TaxTMI 
TaxTMI 
2007 (12) TMI 443
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....he remaining unexpired period of five years. Aggrieved against this order, the present appeals were filed by U.P. Power Corporation Ltd.(hereinafter referred to as Corporation.) 2. In order to dispose of these appeals brief facts may be detailed below. Pursuant to industrial policy of the State of Uttar Pradesh, U.P.State Electricity Board (now U.P. Power Corporation Limited)[hereinafter to be referred to as the "Corporation"]- the appellant herein framed its tariffs vide notifications dated 18.1.1992 & 15.7.1994. By these notifications 33.33% hill development rebate was allowed to the new industrial units for a period of five years from the date of commencement of the supply of the electricity. The above concession was initially valid till 31.3.1995. It was later on extended up to 31.3.1997. It was alleged that all the writ petitioners established industrial units in the hill areas after huge investments and after executing agreement with the appellant-Corporation. But subsequently, by notifications dated 18.6.1998 and 25.1.1999 the concession which was earlier given was reduced by the appellant-Corporation from 33.33% to 17% which is arbitrary and not permissible according to ....
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....ernment and Local Bodies." Name of eight Hill Districts: 1. Almora district 2. Chamoli district 3. Pauri Garhwal district 4. Pithoragarh district 5. Uttar Pradesh district 6. Tehri Garhwal district 7. Uttarkashi district 8. Dehradun district. In respect of connections as may be located in Bundelkhand region, comprising Jhansi, Lalitpur, Hamipur, Jalaun and Banda districts a development rebate of 50% on the amount of the bill as computed under item 4 & 5 above will be given to new Industrial units for a period of five years from the date of commencement of supply. This rebate will also be admissible for the unexpired period of five years to those existing Industrial units of the above district of Bundelkhand region who have not completed five years from the date of commencement of supply. This development rebate shall however not be allowed to the Department/ Corporations/ Undertakings of the State/ Central Government and Local Bodies. " Therefore, this concession was extended to the entrepreneurs in the hill districts including Dehradun who established their industries at the height of 610 metres (2000 feet) above M.S.L.for a period of five years. Then....
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....y. This development rebate of 50% in Bundelkhand region shall, however, not be allowed to the Railways and Departments/ Corporations/Undertakings of the State/ Central Government and Local Bodies. The development rebates under this clause shall be allowed subject to the condition that the net amount payable after allowing these rebates would not be less than the amount of minimum consumption guarantee under item 6 above." Meaning thereby that the energy charges were increased from 200 paise to 280 paise and the concession granted to the hill areas continued. Thereafter, in supercession of earlier notifications another notification was issued in which energy charges were increased from 280 paise to 308 paise per KW. But the concession granted earlier continued. Relevant provision reads as under : "4. Rate of Charge ( Energy Charges) : All KWH consumed in one month 308 paise per KWh. 5.Extra Charge or Rebate: (i) In case of supply given at 400 volts, the consumer shall be required to pay an extra charge of 10 per cent on the amount calculated at the rate of charge under item (4). (ii) If supply is given at voltage more than 11KV, rebate mentioned below will be ad....
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....mption guarantee under item 6 above." Thereafter, on 18.6.1998 a new notification came to be issued, which is relevant for our purpose. By this notification the bills were divided into two parts, i.e. demand charge plus energy charge. Relevant provisions of Clauses 4,5 & 8 read as under: " 4. RATE OF CHARGE : (A) Demand Charge 1. Induction Furnaces Rs.700/- per KVA/ month 2. ARC Furnaces Rs.615/- per KVA/ month 3. Rolling/ Re-rolling Mills Rs.440/- per KVA/month (B) Plus Energy Charge All KWH consumed in the month 100 Paise per month. Notes: (i) Any consumer availing the supply for more than one process of Induction Furnace, ARC furnace or Rolling/ Re-rolling Mill, will be charged at the applicable rate of demand charge whichever is higher. (ii) The recording of demand and energy shall be done through static Trivector Meters. 5. EXTRA CHARGE OR REBATE: (i) In case of supply given at 400 volts, the consumer shall be required to pay an extra charge of 10 per cent on the amount calculated at the rate of charge under item (4). (ii) If supply is given at voltage more than 11 KV, rebate mentioned below will be admissible on the amount calculat....
