TaxTMI 
TaxTMI 
2013 (11) TMI 107
X X X X Extracts X X X X
X X X X Extracts X X X X
....cy contained the provisions for providing incentives, such as capital investment subsidy, subsidy on interest and VAT concessions/refunds for giving impetus to the industrial growth. Clause 29.11 of the Policy makes provision for giving incentives to Mega Units. It provides that special packages shall be formulated for the new projects with direct investment of more than Rs.50 crores on case to case basis. Clause 17 Annexure-1 of the Policy classified different areas of the State in the following three categories viz Category-'A' (least backward),Category-'B' (backward) and Category-'C'( most backward). Clause 22 of the Policy further provides for Identical Incentives Packages for mega industrial units, which are undertaking expansion/diversification or modernization with a view to increase their production. 3. It further appears that the State Government by order as contained in Memo no. 1885 dated 10.06.2003 classified Mega Industrial Units into following three categories for grant of capital investment incentive/ subsidy :- (i) New Industrial Units :- In which capital investment of more than Rs.50 crores has been made or is being made in terms of the Industrial Policy,2001....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on the brink of closure. 7. It then appears that petitioner vide letter dated 26.02.2003 requested the Chief Secretary, Govt. of Jharkhand for granting incentives in terms of Clause 29.11 of the Policy for modernisation of its Chaibasa clinkering and cement grinding plant by making investment of Rs. 270 crores. It then appears that another letter written to Secretary (Industries), Govt. of Jharkhand on 17.5.2003 for giving incentives and subsidies to the petitioner for modernisation of its Chaibasa clinkering and cement grinding plant. 8. Thereafter, Department of Industries, Govt. of Jharkhand brought a proposal before the Cabinet for granting following incentives to the petitioner for modernisation of its Jhinkpani Unit, which are as follows :- S. No. Provision Due amount A Capital Investment Incentive Subsidy after the date of commencement of commercial production (As per the Para "ga" of Order Memo no. 1885 Rs. 15.00 crores B Electricity Duty Exemption for 11 years from the commencement of commercial production (estimated on the basis of the project application) Rs. 5.40 crores C Interest subsidy for 11 years from commercial production (u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he financial year 2003-04 and 2004-05 i.e. since last two years from the date of commercial production. 13. It is further stated by the petitioner that the Director (Industries) vide his letter no. 1162 dated 20.05.2011 had raised following new objections : (a) it is the Chaibasa clinker plant which is under expansion/ modernisation eligible for incentive and not the Sindri grinding plant; (b) the product under consideration is clinker and not cement and (c) equivalent amount of tax needs to be calculated in the form of clinker for which C.A. certificate needs to be submitted duly supported with documentary evidence. It is stated that petitioner filed a representation protesting new objections, raised by the State Government and claimed that petitioner is entitled to get incentives as per decision of the State Government. It is stated that later on the State Government granted capital investment incentive /subsidy applicable to existing industries, which petitioner received under protest and filed second writ application bearing W.P.(C) No. 5513/2011. 14. In the counter-affidavit, the State Government stated that after receiving the request of the petitioner-company for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oss making existing and functional industrial unit. It is submitted that if admissibility of incentive would get determined from the facts existing as on the date of commencement of commercial production, then the entire provisions contained in Industrial Policy will become superfluous and unworkable, because the eligible assessee will be unaware at the time of making application, as to whether at the time commencement of commercial production, it remains a loss making company or become a profit making company. It is further submitted that the Director ( Industries) in his letter dated 21.07.2003( Annexure-5) has not stated that if on the date of commercial production the status of the unit changed from loss making unit to profit making unit, then the benefits sanctioned to the petitioner as loss making unit would not be available or the same will be modified. 16. It is further submitted that the contention of the Government that the incentive would be available only with respect of taxes paid on the sale of clinker and not on the sale of cement, is not tenable. It is further submitted that clinker is an intermediate product, which is not usually sold except in negligible quanti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner and granted incentives to both Chaibasa and Sindri Units, which has been mentioned in the letter dated 21.07.2003. It is submitted that decision of the respondents in restricting the incentives only to Chaibasa Unit is against the principles of promissory estoppel and/or legitimate expectation. Thus, the same cannot be sustained. It is submitted that on the basis of express sanction granted by the State Government, petitioner invested huge amount for modernization of its plant at Chaibasa and altered its position. Therefore, now, it is not open for the State Government to modify the eligibility and/or promise without giving any opportunity of hearing to the petitioner. Accordingly, it is submitted that suitable directions be issued to the respondents/State for sanctioning incentives as promised by it. 18. On the other hand, Sri Ajit Kumar, Addl. Advocate General, submits that petitioner claims incentives on the basis of Jharkhand Industrial Policy, 2001. He further submits that it is clearly mentioned under Clause 29.2 of the Industrial Policy that incentives shall be admissible only to those units, which comes into commercial production during the period this policy remai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s illegal. Learned Additional Advocate General submitted that it is well settled that promissory estoppel could not be invoked to compel the State Government to do an act prohibited by law. Accordingly, it is submitted that writ application filed by the petitioner has no merit, therefore, the same is liable to be dismissed. 