TaxTMI 
TaxTMI 
2011 (10) TMI 391
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....and background and particularly defining their 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 presen....
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....nterest Subsidy, and first payment of wages/employment 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 op....
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....rm of interest subsidy, wage/employment subsidy out of which interest subsidy shall 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....
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....re than Rs.200 crores and has provided employment to more than 100 persons; therefore, it stands covered 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.....
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....bmitted before 28.4.2006 and benefits were also granted by SLSC before 28.04.2006. 2. Where the option 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 g....
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....o revise both the orders of SLSC in favour of the petitioner unit and the increased subsidy of 75% sanctioned under clause 7(vii) of RIPS, 2003 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.....
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....he notification dated 2.12.05 cannot be questioned on any ground whatsoever. xi. Para 89 of the State Budget speech for the year 2004-05 presented in the Vidhan 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 i....
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....paras record the actions taken by the Applicant Company in furtherance of setting up the industrial units, including placing its orders for machinery, civil works etc. xxvi. The finance 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....
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....sp; " ....the respondent state is not precluded from interpreting any of the clauses of the scheme so formulated but, at the same time, it is expected that unnecessary harassment may not be practiced by any of the 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 ma....
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....dia." xxxvi. The SLSC's decision was a consensus decision. The Assessing Authority had granted the sanction and hence the Entitlement Certificate cannot be withdrawn. The Supreme Court in Vadilal Chemical Ltd. vs. State of Andhra Pradesh 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 ....
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....ater, the State Government amended the Scheme by amendment No. F. 12 (20) FD/Tax/2005 on 30.9.08 and a proviso was added under Clause 7 (iii):- "Provided further that the investment made or committed before 22.05.08 or under MOU signed during Rajasthan Resurgent 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 pro....
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....s tax in the case of those units eligible for the same by virtue of the new investments made after the issuance of the scheme. At the point of time when Applicant Company filed its applications, the sales tax rate on cement was 19%. In other words, the effective tax rate under RIPS 2003 for eligible 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, inva....
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.... After the introduction of VAT in Rajasthan front 1.4.06, and the tax rate on cement was placed at 12.5%, the Applicant Company was blessed with an especially low effective tax rate of a mere 3.12% (75% of 12.5%). I have no hesitation in stating that undoubtedly, this could not have been the intention 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 effectiv....
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....quently, when the tax rate on cement was brought down to 12.5% as a result of the introduction of VAT and the national consensus for a tax rate of 12.5% on this commodity, the maximum quantum of tax subsidy also came down to 6.25%. It may be argued that the quantum of tax subsidy that was retained or was 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....
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....ld not be entitled to go back upon it. 34. Applicability of promissory estoppel on Government:- there is, of course, much debate on the applicability of the principle of promissory estoppel on Government. Indeed, the Supreme court has held, for the first time in the case of Union of India vs. Anglo-Afghan 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 s....
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.... no doubt at all that the Applicant Company had started investment for expansion at Ras long before the new scheme was ever conceived. By a fortuitous coincidence the new revised tax exemption scheme came into existence on 2.12.05 and the Applicant Company was fortunately placed at the right point in time in the Ras unit of the 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 furthera....
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.... In other words, when applied to the case in hand, when the State Government is acting on the strength of the authority vested in it in the management and administration of taxes, estoppel cannot and does not apply. 41. The judgment quoted by the Applicant Company at AIR 1993 MP 202 in the case of Shri Bajrang Extraction 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 ....
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.... SC 621. In this case, Supreme Court has also pronounced clearly that if public interest suffers, the promise cannot be enforced; however, Government cannot claim exemptions from the liability to honor the promise on some indefinite and undisclosed ground of necessity or expediency. Under the light of the above it is evident that the scheme based on public money 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 ....
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....to show that facts have transpired subsequent to the promise being made, public interest would be prejudiced should Government carry out the promise made, then it would be necessary to balance the public interest with the promise made to a person or any other entity. In the case quoted by the Applicant Company, Mahavir Oil Mills Pvt. Ltd. vs. State of Harayana (145 STC 350 Supreme 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 ca....
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....fit of such tax exemption. Since several applications were filed and were pending for disposal or were disposed of as pointed out above, the issuance of grant of benefits under the deleted clause 7 (vi) and (vii) and its bearing on such cases was referred by Commissioner, Commercial Taxes Department to the Finance Department of Governance of Rajasthan for clarification. CCT had 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. ....