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....gy charge was charged earlier at 308 paise per KV was reduced to 100 paise KVA per month but the demand charge i.e. induction furnace, ARC furnace, rolling/re-rolling mills etc. which were fixed charges, concession was given at the rate of 17 % computed under item No.4(A) i.e. induction furnace @ Rs.700/- per KVA/ month, ARC furnace @ Rs.615/- per KVA/month and Rolling/ Re-rolling Mills @ Rs.440/- per KVA/ month. Therefore, as a result of restructuring of tariff, the demand charges under item 4(A) were made fixed but the energy charges were reduced from 308 paise to 100 paise per month. It is not the case that the appellant has completely revoked the concession. It is the case that appellant- Corporation has reduced the energy charges from 308 paise per KVA to 100 paise but the demand charges have been fixed per KVA/ month and the concession has been re-scheduled instead of giving them 33.33% the energy charges have been reduced which is applicable to all but in the case of demand charges for hill areas it has been reduced to 17 % in respect of demand A charges and that was allowed to be continued for the unexpired period of five years to its existing connections which have not com....
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.... petition was filed challenging the notification dated 18.6.1998 and it was withdrawn with liberty and thereafter on 4.11.1999 application to recall the order was filed which was rejected. Again, another writ petition has been filed without permission of the High Court. Dr.Singhvi submitted that by virtue of the U.P. Electricity Reforms Act, 1999,(hereinafter to be referred to as the Act of 1999) now the new tariff has been fixed from August, 2000-2001 by the Commission because now the power to determine the tariff has been given to the Commission and no estoppel against the Statute can be pleaded after the Act of 1999 having come into force. Dr.Singhvi, learned senior counsel submitted that in view of the affidavit filed by Shri C.R.Goswami, Executive Engineer, Electricity Distribution Division, Kotdwar, Uttarakhand on behalfof the appellant and a comparative chart has been annexed to indicate that in fact after introduction of two part tariff, energy consumption of these units has considerably increased. The chart has been filed along with the affidavit in respect of all the writ petitioners except Shree Sidhbali Steels Ltd. 6. As against this, Mr.Shanti Bhusan, learned senior....
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....her the impugned notification has no application to existing consumers and does it apply to only those consumers who receive the supply on or after 1-8-1986 ? The High Court after hearing the contesting parties came to the conclusion that the respondent-Board was estopped by virtue of the doctrine of promissory estoppel from withdrawing the development rebate before the completion of the period of three years. On second point, the High Court came to the conclusion that the writ petitioners were barred from questioning the impugned notification on the express terminology found in the agreements entered into by them with the Board for supply of electricity and under those agreements the Board was given full play to revise the tariff rates which included development rebate also from time to time and consequently the impugned notification was not illegal. On the third issue, it was held that the notification dated 31-7-1986 could not be said to be retrospective and consequently, the High Court dismissed all the writ petitions. Aggrieved against this, the matter came up before this Court by Pawan Alloys & Casting Pvt. Ltd. This Court after review of all the earlier decisions observed as....
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....d specifically invited our attention to paragraph 53 that the Corporation is incurring a loss of Rs.15 to 20 crores. Learned senior counsel also invited our attention to paragraphs 56,58 & 60 of the counter affidavit filed before the High Court and submitted that it was not in public interest to continue this benefit to these industries located in hill areas and further submitted that the entire benefit was not withdrawn. This benefit has been rationalized and as a result of this rationalization an affidavit was filed to show that the energy consumption of these units has increased to manifold. Therefore, this restructuring of the rebate has not proved disadvantageous to these industries but for the larger public interest this was done and it not a case that the appellant has totally revoked the concession but the concession still exists in modified form. Therefore, the whole exercise was done in the public interest only. Learned senior counsel stressed that in fact all this public interest was not disclosed in Pawan Alloys & Casting Pvt. Ltd. (supra). Therefore, this turned against the Board on that count. In the present case all the nine points raised by him were raised before th....
