TaxTMI 
TaxTMI 
2002 (4) TMI 924
X X X X Extracts X X X X
X X X X Extracts X X X X
....cane due from it for a period of two years from the date of their commencing production. Subsequently, on their request, the subsidy was extended for a period of five years in G.O. Ms. No. 1497/ Industries (MID.I) Department dated December 26, 1987. 4.. By G.O. No. 268 dated April 16, 1987, M/s Bannari Amman Sugars Ltd., were sanctioned subsidy equivalent to the quantum of purchase tax for sugarcane due from it for a period of five years from the date of commencement of their production. 5.. The Government, by its orders in G.O. Ms. No. 989/Industries (MID.I) Department dated September 1, 1988, modified the scheme of purchase tax subsidy to one of deferral of purchase tax subject to certain conditions. The said order was impugned in T.P. Nos. 568 of 1997 and 517 of 1997 before the Tribunal. By order dated November 26, 1997, the Tribunal allowed the petitions on the ground of promissory estoppel and granted the consequential relief. The present writ petitions are preferred by the Government of Tamil Nadu and others, who were respondents before the Tribunal, praying for issue of writs of certiorari to quash the orders of the Tribunal. 6. Mr. R. Muthukumarasamy, learne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccording to him, the Tribunal erred both on the applicability of promissory estoppel, the law on the subject and on merits and hence he prays that the orders may be set aside. 7.. Mr. Somayaji, learned Senior Counsel, appearing on behalf of the respondent in W.P. No. 2932 of 1998 and Mr. G. Masilamani, learned Senior Counsel, appearing on behalf of the respondent in W.P. No. 3311 of 1998, argued to sustain the order of the Tribunal. According to them, the respondent-factories have acted on the declared policy of the Government and altered their position by expanding their area of operation. The respondents have continued their operation based on the legitimate expectations on the belief and acceptance of the policy of the Government. They had been making representations in writing continuously and in the absence of immediate reply, construing the existing policy of the Government to grant concession to the sugar mills, they have acted by expanding their investment and operation. Therefore, the impugned Government order withdrawing the said concession is contrary to the recognised principle of promissory estoppel. The grant of subsidy was intended to make the industry viable and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re, at the outset, it has to be stated that the units have not come into existence on the assurance or promise of the Government to grant subsidy. 11.. By the impugned Government Order in G.O. Ms. No. 989 Industries (MID.I) Department dated September 1, 1988, the Government modified the scheme as follows: a. The type of assistance, viz., grant of subsidy equivalent to the quantum of purchase tax on the sugarcane is modified to one of deferral of purchase tax for a period of four years. b. The ceiling, i.e., restriction to the levy of purchase tax is introduced on the basis of the capacity of production. c. No subsidy will be granted to any new sugar mill. d. The subsidy will continue to the units who are getting the subsidy even though they are granting dividends. e. The ceiling will be restricted to the purchase tax leviable for the sugarcane actually drawn from the reserved areas. f. If the subsidy has been disbursed in excess of the ceiling indicated, no further disbursement will be made. g. However, no recovery of such excess will be effected. The ceiling has been worked out taking into consideration the optimum crushing capacity of the mill. In r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or every 100 lakhs of deficit to be compensated, excise rebate would have to be given in the case of new sugar factory for the first 25,000 tonnes of sugar produced. The committee feels that this mode of rebate will be more equitable than to give the rebate for a fixed number of years". Coming to the remission of purchase tax, the committee recommended as follows: "The committee, therefore, suggests that different State Governments may be moved to exempt all new sugar factories from payment of purchase tax on sugarcane up to the same level of sugar production for which excise duty rebate is allowed by the Central Government." 17.. It is seen that the Government in G.O. Ms. No. 1294, Industries Department dated October 24, 1975, had issued orders regarding remission of purchase tax payable by sugar industries in the co-operative and public sector for sugarcane purchased by them to the State Government. During the Sixth Five-year Plan period, i.e., from 1980-81 to 1984-85, three sugar mills were commissioned; two in co-operative Sector and one in private sector and M/s. Ponni Sugars and Chemicals Limited commenced their production from January 27, 1984. On the represe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eas, Ponni Sugars had commenced their crushing operations in January 1984 itself and their representation was dated August 6, 1984 and nowhere they have stated of any representation to the Government which permitted them to establish the unit. The grant of two years' subsidy was extended to five years by G.O. Ms. No. 1414, Industries dated November 30, 1984 on the representation of M/s. Ponni Sugars dated December 6, 1984. It was stated to be an appeal against the earlier Government Order granting subsidy for two years, seeking to extend the said relief for a period of five years. In this representation also, they explained certain difficulties and problems faced by the industry and therefore, they requested for an extension of the subsidy. 