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....ts made or committed before 22.05.08 or under MOU signed during the Rajasthan Resurgent Summit. It is correct that by a notification No. F(12) (20) FD/Tax/2005 dated 22.05.08, the cement industry was placed in the negative list for the purposes of available benefits under RIPS 2003. In the light of the investments already made, or were promised to be made by the singing of MOUs during the Rajasthan Resurgent 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 ....
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....n of India. Contentions of Petitioner before this Court:- 18. Mr. S. Ganesh, Sr. Advocate assisted by Mr. Ramit Mehta submitted that the impugned order passed by the Principal Secretary is liable to be quashed by this Court for following reasons:- i) The impugned order of Principal Secretary quashes the order of SLSC in favour of the petitioner company on the reasons other than the reasons mentioned 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 t....
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.... to 50% in case of cement industries. vi) Higher incentive to the cement industries of 75% of subsidy of the total additional tax liability due to higher turn over due to expansion made by it was only to give competitive edge to such new units making investment within the State of Rajasthan, which has large deposits of lime stone, the basic raw material for cement manufacturing industries and the same would get lost, if the 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 sub....
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..... 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. (b) In any event, Clause 13 of RIPS, which is identical to Section 263 of the Income tax Act, does not authorise a revision of the SLSC's Orders if the issue is debatable or if the SLSC has adopted one of the two possible views. This issue is also squarely covered in 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 applic....
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....es of Sales-tax leviable on cement, is devoid of any substance or merit and the said ground or reason, it is respectfully submitted, is only a red herring which is meant to obscure and confuse the real issue which arises for consideration in the present case. This is so inter alia, for the following reasons. (f a) At the outset it needs to be clearly understood that Sales- Tax, at whatever rate, was applicable, was required to be recovered 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 entitle....
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....stments made by existing units and enterprises for modernisation/expansion/diversifications, subject to the condition that such unit shall commence commercial production and operation owing to such investments during the operative period of the Scheme (2003-2008), which was later on extended till 31.3.2011. The applicability of or eligibility to the benefit of the Scheme is nowhere dependant on the rates of Sales Tax charged from time to time during the 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 pa....
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....ntemporaneous understanding of the provisions of RIPS in the minds of the most highly placed officials in the Industries Department and also the Commercial Tax Department of the State Government, that the amount of subsidy has nothing to do with the prevailing rate of Sales-tax. The rates of subsidy were not linked in any way to the current prevailing rates of Sales-tax. There has been a significant reduction in the VAT w.e.f. 1.4.2006 as compared to Rajasthan 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 p....
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....ial production on 17.12.2005, only 15 days after the notification dtd.2.12.2005, giving increased subsidy of 75% and it is not possible for any cement unit to claim promissory estoppel on the ground that it set up such expansion unit on the faith/promise of increased subsidy of 75% within a short period of 15 days and as far as 2nd unit at Bhiwadi is concerned, except taking the land on lease from RIICO for its expansion unit there, the petitioner company did not take any 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 ....
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....% subject to stipulated conditions which inter alia require the option to be exercised within 180 days and that unit shall start commercial production within 5 years of filing such option and such 75% of subsidy to comprise of (i) 45% upfront subsidy on the basis of actual tax liability, 5% interest subsidy and 25 % wage/employment subsidy. 2.12.2005:- The rate of sales tax on cement increased to 28%. 10.12.2005 The option of the petitioner company for cement expansiuon unit at Ras, 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 f....
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....Findings and Reasons of Judgment:- 23. Having heard the learned counsel for the parties and given my thoughtful consideration to the rival submissions and the judgments cited at the Bar, this Court is of the considered and firm opinion that not only the principle of promissory estoppel and legitimate expectation are attracted in the present case, but also the petitioner got a sort of vested right in receiving incentive in the form of increased rebate/subsidy under the amending notification dtd.2.12.2005 inserting clause 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 excep....
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....t in repayment of dues against term loan of the concerned financial institution(s) and/or Bank(s) etc. 26. Clause 7 of the RIPS, 2003 providing for subsidies in for the form of interest subsidy and wage/employment subsidy provides that a maximal limit of 50% of the tax payable and deposited under the Rajasthan Sales Tax, 1994, the Central Sales Tax Act, 1956 and Value Added Tax Act as and when introduced in the State. Same amount of 50% of subsidy was made available in case of investment made in modernization/expansion/diversification 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/Diversificat....
