Partnership firm wins cash subsidy & sales tax loans case against State of Gujarat

The court ruled in favor of the petitioners, a partnership firm, in a case involving entitlement to cash subsidy and interest-free sales tax loans under resolutions dated December 22, 1977, by the State of Gujarat. The court held that the petitioners were entitled to the remaining cash subsidy amount and the interest-free sales tax loans, applying the doctrine of promissory estoppel against the State Government. The court directed the respondents not to apply certain resolutions to the loans and ordered them to pay the petitioners' costs.

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Issues Involved:
1. Entitlement to cash subsidy under the resolution dated December 22, 1977.
2. Entitlement to interest-free sales tax loans under the resolution dated December 22, 1977.
3. Application of the doctrine of promissory estoppel against the State Government.

Issue-wise Detailed Analysis:

1. Entitlement to Cash Subsidy:
The petitioner firm, a partnership engaged in the manufacture of Vanaspati ghee and other products, set up various plants and diversified its activities based on the incentives provided by the State of Gujarat's resolutions dated December 22, 1977. The firm was recognized for cash subsidy for its cotton delinting plant, and the State Level Committee sanctioned a cash subsidy of Rs. 6,43,891/-, of which Rs. 5,79,828/- had been received, leaving a balance of Rs. 64,063/-. The General Manager of the District Industrial Centre, Rajkot, certified the plant as new, entitling it to the subsidy. The Government, in its affidavit-in-reply, agreed to pay the remaining amount upon compliance with necessary formalities.

2. Entitlement to Interest-Free Sales Tax Loans:
The petitioners claimed entitlement to interest-free sales tax loans under the same resolution. However, the Government contended that the petitioners' cotton seed delinting plant fell under excluded industries per Clause 6 of the second resolution, thus disqualifying them from such loans. The court found this contention untenable, clarifying that Clause 6 applied only to sales tax exemption, not to interest-free sales tax loans. The scheme for interest-free loans was to remain in force for five years from November 1, 1977. The petitioners had invested significantly in reliance on the resolution, and the court held that the Government could not deny the benefits of the scheme.

3. Doctrine of Promissory Estoppel:
The petitioners invoked the doctrine of promissory estoppel, arguing that they had invested nearly Rs. 43 lakhs based on the State's assurances. The court referred to Supreme Court precedents, including Jit Ram Shiv Kumar v. State of Haryana and Bhim Singh v. State of Haryana, which established that the Government could not resile from its promises if a party had altered its position to its detriment based on those promises. The court found that the petitioners had indeed relied on the State's resolutions and invested substantially. Thus, the State was estopped from denying the benefits of the interest-free sales tax loans for five years from November 1, 1977.

Conclusion:
The court allowed the special civil application, directing the respondents not to apply the impugned resolutions dated September 26, 1979, and February 27, 1980, to the interest-free sales tax loans for which the petitioners were eligible. The rule was made absolute to this extent, and the respondents were ordered to pay the costs of the application to the petitioners.

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