AI Drafter 
TaxTMI 
TaxTMI 
1999 (9) TMI 925
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....f small-scale industries, the G.O. conferred the benefit of sales tax holiday subject to a ceiling of Rs. 35 lakhs to be availed during a period of 5 years from the date of commencement of production. This was in addition to investment subsidy to the extent of 20 per cent of the capital cost up to a maximum of Rs. 20 lakhs in regard to the industries located in three backward districts including Adilabad district. Committees were constituted at district and State level to scrutinise the applications for incentives and sanctioning them. Paragraph 10 of the G.O. made it clear that only new industrial units which hold valid registrations/letters of intent and have taken steps for the first time on or after October 3, 1989 for project implementation such as applying for project finance, placing orders for of the machinery, commencement of construction, etc., would be eligible for the concessions provided they go into commercial production before March 31, 1995. In paragraph 11, it was declared that "these orders shall be in force till October 2, 1992". A list of industries which are not eligible for grant of incentives were specified in the annexure. The first item which is relevant fo....
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....morandum No. 2125/1A/89-1, dated September 15, 1990, 11 months after the G.O. 498 was promulgated. The Manual of Guidelines envisages four steps for extending the incentives: (1) Registration as S.S.I. unit; (2) issuance of eligibility certificate for availing the incentives; (3) temporary sales tax eligibility certificate and (4) fiscal eligibility certificate after production starts. The said Government memo also laid down in para 6B(ii) that "small-scale industries are exempted from the payment of sales tax for a period of 5 years from the date of commercial production limited to 100 per cent fixed capital investment or Rs. 35 lakhs whichever is less". Questioning this restriction as reflected in the underlined* words, series of writ petitions were filed in this Court. A division Bench of this Court held in P.P.P. Industries v. Commissioner of Industries [1994] 92 STC 110 that the condition laid down in the Government Memo dated September 15, 1990 which restricted the scope of incentives sanctioned in G.O. Ms. No. 498, was invalid and cannot be enforced. The learned Judges held "such an alteration not having been effected by a notified order issued under article 166(2) of the....
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.... sales tax holiday to 100 per cent of the fixed capital investment or Rs. 35,00,000 whichever is less. Going by the plain language of section 2, the benefit was extended to oil mills crushing non-edible oil seeds also, cotton seed being one such, but it goes contrary to G.O. Ms. No. 146 by which the annexure to G.O. Ms. No. 498 was amended. The validity of the Act was upheld by a division Bench of this Court in Kamala Ginning and Oil Mills v. State of Andhra Pradesh [1998] 110 STC 490; (1998) 26 APSTJ 159. We are told that appeals against this judgment are pending in the Supreme Court. 7.. It may be recalled that before the Act came into force, cotton seed oil industries were not eligible for sales tax holiday in view of G.O. Ms. No. 146. Hence, in some of the cases, applications for grant of incentives were rejected and in some cases, the certificates already granted were cancelled. W.P. Nos. 2031 of 1994, etc., were filed questioning the cancellation/rejection orders. By the time the writ petitions came up for disposal, Act 14 of 1995 was enacted. The Division Bench in its judgment dated April 5, 1995 after adverting to section 2 of Act 14 of 1995, observed that cotton seed oi....
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....mall-scale industries set up on or after 3rd October, 1989 and go into commercial production before the 31st March, 1995 in the State of Andhra Pradesh except the industries specified in the annexure to the G.O. Ms. No. 498, Industries and Commerce Department, dated the 16th October, 1989 and the industries located in the Municipal Corporation limits of Hyderabad, Visakhapatnam and Vijayawada." 10.. The objective of this amending Act is spelt out by the preamble. The preamble makes it clear that it was meant to get over the judgment of this Court in W.P. No. 2031 of 1994. In the light of this amended Act, orders were passed by the Industries Department rejecting the claims of the petitioners for the grant of sales tax holiday as per G.O. Ms. No. 498. In other words, the final eligibility certificates were refused. As noted above, eligibility certificates already granted were cancelled even earlier to this. While so, in some of the cases, the Sales Tax Department started demanding the sales tax for the relevant years. This development led to the filing of the present batch of writ petitions in which not only the provisions of Act 18 of 1996 but also rejection orders passed after ....
