TaxTMI 
TaxTMI 
2020 (5) TMI 391
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Policy and the relevant Rules, to deny/curtail the benefits under the former Policy and retract from the promise already made ? (b) Can the exercise pursued by the State be accepted as 'rectification of mistake', as sought to be projected by them ? (c) Can such a deviation / correction as to the change in Policy be upheld in respect of the past transactions ? (d) Is it not hit by the principles of 'Legitimate Expectation' and 'Promissory Estoppel' ? 2. Apart from the question of law, it may be necessary to advert to the sequence of events as well, at least to a limited extent, so as to make a proper analysis and appreciation on the issues involved. This is more so, since the Petitioners have raised the plea of 'legitimate expectation' and 'promissory estoppel' in these cases; thus, necessitating scrutiny as to whether the pre-conditions to have the said principles attracted stand established ? 3. The State of Chhattisgarh was formed in the year 2000, in terms of the Madhya Pradesh Re-Organization Act, 2000. Being one among the rich States in the country in terms of mineral and forest resources, with a large extent of untapped potent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch difference between the two policies in terms of concessions and an option was given to the entrepreneurs who set up the units based on the Policy '2001-2006' and started commercial production after 01.11.2004, either to continue under the said policy or to have the benefits flowing from '2004-2009' Policy. Since the new Policy (2004-2009) also extended exactly similar benefits, the Petitioner-Company in WPT No. 36/2013 opted to have the new Policy, to govern the benefits payable. 7. It is the case of the Petitioner in WPT No. 36/2013 that they had invested huge amounts and set up the unit, in terms of the above Policy. As per Phase-I, the investment was to the tune of 155 crores and for Phase-II, it was to be 400 crores. Copies of both the above policies are placed for perusal of this Court. It is pointed out that the said Petitioner started commercial production, after completing the 1st Phase, on 28.05.2005. 8. The main objective of the Industrial Policy '2004-2009', as provided under the Head 'Preface', in Clause 1.3 is as follows : "......... 1.3. The main objective of the new Industrial Policy is to add maximum value to State's abunda....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Subsidy Notification / Rules, the Petitioner-Company was entitled for a subsidy adjustment / reimbursement of 25% of the infrastructure cost for establishing industry outside industrial area, upto a maximum amount equivalent to the amount of commercial tax / central sales tax paid in the State for 5 years. It is also the case of the Petitioner that, by virtue of the attractive incentives under the Industrial Policy / Rules, the Petitioner expanded and diversified the industry, commissioning production in the Steel Melting; making an additional investment of Rs. 100 crores, against the proposed investment of Rs. 400 crores in the 2nd Phase; thus taking the total investment to Rs. 255 crores. 11. As revealed from the facts and figures, Annexure-P/4 certificate of commercial production was issued by the competent authority on 13.04.2006 and the Petitioner-Company was given registration by the Directorate of Industries as per Annexure-P/5 certificate on 14.06.2007, as to the investment of Rs. 155 crores. The Petitioner pointed out that the registration was only in respect of '1st Phase' and that the Petitioner had proposed to invest a further sum of Rs. 400 crores in the '....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etitioner-Company came within the classification of 'Medium-Large Scale' industries. As per the Industrial Policy 2004-2009 and the relevant Rules notified by the Government, the Petitioner is entitled for a subsidy adjustment / reimbursement of 25% of the infrastructure cost for establishing the industry outside industrial area, upto a maximum amount equivalent to the amount of commercial tax / central sales tax paid in the State for 5 years. The Petitioner-Company had also set up a Captive Power Generating Unit within the premises and the investment made as on 10.10.2007 was to the tune of Rs. 50.5189 crores. Commercial production was started in one of the two furnaces of the Petitioner-Company on 01.07.2006 and the other one, along with Captive Power Plant of 12MW was put on such use on 10.10.2007, as revealed from Annexure-P/4 certificates issued by the General Manager, District Trade & Industries Centre, Raigarh. After commencement of commercial production, the Petitioner-Company was granted registration for getting the benefit of investment subsidy, by the competent authority, on 28.01.2009 (which is produced along with Annexure-P/6 application dated 22.06.2007) for g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y approved in the 15th State Level Committee meeting held on 14.05.2010 was rejected and that the Petitioner Company's claim for benefit was revised and limited to Rs. 85,46,301/-. According to the Petitioner, it was wrongly mentioned in the said letters (Annexure-P/11) that the Company's representative had 'consented' to such revision in the 18th SLC meeting held on 01.02.2012, as there was no need, necessity or requirement for the Petitioner to have expressed any such 'consent', sacrificing the vested / accrued rights of the Petitioner. The position was made clear by the Petitioner as per Annexure-P/12 dated 24.05.2012, addressed to the Commissioner (Industries) Government of Chhattisgarh. In terms of Annexure-P/1, the Respondent-State has also amended the Infrastructure Subsidy Rules as per Annexure-P/13 Notification dated 20.03.2012, intending to give a legal colour to the capping of benefits with effect from retrospective date. It is pointed out that the Petitioner has already satisfied a total sum of Rs. 7,48,94,544/- towards the Value Added Tax (VAT) and Central Sales Tax (CST) for the years 2006-2007 to 2010-2011 and has contributed much to the econo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vs. V.M. Extrusions Pvt. Ltd. and Anr.). 