This principle can be applied against State
where it is necessary to prevent manifest injustice or fraud. The claim
of the petitioners has to be judicially and judiciously examined and
reviewed in accordance with law.
- 30 -
4(ii) Examination of Petitioners' Claim of promissory
estoppel. For determining as to whether plea of promissory estoppel
.
is available against the State to the petitioners in these Writ petitions,
we may first notice the legal position: -
4(ii)(a) In (1979)2 Supreme Court Cases 409, M/s Motilal
Padampat Sugar Mills Vs. State of Uttar Pradesh and others one of
of
the questions considered by Hon'ble Apex Court was whether
assurance given on behalf of the State Government that the appellant
rt
would be exempted from sales tax for a period of three years from the
date of commencement of production could be enforced against the
respondent-State by invoking the doctrine of promissory estoppel. The
Hon'ble Court observed that in Indian law, not only the doctrine of
promissory estoppel had been adopted in its fullness, but it has been
recognized as affording a cause of action to the person to whom the
promise is made. The requirement of consideration has not been
allowed to stand in the way of enforcement of such promise. The
Court also held that in order to attract the applicability of doctrine of
promissory estoppel, it was not necessary that the promisee acting in
reliance on the promise should suffer any detriment. What is
- 31 -
necessary is only that the promisee should have alerted his position in
reliance on the promise. The alteration of position only means that the
.
promisee must have been led to act differently from what he would
otherwise have done. All that is required is that the one should have
acted on the belief induced by the other party. The doctrine is evolved
by equity in order to prevent injustice. It must yield when equity so
of
requires. If it can be shown by the government that having regard to
the facts, it would be inequitable to hold the government to the
rt
promise made by it, the Court will not raise an equity in favour of the
promisee. It will not be enough for the government just to say that the
public interest requires that the government should not be compelled
to carry out the promise or that the public interest would suffer if the
government were required to honour it. For resisting liability, the
government will have to disclose to Court the fact & circumstances
on account of which the government claims to be exempted from
liability and it would be for the Court to decide whether the facts and
circumstances are such as to render it inequitable to enforce the
liability against the government. It is only if the Court is satisfied on
proper and adequate material placed by the government that
- 32 -
overriding public interest requires that the government should not be
held bound by the promise but should be free to act unfettered by it,
.
that the Court would refuse to enforce the promise against the
government. The burden would be upon the government to show that
the public interest in the government acting otherwise than in
accordance with the promise, is so overwhelming that it would be
of
inequitable to hold the government bound by the promise and the
Court would insist on a highly rigorous standard of proof in discharge
rt
of this burden. The Court also held that the taxation is sovereign or
governmental function, but no distinction can be made between the
exercise of a sovereign or governmental function and a trading or
business activity of the Government as far as doctrine of promissory
estoppel is concerned. Whatever be the nature of the function, which
the Government is discharging, the Government is subject to rule of
promissory estoppel and if the essential ingredients of this rule are
satisfied, the Government can be compelled to carry out the promise
made by it.
4(ii)(b) 1986 (Supp.) SCC 728, Pournami Oil Mills. Etc. Vs.
- 33 -
State of Kerala and another, was a case, where, under order dated
11.04.1979, the State of Kerala invited small scale units to set up their
.
industries with a view to boost industrialization. Exemption from sales
tax and purchase tax was made available to such industrial units for a
period of five years from the date of commencement of production.
However, this concession/exemption relating to purchase tax was
of
withdrawn by the State on 29.09.1980. The Court held that if in
response to the order dated 11.04.1979 and in consideration of the
rt
concession made available under that order, the promoters of any
small scale concerns had set up their industries in the State of Kerala,
they would certainly be entitled to plead the Rule of estoppel. The
promised tax exemptions would continue for full period of five years
from the date the industrial units started production. It is only the new
industries set up after 21.10.1980, which would not be entitled to
exemption benefit as they had notice of curtailment in the exemption
before setting up their industries. Relevant portion from the judgment
is as under: -
"7. Under the order dated April 11,1979, new small-scale units
were invited to set up their industries in the State of Kerala
- 34 -
and with a view to boosting of industrialisation, exemption
from sales tax and purchase tax for a period of five years was
extended as a concession and the five-year 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
of
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
rt
authority on this point in the case of M.P. Sugar Mills v.
