TaxTMI 
TaxTMI 
2015 (5) TMI 729
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.... 20.12.1995 Government of Gujarat announced policy named "New Package Scheme of Incentives for Tourism Projects, 1995-2000" (hereafter referred to as the Scheme) with a view to make available all fiscal and non fiscal incentives, reliefs and concessions enjoyed by industries to 'Tourism' which was accorded the status of an industry, in order to give a boost to tourism sector by attracting higher investment in the areas with tourism potential and to generate employment opportunities. Under Clause 2, the Scheme came into operation on 1.8.1995 and was to remain in force for a period of five years upto 31.07.2000. Under Clause 3, to be eligible, a new tourism unit ought to be registered after 1.8.1995. Clause 4.7 dealt with effective steps which such unit was expected to undertake. Under Clause 5, after taking initial effective steps a tourism unit could apply to the Director of Tourism for registration. All projects had to conform to the specifications and requirements spelt out in Appendix B which Appendix dealt with various categories of tourism units and Item 22 thereof pertained to Entertainment Complexes including multi cinema theater complexes or multiplexes. Clause 7 categorise....
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....the total fixed assets as envisaged for the project, and iv) Evidence regarding expenditure on the project, including advances and pre-operative expenses paid, aggregating to at least 25 percent of the capital cost envisaged for the project. 10. PROCEDURE FOR REGISTRATION OF TOURISM UNITS FOR INCENTIVES: All tourism units eligible for the Scheme will apply to the Director of Tourism in a prescribed Form. The Directors of Tourism will scrutinizes the application and will issue temporary and permanent registration adopting the following procedure: a) Director of Tourism shall give provisional registration in the first instance upto 2 years to the eligible unit after scrutinizing the application received by him under the Scheme. b) If such a unit is not in a position to start commercial operation during the initial validity period the unit will have to apply with the progress report to the State Level Committee which is authorized to grant extension upto six months at a time or a total period of 2 years after examining the difficulties experienced by the individual unit in implementing the project and also record the reasons thereof in writing. c) The units which are unable to g....
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.... limits of incentives, whichever is earlier, to the extent referred to in para 8.1 of the said resolution............................................ ..................................................................... .............................................................." Paragraph 17 of the Notification stated that the exemption under said Notification would be subject to all terms and conditions referred to in Government Resolution dated 20.12.1995 in the Scheme and further conditions stipulated in the Notification. 5. The appellants being desirous of setting up a multiplex and avail the incentives under the Scheme took effective steps as stated in the Scheme and the Notification dated 14.02.1997 and applied for Temporary Registration Certification (TRC for short). Said application was examined by the concerned authorities and TRC was granted on 17.09.1999 and the same was sent to the appellants under covering letter dated 04.11.1999. In pursuance thereof the appellants started constructing the multiplex in accordance with the Scheme. 6. On 28.06.2000 Government Resolution No.NTP/1098-3219/C was issued by the State Government seeking to clarify incidental/ancillary ....
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....he provisions of the Gujarat Town Planning and Urban Development Act, 1976. On 27.03.2001 it was directed by the State Government that all development permissions must adhere to structural safety norms as stated in annexure to said order dated 27.03.2001 and that even with respect to the existing development permissions, necessary certification regarding structural stability and strengthening ought to be issued by Structural Engineers having requisite qualifications. The appellants submitted building plans along with the requisite structural stability certificate. The approval was accorded by the Municipal Corporation in October 2001 and the appellants resumed construction work. Since more than a year was lost because of subsequent changes in building norms, the appellants applied on 11.12.2001 for grant of extension for completing the project pointing out the aforesaid difficulties. It was stated that as on the date, the appellants had incurred expenditure to the tune of Rs. 91.25 lakhs for which a certificate of the Chartered Accountant was enclosed. Photographs of the completed civil works were also enclosed. 8. Around 26.02.2002 large scale communal riots took place in the Sta....
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....he validity period would result in extension beyond 31.07.2002 and as such the matter was required to be deferred till the Government took a decision on modification of GR dated 28.06.2000. 10. The appellants vide letter dated 30.10.2002 reiterated their request for extension which was repeated by letters dated 13.12.2002 and 22.04.2003. On 20.06.2003 the Commissioner of Tourism informed that a proposal for amendment of GR dated 28.06.2000 was sent and the matter was being considered at the governmental level. It was stated that the eligibility as per TRC issued to the appellants was in force and that their project was still eligible. The appellants commenced commercial operations on 11.07.2003 and applied for grant of appropriate eligibility certificate on 04.11.2003. 11. In June 2004 Multiplex Association of Gujarat filed Special Civil Application No.5574 of 2004 on behalf of its members in the High Court seeking appropriate directions for grant of eligibility certificate to its members. The High Court by its order dated 22.06.2004 directed the State Government to decide the applications/representations for extension of time. Thereafter, on 22.07.2004 the Commissioner of Touris....
