TaxTMI 
TaxTMI 
2001 (3) TMI 992
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....nder a particular scheme during their initial stage as an incentive. First such incentive Scheme was started vide notification dated 8th November, 1969. With the change of time necessity for revision in this incentive scheme was felt, hence, the Government by notification dated October 12, 1982 announced a new package of incentive known as 1982 Scheme, which envisaged and provided for grant of sales tax exemption to the new industrial units on the purchase of raw materials and sale of finished products for a period of five years from the date of commencement of the commercial production. But, this exemption of sales tax was subject to the production of the eligibility certificate from the Udyog Vikash, which is the main implementing agency. 3.. Again in the year 1986 the State Government announced a new package of incentives (1986 Industrial Policy) vide Notification No. CI-386/86 dated December 25, 1986 fixing the period from January 1, 1987 to March 31, 1990 which was subsequently extended to March 31, 1991. In this 1986 Scheme also State Government granted sales tax exemption to the new industries as well as to the industries undertaking expansion, modernisation and diversifi....
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....ts purchased within the State of Assam and on the manufactured goods sold within the State or in course of inter-State trade and commerce for such period or periods as may be prescribed and from such date as may be specified in the notification. The aforesaid Act came into force with effect from July 1, 1993. 7.. The State Government in exercise of the power concerned under section 9(4) and clause (f) of sub-section (3) of section 74 of the Act by way of notification framed a scheme known as "Assam Industries (Sales Tax Concessions) Scheme, 1995" dated August 16, 1995 granting relief by way of full exemption of sales tax on the purchase of raw materials within the State by the eligible industrial units situated within the State and also on the sale of finished products manufactured in such eligible units in the State or in course of interState trade and commerce. The said Scheme was brought into force with effect from April 1, 1991. As per clause (b) of section 2 of the said Scheme an industrial unit having its registered office within the State which is or was in production prior to April 1, 1991 undertaking expansion, modernisation and diversification to the minimum extent of ....
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....arned single Judge on the ground that there was no substantial difference in the 1991 Industrial Policy and 1995 Concession Scheme and that the 1995 Policy provided for full sales tax incentives only to the new industrial units. Being aggrieved by the judgment and order of the learned single Judge, the present writ appeals were filed before this Court. 10.. We heard the learned counsel for the parties. The grievance of the appellants is that while the appellants have been enjoying the benefits from the respective schemes and were granted eligible certificates till 2001 under the 1991 Scheme, are facing predicament as the State Government has framed a scheme by notification dated August 16, 1995, namely, Assam Industries (Sales Tax Concessions) Scheme, 1995, in exercise of power under section 9(4) of the Assam General Sales Tax Act, 1993 read with clause (f) of subsection (3) of section 74, granting relief by way of full exemption of sales tax on the purchase of raw materials within the State by eligible industrial units. This scheme came into force with effect from April 1, 1991. Further contention of the appellants is that industrial units of the appellants were in production p....
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....ible unit as follows: "Eligible unit: Only new units set up on or after April 1, 1991 and existing units, undertaking expansion, modernisation or diversification at the same location or at any other place in the State of Assam will be eligible for incentives under 1991 Scheme provided that: 2.1. A unit shall have employment of 80 per cent people of Assam in the managerial cadre and 90 per cent people of Assam to the non-managerial cadre and that over a period of 5 years from the commencement of production such units would take all effective steps to ensure 100 per cent employment of people of Assam in non-managerial and at least 90 per cent in managerial posts. They would further give an undertaking that if these conditions are violated, the State Government subsidies/Incentives so availed by them would be fully refunded. 2.2. In exceptional cases where the industrial unit can prove to the satisfaction of the State Level Committee that persons with required skill and expertise are not locally available, relaxation of the above clause will be allowed by the State Level Committee for a period to be determined by the State Level Committee as deemed fit. 2.3. The locatio....
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....ration Limited for the medium and large sector and the same is to be issued after ensuring that all the norms for the eligibility certificate have been fulfilled. 14.. Part III of the Industrial Policy of 1991 deals with various incentives announced and clause 6 of the said Part III deals with the sales tax exemption. Clause 6 reads as under: "6. Sales tax exemption.- Sales tax will be exempted on purchase of raw materials and sales of finished products for a period of seven years." 15.. So, the moot question is whether the appellants have fulfilled the criteria and if so, whether they can claim the benefit promised as per the 1991 Industrial Policy for seven years. The contentions of the appellants were that they were existing industries as on April 1, 1991, undertook expansion, modernisation and diversification work on the basis of the 1991 Industrial Policy announcements and the promises made in the said Industrial Policy and the Incentive Scheme of 1991. After having fulfilled all the requisite criteria for grant of the benefits of various incentive scheme and having undertaken expansion, modernisation and diversification work in the existing industrial unit, the ap....
