TaxTMI 
TaxTMI 
2011 (10) TMI 391
X X X X Extracts X X X X
X X X X Extracts X X X X
....eir prospective a retrospective applications, should be adopted like statement of objects and reasons and memorandum explaining provisions are given with legislative Bills, so that the judicial review becomes an effective exercise and one liner amendments like the notification dated 28.04.2006 in the present case, which have far reaching consequences are not allowed to become missile attacks on the budding industries. Factual Matrix:- 3. The petitioner, a cement manufacturer, is before this Court under Article 226 of the Constitution for challenging the impugned order dtd.31.3.2009 passed by the Principal Secretary, Finance, Government of Rajasthan, Jaipur under the provisions of Clause 13 invoking his revisional jurisdiction under "Rajasthan Investment Promotion Scheme, 2003 (hereinafter referred to as the RIPS ,2003) at the instance of Commissioner, Commercial Taxes Department with respect to two orders of State Level Screening Committee (SLSC, for short) dtd.29.7.2006 and 27.6.2007 in two matters pertaining to the investment made by the petitioner M/s Shree Cement Ltd. 4. The facts giving rise to the present writ petition in nut shell are like this.  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t in case of wage employment subsidy and in case of expansion/modernization/diversification, the unit shall be eligible for subsidy under the scheme from the date of payment of sales tax over and above the highest sales tax paid in the immediately preceeding three years before such expansion/ modernization/diversification. 7. The said RIPS, 2003 came to be amended vide notification Annex.8 dtd.2.12.2005 and following clause 7 (vi) and (vii) were inserted in the RIPS, 2003 by the said amending notification for cement manufacturing units:- "(vi) Notwithstanding anything contained in sub clauses (i) to (v) above, in case of new cement unit having investment exceeding Rs. 400 crores and with a minimum regular employment of 200 persons, the amount of subsidy shall be subject to a maximum limit of 75% of the tax payable or deposited under Rajasthan Sales Tax, 1994 or Value Added Tax Act (as and when introduced in the State) and Central Sales Tax Act, 1956 for a period of 7 years from the date of the commencement of production, subject to the following conditions, namely:- 1. The investor shall submit an option to the Member Secretary, SLSC to avail benefit under t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll be limited to 5% of the documented rate of interest and the amount actually paid as interest shall not include penal interest, and wage/employment subsidy. A unit not claiming any interest subsidy can claim wage/employment subsidy to the extent of 30% subject to other conditions under this amendment. 4. The claim of subsidy shall be as per the provisions of this Scheme. F.12(20)FD/Tax/05-Pt By order of the Governor, Sd/- Subir Kumar Deputy Secretary to Govt." 8. Thus, under clause (vii) applicable in present case, besides interest subsidy and wage subsidy, an upfront subsidy to be paid to the extent of 45% of the RST/VAT/CST was allowed to such eligible units having made investment exceeding Rs.200 crores with further condition that minimum regular employment of 100 persons. It is not in dispute before this Court that the petitioner - company made investment over Rs.200 crores in aforesaid two expansion units at Pali and Bhiwadi and therefore, fell within the aforesaid clause (vii) of the amending notification dtd.2.12.2005 (Annex.8). In pursuance of said amendment, inter alia, requiring vide condition No.1 of clause (vii) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vered under the special dispensation provided for cement units vide F.D. Order dtd.2.12.2005." "The SLSC, therefore, perused the facts of the case and submission made by the representative of the unit, present during the meeting and the list of option submitted by the cement unit to the Member Secretary, SLSC under sub clause (vi) and (vii) of clause 7 of the Scheme. After considering all the relevant facts of the case, the committee decided to grant the eligibility to the unit for interest subsidy @ 5% and wage/employment subsidy @25% for a period of 7 years, to start with the commencement of commercial production/operation as per clause 4(b) of the Scheme, which is 21.12.2005. The amount of subsidy will be subject to maximum limit of 75% of the additional tax (calculated by taking an average of last three years) deposited under RST Act, 1994/VAT and CST Act, 1956." 11. Consequent to the aforesaid decision dtd.29.07.2006 of said SLSC, an Entitlement Certificate was also issued to the petitioner vide Annex.17 by Commissioner of Industries and Member Secretary of SLSC on 8.9.2006 for a period of seven years, for subsidy to the extent of 75%. This was for first expansion unit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion was submitted before 28.04.2006 and benefits were granted by SLSC after 27.04.2006. 3. Where the option was submitted before 28.04.2006 and benefits have not been granted SLSC. 4. Where the option was submitted after 28.04.2006 but within 180 days of 02.12.2005 and benefits has not been granted by SLSC. 5. Where the option was submitted after 27.04.2006 but within 180 days of 02.12.2005 and the case has not been considered by SLSC, and 6. Where the option was submitted after 27.04.2006 but within 180 days of 02.12.2005 and the unit has still not applied for the benefits. Kindly ensure necessary action accordingly. By Order, Sd/- S.S. Rajawat Spl. Secretary to Government". 