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....since the date of announcement of liberalised incentives scheme by G.O. Ms. No. 498, dated October 16, 1989 tells us a story of wavering industrial policy of the Government, deficient G.Os, contradictory orders and abortive attempts to overcome loopholes by legislative measures. A decade following the announcement of incentives package has seen several rounds of litigation between industrial entrepreneurs and the Government, thanks to inartistically drafted G.Os and the legal provisions. The eligibility certificates issued to ineligible industries have also compounded to the problem. The result is that uncertainty is looming large over the subject. We are not sure whether the judgment in the present writ petitions will close the lid on the controversy. Features and objectives of legislation: Act 14/1995 and Act 18/1996 14.. A careful scanning of the provisions of Act 18 of 1996 reveals the following features: (1) To remedy the situation arising out of the broad observations made by this Court in W.P. Nos. 2031 of 1994, etc., that the G.Os, issued prior to commencement of the Act 14 of 1995 (including G.O. Ms. No. 498) must be deemed to have been superseded and to make it c....
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.... Does it mean the annexure appended to G.O. Ms. No. 498 in its original form when the G.O. was promulgated or does it mean the annexure as amended and modified by G.O. Ms. No. 146? The obvious answer is that it only means the annexure as amended and modified by G.O. 146. G.O. Ms. No. 146 issued about 11 months subsequent to the G.O. Ms. No. 498 reflects a slight shift in the policy of the Government as regards the classification of new industries eligible for incentives. The list of industries contained in the annexure to G.O. Ms. No. 146 in effect replaces the original annexure to G.O. Ms. No. 498. After the advent of G.O. Ms. No. 146, the annexure to G.O. Ms. No. 146 gets transplanted into G.O. Ms. No. 498. On the issuance of G.O. Ms. No. 146, the list of ineligible industries contemplated by and specified in G.O. Ms. No. 498 is nothing but the list contained in G.O. Ms. No. 146. It is to be noted that the G.O. Ms. No. 146 is not independent of G.O. Ms. No. 498. The very language of G.O. Ms. No. 146 makes it crystal clear that the Government undertook the exercise of revising the list of ineligible industries mentioned in G.O. Ms. No. 498 and to supplant the original list by a ne....
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....ple that the provisions of the Act must be read as a whole, the operative provisions of the Act can be read and interpreted in harmony with the preamble. Of course, if the operative or enacting provision of the statute runs in a different direction from that of the preamble or it is utterly inadequate to bring into effect what is spelt out in the preamble, the court cannot but disregard the preamble and give primacy to the actual words employed in the enacting part. The principle in this regard has been succinctly stated by Viscount Simonds in Attorney-General v. H.R.H. Prince Ernest Augustus of Hanover [1957] 1 All ER 49 (HL). "I conceive it to be my right and duty to examine every word of a statute in its context, and I use 'context' in its widest sense, as including not only other enacting provisions of the same statute, but its preamble, the existing state of the law, other statutes in pari materia, and the mischief which I can, by those and other legitimate means, discern that the statute was intended to remedy." 20.. Lord Somervell in the same case spoke about the weight to be given to the preamble thus: "If, in an Act, the preamble is a general or brief statement of....
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....the minds of the makers of the Act, and the mischiefs which they intended to redress. However, the preamble itself is not an enacting provision and the utility of preamble diminishes on a conclusion as to clarity of enacting provisions". 26.. As observed in Maharao Saheb Shri Bhim Singhji v. Union of India AIR 1981 SC 234, the preamble to the Act ought to resolve interpretational doubts arising out of the defective drafting of section. (In that case, section 23 of Urbanland Ceiling and Regulation Act fell for consideration.) 27.. The manner in which the preamble could be resorted to was approached from a slightly different angle by Mudholkar, J., speaking for the Supreme Court in Burrakur Coal Co. Ltd. v. Union of India AIR 1961 SC 954. His Lordship observed: "We cannot, therefore, start with the preamble for construing the provisions of an Act, though we would be justified in resorting to it, nay, we will be required to do so, if we find that the language used by Parliament is ambiguous or is too general though in point of fact Parliament intended that it should have a limited application." 28.. Here, we have no difficulty in reading the only enacting provisions in Act....