State of U.P. On the other hand, reliance has been placed on
behalf of the State on a judgment of this Court in Bakul
Cashew Co. v. S.T.O.. 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
concerned persons 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
prejudice. On facts, there- fore, no case for raising the plea
of estoppel has been made out. This Court proceeded on the
footing that the notification granting exemption
retrospectively was not in accordance with section 10 of the
State Sales Tax Act as it then stood, as there was no power to
grant exemption retrospectively. By an amendment that
power has been subsequently conferred. In these appeals
there is no question of retrospective exemp- tion. We also
- 35 -
find that no reference was made by the High Court to the
decision in M.P. Sugar Mills' case (Supra). In our view, to
the facts of the present case, the ratio of M.P. Sugar Mills'
.
case directly applies and the plea of estoppel is
unanswerable."
8. It is not disputed that the first Order namely, the one dated
11.4. 1979 gave more of tax exemption than the second one.
The second notification withdrew the exemption relating to
of
purchase tax and confined the exemption from sales tax to the
limit specified in the proviso of the Notification. All parties
before us who in response to the Order of April 11, 1979 set
rt
up their industries prior to 21.10.1980 within the State of
Kerala would thus-be entitled to the exemption extended
and/or promised under that Order. Such exemption would
continue for the full period of five years from the date they
started production. New industries set up after 21.10. 1980
obviously would not be ,entitled to that benefit as they had
noticed of the curtailment in the exemption before they came
to set up their industries."
The principle followed in Pournami Oil Mills etc. case
supra was reiterated in (1995)1 SCC 274, Kasinka Trading & Anr.
Vs. Union of India & Anr. It was held that if an incentive was
granted by the State Government to set up new industries in the State
with a view to boost industrialization and exemption had been
granted, in that fact situation, doctrine of promissory estoppel was
- 36 -
available to the appellant therein. In the facts of the case, however, it
was found that exemption notification did not hold out any incentive
.
for setting up any industry, therefore, its subsequent withdrawal by the
State in public interest was held justified.
4(ii)(c) In (2020) 13 Scale 500, The State of Jharkhand &
Ors. Versus Brahmputra Metallic Ltd. Ranchi & Anr., the
of
respondent had claimed its entitlement to a rebate/deduction from
electricity duty in terms of the representation held out by the State in
rt
its industrial policy 2012. It was contended that denial of exemption
by the State government during the years 2011-2014 was contrary to
the doctrine of promissory estoppel. The Hon'ble Apex Court traced
out the origin and evolution of doctrine of promissory estoppel in
several judicial precedents. The Court also traversed from doctrine of
promissory estoppel to the doctrine of legitimate expectation and
referred to various Judgments on the issue in the timeline. It was
observed that the State had held out a solemn representation founded
on its stated desire to encourage industrialization in the State. Having
made a solemn representation, it was manifestly unfair and arbitrary
to deprive industrial units of their legitimate entitlement. The State
- 37 -
must discard the colonial notion that it is a sovereign handing out
doles at its will. Its policies give rise to legitimate expectations that
.
the State will act according to what it puts forth in the public realm.
The State is bound to act fairly, in a transparent manner in its action.
This is an elementary requirement of the guarantee against arbitrary
state action which Article 14 of the Constitution adopts. The relevant
of
paras of the judgment are extracted hereinafter: -
rt
"H.6 Expectations breached by the State of Jharkhand
43. Applying the abovementioned principles in the present case,
we are unable to perceive any substance in the submission of
the State which was urged in defense before the High Court.
Not only did the State in the present case hold out a solemn
representation, this representation was founded on its stated
desire to encourage industrialization in the State. The policy
document spelt out:
(i) The nature of the incentives;
(ii) The period during which the incentives would be
available; and
(iii) The time limit within which follow-up action would
be taken by the State government through its
departments for implementing the Industrial Policy
2012.
44. The State having held out a solemn representation in the
above terms, it would be manifestly unfair and arbitrary to
deprive industrial units within the State of their legitimate
entitlement. The State government did as a matter of fact,
- 38 -
issue a statutory notification under Section 9 but by doing so
prospectively with effect from 8 January 2015 it negated the
nature of the representation which was held out in the
.
Industrial Policy 2012. Absolutely no justification bearing on
reasons of policy or public interest has been offered before the
High Court or before this Court for the delay in issuing a
notification. The pleadings are completely silent on the
reasons for the delay on the part of the government and offer
of
no justification for making the exemption prospective,
contrary to the terms of the representation held out in the
Industrial Policy 2012.