13. The case of the petitioner- Company would apparently fall under clause (2) of the said clarification, inter alia, "Where the option was submitted before 28.04.2006 and benefits were granted by SLSC after 27.04.2006" The clarification stipulated that the benefits under the deleted provision cannot be granted on and after 28.04.2006. The petitioner made a representation against the said purported clarification to the Chief Minist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....03 to the unit were asked to be cancelled after 28.4.2006. Preliminary Objections and Case Set-Up by petitioner before Principal Secretary:- 16. The petitioner unit contested the said revision petitions before the Principal Secretary, Finance and made detailed written submissions raising preliminary objections before him vide Annex.39 dtd.31.3.2009. The same as noticed in the impugned order in para No. 7 are narrated hereunder for ready reference:- i. That the show cause notice issued for review is without authority of law as this power does not exist wit the State Government in the Finance Department. ii. Clause 6 of RIPS 2003 empowers the SLSC to grant benefits for investment above Rs.7.00 crores. This committee comprises of six officers including the Secretary Finance. As a result one member of the committee cannot review the orders of the committee. iii. The aggrieved party has not filed the review application within 60 days from the date of communication of the Committee, but only on 18.7.08 and, hence is without authority of law. iv. The power of revision as provided under Clause 13 of RIPS 2003 lies with the Finance Department.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....han Sabha on 12th July 2004 had mentioned the intention of the State Government to make a separate industrial policy for some specified sectors, including cement. The State level Tax Advisory Committee held on 7.2.05 and invited suggestions in this regard from various Industrial and commercial Associations. Further, Para 179 of the Budget speech for 2005-06 had also announced the intention of the State Government to bring a special package for cement industry. xii. Meetings were held in the Finance Department on 7.5.05 and 21.5.05 with regard to formulating a special package for cement. xiii. The efforts made by the Rajasthan Cement Manufacturers' Association culminated in the issuance of the notification dated 2.12.05, whereby sub-clause (vi) and (vii) were added to Clause 7 of RIPS 2003. xiv. In this para of the representation, Sub-Clause (vii) of clause 7 has been reproduced for ready reference. xv. The Applicant Company Shree Cement submitted its option for registration of its unit being expanded at Ras, vide its letter No. SCL/BWR/05-06 dated 10.12.2005 addressed to Commissioner Industries, ex-officio Secretary to SLSC. xvi. The specific....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce Department arbitrarily issued an order dated 28.4.06 deleting sub-clauses (vi) and (vii) of Clause 7 of RIP 2003. The amendment order gave no reasons for the withdrawal of the benefits. The Applicant Company had already applied for registration of option on 10.12.05 and for proposed expansion on 28.1.2006 ad 16.2.06 before the amendment date 28.4.06. xvii. In the meantime, on 29.7.06, the SLSC considered the application of the company filed on 30.1.2006 and decided to grant eligibility to the company for subsidy under RIPS 2003. xxviii. In pursuance thereof, the Commissioner, Industries issued the Entitlement Certificate to the Applicant Company for a period of seven years starting from 21.12.05, that is the date of commencement of commercial production as per the provisions of Clause 7 (vii) of the Scheme. xxix. On 7.11.06, CTO Special Circle, Ajmer determined the average annual tax for the last three years (2002-03 to 2004-05) as Rs.10.61 crores and vide his order dated 7.11.06 allowed subsidy for a sum of Rs.8.07 crores for the period 21.12.05 to 31.3.06. The state Government is assured of an average tax base from the existing units as well as addition....
X X X X Extracts X X X X
X X X X Extracts X X X X
....state authorities in ignorance of the fact that the scheme is meant to promote and protect the industrial Growth in the State." In support of the averments made, the applicant Company has also cited the following cases:- a. Birla Jute and Industries Ltd. V/s State of MP (reported in 119 STC page 14) (SC):- " ...there is no justification for reviewing the certificate long after the time thereof had expired and long after its benefit had been availed by the appellant." b. MP High Court judgment in KP Enterprises vs. Divisional Deputy Commissioner of Sales Tax, Raipur (1996) 102 STC 483:- " ...the eligibility certificate for exemption from tax ... has been withdrawn/revoked ... this cannot be permitted ecause it will amount to causing grater hardship to the assessee... If the authority wants to withdraw the eligibility certificate, then effective of withdrawal shall be with effect from the date of order and it cannot be made retrospective." c. State of Punjab vs. Nestle India Ltd. reported in 2 VAT Reporter 20 (SC) : Appeal Civil 6449 of 1998:- "Chief Minister and Finance Minister in his budget speech announced abolition of purch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....radesh reported in 142 STC page 76 has held that eligibility certificate granted by the Department of Industries cannot be cancelled in revision. xxxvii. The amendment dated 28.4.06 deleting the clauses (vi) and (vii) of clause 7 will not affect the Applicant Company; this view is supported by:- a. Madras High Court case of Commissioner of Income Tax vs. Kumdam Endowments reported in 242 ITR page 159:- " ...it is a settled law that a person who has complied with the law as it exists cannot be penalized by reason of amendment to the law affected subsequently." b. Lokendra Industries vs. State (199603) 89 STC 277. In this case, 'oil extracting or manufacturing industry' and 'cotton ginning industry' were added tot he list of ineligible industries in Rajasthan on May 7, 1990 though the applicants had taken effective steps in setting up their industries as per the provisions of the 1989 Incentive Schemes. The High Court held that:- " ...in this circumstances, the petitioners can very well invoke the principle of equitable and promissory estoppel against respondents under section 115 of the Indian Evidence act." c. Pournami Oil Mills vs. S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Summit for both the new cement