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....come to G.O. Ms. No. 146, item (1) was expanded covering various operations and processes relating to several oil seeds and the extraction of oil therefrom. It is faintly contended by the learned counsel for the petitioners that firstly cotton seed being non-edible oil seed, cotton seed industry is not within the ambit of the exclusionary item and secondly, there was no processing of cotton seed. This argument does not deserve serious consideration and in fact, the learned Senior Counsel appearing for some of the petitioners did not pursue this argument after a certain stage. However, the inaccuracy of the wording is again brought to the force on a perusal of the language used in this item (1). The author of the G.O. assumed that cotton seed and other oil seeds specified therein are edible oil seeds whereas they are non-edible. If any authority is needed for this conclusion, we may refer to the judgments of the Supreme Court in Girdharmal Kapur Chand v. Dev Raj Madan Gopal AIR 1963 SC 1587 and in Real Value Appliances v. Canara Bank AIR 1998 SC 2064. Thus, there is inherent contradiction in referring to edible oil seeds and enumerating them by specifically mentioning certain nonedi....
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....which according to the Supreme Court has been accepted as "part of our law" [vide Punjab Communication Ltd. v. Union of India (1999) 4 SCC 729]. On this aspect, the Supreme Court in the said case observed: "The judgment in Raghunathan's case 1998 AIR SCW 2954; AIR 1998 SC 2779, requires that reliance must have been placed on the said representation and the representee must have thereby suffered detriment". This observation was made by Jagannadha Rao, J., after referring to various view points. 35.. In Union of India v. Hindustan Development Corporation (1993) 3 SCC 499, it was observed that legitimate expectation was not the same thing as anticipation. It is different from a mere wish or desire or hope. It is not a claim based on a right. A mere disappointment would not give rise to legal consequences. We may add that the same observations will hold good in the course of promissory estoppel also. 36.. In the context of application of principle of promissory estoppel or legitimate expectation, the cases on hand fall in two categories: (i) those who took active steps by incurring considerable expenditure before April 25, 1991 in order to establish the industry; (ii) those who t....
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....withdrawing an unintended benefit or a case of variation in policy. Whatever it be, the incentives in favour of cotton seed oil industry and the like stood withdrawn with effect from April 25, 1991. Thus, after April 25, 1991, any of the petitioners acting pursuant to representation does not arise. Such declaration or representation which was made in October, 1989 came to an end in April, 1991 as far as cotton seed oil industry is concerned. Thereafter, any steps taken by the petitioners to establish cotton seed oil manufacturing industry cannot be traced to any promise or representation which is enforceable at law. The petitioners must be presumed to be aware of G.O. Ms. No. 146. In fact, it is not the case of any of the petitioners that they were not aware of revision of list of ineligible industries brought about by G.O. Ms. No. 146. They could not have thereafter entertained or nurtured a legitimate expectation that they would still get incentives as per the original announcement made by the Government in October, 1989. There is no question of the petitioners belonging to second category placing reliance on the representation which was retracted and consequentially altering ....
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....alt. There is no apparent reason why the petitioners desisted from collecting the sales tax despite the fact that the authorities concerned have not issued the sales tax eligibility certificates-temporary or final. The cases where temporary sales tax eligibility certificates were granted however stand on a different footing and we shall deal with them a little later. But in the absence of even temporary sales tax eligibility certificates, no reasonable business man would have omitted to collect the sales tax, more so when their applications were kept pending. Relief to be extended in the light of State Level Committee's decision: 41. Having regard to the view we have taken, if we consider the individual cases, we hold that in the following writ petitions, the respondents concerned should reconsider the petitioners' claims on the basis of the criterion whether they have taken active steps prior to April 25, 1991. This direction is being given irrespective of the question of applicability of promissory estoppel inasmuch as the State Level Committee had taken a decision on August 23, 1993 to extend the incentives even to the industries originally notified under G.O. Ms. No. 498 and....
