Jammu & Kashmir High Court
Sudhir Power Limited vs Union Territory Of Jammu And Kashmir on 9 October, 2024
Author: Sanjeev Kumar
Bench: Sanjeev Kumar
h475
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
Reserved on: 26-09-2024
Pronounced on : 09-10-2024
WP(C) No.2784/2021
Sudhir Power Limited
Through the authorized signatory
Mr. Arvind Samnotra, Age 63 years
Authorized Representative
Unit-III, EPIP, Kathroli, Bari Brahmana
District Samba, Jammu.
...Petitioner(s)
V/s
1. Union Territory of Jammu and Kashmir,
Through the Financial Commissioner, Finance Department
1/44, Civil Secretariat Jammu (J&K).
2. Commissioner/ Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
3. Principal Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
4. Commissioner/Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
5. Principal Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
6. Commissioner,
Sales Tax Department,
Jammu (J&K).
.....Respondent(s)
WP(C) No.418/2022 and WP ( C) No. 419/2022
V J Jindal Cocoa Pvt. Ltd. (CHOCO DIVISION)
Through the authorized signatory
Mr. Rajesh Dogra, Senior Manager
SIDCO Warehouse, EPIP Kartholi
SIDCO Industrial Complex, Bari Brahmana
District Samba, Jammu & Kashmir-181133.
...Petitioner(s)
V/s
1. Union Territory of Jammu and Kashmir,
Through the Chief Secretary,
Civil Secretariat Jammu (J&K).
2. Commissioner/ Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
3. Principal Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
4. Financial Commissioner,
Finance Department,
1/44 Civil Secretariat, Jammu (J&K).
5. Commissioner/ Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
6. Principal Secretary to Government,
Industries & Commerce Department,
Civil Secretariat Jammu (J&K).
7. Commissioner,
Sales Tax Department,
Jammu (J&K).
.....Respondent(s)
WP(C) No.719/2022, 720/2022 and 721/2022
UFLEX LIMITED, UNIT-I, Unit -II and Unit -III
Through the authorized signatory
Mr. Varun Kumar Sharma, Senior Manager,
WPC 2784/2021 & connected petitions 2
Lane # 3, SIDCO Industrial Complex,
PHASE-I, Bari Brahmana
District Samba, Jammu & Kashmir-181133.
...Petitioner(s)
.
V/s
1. Union Territory of Jammu and Kashmir,
Through the Financial Commissioner, Finance Department
1/44, Civil Secretariat Jammu (J&K).
2. Commissioner/ Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
3. Principal Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
4. Commissioner/Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
5. Principal Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
6. Commissioner,
Sales Tax Department,
Jammu (J&K).
.....Respondent(s)
WP(C) No.724/2022
ULTIMATE FLEXIPACK LIMITED,
Through the authorized signatory
Mr. Ravindra Adhikari, Senior Manager (Commercial),
Lane 2, Phase-I, SIDCO Industrial Complex,
Bari Brahmana District Samba, Jammu & Kashmir-181133.
...Petitioner(s)
.
V/s
1. Union Territory of Jammu and Kashmir,
Through the Financial Commissioner, Finance Department
WPC 2784/2021 & connected petitions 3
1/44, Civil Secretariat Jammu (J&K).
2. Commissioner/ Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
3. Principal Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
4. Commissioner/Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
5. Principal Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
6. Commissioner,
Sales Tax Department,
Jammu (J&K).
.....Respondent(s)
WP(C) No.1901/2022
CHETAN ALLOYS,
Through the authorized signatory
Mr. Joginder Raj Sharma, Aged 66 years,
Authorized Signatory,
163-164, SIDCO Industrial Estate,
Kathua, Jammu & Kashmir-184101.
...Petitioner(s)
.
V/s
1. Union Territory of Jammu and Kashmir,
Through the Financial Commissioner, Finance Department
1/44, Civil Secretariat Jammu (J&K).
2. Commissioner/ Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
3. Principal Secretary to Government,
Finance Department,
1/44, Civil Secretariat Jammu (J&K).
4. Commissioner/Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
WPC 2784/2021 & connected petitions 4
5. Principal Secretary to Government
Industries and Commerce Department,
Civil Secretariat, Jammu (J&K).
6. Commissioner,
State Taxes Department,
Jammu (J&K).
.....Respondent(s)
Petitioners through: M/S B. L. Narsimhan, Ankit Awal,
J. A. Hamal, Advocates.
Mr. Surjit Singh Andotra, Advocate
Vice Mr. Jatin Mahajan, Advocate.
Respondents through: Mr. D. C. Raina, Advocate General
with Mr. K. D. S. Kotwal, Dy.AG.
Coram: HON'BLE MR. JUSTICE SANJEEV KUMAR, JUDGE
HON'BLE MR. JUSTICE RAJESH SEKHRI, JUDGE
JUDGMENT
Sanjeev Kumar J
1. In these petitions the petitioners are Small/ Medium/ Large scale
Industries set up in the State of Jammu and Kashmir on different
dates in the year 2011 and before. They are aggrieved of and have
assailed S.O. 239 dated 16-07-2021 issued by the Government of
Jammu and Kashmir, whereby the Budgetary Support Scheme
notified earlier vide SRO 431 dated 25-09-2018 has been withdrawn
with effect from 01-04-2021. The impugned SO is challenged by the
petitioners primarily on the ground that it is hit by the doctrines of
promissory estoppel and legitimate expectation.