unit or under expansion, having capacity more than 200 tons per day shall be eligible for subsidy under this clause on the condition that such unit shall start commercial production by 31.12.2011." This amendment makes it clear that industrial units who already made investment or committed by the Government or SLSC shall be eligible for subsidy as they were getting as per SLSC order. The Applicant Company was getting the benefit of upfront subsidy before 22.5.08 on the basis of investment already made, and is therefore eligible for subsidy. The upfront subsidy of 45% cannot be denied on any ground. This view is supported by the decision of the Hon'ble Supreme Court in Corporation Bank vs. Saraswati Abharanasala reported in 11 VAT Reporter, page 39 (2009). xxxviii. The Applicant Company has requested that these preliminary objections may be decided first before proceeding in the matter and has quoted the case of M/s Assam Roller Flour Mill vs. State of Rajasthan (1979) 13 Tax Reporter Page 463 which states that:- "The Authority should first decide the preliminary objections and in case he overrules them, he should give reasonabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gible investors was 9.5%. Later, on 2.12.05, additional tax exemption benefits were made available specifically for cement units to the tune of a total of 75% i.e. by way of an upfront subsidy of 45% and a further subsidy of 25% and 5% for wage/employment subsidy and interest subsidy respectively. It was also specified that a unit not claiming any interest subsidy can claim wage/employment subsidy to the maximum extent of 30%. it is crucial to mention here that simultaneously, by another notification No.1220 FD/Tax/05 Pt. 97 issued on the same date i.e. 2.12.05, the sales tax rate on cement was enhanced from 19% to 28%. The reason for this is obvious. While it was necessary to encourage cement industry to flourish in Rajasthan, the State Government also realized that in view of the substantial revenues involved in such tax concessions, the State should end up by losing precious revenues, invaluable for the development of the State. Thus, the tax rate on cement was raised to 28%. Assuming that the investor company utilizes the entire available subsidy limit of 75% under the new dispensation for cement plants, the effective tax rate after 2.12.05 became 7% (25% of 28%). 26. Y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the State Government. The State Government, therefore, withdrew the special dispensation allowed to the cement companies vide notification dated 2.12.05 and the impugned Clauses 7 (vi) and (vii), thus bringing the effective rate on cement to 6.25% (i.e. 50% of 12.5%). this current rate of 6.25% is marginally lower, and thus more beneficial than the 7% effective rate of tax enjoyed by the Applicant company immediately after the issuance of the notification dated 2.12.05 whereby Clause 7 (vi) and (vii) were introduced into RIPS 2003. The simultaneous and well-thought out enhancement of the tax rate on cement from 2.12.05 itself from 19% to 28% had reduced the effective tax rate from 9.5% to 7% (75% op 28%) so that the revenue interests of the State are protected. In other words, the tax exemption scheme intended for cement companies, which had been extended the benefit of an effective tax rate of 7% with effect from 2.12.05, stands today marginally lower at 6.25% because of the lowering of the tax rate on cement from 28% to 12.5% as a consequent of the replacement of Sales Tax with the VAT system and a revised tax structure. It was never the State Government's intention that eff....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... retainable by the Applicant Company has been brought down from 21%. But the prerogative of the State to change the tax rate on commodities is supreme. Tax subsidy is also, therefore, a variable as and when such tax rate is modified. The principle of promissory estoppel, which is examined in some more detail in the following paragraphs, and its alleged violation, cannot be raised in the face of the sovereign powers of the State government to decide on a applicable tax rate on cement. it is not possible for the State Government to put in place a tax rate on cement only for the benefit of a single Applicant Company, ignoring the tax burden on the common tax payer, so that it continues to receive the same quantum of tax subsidy. This would be indefensibly discretionary and discriminatory vis-a-vis other cement companies who are not receiving the benefit of the provisions of RIPS 2003 i.e. pertaining to the upfront subsidy that now stands deleted. In other words, the quantum of tax subsidy is directly related to the tax rate extant on the commodity at the point of time in question. To carry this point a little further, the effective tax rate and the quantum of tax subsidy would still b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....han Agencies, that the government also can be made responsible for violating the principle of promissory estoppel if by its actions, such legal intervention becomes necessary. However, there are certain defining characteristics that gives the Government a different status when compared to individuals who violate the principle of promissory estoppel. It may be stated that there are three essential characteristics to make a promise binding on Government namely:- (a) that the State makes the promise within the ambit of law. (b) that there is an intention to enter into a legal relationship, and (c) that the other party must do an act in furtherance of that promise or is forbidden to do anything. 35. Testing the present revisions under consideration, against these three precepts would help us to arrive at a decision. Yes, it is correct to state that State government had an intention to grant a special tax dispensation for cement industries, going beyond the provisions originally announced in RIPS 2003, where the limit of tax exemption was only 50%. When the notification dated 2.12.05 was introduced, the State had held out a promise to increase the subsidy....