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....altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The doctrine of promissory estoppel cannot be invoked in the abstract and the courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present in the mind of the court, while considering the applicability of the doctrine. The doctrine must yield when the equity so demands if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation." However, it was also observed as follows: " The reasons given by the Union of India justifying withdrawal of the exemption notification are not irrelevant to the exercise of the power in "public interest", nor are the same shown to be insufficient to support the exercise of that power. The exemption notification was not issued a....
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....ed as follows : " Any IPR can be changed if there is an overriding public interest involved. In the instant case, it has been stated on behalf of the State that various notifications granting sales tax exemptions to the dealers resulted in severe resource crunch. On reconsideration of the financial position, it was decided to limit the scope of the earlier exemption notifications issued under Section 6 of the Orissa Sales Tax Act. Because of this new perception of the economic scenario of the State, the scope of the earlier notifications had to be restricted. Withdrawal of notification was done in public interest. The Court will not interfere with any action taken by the Government in public interest. Public interest must override any consideration of private loss or gain. Thus the plea of change of policy trade on the basis of resource crunch should have been sufficient for dismissing the respondent's case based on the doctrine of promissory estoppel." 12. Our attention was invited to another decision of this Court in State of Rajasthan & Anr. V. Mahaveer Oil Industries & Ors. [ (1999) 4 SCC 3....
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....desh & Ors. [(1979) 2 SCC 409] and specially invited our attention to paragraph 24 of the judgment. In paragraph 24, their Lordships have summed up the ratio of the earlier decisions given by this Court as follows : " Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry6 out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen. The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise, notwithstanding that there is no consideration for the promise and the promise is not r....
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....ignificant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires.." Mr. Shanti Bhushan emphasized on the basis of this observation made in this case that benevolent Government has to act with equity and the Court should yield in favour of the equity whenever case arises of a citizen who has acted bona fidely on the basis of the representation made by the Government or by the instrumentality of the State. Mr.Shanti Bhushan submitted that since representation was made by the appellant- Corporation, therefore, industries were established in the hill areas and now the appellant- Corporation wanted to change the tariff that will be unconstitutional, unfair and arbitrary to the citizens who have acted on the promise made by the appellant- Corporation. In this connection, Mr.Shanti Bhushan also submitted that this is violative of Article 14 of the Constitution as held in MRF Ltd., Kottayam v. Asstt. Commissioner (Assessment) Sales Tax & Ors. [ (2006) 8 SCC 702]. In that case, the Court held that revocation of such notification is arbitrary and one of us....
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....shan, learned senior counsel invited our attention to paragraph 33 of the judgment in Pawan Alloys & Casting Pvt. Ltd.(supra) and submitted that in fact an argument was made at the Bar that the high-powered Tariff Realisation Committee advised the Board for withdrawing this rebate and the Board acted in the light of the said report submitted to it in the year 1986. It was submitted that the genesis of the notification was the recommendation of the Tariff Realisation Committee. Therefore, the Court concluded that the rebate was revoked not on the ground of general public interest but solely on the ground of commercial interest of the Board. Therefore, it was observed as follows : " Consequently it must be held on the facts of these cases that the impugned withdrawal notification was not backed up by any demands of public interest which would outweigh the individual interests of the appellant-promisees who had acted upon the same. " Mr.Shanti Bhushan, learned senior counsel submitted that in the present case also, the revocation is not on the basis of general public interest but it is only on account of losses t....
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....dget speech for 1996- 97 making representation to the effect that the State Government had abolished purchase tax on milk. The manufacturers of milk products, therefore, were not paying the purchase tax on milk for the assessment year 1996-97 and mentioned this fact in their returns. The taxing authority entertained such returns. The manufacturers passed on the benefit of exemption to the dairy farmers and milk producers. However, after expiry of the said assessment year, the Government took a decision not to abolish purchase tax on milk and the taxing authority therefore raised a demand for the assessment year 1996-97. On these facts, the Court held that in absence of proof of any overriding public interest rendering the enforcement of estoppel against the Government was inequitable, notwithstanding that no exemption notification as required by the statute was issued. It was held that the State Government cannot resile from its decision to exempt milk and raise a demand for the aforesaid assessment year. However, the same principle of estoppel was not invoked after assessment year 1996-97. The Court enforced the principle of estoppel. All the earlier cases on the subject were revi....