2. Before we advert to the grounds of challenge urged by the petitioners
in these petitions, we deem it appropriate to set out facts germane to
the disposal of the controversy raised in these petitions.
3. In the year 2004, the Government of Jammu and Kashmir came up
with Industrial Policy-2004 offering certain incentives to the
entrepreneurs who would set up their Industries in the State of
Jammu and Kashmir. Vide Government Order No. 21-Ind of 2004
dated 27-01-2004 sanction was accorded to the implementation of
Industrial Policy-2004. The Industrial Policy-2004 was stated to
remain in operation from 01-01-2004 until 31-03-2015. Apart from
other incentives granted under the Industrial Policy-2004, the Small
Scale Industries, Medium and Large Industrial Units were exempted
from charging and payment of Central Sale Tax on sale of their
finished goods outside the State up to 31st of March, 2015 except on
the items in the negative list.
4. With a view to giving effect to these incentives, the Government
issued SRO 24 of 2004 dated 31-01-2004 in exercise of powers
conferred by sub-Section (5) of Section 8 of the Central Sales Tax
Act, 1956 [„the CST Act‟]. This notification was in supersession of
all the previous notifications on the subject and provided that, no tax
under the CST Act shall be payable till 31-03-2015 on the sale of
goods in the course of interstate trade and commerce made by a
manufacturer operating a Small, Medium and Large scale unit. The
petitioners, who claim to have established their Units were allured by
the incentives offered by the Industrial Policy-2004 to set up their
units. These units, of course, availed the benefits including the
benefit of CST exemption till 31-03-2015. However, vide SRO 113
of 2015 dated 01-04-2015 the benefit of CST exemption was
extended up to 31-03-2016.
5. In the meanwhile Industrial Policy-2016 came to be promulgated
vide Government Order No. 58-Ind of 2016 dated 15-03-2016 and in
terms of para 2 of the Government order aforesaid, all existing units
were held entitled to incentives specifically provided in the Industrial
Policy 2016 subject to guidelines/procedures issued in respect of
such incentives. Para 3.17 of the Industrial Policy 2016 provided for
exemption from payment of additional toll tax, CST and VAT, as
available to the industrial units under Industrial Policy 2004 and any
subsequent orders of the State/Central Government till further orders
subject to GST regime. With a view to extend the aforesaid benefit
of incentives to the eligible units, the Government issued SRO 107
of 2016 dated 31-03-2016 extending the benefit envisaged under
SRO 113 dated 01-04-2015 up to 30-06-2016. This was further
extended vide SRO 166 dated 30-05-2016 up to 31-03-2017.
6. Vide SRO 177 dated 01-06-2016, apart from other SROs, SRO 166
of 2016 was kept in abeyance but was later restored vide SRO 215
dated 29-06-2016 and all eligible units, including the petitioners
were allowed to take the benefit of exemption of CST and other
benefits till 31st of March, 2017.
7. Vide SRO 36 dated 01-02-2017 the benefit was further extended up
to 31-03-2018 or till the same is superseded by any other notification
whichever is earlier. In the meanwhile, the Integrated Goods and
Service Tax Act 2017 came to be implemented in the State of Jammu
and Kashmir and the Government notified a new scheme for
providing budgetary support to the manufacturing units in the shape
of reimbursement of Integrated Goods and Service Tax [„IGST‟]
paid under the IGST Act, 2017. This scheme was promulgated vide
SRO 431 dated 25th September, 2018. The scheme was stated to
remain in force till last date of Industrial Policy 2016 i.e. 31-03-
2026. However, in terms of para 7 of SRO 431, a right was reserved
in the Finance Department to review the viability of the policy at the
end of every financial year with special reference to its continuance
in the next financial year, the items in the negative list and
determination of the amount of reimbursement etc.
8. While the petitioners were taking the benefit of this budgetary
scheme, the Government accorded sanction for Industrial Policy
2021-30 vide Government Order No. 117-IND of 2021 dated 19-04-
2021. As per the Industrial Policy 2021-30, the existing units eligible
for incentives under the Industrial Policy 2016 were allowed to avail
the incentives under the Industrial Policy 2016 till 31-03-2026.
Alongside the Industrial Policy 2021-30, the Government also
accorded sanction for promulgating the 'Turnover Incentive
Scheme 2021' to provide support to the existing industrial units
located in the Union Territory of Jammu and Kashmir. This scheme
was to remain in operation for five years with effect from 01-04-
2021. After having promulgated the Turnover Incentive Scheme
2021, the earlier scheme of reimbursement of IGST, 2017 issued
vide SRO 431 dated 25-09-2018 was withdrawn with effect from 01-
04-2021 by issuing SO 239 dated 16-07-2021, which is impugned in
these petitions.