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....date prior to the appointed date. Apparently, this amendment was done keeping in view the exemptions announced and granted under the 1991 Industrial Policy and incentive scheme with effect from April 1, 1991. 19.. In exercise of the power under section 9(4) of the Act, 1993, read with clause (f) of sub-section (3) of section 74 of the Act, 1993, the Government of Assam, by a notification framed a scheme, viz., Assam Industries (Sales Tax Concessions) Scheme, 1995 dated August 16, 1995 granting relief by way of full sales tax exemption on the purchase of raw materials within the State of Assam by the eligible industrial unit and also on the sale of finished products manufactured in such eligible units in the State or in course of interState trade and commerce. This scheme came into force with retrospective effect from April 1, 1991. 20.. As the appellants have challenged some of the clauses of the Scheme, 1995 alleging discriminatory treatment meted out to them and deprivation of the benefits under the 1991 Scheme, it require some discussion in the light of the promised incentives/ benefits given to them under the 1991 Scheme. 21.. Clause B, paragraph 2 of Part I of the afo....
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....on, modernisation, diversification work and the production during the base year. That, such benefit of taxes on the purchase of the raw materials has to be granted by way of refund in the manner laid down in clause 11. That, so far the finished products are concerned, the benefit has been limited to the increase in production which is corresponding to the difference between the actual annual production after completion of the expansion, modernisation and diversification and the annual production during the base year. It has further been submitted that para 7 of Part I has provided for the determination of the increase in production of the industrial unit which undertakes expansion, modernisation and diversification which shall be equal to the annual production after completion of the modernisation, etc., minus the production during the base year which has been subject to the actual production of industrial unit during the 365 consecutive working days of the unit preceding the date of expansion, etc., to be expressed in percentage. In view of this, it has been submitted, as per the Scheme, 1995, the industrial unit undertaking expansion, etc., on the basis of the 1991 Industrial Pol....
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.... extra investment for their original units for a further period along with the expanded portion and that such exemption has not been provided under the 1986 Act. The learned Advocate-General further submitted that 1991 policy did not contain any promise and that the Scheme, 1995, being a statutory scheme framed under the 1993 Act and, therefore, there cannot be any estoppel against the statutory provisions. 30.. Before proceeding further with the issue relating to applicability of the promissory estoppel in the case of the applicants' claim clause 5 of Part I of the 1991 Scheme needs some examination in the light of the claim of the appellants. 31.. In the preceding paragraphs we have discussed the provisions of clause 5 of Part I of the 1991 Scheme along with other clauses. However, considering the importance of the issue in question, we find it necessary to look into those clauses along with clause 5 of Part I. 32.. Clause 3 of the 1991 Scheme deals with new unit which states that an industrial unit which has taken all the initial effective steps on or after April 1, 1991 would be considered a new unit. Existing unit means a unit which is or was in commercial production ....
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.... machinery in the expansion, modernisation or diversification, as the case may be, is more than 25 per cent of the total fixed capital investment of the existing unit. Further, this clause 5 also gives a guideline for the manner to calculate the gross value of all the capital investment on such modernisation, etc., as indicated in this clause which relates to "existing units" and take those into consideration for the purpose of calculation to give tax exemption, etc. The intention of the policy maker is clear and categorical that expansion, modernisation and diversification will imply an increase of at least 25 per cent in the existing installed capacity as well as increase of additional employment at least by 10 per cent. The intention of the industrial policy maker of 1991 policy categorically clarified the intention in clear terms that "the fact of existing units has availed itself of incentives will not disqualify the expansion, modernisation and diversification project to get the incentives for extra investment made". Meaning Here italicised. from this clause can be interpreted that subject to those conditions inserted therein, the existing units can derive the benefit of t....
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.... enacted with effect from July 1, 1993 to give effect to the policy of 1991. Further, the provisions of section 9(4) of the Act, 1993, conferred powers to the State Government to frame scheme by way of notification in the official gazette for granting relief to any class of industries within the State. The 1991 policy which was given effect to from April 1, 1991 promised full exemption to sales tax including all industries stated in clause 5 therein. The main contention of the counsel for the appellants is that Scheme, 1995, was framed to give effect to the promises and policy statements of 1991 Industrial Policy, therefore, the Scheme, 1995, cannot be contrary to the policy statements made in 1991 by the State Government. From the perusal of the Scheme, 1995, it is seen that Scheme, 1995, also granted similar relief by way of sales tax exemption to the industrial units. However, this scheme was given retrospective effect from April 1, 1991 with restriction under clause 7 of Part I. It is also seen that the implementing agency on being satisfied issued eligibility certificates to appellants on various dates, certifying that the appellants are entitled for sales tax exemption for se....