20.. The Government, by an order in G.O. Ms. No. 1497 dated December 26, 1984, extended the subsidy to five years. From the file relating to the Government Order, it is seen from the note put up before the Secretary in the file relating to G.O. Ms. No. 1497, dated December 26, 1984, it is stated that the request for concession was originally rejected by the Government and subsequently conceded for a limited period of two years, probably on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be Rs. 610.10 lakhs as shown below: Rs. Sales from additional free levy sugar - 520.82 lakhs Excise duty - 89.28 lakhs -------- Total - 610.10 lakhs -------- As regards the purchase tax liability of the company, they have to pay 13.25 per cent of the cane price and the total liability of the company on account of the first five years of its operation is Rs. 349.51 lakhs. In the project report, the company has not taken into account the purchase tax payable to the State Government and as per the report of the Government, it will earn a total net profit of Rs. 728.51 lakhs before providing for purchase tax and income-tax during its five years of operation. And, if purchase tax is also taken into account, the total profit likely to be earned by the company would be Rs. 379.20 lakhs. A note was put up to the effect that the company will earn Rs. 379.20 lakhs providing for purchase tax and its profitability will be still higher if it is able to increase its capacity utilisation and it will not lose on any account if it is directed to pay purchase tax. Initially, it is stated in the file that as per the order of the Chief Minister dated July 25, 1986, M/s. BS cannot ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... purchase tax subsidy. It is also likely that BS Mill would have shown cane crushed in some other mills under their control as if they were crushed in BS Mills, just to get the subsidy. The records of the mill have to be perused to see whether there was crushing throughout the entire period. Electricity consumption during this period may be an indicator. In reply to this, the Director of Sugar recommends in his letter dated February 4, 1988 to drop all investigation as nothing will come to surface at this distance of time and inter-related certification by different departments is too technical and complex to be revised. It was further pointed out that according to the existing Government Orders, there is no limit up to which the subsidy can be claimed. 24.. For the purpose of re-examination of this issue and to find out how much of purchase tax subsidy has been given, it was pointed out that canes from other States were brought and crushed by BS, which is totally against the spirit of any purchase tax subsidy scheme of the Government of Tamil Nadu. It was also felt that sugarcane bought by some other mill has been shown against BS probably in view to show their operation from 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... granting subsidy has to be modified. It is further argued that by virtue of this modified scheme, interest saving would come to the tune of Rs. 55 lakhs, as the purchase tax for the first, second, third and fourth year would be collected without interest in the fifth, sixth, seventh and eighth year respectively whereas, as a matter of fact, it could be seen that the respondents have been benefited by more than Rs. 3 crores by way of subsidy in the purchase tax payable at 12 per cent at the time of last purchase in the State. 27.. Before the Tribunal, the respondents contended that a request was made by them citing examples of concession extended to public sector and co-operative sector sugar mills that they may also be granted similar concession and their request was also considered favourably and a promise was held out by the Government in the Government Order that purchase tax subsidy will be granted for a period of five years. Therefore, according to them it is not open to the Government to recede from the promise and restrict the benefits. On behalf of the Government, the jurisdiction of the Tribunal was questioned and was further contended by relying on the decision in Bak....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the notification being prospective in operation, the period prescribed period would apply only to new industries commissioned subsequent thereto. Their Lordships also held that the appellant did not acquire any vested right to the tax holiday and the State Government was under no obligation to grant exemption from payment of the sales tax; when it did so, it was only by way of concession and a concession could be withdrawn at any time and no time-limit could be insisted upon before it was withdrawn; that the rule of promissory estoppel could be invoked only if, on the basis of the representation made by the Government, the industry was established to avail of the benefit of the exemption. 