19. Having heard the submissions, I have gone through the records of the case and various documents submitted on behalf of both the parties. From the pleadings of the parties and rival contention raised on behalf of them, following three points emerges for determination in these writ applications :- (1) Whether petitioner is eligible for incentive/subsidy as existing functional industrial unit (category II unit) or loss making, existing and functional industrial unit ( category III unit) ? (2) Whether plea of the State Government that petitioner is entitled to get tax relief only on the sale of clinker and not on the sale of cement is sustainable ? (3) Whether petitioner is entitled to get capital investment subsidy on the amount paid to the State Government as additional incremental sales tax on the sale of cement produced both by the Chaibasa and S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnment has considered the proposal of petitioner and sanctioned special package available to category (III) Mega Units i.e. loss making existing and functional industrial units situated in most backward area of the State of Jharkhand. 22. It appears that after sanction of special package, petitioner invested more than Rs.300 crores for modernization of its clinker plant at Chaibasa and setting up a captive power plant. It further appears that thereafter, commercial production started on 09.8.2005. It also appears that thereafter, petitioner filed applications for granting incentive/subsidy as mentioned in the sanction order ( Annexure-6). 23. It appears that State Government after scrutinizing the applications of the petitioner come to the conclusion that unit had not incurred cash losses during financial year 2003-04 and 2004-05. Thus, status of the unit has changed from loss making unit ( Category-III unit) to profit making unit (Category-II unit). Accordingly, State Government modified its stand taken in Annexure-6 and decided that petitioner's unit comes under category (II) of Mega Industrial Unit and not under category (III) i.e. loss making ,existing and functional unit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... status of the petitioner's unit from loss making unit to profit making unit is not correct, because on the date of intimation for expansion/diversification/ modernization, petitioner's unit was a loss making unit, because it incur cash losses since last five years. Thus, I hold that petitioner's unit entitled to get capital investment incentive/subsidy as Category (III) Mega Industrial Unit i.e. loss making, existing and functional industrial unit. 27. Re: Question No.2 Petitioner's applications as contained in Annexure-2,3 and 4, reveals that petitioner prayed for incentive/subsidy for undertaking modernization of Chaibasa clinker and cement grinding plant. Annexure-2, further reveals that petitioner prayed for exemption from sales tax and other incentives on cement manufactured out of clinker produced at Chaibasa cement plant. From perusal of the proposal placed before the Cabinet ( Annexure-5), it is clear that Cabinet considered special package for expansion/ diversification/ modernization of ACC Cement Jhinkpani and approved the same. Thereafter, the Director Industry vide his letter no. 2318 dated 21.7.2003 sanctioned special package as mentioned in the said letter for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sales tax on the sale of cement from Chaibasa Unit and Sindri Unit. Therefore, State Government is bound by its promise on the principle of promissory estoppel. Thus, liable to release aforesaid incentives on the amount paid to the State Government as sales tax on the sale of cement by Chaibasa and Sindri Units. The aforesaid contention of Sri Andhyarujina can not be accepted in the facts and circumstances of this case. 31. It is well settled that Government is bound to fulfill its promise, if the promisee acted in reliance of it, alters his position. It is equally well settled that promissory estoppel cannot be invoked to compel Government or even a private party to do an act prohibited by law. Reference in this connection may be made to "M/s Motilal Padampat Sugar Mills Vs. State of Uttar Pradesh and others" reported in 1979(2) SCC-409. 32. In the instant case, as noticed above, according to Clause 22 of the Jharkhand Industrial Policy, only those units are entitled to get incentive, which undertake expansion /diversification /modernization. Admittedly, no expansion/diversification/ modernization took place in the Sindri Unit of ACC Limited. Under the said circumstance, Sin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ef straight way from the administrative authority on the basis of doctrine of legitimate expectation. He can only claim that the authority, who took decision for negativing a promise, should give him a fair hearing. 35. In the instant case, as noticed above, petitioner is knowing that according to industrial policy only those units are entitled to get incentive on payment of sales tax, which undertake expansion/ diversification/ modernization. From perusal of Annexure-9, it is clear that the State Government had written to the petitioner to clarify as to how it claims subsidy on the amount paid as additional sales tax to the State Government on the sale of cement by Sindri unit because it is the Chaibasa Clinker Plant which undertaken expansion/diversification/ modernization eligible for incentive and not the Sindri Grinding Pant. It appears that petitioner gave its reply to the aforesaid letter ( Annexure-9). Under the said circumstance, right to fair hearing before taking a decision for negativing the promise had been given to the petitioner. 36. In view of aforesaid facts and circumstances, since the promise to pay aforesaid incentive on the sales tax to the Sindri Unit is....