9. The short grievance of the petitioners in all these petitions is that, all
the petitioners have set up their units in the erstwhile State of Jammu
and Kashmir (now Union Territory of Jammu and Kashmir) being
allured by slew of incentives offered by the Government of Jammu
and Kashmir from time to time. In terms of clause 3.19 of the
Industrial Policy 2016, the Government issued SRO 431 of 2016
dated 25-09-2018 and introduced Budgetary Support Scheme to
provide for reimbursement of the IGST paid under the IGST Act,
2017. SRO 431 clearly provided that the benefit of Budgetary
Support Scheme shall be available to the eligible units till the last
date of Industrial Policy 2016 i.e. 31-03-2026 and, therefore, the
Government could not have withdrawn the scheme prematurely
without allowing the petitioners to avail the benefit for complete
period ending with 31st of March, 2026. By the issuance of
impugned SO and withdrawing the Budgetary Scheme promulgated
by SRO 431, the Government violated the doctrine of promissory
estoppel. It is argued that, relying upon the consistent policy of the
Government to encourage industrialization in the State of Jammu
and Kashmir by doling out slew of incentives, a representation was
made to the petitioners to establish their units by investing huge
sums. The respondents, therefore, could not have withdrawn SRO
431 of 2018 thereby putting the petitioners to serious detriment.
Alternatively the petitioners would argue that, even if the doctrine of
promissory estoppels may not be technically attracted, yet the
consistent representation made by the respondents through their
Industrial Policies issued from time to time, the petitioners
entertained legitimate expectation that the Government would act on
its promise. The impugned SO issued by the Government violates
such promise and is, therefore, hit by doctrine of legitimate
expectation, more particularly when issuance of impugned SO has
not been issued in public interest. Strong reliance was placed by
learned counsel appearing for the petitioners on the judgment of The
State of Jharkhand and ors v. Brahmputra Metallics Ltd. and
another, (2023) 10 SCC 634, and couple of other judgments on the
question of doctrines of promissory estoppel and legitimate
expectation.
10.The stand of the respondents is that, at no point of time any promise
was extended to the petitioners with respect to grant of incentives, in
particular, exemption from payment of CST for a definite period nor
is it the case of the petitioners that they acted upon such promise to
their detriment. The learned Advocate General, appearing for the
respondents, would argue that the petitioners have not pleaded the
requisite particulars and set up a case on the basis whereof they
could claim the benefit of doctrine of promissory estoppel or for that
matter the legitimate expectation. To build on these doctrines, it is
contended, there must be specific pleadings and in absence thereof it
is not permissible for a party to claim the breach of doctrine of
promissory estoppel. We were taken through the Industrial Policies
issued by the Government from time to time and the statutory SROs
and SO issued to grant exemptions by the learned Advocate General
to impress upon us that none of the Industrial Policies, in particular
SRO 431 of 2018, extended an unequivocal promise that the benefit
of budgetary scheme shall remain available to the petitioners till 31-
03-2026. Attention of this Court was invited to clause 7 of SRO 431
of 2018 to submit that the budgetary support policy was subject to
review at the end of every financial year with special reference to its
continuance in the next financial year.
11.Having heard the learned counsel for the parties and perused the
material on record we are of the considered opinion that the
petitioners have miserably failed to make out a case of breach of
promissory estoppel or the doctrine of legitimate expectation.
12. Before we come to specific facts of the case of the petitioners, a
look at the latest legal position on the aforesaid twin doctrines
enunciated by Hon‟ble Supreme Court in the latest judgment in
Brahmputra Mettalics (supra) is necessary. Hon‟ble the Supreme
Court in Manuelsons Hotels Private Limited v. State of Kerala
and ors, 2016 (6) SCC 766 examined the doctrine of promissory
estoppel as laid down in Motilal Padampat Sugar Mills Co. Ltd v.
State of U.P, (1979) 2 SCC 409 and as followed in State of Punjab
v. Nestle India Limited, (2004) 6 SCC 465. It is held that the
doctrine of promissory estoppel is a doctrine whose foundation is
that an unconscionable departure by one party from the subject
matter of an assumption which may be of fact or law, present or
future, and which has been adopted by the other party as the basis of
some course of conduct, act or omission, should not be allowed to
pass muster. The central principle of the doctrine is that the law will
not permit an unconscionable or, more accurately, unconscientious
departure by one party from the subject matter of an assumption
which has been adopted by the other party as the basis of some
relationship, course of conduct, act or omission which would operate
to that other party's detriment, if the assumption be not adhered to for
the purposes of the litigation. The doctrine of promissory estoppel
would be attracted where one party, by clear and unequivocal
representation invites the other party to act upon such promise and
that other party, acting bona fide on such representation acts to his
detriment or changes his course of conduct by some act or omission,
in such eventuality the party making representation shall be held by
the representation or the promise made. It is further held that it is not
the law that there can be no promissory estoppel against the
Government in the exercise of its sovereign or executive functions. It
is true that taxation is a 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, so far as the doctrine of promissory estoppel is
concerned. Where the Government makes a promise knowing or
intending that it would be acted on by the promisee and, in fact, the
promisee, acting in reliance on it, alters his position, the Government
would be held bound by the promise and the promise would be
enforceable against the Government at the instance of the promisee,
notwithstanding that there is no consideration for the promise and
the promise is not recorded in the form of a formal contract as
required by Article 299 of the Constitution. It is elementary that in a
republic governed by the rule of law, no one, howsoever high or low,
is above the law. Everyone is subject to the law as fully and
completely as any other and the Government is no exception. It is not
necessary for the petitioner to show that it has suffered detriment and
it is enough that petitioner had relied upon the promise or
representation held out, and altered its position relying upon such
assurance.