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Applicant Company did not arise because of the promise of higher tax exemption held out by the State Government. Rather the investment had commenced long before the announcement of the scheme. Clause 3 of the RIPS 2003 clearly stipulates the conditions attached to applicability of the scheme on any particular unit. The Scheme shall be applicable to all new investments and investments made by the existing units and enterprises for modernization/expansion/ diversification, subject to condition that such units shall commence commercial production/operations owing to such investment during the operative period of the scheme. The investment made in the mater of this decision of SLSC dated 29.7.069 was initiated much earlier. When tested against the three premises mentioned above, it is clear that the applicant company has not acted in furtherance of that promise extended by the State Government, but prior to, and independent of it. 39. The fact with regard to the second matter of expansion approved by the SLSC in its meeting dated 27.6.07 are different. As per the fats of the case, the land was acquired on 24.2.06 and development of the site was started thereaft....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Pvt. Ltd. vs. the Secretary to the Government of MP is not relevant in the case at hand. This quoted judgment refers to the withdrawal of a scheme of the year 1971 of the Government of India pertaining to grant of subsidy for industrial units set up in Backward area. A reading of the judgment would reveal that it pertains to the comparative merit of two application for such subsidy, one of which is processed fast and other is processed in a delayed manner. The High Court had held in this case that if the scheme is withdrawn by the Government of India on a particular date, the second of the applications pending on the date of withdrawal of the scheme cannot be dismissed solely on the grounds of its pendency on the date of withdrawal of the scheme simply because of the delay in processing. The essence of the judgment is not relevant to the issues raised in the case at hand. 42. The second judgment quoted by the Applicant Company i.e. Hossein Kasam Dada (India) Ltd. vs. The State of Madhya Pradesh delivered on 25.2.1953 quoted in Sales Tax Cases, Vol. IV at page 114 is again not germane to the case at hand. It deals with the right of appeal as a substantive right where the cri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y promised 75% exemption on the basis of tax rate of 28%, which a citizen was to pay to buy cement. On the basis of revenue so accrued, in the public interest, so as to get more such investments in the cement sector, effective tax rate was made 7% by promising 75% subsidy. However, when the entire country witnessed historic change in the field of tax administration by implementing VAT, Rajasthan was no exception and revised the rate tax on cement from 28% to 12.5%. As pointed out above, by giving 50% subsidy, the effective tax on cement became 6.25%. Therefore, in the public interest, it was logical to revise the scale of benefits available to the cement sector. Otherwise with upfront subsidy intact, the effective tax rate would have been 3.12%. By no stretch of arguments, while examining the principle of promissory estoppel on the touchstone of public interest, such massive reduction of tax of tax on a commodity based on non renewable natural resources, and that too for a single company, could have have justified. 46. On this question of public interest vis-a-vis the principles of promissory estoppel, Supreme Court had made it remarkably clear in the following paragraph (S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upreme Court), a new industry was set up on the basis of an incentive scheme from the Government wherein it promised some benefits. The Supreme Court held that the State Government was bound by its promise held out in such situation. Any alteration that adversely affected the investor was considered to be a violation of the principle of estoppel. It is interesting to note that in similar case quoted more fully later on (State of Rajathan V/s Mahaveer Oil Industries and others SC 1999 357, the Surpeme Court also held that it does not preclude the State Government from withdrawing the scheme prospectively. It could withdraw the scheme even during its continuance, if public interest so requires. In other words, if due to supervening circumstances, public interest requires the withdrawal of benefits, the benefits can be withdrawn or modified even retrospectively. The supervening public interest would prevail over promissory estoppel. 50. The provision of the RIPS 2003 including amendments made thereof on 2.12.05 by addition of clauses 7 (vi) and (vii), were withdrawn on 28.4.06, primarily because of the promulgation of the Rajasthan Value Added Tax Act, 2006, the new tax regime....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sought clarification under six scenarios as detailed below:- (a) Where the option was submitted before 28.04.06 and benefits were also granted by SLSC before 28.4.06. (b) Where the option was submitted before 28.4.06 and benefits were also granted by SLSC after 27.4.06. (c) Where the option was submitted before 27.4.06 and benefits have not been granted by SLSC. (d) Where the option was submitted after 27.04.06, but within 180 days of 2.12.05 and benefits has not been granted by SLSC. (e) Where the option was submitted after 27.04.06, but within 180 days of 02.12.05 and the case has not been considered by SLSC. (f) Where the option was submitted after 27.04.06, but within 180 days of 02.12.05 and the unit has still not applied for benefit. 