45. It is one thing for the State to assert that the writ petitioner
rt
had no vested right but quite another for the State to assert
that it is not duty bound to disclose its reasons for not giving
effect to the exemption notification within the period that was
envisaged in the Industrial Policy 2012. Both the
accountability of the State and the solemn obligation which it
undertook in terms of the policy document militate against
accepting such a notion of state power. The state must discard
the colonial notion that it is a sovereign handing out doles at
its will. Its policies give rise to legitimate expectations that the
state will act according to what it puts forth in the public
realm. In all its actions, the State is bound to act fairly, in a
transparent manner. This is an elementary requirement of the
guarantee against arbitrary state action which Article 14 of
the Constitution adopts. A deprivation of the entitlement of
private citizens and private business must be proportional to a
requirement grounded in public interest. This conception of
state power has been recognized by this Court in a consistent
- 39 -
line of decisions. As an illustration, we would like to extract
this Court's observations in National Buildings Construction
Corporation (supra):
.
"The Government and its departments, in administering the
affairs of the country are expected to honour their statements
of policy or intention and treat the citizens with full personal
consideration without any iota of abuse of discretion. The
policy statements cannot be disregarded unfairly or applied
selectively. Unfairness in the form of unreasonableness is akin
to violation of natural justice."
46. Therefore, it is clear that the State had made a representation
of
to the respondent and similarly situated industrial units under
the Industrial Policy 2012. This representation gave rise to a
legitimate expectation on their behalf, that they would be
rt
offered a 50 per cent rebate/deduction in electricity duty for
the next five years. However, due to the failure to issue a
notification within the stipulated time and by the grant of the
exemption only prospectively, the expectation and trust in the
State stood violated. Since the State has offered no
justification for the delay in issuance of the notification, or
provided reasons for it being in public interest, we hold that
such a course of action by the State is arbitrary and is
violative of Article 14."
4(ii)(d) The riders on application of principle of promissory
estoppel as explained in (1997)7 SCC 251, Pawan Alloys & Casting
(P) Ltd. Vs. U. P. State Electricity Board & Ors, are:-
"10. It is now well settled by a series of decisions of this
Court that the State authorities as well as its limbs like the
- 40 -
Board covered by the sweep of Article 12 of the Constitution
of India being treated as 'State' within the meaning of the
said Article, can be made subject to the equitable doctrine of
.
promissory estoppel in cases where because of their
representation the party claiming estoppel has changed the
position and if such an estoppel does not fly in the face of any
statutory prohibition, absence of power and authority of the
promisor, is otherwise not opposed to public interest, and
of
also when equity in favour of the promisee does not outweigh
equity in favour of the promisor entitling the latter to legally
get out of the promise."
In catena of decisions public interest has been accepted
rt
as the superior equity which can override estoppel. In (2019)10 SCC
575, Union of India & Ors. Vs. Ms. Unicorn Industries, it was
concluded that when withdrawal of the exemption is in public interest,
the public interest must override any consideration of private loss or
gain. Withdrawal of exemption on ground of severe resource crunch
has been found to be a valid ground and to be in public interest in
(1998)1 SCC 572, STO Vs. Shree Durga Oil Mills.
While holding that there can be no promissory estoppel
against the exercise of legislative power, (2023)1 SCC 386, Hero
Motocorp Ltd. Vs. Union of India also elaborates that this principle
cannot be invoked for preventing the government from discharging
- 41 -
its functions under the law.
4(iii) Petitioners have categorically taken the plea of
.
promissory estoppel. The questions as to whether this plea is
available to them; whether the petitioners can hold on to the State
to bind the latter invoking the doctrine of promissory estoppel,
can be answered by discussing facts of the case in light of above
of
legal position:-
4(iii)(a) It is not in dispute that the respondents-State issued
rt
Industrial Policy, 2004 to boost investment in its tribal and backward
areas by making them tax free zones (category 'C'). The instrument
was meant to boost the confidence of the investors and catalyze
industrial expansion in the backward areas of the State. With that aim,
tax exemptions were promised. The tax concessions were not only
promised, but the duration of such concession was also laid out. It
was also spelt out that the policy statement was an expression of
Government's intent and commitment to accelerate growth of the
industrial sector in backward areas. The State of Himachal Pradesh,
on behalf of its people had assured the investors in the State of their
wholehearted support.
- 42 -
Clause 8.3 of the Industrial Policy, 2004, provided
framing of Rules to govern incentives, concessions and facilities as
.
part of the Industrial Policy, 2004, which were to remain operative till
the next Rules governing the incentives, concessions and facilities
were announced or the Rules got amended. Clause 8.3 also stipulated
that even in case of amendments, efforts would be made to enable the
of
existing units to avail the incentives which they would be already
availing for the periods they were entitled to.
rt
Clause 18.1 of the Policy provided for exemption from
payment of CST/VAT/Sales Tax in terms of the Rules to be framed
under the policy.
4(iii)(b) It is also not in dispute that the Incentive Rules, 2004
framed in furtherance of Industrial Policy, 2004 came into force w.e.f.