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....ion or withdrawal would be subject to one limitation, viz., the power cannot be exercised in violation of the rule of promissory estoppel. In other words, the Government can withdraw an exemption granted by it earlier if such withdrawal could be done without offending the rule of promissory estoppel and depriving an industry entitled to claim exemption from payment of tax under the said rule. If the Government grants exemption to a new industry and if on the basis of the representation made by the Government an industry is established in order to avail the benefit of exemption, it may then follow that the new industry can legitimately raise a grievance that the exemption could not be withdrawn, except by means of legislation, having regard to the fact that promissory estoppel cannot be claimed against a statute." The aforesaid law was again reiterated by the Supreme Court in Pine Chemicals Ltd. v. Assessing Authority [1992] 85 STC 432; (1992) 2 SCC 683. 42.. The learned counsel for the respondents in their arguments did not dispute the validity of the contentions of the appellants that the incentives granted under the industrial policy cannot be curtailed/ denied by framing a....
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....re at liberty to approach the respondents/Government for implementation of the Scheme, 1995 and for the benefits in the light of the Scheme, 1991. The Government may pass appropriate orders within a period of six weeks from the date of receipt of such representation from the appellants. 46.. The appeals are allowed to the extent indicated above. No orders as to costs. JUDGMENT D. BISWAS, J. (13-10-1999)-I have seen the judgment written by my sister Mrs. M. Sharma, J. I fully agree to the principles of law as discussed by her. There is no controversy that the State cannot resile from the promise it makes through its Industrial Policy for extending benefits like exemption of payment of taxes, rebate in rent for land and subsidies in different forms when the investors in pursuance of the said promise set up industrial units. Promise once held by the State cannot be withdrawn, except in certain exceptional circumstances, to the detriment of the investors. Therefore, I fully agree to the conclusion arrived at by my sister Mrs. Sharma, J., that the incentives proposed in the Industrial Policy of Assam, 1991 cannot be taken away or abridged in any manner before the expiry of the ....
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....ncentives proposed to be given to the existing units. Clause 5 reads as follows: "5. Expansion/modernisation/diversification: Expansion/modernisation/diversification of an existing industrial unit will also be eligible for all incentives if the total capital investment on plant and machinery in the expansion/modernisation or diversification as the case may be, is more than 25 per cent of the total fixed capital investment of the existing unit. For the purpose of calculation gross value of all the capital investments made on land, building, plant and machinery of an existing unit will be taken into consideration. Expansion, modernisation, diversification will imply an increase of at least 25 per cent in the existing installed capacity as well as increase of additional employment at least by 10 per cent. The fact that existing unit has availed itself of incentives will not disqualify the expansion/modernisation/diversification project to get incentives for the extra investment made." 5.. It would appear from clause 5 that the existing units which have undertaken expansion/modernisation/diversification have been made eligible for all incentives if the total capital inv....
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....tion of sales tax on purchase of raw materials within the State of Assam by the eligible industrial units situated within the State of Assam and also on the sale of the finished products manufactured in such eligible units in the State of Assam or in course of inter-State trade or commerce. This scheme has been brought into force with effect from April 1, 1991. Although not spelt out in explicit term, the provisions of the scheme appears to be to give effect to the industrial policy of 1991. In para 2 of the scheme, eligibility of Industrial Units have been defined. New industrial unit has been defined in para 2 "A". The unit which is or was under production prior to April 1, 1991 undertaking expansion/modernisation/diversification to the minimum extent of 25 per cent at the same location has been dealt with in para 2 "B". It reads as follows: "'B' An industrial unit, having its registered office within the State of Assam, which is or was in production at any time prior to April 1, 1991 undertaking expansion/modernisation/diversification to the minimum extent of 25 per cent at the same location or at other place(s) of the State of Assam and with an additional employment of at....