52. The issues so raised were examined by FD and the opinion on the same was sought from Additional Advocate General, Government of Rajasthan on file. AAG opined as under:- "I am of the opinion that the deletion of the provisions contained in Clause 7 and its sub-clauses (vi) and (vii) vide Government Order dt. 28.04.2006, neither the cases can be considered for the grant of benefit ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....esurgent Summit, it was decided that these cement units would continue to avail benefits under RIPS 2003: it is in this context that the above mentioned notification was inserted as proviso under Clause 7 (iii). In other words, such cement units would continue to get the benefit of 50% tax exemption, despite the fact that cement industry was placed in the negative list. Since the Applicant Company had already made the investment before the said date, they would not be placed in the negative list. They would continue to get the benefit of Clause 7 of RIPS 2003 to the extent of 50% tax exemption. 56. After a thorough examination of facts on record, various judgments pronounced by the apex court of the country and the two hearings granted to the Applicant Company on 3.3.2009 and 26.3.09, I come to my conclusions as stated below: 57. The first decision of SLSC dated 2.7.06 had extended fresh benefits of up front tax subsidy to a unit for which, investment was certainly not propelled by the insertion of Clauses 7 (vi) and (viii). The investment was made much earlier and cannot be said to have been motivated by the new scheme. Accordingly, the unit cannot claim eligibilit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntioned in the show cause notice or the reasons given in the application moved by the Commissioner, a copy of which was supplied to the petitioner company and this being beyond of the power of revision under Clause 13 of RIPS, 2003 is not sustainable. ii) The impugned order of the Principal Secretary dtd.31.3.2009 is contrary to the principles of promissory estoppel and legitimate expectation of the petitioner company and increased benefit of 75% of subsidy under clause 7(vii) inserted in RIPS, 2003 vide notification dtd.2.12.2005, the vested rights of the petitioner - company to avail such increased benefits cannot be withdrawn by the State and the said decision being contrary to the principleS of promissory estoppel and legitimate expectation deserves to be quashed. iii) Amending notification dtd.28.4.2006 by which clause (vi) and (vii) of clause 7 of RIPS, 2003 were deleted can only be applied prospectively and to the cement industries coming into production after the said date or they have started taking the effective steps for setting up of the expansion units after 28.4.2006 and the same cannot be applied to the units like that of the petitioner - company whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he subsidy percentage is reduced contrary to the principles of promissory estoppel from 75% to 50% as new units made much higher capital investment for undertaking such expansion projects in the State of Rajasthan in comparison with the old existing units and their capital investment can only be recovered, if higher quantum of subsidy promised at 75% of additional tax liability under the notification dtd.2.12.2005 is continued to be given to them by seven years. The State of Rajasthan got all it wanted under the Scheme from the petitioner company viz. the high investment of about Rs.500 crores in both units, fresh employment to more than 200 people and other tax revenues and therefore, now State cannot be permitted to go back on its promise of assured subsidy of 75% of additional tax liability. vii) That in any case, the view taken by the SLSC in its two meetings held on 29.7.2006 and 27.6.2007 in favour of the petitioner - company for giving it benefit of increased subsidy of 75% was a plausible, rational and correct view of law and even if the second view was possible, the orders of SLSC could not be revised by invoking revisional powers by Principal Secretary under claus....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... favour of the Petitioner by the Judgments of the Hon'ble Supreme Court in Malabar Industries Co. Ltd. vs. Commissioner of Income Tax, Kerala : 2000 (243) ITR 83 (SC) = 2000(2) SCC 718 and Commissioner of Income Tax vs. Max India Ltd. 2007 (295) ITR 282 (SC). In the present case, the SLSC, which consisted of persons at the highest levels of the Government and who were fully conversant with all aspects of the matter, took a considered and informed decision that the deletion of Clause 7(vi) and (vii) of RIPS on 28.04.2006 did not affect the undertakings like the Petitioner, who had earlier exercised their option as required before the purported deletion of the of Clause 7(vi) and (vii) on 28.04.2006 and had also duly complied with all other applicable requirements and terms and conditions of Notification dated 2.12.2005. This is not only a possible view but in fact is the only correct view, having regard to the Judgments of the Hon'ble Supreme Court in MRF Ltd. Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and Ors. reported in 2006 (8) SCC 702 and S.L. Srinivasa Jute Twine Mills (P) Ltd. vs. UOI and Anr. reported in 2006 (2) SCC 740. Consequently, the attempt to "revise" th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the manufacturer and paid over to the Sales-tax authorities. The rate of Sales Tax was the same for manufacturers covered by RIPS and also for manufacturers not covered by RIPS. The general fall in rates of tax, therefore, does not result in any special gain to a unit covered by RIPS, because such a unit would be required to recover and pay over Sales-tax at the same rate as the other competing units. The general fall in the rate of Sales-tax therefore does not give any edge or advantage to a new industrial unit which has qualified for the benefit of subsidy under RIPS. It needs to be clarified that the general reduction in the rate of sales tax has the effect of sharply reducing the quantum of subsidy which the Petitioner is entitled to claim under RIPS. At the same time, the 7 year period within which the amount of subsidy will be paid remain unchanged. Consequently, for the same amount of capital investment if there is a general reduction in the rate of sales-tax, there is an equal and proportionate reduction in the quantum of subsidy payable to the Petitioner