13.It is also not in dispute that the doctrine of promissory estoppel
operates even in the legislative field. The plea of promissory
estoppel is in the nature of equitable plea and must be determined in
the facts and circumstances of each case where it is raised. Para 21
and 22 of the judgment encapsulate the legal position in respect of
promissory estoppel and are, therefore, set out below:-
"21. In fact, we must never forget that the doctrine of promissory
estoppel is a doctrine whose foundation is that an unconscionable
departure by one party from the subject matter of an assumption which
may be of fact or law, present or future, and which has been adopted by
the other party as the basis of some course of conduct, act or omission,
should not be allowed to pass muster. And the relief to be given in cases
involving the doctrine of promissory estoppels contains a degree of
flexibility which would ultimately render justice to the aggrieved party.
The entire basis of this doctrine has been well put in a judgment of the
Australian High Court reported in The Commonwealth of Australia v.
Verwayen, 170 C.L.R. 394, by Deane,J. in the following words:
1. While the ordinary operation of estoppel by conduct is
between parties to litigation, it is a doctrine of substantive law the
factual ingredients of which fall to be pleaded and resolved like
other factual issues in a case. The persons who may be bound by
or who may take the benefit of such an estoppel extend beyond
the immediate parties to it, to their privies, whether by blood, by
estate or by contract. That being so, an estoppel by conduct can
be the origin of primary rights of property and of contract.
2. The central principle of the doctrine is that the law will not
permit an unconscionable - or, more accurately, unconscientious -
departure by one party from the subject matter of an assumption
which has been adopted by the other party as the basis of some
relationship, course of conduct, act or omission which would
operate to that other party's detriment if the assumption be not
adhered to for the purposes of the litigation.
3. Since an estoppel will not arise unless the party claiming the
benefit of it has adopted the assumption as the basis of action or
inaction and thereby placed himself in a position of significant
disadvantage if departure from the assumption be permitted, the
resolution of an issue of estoppel by conduct will involve an
examination of the relevant belief, actions and position of that
party.
4. The question whether such a departure would be
unconscionable relates to the conduct of the allegedly estopped
party in all the circumstances. That party must have played such a
part in the adoption of, or persistence in, the assumption that he
would be guilty of unjust and oppressive conduct if he were now
to depart from it. The cases indicate four main, but not
exhaustive, categories in which an affirmative answer to that
question may be justified, namely, where that party:
(a) has induced the assumption by express or implied
representation;
(b) has entered into contractual or other material relations with
the other party on the conventional basis of the assumption;
(c) has exercised against the other party rights which would exist
only if the assumption were correct;
(d) knew that the other party laboured under the assumption and
refrained from correcting him when it was his duty in conscience
to do so.
Ultimately, however, the question whether departure from the
assumption would be unconscionable must be resolved not by
reference to some preconceived formula framed to serve as a
universal yardstick but by reference to all the circumstances of
the case, including the reasonableness of the conduct of the other
party in acting upon the assumption and the nature and extent of
the detriment which he would sustain by acting upon the
assumption if departure from the assumed state of affairs were
permitted. In cases falling within category (a), a critical
consideration will commonly be that the allegedly estopped party
knew or intended or clearly ought to have known that the other
party would be induced by his conduct to adopt, and act on the
basis of, the assumption. Particularly in cases falling within
category (b), actual belief in the correctness of the fact or state of
affairs assumed may not be necessary. Obviously, the facts of a
particular case may be such that it falls within more than one of
the above categories.
5. The assumption may be of fact or law, present or future. That
is to say it may be about the present or future existence of a fact
or state of affairs (including the state of the law or the existence
of a legal right, interest or relationship or the content of future
conduct).
6. The doctrine should be seen as a unified one which operates
consistently in both law and equity. In that regard, "equitable
estoppel" should not be seen as a separate or distinct doctrine
which operates only in equity or as restricted to certain defined
categories (e.g. acquiescence, encouragement, promissory
estoppel or proprietary estoppel).
7. Estoppel by conduct does not of itself constitute an
independent cause of action. The assumed fact or state of affairs
(which one party is estopped from denying) may be relied upon
defensively or it may be used aggressively as the factual
foundation of an action arising under ordinary principles with the
entitlement to ultimate relief being determined on the basis of the
existence of that fact or state of affairs. In some cases, the
estoppel may operate to fashion an assumed state of affairs which
will found relief (under ordinary principles) which gives effect to
the assumption itself (e.g. where the defendant in an action for a
declaration of trust is estopped from denying the existence of the
trust).