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....extended full sales tax exemption for 7 years to the new units while it conferred restricted benefits to the "existing units" to the extent of expanded industrial activity only. That being the position, I am of the opinion that these appeals are devoid of merit and deserves dismissal. N.C. JAIN, C.J. (27-3-2001)-As many as nine industrial units, viz., Manjushree Extrusions Ltd., A. Bakers Pvt. Ltd., G.W. Mills Ltd., United Soft Drinks Pvt. Ltd., Sunrise Biscuits Co. Ltd., M.C.I. (P.) Ltd., A.A. Ltd., P. Steel Ltd., and M/s. K.U. Pvt. Ltd., filed as many as nine writ petitions before the learned single Judge in which the basic relief claimed by them was that they were entitled to full sales tax exemption as was contemplated by the Industrial Policy of 1991 issued by the State of Assam if they undertake expansion, modernisation and diversification work in their existing industrial units to the extent of at least 25 per cent in capital investment and 10 per cent in additional employment. It was further the case of the industrial units in the writ applications that having granted full sales tax exemption, the Government of Assam could not issue notification in the year 1995 and fram....
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....wordings of the Industrial Policy of 1991 (hereinafter called "Policy of 1991") and the notification of the Assam Government issued in the year 1995 (hereinafter called "the Notification of 1995 "). The relevant provisions of the Policy of 1991, are reproduced below: "2. Eligible unit: Only new units set up on or after April 1, 1991 and existing units, undertaking expansion, modernisation or diversification at the same location or at any other place in the State of Assam will be eligible for incentives under 1991 Scheme provided that: 2.1. A unit shall have employment of 80 per cent people of Assam in the managerial cadre and 90 per cent people of Assam in the non-managerial cadre and that over a period of 5 years from the commencement of production such units would take all effective steps to ensure 100 per cent employment of people of Assam in nonmanagerial and at least 90 per cent in managerial posts. They would further give an undertaking that if these conditions are violated, the State Government subsidies/incentives so availed by them would be fully refunded. 3. New unit: An industrial unit which has taken all the initial effective steps on or after April 1, 19....
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....production, expressed in percentage. ....................... 10.. Procedure for the extension of the benefit under this scheme to an eligible industrial unit of the category 'B', which obtains the certificate of authorisation on or after the date of issue of this notification, dated the 16th August, 1995 with effect from the date of issue of this notification or thereafter: (a) With regard to the purchase of permitted raw materials, as stated in the certificate of authorisation, granted to an industrial eligible unit, of the category 'B' under this para 10, the following shall be the procedure: Under this scheme, an eligible existing industrial unit, undertaking expansion/modernisation/diversification, fulfilling all conditions and norms and holding the certificate of authorisation shall be entitled to the benefit of full sales tax relief in the purchase of permitted raw materials, stated in the certificate of authorisation, granted to it by the assessing officer of the area to such extent as are required for achieving the difference between actual annual production after the completion of the expansion/modernisation/diversification and the annual production duri....
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....days from the date of issue of the certificate of authorisation. The refund shall be governed by the provision of section 30 of the Assam General Sales Tax Act, 1993 and Rules made thereunder. (ii) During the period from or after the date of issue of this notification dated the 16th August, 1995, the benefit of sales tax relief as entitled under this scheme in the purchase of permitted raw materials stated in the certificate of authorisation granted to any of the above-mentioned eligible industrial units of category 'B' under this para 11 shall be available to it in the same manner as laid down in sub-para (a) of para 10: Provided that........................... (b) With regard to the sale of the finished products, the following shall be the procedure: Corresponding to the difference between the actual annual production after the completion of expansion/modernisation/ diversification and the annual production during the base year, the holder of the certificate of authorisation in the case of an eligible unit of the category 'B' under this para 11 shall be competent to sell his finished products in the State of Assam or in the course of interState trade or commerce, for ....
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....oresaid law was again reiterated by the Supreme Court in Pine Chemicals Ltd. v. Assessing Authority [1992] 85 STC 432; (1992) 2 SCC 683. 42.. The learned counsel for the respondents in their arguments did not dispute the validity of the contentions of the appellants that the incentives granted under the industrial policy cannot be curtailed/ denied by framing a scheme, in the instant case the Scheme, 1995. The ratio enunciated in the judicial pronouncement mentioned above is that principle of promissory estoppel and legitimate expectation require regularity, predictability and certainty in the Government's dealing with the public. These principles may not be source of Constitutional Code, but are the consequences of rights of individual/ public on substantive effect of Government action as defined and enforced by the courts. As submitted by Dr. Saraf, promissory estoppel has arisen with legitimate expectation on the decision of the respondent-State Government from the incentives already given by the 1991 Industrial Policy and that by the subsequent Scheme, 1995 the same benefit be given to them. It is an admitted fact that the industrial units of the appellants were in produc....