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.... 9 per cent on reducing balance. 13. Appearing for the appellants, Mr. Rakesh Dwivedi, learned Senior Advocate submitted that the incentives provided in Clauses 8 and 8.1, and the procedure prescribed for registration in Clause 10 formed the core of promise and representation on part of the State Government based on which eligible units including that of the appellants had altered their position and made huge investments in Large Scale Tourism Units. He submitted that such units could not now be told that the non fiscal benefits of extension of validity period would not be granted to them despite they have been fulfilled the conditions of satisfactory progress. It was further submitted that Clause 10(b) and more particularly the expressions "in the first instance" and "initial validity period" in said Clause 10 (b) promised an over all validity period of four years; the initial validity period being two years granted straight away under TRC while the subsequent period of two years could be granted depending upon the progress report and difficulties experienced. He submitted that the notification dated 14.2.1997 was issued under Section 29 of Act 16 of 1977 incorporating the terms ....
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....final effective steps would necessarily have to be taken after the expiry of the Scheme and thus the Scheme itself contemplated that the actions under various clauses would continue to be undertaken even after the expiry of the Scheme. In his submission the concept of "accrued right" is to be seen in the context of Section 6 of the General Clauses Act which may not strictly apply in the present case. It was submitted that in any case positive acts in the form of huge investments for setting up the projects having been undertaken during the initial validity period of the Scheme, the entitlement to claim benefit of consideration of case for extension under the Scheme was an "accrued right". 16. Reading of the Scheme shows that to be eligible for the incentives under the Scheme, a new project ought to have obtained registration after 1.8.1995 and taken initial effective steps under Clause 4.7(a) which inter alia included effective possession of land free from all encumbrances and submission of Project Report. It is only thereafter that an intending unit could apply and be given provisional registration under Clause 10(a). Said clause indicates that such provisional registration "in t....
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.... for further extension. In our view, Clause 10 was one of the core features of the Scheme based on which eligible units were invited to make capital investment of more than Rs. 90 Lakhs with a promise of incentives under Clause 8. Having given such promise, based on which the appellants incurred capital expenditure, the question now arises as regards applicability of doctrine of Promissory Estoppel. 18. The law on the subject of Promissory Estoppel was recapitulated and succinctly dealt with by this Court in State of Punjab Vs. Nestle India Ltd. 2004(6) SCC 465. It found the foundation of the doctrine laid in the decision in Collector of Bombay Vs. Municipal Corporation of the City of Bombay 1952 SCR 43, the principle built upon in Union of India Vs. Anglo Afghan Agencies 1968(2) SCR 366 and the superstructure of the doctrine, with its pre-conditions, strengths and limitations outlined in the decision in Motilal Padampat Sugar Mills Co. Ltd. Vs. State of UP 1979(2)SCC 409. This Court then dealt with the discordant note in Jit Ram Vs. State of Haryana 1981 (1) SCC 11 and how that was firmly disapproved in Union of India Vs. Godfrey Philips India Ltd. 1985(4) SCC 369 by a bench of t....
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....mise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, 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 promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. (SCC p. 442, para 24) * * * [E]quity will, in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights, even where they arise, not under any contract, but on his own title deeds or under statute. (SCC p. 425, para 8) * * * Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it." (SCC p. 453, para 33) 34. The discordant note struck by Jit Ram case5 was firmly disapproved by a Bench of three Judges in Union of India v. Godfrey Philips India Ltd. 1985(4) SCC 369. It was affi....
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....thority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority." 19. Coming to the facts of the present case, we find that the Scheme definitely promised incentives in the form of Tax holiday of 5-10 years in respect of exemptions from Sales Tax, Turnover Tax, Electricity Duty, Luxury Tax and Entertainment Tax upto 100 per cent of capital investment if a new unit was registered after 1.8.1995 and appropriate investment in fixed capital assets was made. It also promised an initial period of two years for going operational in the first instance, extendable by further period of two years subject to satisfactory progress to be found by the State Level Committee. Even thereafter, the Unit ....
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....anslated in a statutory notification under Section 29 of the Act 16 of 1977. In the absence of such steps having been undertaken, G.R. dated 28.06.2000 could not in any way detract from or dilute the effect of the Scheme which had acquired statutory status. 21. We therefore hold that the appellants were entitled to have full benefit and advantage of Clause 10 of the Scheme and the curtailment of the period and opportunity available under said Clause 10 of the Scheme by subsequent G.R. dated 28.06.2000 was bad and ineffective. 22. The record indicates that the progress of the project of the appellants was greatly hampered as a result of major earth quake in the State on 26.01.2001 and large scale communal riots in the State in February 2002. The State Level Committee was satisfied that the commencement and continuation of the project was so affected as a result of these major difficulties and had granted initial extension of six months but the appellants had benefit of only few days out of such extension. The subsequent request for further extension which was backed with relevant certificate from the Chartered Accountant certainly persuaded the State Level Committee to find that t....