8. The recognition of estoppel by conduct as a doctrine operating
consistently in law and equity and the prevalence of equity in a
Judicature Act system combine to give the whole doctrine a
degree of flexibility which it might lack if it were an exclusively
common law doctrine. In particular, the prima facie entitlement
to relief based upon the assumed state of affairs will be qualified
in a case where such relief would exceed what could be justified
by the requirements of good conscience and would be unjust to
the estopped party. In such a case, relief framed on the basis of
the assumed state of affairs represents the outer limits within
which the relief appropriate to do justice between the parties
should be framed."
22. The above statement, based on various earlier English authorities,
correctly encapsulates the law of promissory estoppel with one
difference - under our law, as has been seen hereinabove, promissory
estoppel can be the basis of an independent cause of action in which
detriment does not need to be proved. It is enough that a party has acted
upon the representation made. The importance of the Australian case is
only to reiterate two fundamental concepts relating to the doctrine of
promissory estoppel - one, that the central principle of the doctrine is
that the law will not permit an unconscionable departure by one party
from the subject matter of an assumption which has been adopted by the
other party as the basis of a course of conduct which would affect the
other party if the assumption be not adhered to. The assumption may be
of fact or law, present or future. And two, that the relief that may be
given on the facts of a given case is flexible enough to remedy injustice
wherever it is found. And this would include the relief of acting on the
basis that a future assumption either as to fact or law will be deemed to
have taken place so as to afford relief to the wronged party."
14. The Supreme Court in Brahmputra Mettalics (supra) has also
drawn distinction between the doctrine of promissory estoppel and
doctrine of legitimate expectation. The doctrine of legitimate
expectations is founded on the principles of fairness in government
dealings and would come into play if a public body leads an
individual to believe that they will be a recipient of a substantive
benefit. So far as difference between the doctrine of promissory
estoppel and doctrine of legitimate expectation under English law is
concerned; under English law the doctrine of legitimate expectation
initially developed in the context of public law as an analogy to the
doctrine of promissory estoppel found in private law . Another
difference is that the legitimate expectation can constitute a cause of
action whereas the doctrine of promissory estoppel can only be used
as a shield. The scope of legitimate expectation is wider than the
promissory estoppel because it not only takes into consideration a
promise made by a public body but also official promise, as well.
Under the doctrine of promissory estoppel, there may be a
requirement to show a detriment suffered by a party due to the
reliance placed on the promise. However, under Indian Law there is
often a conflation and overlapping between the two doctrines. At
times, the expressions „legitimate expectation‟ and „promissory
estoppel‟ are used interchangeably, but that is not a correct usage
because „legitimate expectation‟ is a concept much broader in scope
than „promissory estoppel‟.
15. With a view to steer clear the confusion between the two doctrines,
Hon‟ble the Supreme Court in Brahmputra Mettalics case (supra)
endeavored to draw distinction between the two doctrines. The
discussion in para 40 and 41 of the judgment clears the mist
surrounding the true import and scope of the two doctrines and is,
thus, reproduced hereunder:-
"40. In a concurring opinion in Monnet Ispat and Energy Ltd. vs Union of
India31 ("Monnet Ispat"), Justice H L Gokhale highlighted the different
considerations that underlie the doctrines of promissory estoppel and legitimate
expectation. The learned judge held that for the application of the doctrine of
promissory estoppel, there has to be a promise, based on which the promisee
has acted to its prejudice. In contrast, while applying the doctrine of legitimate
expectation, the primary considerations are reasonableness and fairness of the
State action. He observed thus:
"Promissory Estoppel and Legitimate Expectations
289. As we have seen earlier, for invoking the principle of promissory estoppel
there has to be a promise, and on that basis the party concerned must have acted
to its prejudice. In the instant case it was only a proposal, and it was very much
made clear that it was to be approved by the Central Government, prior whereto
it could not be construed as containing a promise. Besides, equity cannot be
used against a statutory provision or notification.
290.....In any case, in the absence of any promise, the Appellants including
Aadhunik cannot claim promissory estoppel in the teeth of the notifications
issued under the relevant statutory powers. Alternatively, the Appellants are
trying to make a case under the doctrine of legitimate expectations. The basis of
this doctrine is in reasonableness and fairness. However, it can also not be
invoked where the decision of the public authority is founded in a provision of
law, and is in consonance with public interest." (emphasis supplied)
41. In Union of India vs Lt. Col. P.K. Choudhary32, speaking through Chief
Justice T S Thakur, the Court discussed the decision in Monnet Ispat (supra)
and noted its reliance on the judgment in Attorney General for New South
Wales vs. Quinn 33. It then observed:
"This Court went on to hold that if denial of legitimate expectation in a given
case amounts to denial of a right that is guaranteed or is arbitrary,
discriminatory, unfair or biased, gross abuse of power or in violation of
principles of natural justice, the same can be questioned on the well-known
grounds attracting Article 14 of the Constitution but a claim based on mere
legitimate expectation without anything more cannot ipso facto give a right to
invoke these principles."
Thus, the Court held that the doctrine of legitimate expectation cannot be
claimed as a right in itself, but can be used only when the denial of a legitimate
expectation leads to the violation of Article 14 of the Constitution."
