2020 (7) TMI 513 - SC - VAT and Sales Tax

Supreme Court Affirms Subsidy Decision: Appellant Entitled to 50% Subsidy, Must Refund Excess with Interest

The Supreme Court affirmed the High Court's decision and the revision order, holding that the Appellant was entitled to a 50% subsidy, not 75%. The SLSC's ... Capital Investment Subsidy - Rajasthan Investment Promotion Scheme-2003 - Revision under Clause 13 - Entitlement Certificate - State Level Screening Committee (SLSC) decision - BIDI decision and its interpretation - Strict interpretation of incentive/exemption provisions - Doctrine of Contemporanea Expositio - Promissory estoppel - Recovery of excess subsidy and interestCapital Investment Subsidy - Rajasthan Investment Promotion Scheme-2003 - Entitlement Certificate - Extent of Capital Investment Subsidy payable to the Kotputli Unit of the Appellant under RIPS-2003 - HELD THAT: - The Court examined the text and amendments of Clause 7 of RIPS-2003, the BIDI minute of 01.04.2006, the deletion of Sub-clauses (vi) and (vii) on 28.04.2006, the SLSC decisions of 17.03.2011 and 24.11.2011 and the subsequent revision. It held that BIDI's direction that the 'recently announced cement package and RIPS-2003 will be applicable on the company' referred to the then-existing Sub-clauses (vi) and (vii) (inserted 02.12.2005) and did not constitute a decision under the proviso to Clauses 7(i)(a)/(b) to raise the limit to 75%. After deletion of Sub-clauses (vi) and (vii) on 28.04.2006 there was no extant policy authorising 75% subsidy when SLSC granted subsidy in 2011. SLSC's construction importing the proviso to Clauses 7(i)(a)/(b) into BIDI's 01.04.2006 decision was perverse and unauthorised. The Appellant was therefore entitled only to subsidy up to 50% of tax payable and deposited, not 75%. [Paras 19, 20, 30, 31]The Appellant was entitled to Capital Investment Subsidy only to the extent of 50% of the payable and deposited tax; the 75% entitlement as granted by SLSC was erroneous and set aside.BIDI decision and its interpretation - State Level Screening Committee (SLSC) decision - Strict interpretation of incentive/exemption provisions - Whether SLSC's grant of 75% subsidy was a possible view deserving protection from revision - HELD THAT: - The Court held that the SLSC's decision was not merely an alternative but a legally unsustainable construction. The scheme and its amendments were to be strictly construed (following the principle that incentive/exemption provisions are strictly interpreted). The record showed no decision by BIDI to invoke the proviso to Clauses 7(i)(a)/(b) to raise the limit to 75% for this unit; SLSC misread the BIDI minute. Given the absence of any material supporting SLSC's construction and the deletion of Sub-clauses (vi)/(vii), SLSC's view could not be treated as a defensible or possible view for purposes of resisting revision under Clause 13. [Paras 19, 20, 24]SLSC's grant of 75% subsidy was not a possible view of the matter and therefore was open to revision and cancellation.Revision under Clause 13 - Recovery of excess subsidy and interest - Validity of the State Government's exercise of revision under Clause 13 of RIPS-2003 and consequent recovery of excess subsidy - HELD THAT: - Clause 13 authorised revision by the Finance Department where an order by a Screening Committee was 'erroneous and prejudicial to the interest of the State revenue' within five years of full availing of benefits. The Finance Department's enquiry and ACS order found SLSC's decisions erroneous and prejudicial because they caused excess payment from public exchequer. The revision proceedings were initiated within the five-year window (benefit fully availed up to Feb 2017; show cause July 2017; revision March 2018). Applying principles in Malabar and allied authorities, the Court found the revision exercise lawful and the cancellation of the Entitlement Certificates and direction to recover excess subsidy valid. [Paras 11, 27, 30, 31]Exercise of revision under Clause 13 and directions to cancel the entitlement certificates and recover the excess subsidy were lawful.Doctrine of Contemporanea Expositio - Promissory estoppel - Applicability of the doctrines of contemporanea expositio and promissory estoppel in favour of the Appellant - HELD THAT: - The Court rejected reliance on contemporanea expositio because the administrative/contemporaneous construction relied upon (SLSC's interpretation) was clearly wrong and not binding; the doctrine does not immunise an erroneous administrative view. Promissory estoppel was also rejected: there was no representation by BIDI or SLSC granting 75% under the proviso, and estoppel cannot be invoked to enforce a promise contrary to law or beyond authority. Further, the Scheme itself preserved revisional power under Clause 13, which would defeat any estoppel against revision of an erroneous grant. [Paras 25, 26]Neither contemporanea expositio nor promissory estoppel inures to the Appellant's benefit; they do not prevent revision of the erroneous grant.Recovery of excess subsidy and interest - Rate of interest payable on recovery of the excess subsidy - HELD THAT: - Clause 10 of RIPS-2003 provided for recovery with interest @18% where