during the subsidy period of 7 years which straightaway diminishes the competitive advantage or the benefit which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 7 years' period commencing from the date of commercial production. This position is further made clear by Clause 5 of RIPS (at page 102 of writ petition paper book) which states that the benefit of subsidy under Clause 7 of RIPS shall be available to all the units other than those covered by the list of ineligible units. The list of ineligible units has nothing to do with the rates of sales-tax charged from time to time during the 7 years period when subsidy is payable to the units. (f d) Further the said State Level Screening Committee (SLSC) is required to dispose the application for subsidy within a period of 15 days and on finding that the industrial unit is eligible, is required mandatorily under Clause 9B(iii) (at page 108) to issue the Entitlement Certificate in the prescribed format to the industrial unit. The Entitlement Certificate (see format at page 201/227) expressly states that the unit would be eligible for the benefit of the subsidy (either at 50% or at 75%, according to its entitlement) throughout the period of 7 years starting from the date of the commencement of commercial production. This provision makes it abundantly clear that the right to subsidy at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an Sales-tax earlier chargeable in respect of other product groups viz Air-conditioners, refrigerators, firearms, Pan masala, Transmission Towers, ASCR Conductors, Cables, Railway Wagons and sleepers, Nonferrous metals etc., to name few. However, the rate of subsidy available to the units engaged in the manufacture of these products has not in any manner been reduced. It is, therefore, extremely unfair and highly discriminatory that the reduction in the rates of sales-tax on cement should be considered to be the ground or reason for reduction of rate of subsidy to cement plant only but not in the case of any other product where also similar Sales-tax rate reductions had taken place. Such discrimination and arbitrariness cannot possibly be countenanced. (f g) The reduction in the rate of sales-tax payable on cement is therefore not even a valid economic ground or reason or justification for the purported reduction in the rate of subsidy from 75% to 50%. In any event, even if it is considered to be a valid and adequate economic justification, it is no answer at all to the three fundamental legal issues raised by the Petitioner. In fact, higher quantum of investment required a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny effective steps on the basis of promise allegedly made by the notification dtd.2.12.2005 and consequently, the petitioner is not entitled to increased amount of subsidy. However, the petitioner was entitled to 50% of subsidy of additional tax liability after 28.4.2006 and at the most only for the period between 2.12.2005 to 28.4.2006 for a period of 5 months, the petitioner can be given subsidy of 75% of additional tax liability in terms of clause 7(vii) of the RIPS, 2003. v) That there is no error of law in the impugned revisional order dtd.31.3.2009 passed by the Principal Secretary and therefore, the writ of certiorari cannot be issued to quash the same. vi) That subsidy is a concession and is not legally enforceable right and being defeasible right, it can be taken away in exercise of very power under which it was granted and the State Government can modify its policies in public interest and there being no arbitrariness in the same, the State Government cannot be bound down to provide increased subsidy of 75% of additional tax liability to the petitioner company. vii) That no vested right accrued in favour of the petitioner company merely by exercise....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Tehsil Jaitaran, Dist. Pali. 17.12.2005:- The commercial production of the unit first expansion Unit of clinker at village Ras commenced. 28.1.2006:- The letter of the petitioner to register the cement unit for availing the increased benefit under the notification dtd.2.12.2005. 30.1.2006:- The letter of the petitioner company for grant of subsidy as it has invested 285.98 crores upto 31.12.2005. 9.2.2006:- The option letter for the second unit (grinding) unit at Khushkhera, Bhiwadi, given to Secretary, Industries. 13.2.2006:- The land taken at Khushkheda, Bhiwadi on lease from RIICO. 1.4.2006:- The Rajasthan VAT Act, 2003 came into force. 1.4.2006:- The rate of VAT on cement reduced from 28% to 12.5% in uniformity with the rate of tax on cement all over country. 28.4.2006:- The amendment in RIPS, 2003. Clause (vi) and (vii) inserted in clause 7 of RIPS, 2003 vide notification dtd.2.12.2005 deleted by a one-liner amendment. No preamble, reason or context explained. 29.7.2006:- The decision of SLSC to issue Entitlement Certificate in respect of Ras District Pali, Unit No.1 of the petitioner company in terms of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 7(vi) and (vii) in RIPS, 2003 which despite deletion of these clauses (vi) and (vii) w.e.f. 28.4.2006 could not deprive the petitioner company of such continued benefit of increased subsidy/rebate against the "additional tax liability" over and above its average tax liability for base years for the complete period of seven years. 