31.12.2004. Under these Rules, the backward Panchayats were
categorized as 'C' category areas, which fell within the purview of
Tax Free Zone as defined under rule 3(bb).
Rule 10 of the Incentive Rules, 2004 provided exemption
from payment of sales tax for a period of ten years to the new
- 43 -
industrial units set up in category 'C' areas. Rule 19 provided that all
new industrial units set up in category 'C' areas, notified from time to
.
time, will be exempted from payment of any State taxes and duties
(excluding levies in the shape of cess, fees, royalty etc.) for period of
ten years from the date of commencement of commercial production
or the date of notification by the concerned Department, whichever
of
was later.
4(iii)(c) Issuance of statutory exemption notifications dated
rt
30.03.2005 & 19.01.2006 granting exemption from payment of VAT
and CST to the industrial units located in tax free zone is borne out
from the record.
4(iii)(d) It is not in dispute that all the petitioners had set up their
new industrial units pursuant to the Industrial Policy, 2004 and the
Incentive Rules, 2004 framed thereunder. It is also not denied that
all the petitioners had commenced production in new industrial units
set up in tax free zone subsequent to the coming in force of the
Incentive Rules, 2004.
4(iii)(e) It is an admitted position that all the petitioner units were
eligible for exemption from payment of VAT/CST for a period of ten
- 44 -
years under the Incentive Rules, 2004 and the exemption notifications
dated 30.03.2005 and 19.01.2006.
.
It is not in dispute that promised tax exemptions
(VAT/CST) were actually made available to all the petitioner units for
having set up their industrial units in backward areas for a few years
i.e. till the de-notification of the concerned Panchayats by the
of
respondents.
4(iii)(f) Noticeably the statutory exemption notifications dated
rt
30.03.2005 (HPGST), 30.03.2005 (CST) and 19.01.2006 (VAT) have
not been withdrawn by the State even after the de-notification of
Panchayat areas where the petitioner industrial units had been
established. The Industrial Policy, 2004 was also not altered by the
respondents.
4(iii)(g) One more significant factual facet that needs to be
noticed is a notification issued by the respondents on 12.03.2015
(Annexure P-23 with CWP No.4599 of 2013) whereby Incentive
Rules, 2004 were amended. For deciding present issue, it will be
appropriate to refer to following two rules as amended on
12.03.2015:-
- 45 -
"10.1(1) For existing industrial units set up and
commencing commercial production up to the date of this
notification Sales Tax Incentives, that is, exemption from
.
payment of CST/VAT for 10 years from the date of their
commencement of production in the Category 'C' areas
shall be provided as per the provision of the 2004 incentive
rules as amended up to the date of this notification. This
incentive will be admissible to New Industrial Units and or
of
existing industrial units (set up or commencing commercial
production up to the date of this notification for the purpose
of this incentive only) which commences commercial
production (New Units) or undertake substantial expansion
rt
after the date of this notification, as per the provision made
under rule 19 of these rules. This incentive will not be
available to units listed in the negative List (Annexure-III)
also.
19(13) Any dealer who was enjoying the benefit of
exemption under the notification No. EXN-F(1)2/2004 (i)
dated 30.03.2005 issued under Section 42 of the Himachal
Pradesh General Sales Tax Act, 1968 and EXN-F(1)-5/2004
dated 19.01.2006 of the Himachal Pradesh Value added
Tax, 2005 and who would have continued to be eligible for
such exemption on the date of the commencement of this
notification shall continue to avail the benefit of the
exemption from payment of tax on the sale of manufactured
goods for the unexpired period as per the conditions
applicable vide the above said notifications."
In the face of above provisions coupled with the fact that
- 46 -
exemption notifications of 2005 and 2006 had not been withdrawn
and the Industrial Policy, 2004 remained as it was even after the de-
.
notification of Panchayats, it is doubtful that even intention of the
government was to take away the benefits of tax concessions from the
petitioner units.
4(iv) Conclusion
of
It is, thus, quite apparent that petitioner units had acted
upon the promise extended to them by the State for investing in
rt
backward Panchayats of the State categorized as tax free zone. The
promise being exemption from payment of VAT/CST for a period of
ten years from the date of commencement of production. The
petitioner units changed their position and invested in the State by
setting up industrial units in backward areas/tax free zone. The
doctrine of promissory estoppel is definitely applicable to the facts of
the instant case. Having promised the petitioners exemption from
payment of VAT/CST for a specific period, the respondents-State
cannot be permitted to now assert that it is entitled to withdraw the tax
concessions and to direct the industrial units to pay VAT/CST merely
because in the subsequent years the Panchayats where the petitioners
- 47 -
had set up their industrial units were de-notified and no longer carried
the backward status. The growth of industrial sector can be said to be
.