there was breach of conditions; Form 2 (submitted by the Appellant) contained an undertaking to repay excess benefits with interest at 12% per annum. The Court found no allegation that the Appellant breached scheme conditions or committed misrepresentation; the overpayment resulted from SLSC's erroneous grant. Given the parties' contractual undertaking and absence of grounds for invoking the 18% Clause-10 rate, the Court held recovery of excess subsidy permissible but limited interest to 12% per annum from the date of availing excess subsidy until payment/recovery. [Paras 33]Excess subsidy must be refunded; interest recoverable at 12% per annum (as per the Form-2 undertaking) from the date of availing excess subsidy until recovery/payment.Final Conclusion: The High Court's order upholding the Finance Department's revision is affirmed. The Appellant was entitled only to 50% subsidy (not 75%); the SLSC entitlement certificates granting 75% were cancelled and excess subsidy is to be refunded. Recovery is lawful but interest is limited to 12% per annum (per the Appellant's undertaking) from the date of availing the excess subsidy until payment/recovery. Parties to bear their own costs. Issues Involved:1. Entitlement to Capital Investment Subsidy under RIPS-2003.2. Validity of the decision of SLSC granting 75% subsidy.3. Applicability of the doctrine of Contemporanea Expositio.4. Applicability of the principles of Promissory Estoppel.5. Exercise of powers of revision by the State Government under Clause 13 of RIPS-2003.6. Effect of availing 75% subsidy for 7 years.7. Levy of interest on the excess subsidy availed.Issue-wise Analysis:1. Entitlement to Capital Investment Subsidy under RIPS-2003:The Appellant company, engaged in manufacturing and marketing of cement, claimed entitlement to a 75% Capital Investment Subsidy under the Rajasthan Investment Promotion Scheme-2003 (RIPS-2003). The controversy centered on whether the company was entitled to this extent of subsidy for its Kotputli Unit.2. Validity of the decision of SLSC granting 75% subsidy:The State Level Screening Committee (SLSC) had initially granted the Appellant a 75% subsidy based on the decision of the Board of Infrastructure Development and Investment Promotion (BIDI) dated 01.04.2006. However, the Supreme Court found that BIDI's decision did not specifically grant a 75% subsidy under the proviso to Clauses 7(i)(a) and 7(i)(b) of RIPS-2003. Instead, BIDI's decision referred to the 'recently announced cement package,' which was later deleted on 28.04.2006. The SLSC's decision was deemed erroneous and unauthorized, as it misinterpreted BIDI's decision and exceeded its authority.3. Applicability of the doctrine of Contemporanea Expositio:The doctrine of Contemporanea Expositio, which interprets a document based on contemporary understanding, was invoked by the Appellant. However, the Supreme Court held that this doctrine was inapplicable as the SLSC's interpretation was clearly erroneous. The doctrine cannot be used to uphold an incorrect administrative interpretation.4. Applicability of the principles of Promissory Estoppel:The Appellant argued that the State was bound by the principles of promissory estoppel, given the representations made by BIDI and the MoU dated 30.11.2007. The Supreme Court rejected this argument, noting that no clear representation was made to grant a 75% subsidy. Additionally, promissory estoppel cannot be invoked against statutory provisions or when the representation was not clear and unequivocal.5. Exercise of powers of revision by the State Government under Clause 13 of RIPS-2003:The State Government exercised its powers under Clause 13 of RIPS-2003 to revise the erroneous decision of SLSC. The Supreme Court upheld this exercise of power, noting that the decision of SLSC was both erroneous and prejudicial to the interest of the State revenue. The revision was conducted within the stipulated period of five years from the date of fully availing the benefits, making it valid.6. Effect of availing 75% subsidy for 7 years:The Appellant had availed the 75% subsidy from February 2010 to February 2017. The Supreme Court held that the mere fact of having availed the subsidy did not preclude the State from revising the decision within the stipulated period. The erroneous advantage obtained by the Appellant had to be corrected to protect public revenue.7. Levy of interest on the excess subsidy availed:The Supreme Court modified the order regarding the levy of interest. While the State was entitled to recover the excess subsidy, the interest rate was reduced from 18% to 12% per annum, as per the undertaking given by the Appellant in Form 2. The Appellant was directed to refund the excess subsidy with interest at this rate from the date of availing the excess subsidy until recovery.Conclusion:The Supreme Court affirmed the High Court's decision and the revision order dated 12.03.2018, holding that the Appellant was entitled to a 50% subsidy, not 75%. The SLSC's decisions granting 75% subsidy were erroneous and unauthorized. The State Government's exercise of revision powers was valid, and the Appellant was required to refund the excess subsidy with interest at 12% per annum.