24. The principles of promissory estoppel and legitimate expectation having been discussed in large number of judgments even by the Hon'ble Apex Court of the country and various High Courts, is not a new phenomenon and as the same operate in the realm of equity, fair play and good conscience and barring established exception, the same furnishes a cause of action to the aggrieved party for invoking Court's jurisdiction for binding down the promisor to his promise and to grant consequential relief to the promissee. To understand the applicability of these principles in the present case, a little peep into the history of introduction of RIPS 2003 which is exclusively an executive policy framed by the State Government and efforts made by the petitioner company right from the beginning with the conception of setting up of its expansion units and makin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on though provided that maximum limit of 50% may be raised by BIDI (Board of Infrastructure Development and Investment Promotion, Government of Rajasthan) to 60% in such cases were the investments exceed Rs.100 crores but are less than or equal to Rs.200 crores and this maximum limit may be raised further to 75% in cases were the investments exceed Rs.200 crores. Clause 7(iii) provides that the subsidy shall be available to the investors for seven years from the date of first repayment of interest in case of Interest Subsidy and first payment of wages/employment in case of wage employment subsidy. In case of Expansion/Modernization/Diversification, the unit shall be eligible for subsidy under the Scheme from the date of payment of sales tax over and above the highest sales tax paid in the immediately preceding three years before such Expansion/Modernization/Diversification. Clause (vi) and (vii) introduced in RIPS, 2003 by notification dtd.2.12.2005 applied to new cement units and investment for expansion of existing unit respectively and provided for increased subsidy of 75% of the tax payable and deposited under the RST/CST/VAT Act for the period of 7 years which inter alia besid....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 75% incentives for 11 years to new cement plants to be given vide Annex. 4. It would again appear from the representation of the petitioner - company to the Chief Minister vide Annex.5 dtd. 12.4.2005 that upon representation of the petitioner - company, the Chief Minister had assured of looking into the matter besides allowing 75% Sales Tax Exemption to make the Expansion Project economically viable. Again in another representation dtd.5.5.2005 vide Annex.7 to the Hon'ble Industries Minister, the petitioner - company brought it to the notice of the State Government that they intended to make capital investment of over Rs.300 crores for setting up of new cement plant of 1.2 million tons at village Ras, Dist. Pali and even though it was given status of pipe line unit in BIDI meeting dtd.10.1.2002, they deserve to be given sales tax exemption to the extent of 75% in customized package to make the project economically viable. This would also provide level playing field to the petitioner company. 28. It appears that with this persuasion, the petitioner company at its own level and at the level of Cement Manufacturing Association succeeded in getting increased rebate/subsidy in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unit has still not applied for the benefits. By this clarification, it was therefore, directed that for all these aforesaid six categories, none of the categories enumerated would qualify for benefits under deleted sub clause (vi) and (vii) of Clause 7 of RIPS, 2003 on or after 28.4.2004. Thus, under the garb of this clarification issued on 22.5.2008, the State Government effectively put down all the cases to be deprived of increased benefit of 75% of subsidy after 28.4.2006 but in fact only one single unit was sought to be deprived of increased subsidy of 75% under category (ii) aforesaid, that of the petitioner company. 30. Though the petitioner company made a representation to the Chief Minister again on 19.6.2008 against the aforesaid purported clarification dtd.22.5.2008, the said benefit came to be denied to it by the impugned order dtd.31.3.2009 passed by the Principal Secretary of Finance in pursuance of revision petitions filed by the Commissioner, Commercial Taxes Department of State Government on 18.7.2008 for withdrawal of both the SLSC decisions in favour of the petitioner company, though in the meanwhile, the petitioner company continued to represent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the said benefit of exemption with effect from 15.1.1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event the State Government has no power to make a retrospective amendment to SRO No.1729/93 affecting the righs already accrued to MRF thereunder." The Apex Court further held as under:- "On a conjoint reading of SRO No.1729/93, SRO No.38/98 and SRO No.1092/99 the intention of the Government does not seem to take away the benefits of exemption in respect of manufactured products including compound rubber after 15.1.1998 (the date on which SRO No.38/98) was issued) where commercial production had commenced prior to that date. By virtue of the certificate of eligibility and by virtue of the exemption order granted pursuant to SRO No.1729/93 dated 3.11.1993, MRF Ltd. had acquired the right to avail tax exemption for a fixed period of 7 years from 30.12.1996 to 29.12.2003, in respect of products manufactured from raw rubber, including compound rubber. In the eligibility certificate and in the exemption order the date of commenceme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e General Clauses Act, 1897, unless a different intention appears the repeal would not affect any right, privilege or liability acquired, accrued or incurred under the repealed enactment. The effect of the amendment in the instant case is the same. The appellants would be entitled to the protection as had accrued to them prior to the amendment in 1997 for the period of 3 years starting from the date the establishment was set up irrespective of repeal of the provision for such infancy protection." 33. That principles of promissory estoppel which were first unequivocably propounded by the Hon'ble Supreme Court in the case of Union of India V/s Indo-Afghan Agencies reported in AIR 1968 SC 718, were further concretized and glorified in the celebrated judgment of Hon'ble Justice P.N. Bhagwati in the case of M/s Motilal Padampat Sugar Mill Co. Ltd. V/s The State of Uttar Pradesh and ors. reported in AIR 1979 SC 621 and a short extract from the said judgment is quoted here:- "Doctrine of promissory estoppel has been variously called 'promissory estoppel', requisite estoppel', quasi estoppel' and 'new estoppel'. It is a principle evolved by equity to avoid injustice and tho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dustries vs. State of Gujarat and Ors. reported in 1987 (6) SCC 31 do not demolish the case of the present petitioner-company in any manner. 