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....had looked into the matter and thereafter they had granted sales tax exemption to the extent of 35% only. Since our project was not becoming economically viable at 35% incentive, we had again requested for 75% sales tax incentive." In the same representation, the petitioner - unit had given out its plan of investing more than Rs.200 crores in its expansion unit. In the meeting of the State Level Advisory Committee on 7.2.2005 under the Chairmanship of Hon'ble Chief Minister, the Rajasthan Cement Manufacturing Association suggested inter alia for 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 sett....
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....itted before 28.4.2006 and benefits were granted by SLSC after 27.4.2006; (iii) where the option was submitted before 28.4.2006 and benefits have not been granted by SLSC; (iv) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and benefits has not been granted by SLSC; (v) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and the case has not been considered by SLSC; and (vi) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and the 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 co....
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....e State exchequer in the form of State's share i.e. 40% of the Central Excise duty paid on compound rubber of Rs.177 crores within the State of Kerala. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and therefore, violative of Article 14 of the Constitution. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of "justice and fair play". The attempt to take away 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 ....
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.... infancy period of the appellants, omitted w.e.f. 22.9.1997 by an ordinance which was followed by two other ordinances and ultimately by Act 10 of 1998. The appellants filed writ petitions before the A.P. High Court for a declaration that the omission of Section 16(1)(d) would not affect their right to exemption for the balance of their infancy period in terms of the erstwhile Section 16(1)(d). The High Court dismissed the writ petitions. The appellants, then filed the present appeals." Allowing the appeals, the Supreme Court held:- "In terms of Section 6(c) of the 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'bl....
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....would be caused to the promisee, if the promisor were allowed to go back on the promise." Case Laws cited by Respondent-State Discussed:- 34. On the other hand, the arguments of learned Advocate General Sh. G.S. Bafna that the principle of promissory estoppel and legitimate expectation could not be invoked by the petitioner - company in the present case and reliance placed by him on the case of Shree Sidhbali Steels Limited and Ors. vs. State of Uttar Pradesh and Ors., reported in (2011) 3 SCC 193 and the decision of Hon'ble Supreme Court in the case of Shree Bakul Oil Industries 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 challeng....
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....ed on executive necessity would not be accepted by the Court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something 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 ex....
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....tion of the tax exemption, the benefit thereunder could be claimed only for such period as the exemption was in force before being withdrawn by the subsequent notification. The second notification providing for a period of five years' operation of the exemption was prospective in operation. That notification was, therefore, to apply only to those new industries which were commissioned subsequent to issuance thereof and not to those commissioned prior to its issuance. Moreover, the State Government was under no legal obligation to grant the tax exemption. What was granted by the first notification was only by way 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....
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....998. Here the quantum of relief and incentive is only depending upon additional revenue generated by the company in the form of additional tax liability by increasing its turnover of additional production of cement by its expansion units. That is why the argument of State that increased subsidy and its reduction consequent upon increase and fall in rate of sales tax is misconceived and without any substance. Had it been so, subsidy for all other sectors manufacturing different items had also been reduced, when rates of tax had been reduced across the board for all such goods with the introduction of VAT in the State w.e.f. 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.....
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.... crores was made during the period from 2.12.2005 to 28.4.2006 in the said unit. Therefore, it cannot be said that no effective steps were taken during the period when the increased benefit of subsidy was alive on the statute book under the RIPS, 2003. The fact that both the units commenced production from operative period of the Scheme is not even disputed by the respondent - State. 43. Consequently, this Court is of the firm and clear opinion that the petitioner company satisfied all the conditions for binding down the respondent - State by the assurance and promise of increased subsidy of 75% of additional tax liability 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 2....
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....6 itself was to be immediately applied though it uses the words "clause (vi) and (vii) of clause 7 shall be deleted" and no other statutory notification was thereafter issued really deleting these clause (vi) and (vii), but even assuming for argument's sake that the words "shall be deleted" were to be considered to mean "are hereby deleted" also, the fact remains that increased benefit continued for 2½ more years upto 22.5.2008, when under the purported clarification in all the six contingencies of exercise of option and consideration by SLSC, the Finance Department chose to deny such benefit of increased subsidy to only a single large scale manufacturing unit, that of the petitioner - company in the State. This Court is at loss to understand why for adversely affecting the single large scale manufacturing cement unit, such withdrawal of clauses (vi) and (vii) was even considered necessary by the State. No overriding public interest has been shown behind that much-less established. However, even though a prayer has been made in the writ petition for quashing of the said notification dtd. 28.4.2006, since it was not pressed during the course of arguments by the learned counse....