31.. In Arvind Industries v. State of Gujarat [1995] 99 STC 333; (1995) 6 SCC 53, it was held by the Supreme Court that the Government is entitled to grant exemption to industries having regard to the industrial policy of the Government. The Government is equally free to modify its industrial policy and grant, withdraw or modify fiscal benefits from time to time. It was found in that case that there was nothing in the notification by which any assurance was held out to any industry and it wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e applicable even in cases where a period has been indicated for operation of the promise. If there is a supervening public equity, the Government would be allowed to change its stand; it would then be able to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. Moreover, the Government is competent to rescind from a promise even if there is no manifest public interest involved, provided, of course, no one is put in any adverse situation, which cannot be rectified. 34.. In Pawan Alloys and Casting Pvt. Ltd., Meerut v. U.P. State Electricity Board AIR 1997 SC 3910, the Supreme Court held as follows: "In the light of this settled legal position we, therefore, hold that even though the appellants have succeeded in convincing us that the earlier three notifications dated 29th October, 1982, 13th July, 1984 and 28th January, 1985 did contain a clear promise and representation by the Board to the prospective new industrialists that once they established their industries in the region within the territorial limits of the operation of the Board, they would be assu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rise to a legitimate expectation that the policy will not change. In matters of economic policy, the Government enjoys the greatest possible latitude subject only to the overall requirements. Economic policies are necessarily subject to change, as the policy appropriate to a given environment will not be suitable in a changed scenario. The division Bench accepted the justification that the need has been felt to bring about uniformity in that policy; and as a result, the Government adopted a scheme of deferment of tax, rather than the one for waiver or the grant of subsidy. Even such deferral was to be up to a particular ceiling, annual and overall and for a specific period. The desire on the part of the Government to minimise its revenue loss, having regard to the magnitude of the amount involved, by itself, constituted sufficient public interest justifying the change in the scheme. Their Lordships observed that there was no promise by the State to the petitioner at any point of time that its policy of giving subsidy to the new sugar mills would continue till such time as the petitioner commences commercial production. 37.. In W.A. Nos. 74 of 1995, etc. batch dated December 6, 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nomaly or loopholes, if any, in order to reach the objective and preventing the defeating the purpose of granting the concession. 39.. Learned Senior Counsel on behalf of the respondents has also relied on some of the decisions in support of their claim of legitimate expectations, which are summarised as follows: (a) In Food Corporation of India v. Kamadhenu Cattle Feed Industries (1993) 1 SCC 71, it was held that whether the expectation is legitimate, is a question of fact that has to be determined not according to the claimants' perception, but in the larger public interest. Their Lordships held that due observance of the obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly. Mere reasonable or legitimate expectation of a citizen cannot by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. A bona fide decision of the public authority reached in public intere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t reasons must be given for an administrative decision. The order of an administrative authority, which has no statutory or implied duty to state the reasons or the grounds of its decision, is not rendered illegal merely on account of absence of reasons. It has never been a principle of natural justice that reason should be given for decisions. It was further held that there are many areas of administrative activity where no reasons are recorded and if such a decision is challenged before the court for judicial review, the reasons for the decision may be placed before the court. Their lordships have observed as follows: "In Governmental functioning, before any order is issued the matter is generally considered at various levels and the reasons and opinions are contained in the notes on the file. The reasons contained in the file enable the competent authority to formulate its opinion. ............... If such an order is challenged in a court of law it is always open to the competent authority to place the reasons before the court which may have led to the rejection of the representation. It is always open to an administrative authority to produce evidence aliunde before th....