TaxTMI 
TaxTMI 
1993 (3) TMI 340
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....of caustic soda and other allied products. It was set up at Gandiparla village, Kurnool district, which is an industrially backward area. The unit is established at a total cost of Rs. 30 (thirty) crores with the collaboration of an Italian company-M/s. Oronzio De Nora Impaianti, Milano, Italy. The Government of Andhra Pradesh in G.O. Ms. No. 224, Industries and Commerce Department, dated March 9, 1976, introduced new scheme of State incentives for new industries to be set up in the State of Andhra Pradesh. According to the scheme, the industries which go into regular production on or after January 1, 1976, as well as such of those existing industries effecting substantial expansion are eligible for the incentives. One of the important incentives offered under the said G.O. Ms. No. 224, dated March 9, 1976, was interest-free sales tax loan. Entrepreneurs setting up industries will be eligible for interest-free sales tax loan equal to the tax paid by them under the Andhra Pradesh General Sales Tax Act, 1957, on construction materials, plant and machinery equipment, during the pre-production stage and purchase or sales tax paid by them under the said Act for a period of five years fr....
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....d in the affidavit that, in any event, Act 20 of 1987 itself is violative of articles 14, 19 and 21 of the Constitution of India. It was claimed that the units, like the petitioner-unit, which were started acting upon the incentives offered by the State Government, are protected under the principle of "promissory estoppel" and that the State cannot back out from its obligation having induced the entrepreneurs, like the petitioner herein, to invest huge monies, viz., rupees thirty crores. Therefore, the petitioner is entitled for the relief prayed for. A counter was filed on behalf of the respondents admitting the incentives offered in G.O. Ms. No. 224, Industries and Commerce Department, dated March 9, 1976, for the industries established in the declared backward blocks/taluks, including Adoni in Kurnool district. It was also mentioned that by G.O. Ms. No. 736 dated December 28, 1981, the validity of the scheme of incentives introduced in G.O. Ms. No. 224 dated March 9, 1976, was extended beyond December 31, 1980, till a revised scheme is introduced and in G.O. Ms. No. 437 dated October 10, 1985, it was mentioned that pending formulation of the new scheme of incentives, r....
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....evance in view of the passing of Act 20 of 1987 by the Legislature. Therefore, the writ petition is liable to be dismissed. At this stage, it is necessary to refer to Writ Petitions Nos. 1861 of 1982, 13447 and 17406 of 1987 filed by similarly placed petitioners, in this Court, contending that they are entitled to the benefit of interest-free sales tax loan as per G.O. Ms. No. 224 dated March 9, 1976. In fact, Writ Petition No. 1861 of 1982 was filed at the earliest point of time invoking the principles of "promissory estoppel". During the pendency of the writ petition, Act 20 of 1987 came into force. The petitioner therein filed an additional affidavit raising the plea that Act 20 of 1987 was unconstitutional being violative of articles 14 and 19(1)(g) of the Constitution of India. Writ Petitions Nos. 13447 and 17406 of 1987 were filed after coming into force of Act 20 of 1987. Petitioners questioned the constitutional validity of Act 20 of 1987 in those writ petitions and also invoked the principles of "promissory estoppel" to claim the benefit of interest-free sales tax loan offered by the State in G.O. Ms. No. 224 dated March 9, 1976. The above writ petitions were dismissed ....
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....cide the questions involved in this case and answer the reference, it is necessary to refer to the long-line of decisions wherein the parameters of doctrine of "promissory estoppel" have been considered. This aspect fell for consideration before the Supreme Court in Union of India v. Anglo Afghan Agencies AIR 1968 SC 718. The facts of this case, which are relevant for the purpose of the present discussion are as follows: On October 10, 1962, the Textile Commissioner published a scheme called the "Export Promotion Scheme" giving certain incentives to exporters of woollen goods. The scheme was extended to exports to Afghanistan also by a trade notice dated January 1, 1963. M/s. Indo-Afghan Agencies, a firm, exported woollen goods to Afghanistan of the f.o.b. value of Rs. 5,03,471.73 in September, 1963. In the Export Promotion Scheme, it was specifically provided for granting certificates to import materials of the value equal to 100 per cent of the f.o.b. value of the goods exported. Despite the fact that the firm exported woollen goods of f.o.b. value of Rs. 5,03,471.73, the Deputy Director in the Office of the Textile Commissioner, Bombay, issued to the firm an Import Entitle....