one significant factor in the development of an area. The petitioners
who set up their industrial units in the then backward areas under the
promise of tax exemption extended to them by the State for specific
period cannot be penalized for the subsequent development of the
of
area, by withdrawing tax exemptions from them during the promised
period on the ground that with passage of time, the erstwhile
rt
backward areas had developed and were no more part of the tax free
zone. Doctrine of promissory estoppel is applicable in the facts of the
cases and can certainly be successfully invoked by the petitioners in
such circumstances to compel the State to adhere to its side of bargain
promised under the Industrial Policy, 2004 and the Rules framed
thereunder. The action of the respondent in withdrawing tax
concessions granted to the petitioner units is not in consonance with
law.
We have refrained from examining the validity of the
notifications withdrawing backward area status of the concerned
Panchayats. Nonetheless, the notifications withdrawing the backward
- 48 -
area status from the concerned Panchayats will have only prospective
effect i.e. will be applicable to industries being set up/expanded after
.
the date of withdrawal notifications. These cannot be applied
retrospectively to the petitioner units which had already come into
production by the time the backward areas status was withdrawn from
such Panchayats. These Panchayats shall have to be construed as
of
backward areas/ tax free zone for the purpose of grant of tax
incentives to the petitioners for specific period as per the promise
rt
extended by the State.
The three judgments cited by learned Advocate General
are distinguishable on facts. In VVF Ltd. case, the Industrial Policy/
Notifications were issued to encourage setting up new industries in the
area. It, however, turned out that exemptions meant to be granted to
genuine manufacturers were being misused by unscrupulous
manufacturers who had indulged in different types of tax evasion
tactics etc. The Government then came out with subsequent
notifications, policies allowing refund of excise duty only to the
extent of duty payable on the actual value addition made by the
manufactures undertaking manufacturing activities in the areas
- 49 -
absolutely in consonance with the incentive scheme. The Apex Court
held that subsequent notifications/industrial policies do not take away
.
any vested right conferred under the earlier notifications/industrial
policies. Subsequent notifications were not hit by doctrine of
promissory estoppel. The subsequent notifications were held to be
only clarificatory in nature. In the instant case, it is not the case of
of
the respondents that impugned directions were clarificatory. It is
the positive point pressed by the State that it has the power and
rt
authority to withdraw the exemptions allowed to the petitioner units.
Instant is not a case where previously issued notifications have been
clarified later on. It's a case where tax concessions allowed to the
petitioners under the Industrial Policy, 2004, the Incentive Rules,
2004 and the statutory exemptions notifications are being withdrawn
on the ground that tax free zone where the petitioners had set up their
industrial units in terms of above policy/rules/notifications, no longer
carried the tax free zone status. Therefore, the decision relied by the
respondents has no applicability to fact situation of these petitions.
Similarly in 'Krishi Upaj Mandi Samiti' case, it was laid down that
the exemption notification should be strictly construed and given a
- 50 -
meaning according to legislative intendment. If any condition of the
notification is not fulfilled, the party is not entitled to the benefit of
.
that notification. Reverting to the facts before us, it is no body's case
that the petitioner units were not entitled to tax incentives. It is an
admitted factual position that petitioner industries satisfied conditions
for grant of tax incentives. They were eligible and were being allowed
of
tax exemptions. The judgment relied upon by the respondents has no
applicability to the present petitions.
rt
It is also not the plea of the State that tax incentives have
been withdrawn from the petitioners in public interest or in exercise of
any legislative power. The simple case of the State is that once the
backward areas where the petitioner industrial units were set up, lost
their backward status, the tax incentives could no longer be availed by
the petitioners. We have already turned down this defence in the
given facts of the case.
5 The result
As a result of above discussion, these Writ petitions are
allowed. Impugned office communication dated 26.04.2013
- 51 -
(Annexure P-10 in CWP No.9131 of 2013) directing realization of tax
from the petitioner Industrial units established in tax free zones, the
.
consequent notices issued to the petitioners to deposit tax (Annexure
P-11 in CWP No.9131 of 2013) are quashed and set aside. Petitioners
are held entitled to tax exemptions in terms of the Industrial Policy,
2004, the Incentive Rules, 2004 and the tax exemption notifications
of
dated 30.03.2005(GST & CST) and 19.01.2006 (VAT) till the coming
into force of GST regime in the year 2017.
rt
The pending miscellaneous application(s), if any, also
stand disposed of.
(M. S. Ramachandra Rao)
Chief Justice
(Jyotsna Rewal Dua)
December 04, 2023 Judge
R.Atal