16. From the aforesaid annunciation of law by the Hon‟ble Supreme
Court in its latest judgment in Brahmputra Mettalics case (supra),
it is abundantly clear that for invoking the principle of promissory
estoppel there has to be a clear and unequivocal promise and on that
basis the party concerned must have acted to its prejudice, whereas
the basis of doctrine of legitimate expectation is in reasonableness
and fairness. True it is that the doctrine of legitimate expectation
cannot be claimed as a matter of right and can be used when the
denial of legitimate expectation leads to violation of Article 14 of the
Constitution. The relationship between Article 14 and the doctrine of
legitimate expectation is aptly explained by a three Judge Bench of
Hon‟ble the Supreme Court in Food Corporation of India vs.
Kamdhenu Cattle Feed Industries, (1993) 1 SCC 71.
17. If, because of a previous practice, which is clear and consistent, a
party is led to legitimately expect that such practice shall be
continued, the withdrawal or discontinuance of such practice
arbitrarily and without any justifiable reasons would invite wrath of
Article 14 of the Constitution of India. Whether the expectation of
the claimant is reasonable or legitimate in a particular context, is a
question of fact in each case. Whenever the question arises, it is to be
determined not according to the claimant's perception but in larger
public interest wherein other more important considerations may
outweigh what would otherwise have been the legitimate expectation
of the claimant. A bona fide decision of the public authority reached
in this manner would satisfy the requirement of non-arbitrariness and
withstand judicial scrutiny. The doctrine of legitimate expectation
gets assimilated in the rule of law and operates in our legal system in
this manner and to that extent. (excerpts drawn from the judgment of
Kamdhenu Cattle case)
18. Having explained the two doctrines and their sweep and area of
operation, we need not delve more on the two doctrines which are
aptly explained in the latest judgment in Brahmputra Mettalics
(supra).
19. Let us now apply this legal position to the facts of the cases on hand.
Indisputably, the petitioners established their units while the
Industrial Policy 2004 was in operation. The Industrial Policy 2004,
as is apparent from its clause 1.2, was to remain in operation till 31-
03-2015. It is not the case of the petitioners that the incentives
provided in the policy were not availed by them or the same were
prematurely withdrawn. It is true that Industrial Policy 2004 worked
its full tenure till 31-03-2015 when it was replaced by Industrial
Policy 2016. Clause 3.17 of the Policy provided exemptions inter
alia from payment of CST to the industrial units under the Industrial
Policy 2016. For facility of reference clause 3.17 is reproduced
hereunder:-
"3.17 Tax Exemptions.
The exemption from payment of additional toll tax,
CST, VAT as available to the industrial units under
Industrial Policy 2004 and any subsequent orders of the
State and Central Government shall continue for now
and also be applicable to all new MSME/Large scale
units in Zone- A and Zone- B till further orders, subject
to the GST regime."
20. Clause 3.19 of the Industrial Policy 2016 made it clear that in the
event of adoption of GST regime by the State Government, fresh
guidelines/ orders/ notification separately relating to Tax matters and
incentives in supersession of the existing notifications/orders and
circulars, shall be issued by the Finance Department. Clause 3.19
reads thus:-
"3.19 In the event of adoption of GST regime by the
State Government, the Finance Department shall issue
fresh guidelines/ orders/ notification separately relating
to Tax matters and incentives in supersession of the
existing notifications /orders and circulars etc in the
matter."
21. From these two clauses it is abundantly clear that while the benefit of
exemption, inter alia from payment of CST envisaged under
Industrial Policy 2016 was promulgated for a period of 10 years i.e.
up to 31-03-2026, but it was also made clear that, in the event of
State Government adopting the GST Regime, the Finance
Department shall issue fresh guidelines/ orders/ notification
separately relating to Tax matters and incentives in supersession of
the existing notifications /orders and circulars and this was rightly so
as the adoption of GST regime would have changed the entire tax
structure. It is because of this reason, the Government, while issuing
statutory notifications under Section 8 of the Central Sales Tax Act,
1956, extended the period of exemption on year to year basis. Under
SRO 24 dated 31.01-2004 the benefit of CST exemption was till 31-
03-2015. Vide SRO 113 dated 01-04-2015 it was extended till 31-
03-2016 and vide SRO 107 dated 31-03-2016 it was extended up to
30-06-2016. This was a time when the adoption of GST regime was
under contemplation of the State Government. Vide SRO 166 dated
30-05-2016 the benefit was extended up to 31-03-2017, which was
later on withdrawn and restored in terms of SRO 177 dated 01-06-
2016 and SRO 215 of 2016 dated 29-06-2016.
22. While the benefit of CST was being extended on year to year basis
awaiting implementation of Integrated Goods and Services Tax Act,
2017 (IGST) and adoption of GST regime, the GST regime came to
be adopted by the State with effect from 08-07-2017 and with that
the entire tax structure in the State underwent a change. It was no
longer possible to continue with the exemption from payment of
GST as the scheme was now replaced by IGST payable under the
Integrated Goods and Services Tax, 2017. However, with a view to
continue supporting the entrepreneurs, who had established their
industrial units in the State, the Government came up with a
Budgetary Support Scheme which was promulgated vide SRO 431
of 2018 dated 25-09-2018. Initially it was envisaged in the scheme
that the benefit of budgetary support to the manufacturing units in
the shape of IGST shall be continued till 31-03-2026. This is evident
from the preamble of the Scheme in the heading „Short title and
commencement‟ which reads thus:-
"The scheme shall be called as Jammu and
Kashmir Reimbursement of Integrated Goods and
Services Tax for promotion of Small/ Medium/
Large Scale Industries in the State of Jammu and
Kashmir. The said scheme shall deemed to have
come into operation w.e.f. 01-04-2018 for an
eligible unit and shall remain in force till the last
date of Industrial Policy 2016."