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....itioner therein, viz., company, set up its factory in the year 1956, within the limits of village Shahad, Taluka Kalyan, within the area known as "industrial area". At that time, no octroi duty was payable in respect of the goods imported by the company into the industrial area for use in the manufacture of its products. On October 30, 1959, the Government of Bombay issued a notification, wherein there was an announcement to constitute a municipality for certain villages including the industrial area wherein the company was situated. In spite of objection by the petitioner therein and others, a notification was published constituting municipality with effect from April 1, 1960, including the industrial area. Representations were made by the petitioner-company therein and other manufacturers for excluding the industrial area. When the State of Maharashtra proclaimed that the industrial area will be excluded from the jurisdiction of the municipality, the municipality made a representation to the Government to withdraw its proclamation dated April 27, 1962 and agreed to exempt the existing factories, viz., the petitionercompany therein and other manufacturers from payment of octroi fo....
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....2734 the main point urged was regarding the constitutional validity of the Kerala Private Forests (Vesting and Assignment) Act, 1971 (Act 26 of 1971) which was upheld by the Supreme Court and the writ petitions were dismissed, while they were allowed by the High Court. Question of the plea of equitable/promissory estoppel was also raised in Civil Appeal No. 1398 of 1972 which was dealt with in para 23 of the Report. The contention was that the writ petitioner-company established in Kerala for the production of rayon cloth pulp, on an understanding that the Government would bind itself to supply the raw material. However, the Government later on was unable to supply the same and by an agreement undertook not to legislate for the acquisition of private forests for a period of 60 years in case the company purchased forest lands for the supply of raw materials. On the basis of the agreement, the company purchased 30,000 acres of private forests. On the above facts, it was contended that the State is bound by the agreement not to legislate for the acquisition of private forests purchased by the company. The contention was that the agreement under which the State agreed not to legislate ....
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....ax, etc. Thereupon, the appellant approached the court to compel the State Government to adhere to the promise made on the basis of which, it acted and established the company. While dealing with this aspect, the learned Judges of the Supreme Court stated that the letter dated January 23, 1969, contained a clear representation to the company on behalf of the Government that it would be entitled from exemption of sales tax in respect of vanaspati unit for a period of three years from the date of commencement of commercial production. On the said representation, the appellant-company acted and altered its position and borrowed monies from financial agencies and purchased plant and machinery. The learned Judges, on the facts and circumstances, held that the company is entitled to invoke the doctrine of "promissory estoppel" to make the Government bound to carry out the representation made and exempt the appellant-company from the payment of sales tax in respect of sales of vanaspati for a period of three years from the date of commencement of the production. While dealing with this case, the learned Judges stated that the doctrine of "promissory estoppel " applies against the Gover....
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....aw; 4.. The Legislature can never be precluded by invoking the principles of "promissory estoppel" from exercising its legislative functions. In Jit Ram Shiv Kumar v. State of Haryana AIR 1980 SC 1285 again the learned judges of the Supreme Court considered the applicability of the principles of "promissory estoppel". In the said case, Municipal Committee of Bahadurgarh while establishing Mandi Fateh in Bahadurgarh town, decided that the purchasers of the plots in the Mandi would not be required to pay octroi duty on goods imported within the said Mandi. This was done with a view to improve the trade in the area. A resolution to that effect was passed on November 20, 1916. In the handbills issued for the sale of plots also, the same thing was proclaimed. Subsequently, the Municipal Committee changed its mind and passed a resolution dated May 8, 1954, resolving that octroi duty was also to be levied on the goods imported into Fateh Mandi. The said resolution was annulled by the Punjab Government exercising its powers under section 236 of the Punjab Municipal Act. Subsequently, the State of Haryana came into existence on November 1, 1964 and approved the resolution of the Munic....