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....rwhelming consideration for revoking such exemption in public interest. 16. Mr.S.Ganesh, learned senior counsel appearing for some of the respondents invited our attention to a decision of this Court in Mahabir Vegetable Oils (P) Ltd. & Anr. V. State of Haryana & Ors. [ (2006) 3 SCC 620]. In this case, the appellants were the owner of solvent extraction plants. Industrial policy for the period 1.4.1988 to 31.3.1997 granted incentive by way of sales tax exemption to the industries set up in backward areas in the State. Solvent at that time was not included in the negative list in the Rules. In August, 1995 the appellants purchased land to set up a net unit and they made huge amount in construct work, erection of plant and that investment constituted 45% of the total investment. They started trial production on 26.3.1997 and commercial production on 29.3.1997 and then they applied for grant of exemption for payment of sales tax. Meanwhile, the State Government notified its intention to amend the Haryana General Sales Tax Rules and invited objections and thereafter they issued notification on 16.12.1996 which included solvent extraction plants in the negative list but Note 2 append....
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....estment and thereafter if the State Government resile from such benefits, then it certainly is an act of unfairness and arbitrariness. Consideration of public interest and the fact that there cannot any estoppel against a Statute are exceptions. 18. Learned senior counsel for the appellant has cited nine instances which can be loosely categorised into two i.e. (i) that there cannot be any estoppel against the statute and (ii) overriding public interest. So far as the first part is concerned i.e. the revocation has the statute flavour i.e. the benefit which was extended under Section 49 of the Act of 1948 and the notification had been issued revoking the same benefit under Section 49 of the Act of 1948 by invoking the provisions of the General Clauses Act that an authority granting exemption has a right to revoke the same also. It is true that it has a right to revoke the same but if the other party has suffered on that account then such representation will be against the public policy and the morality. Notification issued under Section 49 of the Act of 1948 for giving the benefit of exemption for the hill areas was in the nature of delegated legislation and not an Act framed by ....
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....e State to act in such an arbitrary fashion. Other grounds for the purpose of public interest which have been pleaded; namely that there are two methods of tariff provided by the amendment and the actual consumption has been reduced based on the calculation of energy charges per KV from 308 paise to 100 paise and there was large scale theft or that units were closing down and there was no mala fide intention in the matter of revocation of the notification and the cost of production of power has gone up to Rs.2.50 per unit, are considerations which hardly involve any public interest. They were more of a nature of losses which has been suffered by the Corporation and in order to make these losses, these methods were evolved to reduce and to make good of the losses. Restructuring benefit to 17% of the Tariff 4(A) (demand chages )are the factors which are aimed at to make the losses good for the Corporation. This is not case in which serious public repercussion was involved. These are not the factors which put together can constitute a public interest. Theftof the energy if it was proved by cogent datas that as a result of giving this benefit to the entrepreneurs in the hill areas, the....
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....rawing such benefit to the detriment of the such people except in public interest or against the Statute. So far as the public interest as involved in the present case is concerned, we have found that there was no overwhelming evidence to revoke the benefit granted to the industrial units in the hill areas. So far as the Statute is concerned, the notification was issued under Section 49 of the Act of 1948 and the same was revoked under Section 49 of the Act of 1948 though there was no such provision contained in Section 49 that it will be open to the Corporation to revoke the same but could be possible by invoking the principle of General Clauses Act. But in such delegated legislation such withdrawal could only be permitted if larger public interest is involved or if the Act is passed by legislature. 19. Dr.Singhvi, learned senior counsel for the appellant- Corporation submitted that now the Act of 1999 has come into force and that Act does not recognize the concessions given to the hill areas and that this is a primary legislation i.e. Act passed by the State Legislature. Therefore, to this extent we can accept the submission of Dr. Singhvi that since the Act of 1999 does not r....