23. The mode of determination of amount of reimbursement was laid
down in clause 3.1, which reads thus:-
"3.1. The amount of Reimbursement under the
scheme for specified goods manufactured by the
eligible unit shall be the:
two percent of the taxable turnover with
respect to the interstate supplies made by the
Industrial Unit under Integrated Goods and
Services Tax Act, 2017 provided that the
maximum amount of annual reimbursement shall
be limited to 2% of the interstate sales turnover
reflected by the dealer in his returns for the
accounting year 2016-17."
24. The other noticeable clause is clause 7, which is also produced
below:-
"7. The Finance Department shall review the
viability of the policy at the end of every
financial year with special reference to its
continuance in the next financial year, the items
in the Negative list, determination of the amount
of reimbursement etc."
25. From reading of clause 3.1 and clause 7 it clearly transpires that
SRO 431, envisaging budgetary support in the shape of
reimbursement of IGST which was required to be determined at the
rate of 2% of the taxable turnover with respect to interstate supplies
made by the industrial unit under IGST Act, 2017 it was
unequivocally and clearly made it known to the industrial units that
the scheme of budgetary support is though envisaged for a period
ending 31-03-2026 but same shall be reviewed by the Finance
Department at the end of every financial year to find out its viability
with reference to its continuance in the next financial year, the items
in the negative list and determination of the amount of
reimbursement etc. The representation made to the Industrial Units
was, therefore, conditional and not unequivocal.
26. It is not the case of any of the petitioners that, acting upon
representation contained in SRO 431 with regard to the Budgetary
Support, they changed their position in a particular manner to their
detriment or otherwise.
27. While the Budgetary Support Scheme was in operation in terms of
SRO 431 of 2018, the Government accorded sanction for adoption of
Industrial Policy 2021-30 vide Government Order No. 117-Ind of
2021 dated 19-04-2021. The Industrial Policy 2021-30 envisaged the
grant of benefit of incentives to the existing units as per the erstwhile
Industrial Policy 2016. Undoubtedly, the Budgetary Support scheme
was to be extended till 31-03-2026 subject to review by the Finance
Department at the end of every financial year to see the viability to
continue it. Simultaneously, with the issuance of Industrial Policy
2021-30, the Government promulgated new scheme, namely,
Turnover Incentive Scheme 2021 vide Government Order No. 127-
Ind of 2021 dated 21-05-2021. As per this scheme the quantum of
incentives admissible to Industrial Units located in the Union
Territory of Jammu and Kashmir was laid down in clause 7, which
reads as under:-
" 7. Quantum of Refund:
i. Unless otherwise specified, the quantum of
incentive admissible to an Existing Industrial
Unit located in Jammu and Kashmir as per
applicability of incentive given at para 6 above
is:-
a. 3% of the gross turnover of the industrial unit
for the year, in case of Micro category units as
defined under the MSMED Act 2006 and
modified vide notification of Government of
India dated 01-06-2020, subject to a maximum
of Rs. 10 lakh per annum per unit for a period
of 5 years from the appointed date.
b. 2% of the gross turnover of the unit for the
year, in case of Small, Medium and Large
category Industrial Units as defined under the
MSMED Act 2006 and modified vide
notification of Government of India, dated:
01-06-20020, subject to a maximum of Rs 50
lakh per annum per unit for a period of 5 years
from the appointed date.
ii. Notwithstanding anything contained in this
Scheme, the turnover incentive shall be available
subject to availability of funds on proportionate
basis of the turnover disclosed.
iii. The incentive shall be calculated on the basis of
turnover so determined. For the purpose of
determining the turnover, the highest turnover of
the three preceding years up to 2020-21 shall
form the turnover for calculation of the
incentives. However, in no case it shall be higher
than the turnover of the current financial year.
Explanation: For example, for determining
turnover for the current financial year 2025-26,
the turnover for Financial Year 2018-19, 2019-
20, 2020-21 & 2025-26 is Rs 2.00 Lakh, Rs. 1.00
Lakh, Rs. 4.00 Lakh & Rs. 3.00 Lakh
respectively. The turnover for determining
turnover incentive shall be Rs 3.00 Lakh."
28. It is thus clear that under the Budgetary Support Scheme envisaged
under SRO 431 of 2018, the budgetary support was in the shape of
reimbursement of IGST paid under IGST Act, 2017 in respect of
interstate supplies, whereas under the Turnover Incentive Scheme
2021, the incentive was to be calculated on the gross turnover of the
Industrial Unit subject, of course, to the maximum provided under
clause 7. The incentive in terms of percentage of gross turnover of
Industrial Unit would include the incentive on the taxable turnover
with respect to interstate supplies made by the industrial unit under
IGST Act as well. There was, thus, overlapping of the Turnover
Incentive Scheme 2021 and the Budgetary Support Scheme
promulgated by SRO 431 of 2018. It is with a view to set the record
straight and also to remove the ambiguity, the impugned SO 239
dated 16-07-2021 was issued and the Budgetary Support Scheme
envisaged under SRO 431 of 2018 was withdrawn with effect from
01-04-2021 i.e. with effect from the date the Turnover Incentive
Scheme came into force.