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....existing units to the extent of expanded industrial activity only. It would be fruitful to reproduce the exact observations of D. Biswas, J.: (para 9). "It would appear from para 'B' that the appellants who are in production prior to April 1, 1991 fall within the above category and they have been given limited benefit only for the expansion/ modernisation or diversification subject to certain conditions. In para 7, we find the procedure for determination in increase of production of an industrial unit which undertakes expansion/modernisation/diversification. In para 10 'A' and 'B', procedure have been prescribed with regard to raw materials and finished products so far they apply to the 'existing units'. A joint reading of the provisions of Industrial Policy of 1991 with the provisions of the Scheme of 1995 as above prepared under the provisions of the Assam General Sales Tax Act, 1993, would show that the incentives promised to be given by the State in its Industrial Policy of 1991 have not been in any way taken away or restricted in any manner so as to prejudice the appellants. In fact, the scheme prepared in 1995 is in conformity with what have been spelt out in the policy de....
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....so be eligible for all incentives provided the total capital investment is made by the industrial unit at least to the extent of 25 per cent in the installed capacity and increase of additional employment at least by 10 per cent. According to the counsel, this has been made clear by the wording of clause 5. It is further the argument of Dr. Saraf that the factum of the existing units availing the benefits of incentives would not disqualify the expansion/modernisation/diversification projects to get the incentives for the extra investment made. According to clause 6, the counsel submits that both new as well as existing units were entitled to full exemption of sales tax on purchase of raw materials as well as the sale of finished products for a period of seven years. The learned counsel, after reading the notification of 1995, that is, the Industrial Scheme of 1995, has submitted that a change has been made inasmuch as a mention has been made in clause 7 to the effect that the actual production of an industrial unit during 365 working days of the unit preceding the date of completion of its expansion/ modernisation/diversification would be called its base year production. Accordi....
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....ance with each other. It has further been argued by Mr. Das that the factum of the existing units getting full exemption from payment of sales tax under the old Industrial Policy of 1986 is also relevant for considering the object sought to be achieved of the public good at large by the Industrial Policy of 1991 and that it would be discriminatory and against public interest to give the industrial units full exemption under the 1991 Policy for another period of seven years. The decision of the apex Court in the State of Bihar v. Suprabhat Steel Ltd. [1999] 112 STC 258; (1999) 1 SCC 31, relied upon by Dr. Saraf, has been distinguished by Mr. Das by arguing that the apex Court on interpretation of clause 10.4(i)(a) and (b) of the Bihar Industrial Incentive Policy, 1993, held that the benefit would not only be extended to old industrial units which started production between April 1, 1993 and March 31, 1998 but also to those industrial units which started production before April 1, 1993. 9.. As regards the decision of the apex Court in Shahzada Nand's case reported in [1966] 60 ITR 392, Mr. Das submitted that the present is not a case where there is any ambiguity, the benefit of wh....
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....e in capital investment on plant and machinery. The phraseology of the words and more particularly the word "also" mentioned above clearly denotes that an existing unit has been placed on equal footing as regards availing of incentives is concerned. This position has further been strengthened by sub-para of clause 5, which clearly says that the factum of the existing unit availing itself of incentives, the same would not disqualify the expansion/modernisation/diversification project to get incentive for the extra investment made. Clause 6 of the Policy of 1991 clearly says that sales tax will be exempted on purchase of raw materials and sales of finished products for a period of seven years. This clause is mandatory as the word "will" has been used therein. Sales tax exemption has been granted both on purchase of raw materials and sales of finished products by an industrial unit. In other words, an existing industrial unit would not be liable to pay sales tax on purchase of raw materials and shall also be not liable to pay sales tax on finished products for a period of seven years. May be-the words "full sales tax" have not been used in clause 6, but the use of the words "sales tax....
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....ng from the expansion, modernisation or diversification and in fact, no provision in the Industrial Policy of 1991 contemplated about the increase in production for availing of the full sales tax exemption. In other words, the industrial policy was understood both by the industrial units and by the department in the same manner. It is now too late in the day to ask the industrial units to pay the sales tax beyond the increased capacity when they have neither paid the same on raw materials purchased nor charged the same on finished goods from their customers. 14.. It appears to me that full sales tax exemption was granted even to the existing industrial units keeping in view the peculiar conditions prevailing in Assam where, it cannot be denied, that industries have gone to dogs. It appears to me that in order to boost up the setting up of new industries and also to boost up the expansion, modernisation and diversification of existing industrial units that exemption from payment of sales tax was granted for a period of seven years. After making a clear cut provision in the 1991 Policy, the State cannot take a somersault and change the scheme in the year 1995 to the detriment o....