35. In the case of Shree Sidhbali Steels Ltd. (supra), the petitioner industrial units, which were located in hill area in the State of Uttrakhand, claimed continued grant of Hill Development Rebate of 33.33% on the power tariffs for a period of five years but the same was prematurely withdrawn upon enactment of U.P. Electricity Reforms Act, 1999 and when new tariff notifications were issued under Section 49 of the 1948 Act, the same were challenged by direct writ petition under Article 32 of the Constitution of India and negativating the said claim and while overruling the earlier decision of two Judges bench in the case of Sant Steels case (supra) 2008 (2) SCC 777, the Hon'ble Supreme Court in the aforesaid case held as under:- "The two Judge Bench in Sant Steels case, (2008) 2 SCC 777 was of the view that notification issued under Section 49 of the 1948 Act can be revoked/modified only if express provision was made for the revocation/modification of the said notification under Section 49 itself and the Court found that as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omething which is not allowed by law or prohibited by law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute (including delegated or subordinate legislation which is deemed to be a part of the parent statute). Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law." 37. The said case relied upon by the respondents is not applicable to the facts of the present case for more than one reasons. Firstly, RIPS 2003 is an executive policy decision of the State Government involved here in this case; whereas upon enactment of U.P. Electricity Reforms Act, 1999, uniform tariffs for supply of electricity were introduced in the case before the Apex Court and thus obviously principle of promissory estoppel were held not applicable against the legislation. Secondly, quite a few number of industrial units set-up, 10 petitioners, were before the Hon'ble Supreme Court in the hill areas, which were given Hill Development Rebate of 33.33% against the electricity bills but the said rebate was withdrawn uniformly for all; whereas in the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of a concession for encouraging entrepreneurs to start industries in rural and undeveloped areas. A concession can be withdrawn at any time and no time limit can be insisted upon before the concession is withdrawn. It was, therefore, fully within the power of the Government to withdraw or revoke the exemption by means of a subsequent notification." The said case law as well as others relied by the State are also of little avail to the respondents in the present case for the same reasons, which distinguish the case of Shree Sidhbali Steels Ltd. (supra) as aforesaid. The facts obtaining in these cases relied upon by the learned Advocate General were quite different. 39. It has to be noticed here that RIPS, 2003 in the first instance is exclusively within the domain of executive and the Scheme itself was announced as a policy statement in the year 2003 without any legislative enactment to this effect. Acting bonafide, the notification dtd.2.12.2005 a subordinate legislation was issued by the Government of Rajasthan making amendment in RIPS, 2003 and it is the sheet-anchor of the petitioner's case. That is where contention of respondent that RIPS 2003 was issued witho....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 01.04.2006. But, it was not to be and only petitioner's unit was chosen to be hit by notification dated 28.04.2006. The said argument, therefore, is liable to be rejected and is accordingly rejected. 41. As far as factual foundation for invoking principles of promissory estoppel is concerned, this Court is of the opinion that both the units by way of expansion project undertaken by the petitioner - company at Ras, Dist. Jaitaran, Dist. Pali and at Khushkheda, Bhiwadi, Dist. Alwar satisfied the criteria for invoking the principles of promissory estoppel. As far as unit No.1 is concerned, even though investment in the same started prior to notification dtd.2.12.2005, but the MOU was signed with the State Government right after the issuance of RIPS, 2003 itself and constant efforts were made by the petitioner company for giving it increased rebate/subsidy which was envisaged even in original Scheme of 2003 at the time of its announcement on 28.7.2003. Therefore, the customized package was given by the BIDI and even announcement was made by the Chief Minister on the floor of the Legislative Assembly for giving such increased benefit. Therefore, it can be inferred that such pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity for entire period of 7 years especially in view of the fact that SLSC after being duly aware of the withdrawal of notification dtd.28.4.2006 granted such benefit and even the Entitlement Certificates issued for a period of 7 years for availing subsidy at the increased rate of 75%. Therefore, the question is whether the withdrawal notification dtd.28.4.2006 can be applied to the petitioner company giving it virtually retrospective effect and whether the purported clarification issued after 2½ years of the withdrawal notification dtd.28.4.2006 on 22.5.2008 can really shut up the increased subsidy of 75% for the petitioner company. The answer has to be in clear negative. Lest the promise as made by the welfare State is allowed to be tinkered and withdrawn lightly and so casually especially ignoring that such withdrawal is going to affect only the single industry of the petitioner company and not others, the very competitive edge which the petitioner got because of this assurance of increased subsidy of 75% is bound to be lost and entire economical viability of the petitioner company may be put in jeopardy if such withdrawal notification was to be applied to it with retrosp....