29. Viewed thus, it cannot be contended by the petitioners that the
Government has acted arbitrarily and in breach of legitimate
expectations entertained by them on the basis of consistent policy
adopted by the State to encourage the entrepreneurs to set up their
industrial units in the State of Jammu and Kashmir. The doctrine of
promissory estoppel is clearly not attracted in the instant case. SRO
431 of 2018 was issued immediately upon adoption of GST regime
by the State of Jammu and Kashmir. With the coming into operation
of the IGST Act, 2017, the CST Act stood abolished and, therefore,
continuance of the benefit of exemption from payment of CST was
out of question. However, keeping in view the policy of the State to
encourage industrialization in the State of Jammu and Kashmir, the
Government came up with a scheme for providing budgetary support
to the manufacturing units in the shape of reimbursement of IGST
which was to be calculated at the rate of 2% of the taxable turnover
in respect to interstate supplies made by the Industrial Units under
IGST Act, 2017. This was obviously a benefit extended to the
manufacturing units like the petitioners in lieu of benefit of
exemptions like the CST which was being enjoyed by the petitioners
under the Industrial Policy 2016. In terms of clause 7 of SRO 431 it
was clearly and unequivocally made clear to the industrial units that
though the Budgetary Support Scheme is envisaged to remain in
operation till 31-03-2026, yet the Finance Department will review its
viability at the end of every financial year with respect to its
continuance in the next financial year.
30. While the scheme was operating, the Industrial Policy 2021-30 came
to be promulgated by the Government vide Government Order No.
117-Ind of 2021 dated 19-04-2021. The policy, of course, made a
representation to the existing industrial units that they shall be
entitled to avail all the incentives envisaged under the erstwhile
Industrial Policy 2016, undoubtedly the Budgetary Support Scheme,
was issued in lieu of GST exemption envisaged under the Industrial
Policy 2016. It seems that after the promulgation of Industrial Policy
2021-30, the Government came up with a new scheme to support the
existing industrial units located in the Union Territory of Jammu and
Kashmir. This scheme was named as Turnover Incentive Scheme
2021 and was promulgated by Government Order No. 127-Ind of
2021 dated 21-05-2021. Instead of extending the refund/budgetary
support in respect of IGST, the new scheme gave benefit to existing
industrial units on the basis of fixed percentage of the gross turnover
of a unit which would necessarily include the taxable turnover with
respect to interstate supplies made under IGST Act 2017. As a matter
of fact the Budgetary Support Scheme promulgated vide SRO 431 of
2018 has subsumed under the Turnover Incentive Scheme 2021. The
petitioners are not deprived of the incentives but have been extended
the same in different form. In the absence of any prejudice pleaded
by the petitioners, the action of the respondents, replacing the
Budgetary Support Scheme by the other scheme, both aimed at
providing incentives to the industrial units like the petitioners,
cannot be said to be irrational, unreasonable or arbitrary. Firstly,
there is nothing in the conduct exhibited by the Government of
Jammu and Kashmir to raise any legitimate expectation in the
petitioners and, secondly, even if it were there, the Government has
not acted arbitrarily, unjustly or in an unfair manner. The benefit of
incentives in the shape of reimbursement paid under IGST Act, 2017
is continued to be paid now under the Turnover Incentive Scheme
2021. It is only the mode and manner which has been changed. The
Turnover Incentive Scheme 2021 came into operation with effect
from 01-04-2021 and, therefore, it was necessary to do away with
the Budgetary Support Scheme promulgated vide SRO N431 of
2018. It is because of this reason the impugned SO was issued and
given effect from 01-04-2021.
31. The two schemes, the Budgetary Support Scheme, 2018 and the
Turnover Incentive Scheme 2021 could not have operated
simultaneously. At the cost of repetition we may say once again that
the Budgetary Support Scheme envisaged under SRO 431 of 2018
stood subsumed in the Turnover Incentive Scheme 2021 which
brought within its sweep the gross turnover of the industrial unit and
the gross turnover would include the taxable turnover with respect to
interstate supplies made under the IGST Act, 2017.
32. Viewed from any angle, both the doctrines i.e. doctrine of
promissory estoppel and the doctrine of legitimate expectations are
not attracted nor do we find issuance of the impugned SO in
violation of Article 14 of the Constitution of India.
33. For all these reasons, the writ petitions are found to be without any
merit and are, accordingly, dismissed.
(Rajesh Sekhri) (Sanjeev Kumar)
Judge Judge
JAMMU:
09.10.2024
Anil Raina, Addl. Reg/Secy
Whether the order is reportable: Yes
Anil Kumar Raina
2024.10.11 14:40
I attest to the accuracy and & connected petitions 29
integrity of this document