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....t not being able to comply with the obligations in public interest. Therefore, in so far as legislative and statutory functions are concerned, the principles of "promissory estoppel" are not applicable and continues to hold the field. In the decision referred to supra (Union of India v. Godfrey Philips India Ltd. [1986] 59 Comp Cas 526 (SC); AIR 1986 SC 806) the learned Judges of the Supreme Court once again considered the principles governing the doctrine of "promissory estoppel". It was laid down that there can be no promissory estoppel against the Legislature in the exercise of its legislative functions. The Government or a public authority cannot be debarred by promissory estoppel from enforcing a statutory provision. The Government or a public authority cannot be compelled to carry out the representation or promise which is contrary to law. It cannot also be compelled to carry out a representation or promise which is ultra vires the power of the officer of the Government or public authority who or which made the representation or promise. The doctrine of "promissory estoppel" being an equitable doctrine, it must yield when equity so requires, viz., if it can be shown by ....
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....n made by the Estate Manager of the Port Trust is beyond his authority, viz., it is an ultra vires act and therefore, held that promissory estoppel cannot be invoked to enforce the representation made by the officer which is ultra vires his powers. Learned Judges in that context stated as follows: "It is equally settled law that the promissory estoppel cannot be used compelling the Government or a public authority to carry out a representation or promise which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield place to the equity, if larger public interest so requires, and if it can be shown by the Government or public authority, for having regard to the facts as they have transpired that it would be inequitable to hold the Government or public authority to the promise or representation made by it. The court on satisfaction would not, in those circumstances raise the equity in favour of the persons to whom a promise or representation is made and enforce the promise or representation against Gov....
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....tion that by the provisions of the Act all the existing contracts between the parties and the State and existing grants in respect of collection, transport, storage and otherwise dealing with resin have been forthwith terminated and a monopoly situation has been created qua these operations in resin in favour of the Government company. While dealing with the above contention raised by the petitioners therein, the learned Judges specifically referred to the fact that article 19(1)(f) of the Constitution was deleted by the Forty-fourth Amendment with effect from June 20, 1979, with the result, the holding and/or disposal of property ceased to be a fundamental right. So far as the Constitution of the State of Jammu and Kashmir is concerned, no change was brought about with regard to the right to property and it continued to be a fundamental right. The learned Judges, on a consideration of the contention raised therein, declared the provisions of sections 3 and 4 of Act 7 of 1986 to be ultra vires the Constitution. Having regard to the fact that those provisions of the Act contained the soul of the Act, the Act itself was held not to operate. While dealing with that situation, at th....
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....ervations of the learned Judges insofar as promissory estoppel are concerned, as we understand them, are general in nature. We understand the learned Judges as saying that (1) there will not be estoppel against the Legislature from legislating and the vires of the Act cannot be tested by invoking the plea of promissory estoppel; (2) so far as the Government is concerned, the rule of estoppel does apply in a given case. The observations, in our opinion, should not be understood as laying down a principle of law that promissory estoppel can be invoked against the State even when it is governed by a statute. There is another way of understanding these provisions. Since the Act itself was struck down, the learned Judges stated that the principle of promissory estoppel can be invoked, having regard to the fact that there is no statute governing the situation. When the learned Judges clearly mentioned that "the precedents of this Court are clear ", we are of the opinion that the learned Judges did not intend to lay down any law contrary to what the precedents laid down earlier. On a consideration of the precedents of the Supreme Court, the following principles emerge: (1) Th....