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....ment of this Court in W.P. No. 2031 of 1994. Most of the petitioners, though not all, were either parties to the said decision rendered on April 5, 1995 or they obtained similar orders following the said judgment. As already noticed, the main attack in that judgment was against G.O. Ms. No. 146 dated April 25, 1991. By the time the writ petitions came up for hearing, Act No. 14 of 1995 was enacted. The division Bench referred to section 2 of the said Act and observed that cotton seed oil industries were also entitled for the benefits extended by G.O. Ms. No. 498. It was then observed: "Once this Act came into force, all the earlier G.Os are deemed to be superseded." 45.. So holding, the learned Judges of the division Bench set aside the "impugned G.O." (meaning thereby G.O. Ms. No. 146) and directed the concerned authorities to dispose of the petitioners' applications and to pass appropriate orders in the light of the provisions of the Act. The stay granted by this Court was directed to be continued till the disposal of the petitions. 46.. The contention of the learned counsel is that the categorical declaration in the judgment that cotton seed oil industries are eligible ....
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.... precluded from giving effect to that amended provision. We are therefore of the view that the consideration and disposal of the petitioners' applications for incentives in the light of section 2 of Act 14 of 1995 as amended by Act 18 of 1996 does not go contrary to the mandamus issued by this Court in W.P. No. 2031 of 1994 and batch. 48.. We are also of the view that even if the declaration of law by this Court that G.O. Ms. No. 146 is rendered ineffective by Act 14 of 1995 and therefore, cotton seed oil industries can avail of the incentives under G.O. Ms. No. 498 stands, Act 18 of 1996 strikes at the root of the judgment. The declaration of the legal position in the light of the pre-amended section 2 is made ineffective by the amendments brought about by Act 18 of 1996. In this context, it is submitted by the learned counsel that the Legislature has no power to overrule and neutralize the effect of a judgment of court of law which has merely interpreted the existing provisions and to take away the benefits accruing therefrom. If Act 18 of 1996 is construed to have such effect, it would amount to interference with judicial functions and such a legislation would be beyond the c....
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....onstitutional Bench decision in State of Tamil Nadu v. Arooran Sugars Ltd. (1997) 1 SCC 326. Before the Supreme Court, more or less a similar contention was raised which was not accepted. The correct legal position as regards the power of Legislature to make retrospective legislation to remedy the situation arising out of a court's judgment was stated in the following terms: "It is open to the Legislature to remove the defect pointed out by the court or to amend the definition or any other provision of the Act in question retrospectively. In this process it cannot be said that there has been an encroachment by the Legislature over the power of the judiciary. A court's directive must always bind unless the conditions on which it is based are so fundamentally altered that under altered circumstances such decisions could not have been given. This will include removal of the defect in a statute pointed out in the judgment in question, as well as alteration or substitution of provisions of the enactment on which such judgment is based, with retrospective effect. This is what has happened in the present case. The judgment of the High Court in Writ Petition No. 1464 of 1974, dated Octo....
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.... any court". We have already noticed the objectives of the amendment. The underlying basis of the judgment in holding that cotton seed oil industry was eligible to get the benefit of incentives, was removed. G.O. Ms. No. 146 excluding the benefit to the industries producing cotton seed oil and other ineligible industries specified therein, was resuscitated. It cannot be doubted that this Court would not have observed that cotton seed oil industry was also entitled to the benefits conferred by G.O. Ms. No. 498 but for the wording of the then existing section 2. With the amendment of section 2 with retrospective effect, the legal position has been so fundamentally altered that the decision could not have been given in the altered circumstances. The mere fact that the amending Act does not contain the usual provision for validating the acts done or orders passed, is immaterial. In fact, such a provision is perhaps superfluous. Between the enactment of Act 14 of 1995 (in the light of which directions were issued in W.P. No. 2031 of 1994) and the introduction of Act 18 of 1996, practically, there was status quo and therefore the Legislature would have felt no need to insert a validating....