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....particular, the observations made with reference to the doctrine of "promissory estoppel" were referred to and considered by a Division Bench of this Court, to which two of us were members (A. Lakshmana Rao and P. Venkatarama Reddi, JJ.,) in Andhra Pradesh Rayons Ltd. v. Government of Andhra Pradesh [1994] 92 STC 412 supra; [1992] 14 APSTJ 12. The case arose on almost identical circumstances as in the present one, and the learned Judges held *Reported as Sree Rayalaseema Paper Mills Ltd. v. Government of Andhra Pradesh [1991] 81 STC 458 (AP). that the doctrine of "promissory estoppel" cannot be invoked in the face of the provisions of Act 20 of 1987 itself. The learned judges had occasion to consider the purport of the observations made by the Supreme Court in the decision referred to supra (Vij Resins Pvt. Ltd. v. State of Jammu and Kashmir AIR 1989 SC 1629). The learned Judges stated that the facts of the said case and the ratio of the judgment of the Supreme Court are altogether different from the one they were dealing with. The learned Judges in fact referred to the judgment rendered by the Division Bench of this Court in Writ Petitions Nos. 1861 of 1982, 13447 and 17406 of ....
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....ementation of the scheme and suggest changes or modifications as necessary from time to time for the approval of the Government. The relevant portion is as follows: "State Government will give an interest-free sales tax loan to all new industrial units and/or those going in for substantial expansion in all the areas excepting the municipal limits of Hyderabad and Secunderabad, Vijayawada and Visakhapatnam. Entrepreneurs setting up industries will be eligible for interestfree sales tax loan equal to the tax paid by them under the Andhra Pradesh General Sales Tax Act if any on construction materials, plant and machinery and equipment during pre-production stage and purchase tax/sales tax amount paid by them under the Andhra Pradesh General Sales Tax Act...............during the period of 5 years from the date of going into regular production, on raw materials, components and finished goods." Adoni in Kurnool district, where the petitioner-industry is situate is one of the areas covered by the scheme. The said scheme expired on December 31, 1980. But by G.O. Ms. No. 736, Industries and Commerce (II & CP) Department, dated December 28, 1981, the same was extended beyond December ....
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....any obtained industrial licence in August, 1980 and the project report was finalised in the year 1981. It also discloses that the civil works commenced in the year 1982 and went into production on December 1, 1987 and the application for the grant of interest-free sales tax loan was made on January 14, 1988. Now the question is whether these facts show that the petitioner established its industry acting on the representation made by the State in G.O. Ms. No. 224 dated March 9, 1976? As already stated, G.O. Ms. No. 224 dated March 9, 1976, was operative for a period of five years with effect from January 1, 1976. The operation of the scheme expired by December 31, 1980. The petitioner-company obtained the industrial licence from the Government of India during August, 1980 only, just before the expiry of the date of the operation of G.O. Ms. No. 224, dated March 9, 1976, viz., December 31, 1980. By G.O. Ms. No. 736, dated December 28, 1981, the scheme introduced in G.O. Ms. No. 224 was extended till a revised scheme is introduced. Therefore, from December 31, 1980 till December 28, 1981, there was no notification extending the operation of the scheme of incentives. The petition....
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....for the grant of incentives under G.O. Ms. No. 224 dated March 9, 1976, was made on January 14, 1988, long after Act 20 of 1987 was published in the Gazette giving retrospectivity with effect from January 1, 1976. The said Act was published in the Gazette on April 13, 1987. Having regard to the above-mentioned facts, we are of the opinion that the petitioner never intended to establish the industry on the representation made by the first respondent in G.O. Ms. No. 224 dated March 9, 1976. The dates given above clearly indicate that the petitioner-company did not even register its application within the period, during which the registration of applications were permitted under the scheme. The petitioner did not even make any representation or application for the grant of incentives before the incentive scheme in G.O. Ms. No. 224 dated March 9, 1976, was superseded and a new scheme was introduced restricting its application to the districts of Adilabad, Srikakulam and Anantapur only. The company was incorporated on June 24, 1981 during the interregnum, i.e., after the expiry of operation of G.O. Ms. No. 224 dated March 9, 1976 and before the scheme was extended till December 31, 1....