17. Shri Satish Chandra Verma, the learned Advocate General, appearing on behalf of the Respondents/State, sought to justify the course of action pursued by the Respondents, adding that, by virtue of the specific condition incorporated under 'Clause 16' of the Agreement, it is open for the Governor to impose 'condition' to safeguard the interest of the Government. The non-mentioning of a clause fixing ceiling with regard to the investment subsidy payable in respect of Medium-Large scale and 'Mega Industries, as incorporated in the case of Small Scale Industries, was noted only later and it was in the said circumstances, that the mistake was caused to be rectified by placing the matter in the Cabinet, who approved the same; in turn leading to the Notification / Rules under challenge. The learned Advocate General submits that, loss to the exchequer involves 'public interest' and as such, the course of action pursued is within the four walls of law and is not assailable in the light of the ruling rendered by the Apex Court as noted below : 18. Reliance is sought to be placed by the learned Advocate General on the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fit due to decontrol cannot in all fairness lay claim to be restored the benefit of the incentives in full now over again though the basic premise became non-existent. The benefit under the subsequent scheme in force from 15-11-1980 has already been accorded to them in full measure'." 19. In D.C.M. Ltd. (supra), the appellants were owners of Sugar Factories. The Central Government had promulgated the Sugar (Control) Order on 10.06.1966, by which the sale of sugar by producers was controlled. In order to mitigate the hardship caused to the sugar industry in establishing new sugar factories and for effecting substantial expansions of the existing units, certain incentives were declared by the Government. But later, there was a major change in the Sugar Policy, by virtue of which the Control was lifted w.e.f. 16.08.1978. However, a modified Sugar Policy was brought about w.e.f. 17.12.1979, providing for partial Control, by virtue of which, the extent / quota of 'levy-free sugar' allocable as part of the concession under the 'modified Policy' happened to be lesser than the earlier Policy. Hence the revised Policy was challenged placing reliance on the principles o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for all times to come. When the Government are satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotments or utilisation of its finances in the public interest. It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved. We, therefore, hold that the petitioners have no vested or accrued right for the issuance of permits on the MEE or NQE, nor the Government is bound by its previous policy. It would be open to the Government to evolve the new schemes and the petitioners would get their legitimate expectations accomplished in accordance with either of the two schemes subject to their satisfying the conditions required in the scheme. The High Court, therefore, was right in its conclusion that the Government are not barred by the promises or legitimate expectations from evolving new p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1964 if there are good and weighty reasons for doing so. We are far from suggesting that a new policy should be made merely because of the lapse of time, nor are we inclined to suggest the manner in which such a policy should be shaped. It is entirely within the reasonable discretion of the Union of India. It may stick to the earlier policy or give it up. But one imperative of the Constitution implicit in Article 14 is that impression that it is acting by any ulterior criteria or arbitrarily. This object is achieved if the new policy, assuming government want to frame a new policy, is made in the same way in which the 1964 policy was made and not only made but made known. After all, what is done in secret is often suspected of being capricious or mala fide. So, whatever policy is made should be done fairly and made known to those concerned. So, we make it clear that while the Central Government is beyond the forbiddance of the court from making or changing its policy in regard to the Directorate of Military Farms or in the choice or promotion of Brigadiers, it has to act fairly as every administrative act must be done." 23. The decision rendered by the Apex Court in Col. A.S. Sang....
X X X X Extracts X X X X
X X X X Extracts X X X X
....PVC resin from abroad, enjoying the benefit of exemption from import duty under a Notification issued by the Government on 15.03.1979, which was to be in force till 31.03.1981. But before expiry of the said period, the Government issued another Notification on 16.10.1980 under the same provision i.e. under Section 25 of the Customs Act, withdrawing the exemption in 'public interest', which was under challenge referring to the doctrine of 'Promissory Estoppel'. It was explained from the part of the Government that the exemption notification was issued with a view to equalise the sale prices of the indigenous and the imported materials and to make the commodity available to the consumer at a uniform price, keeping in view the trends in supply of the material. Later, when it was found that the international price of the product had fallen down, resulting in the import prices to be lower than the ex-factory prices of the indigenous material, the matter was re-examined by the Government and it was decided to withdraw the Exemption Notification in 'public interest'. It was in the said context, that the element of public interest was held as weighed more, in turn, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....setting the clock, it will be worthwhile to have a look at the said provision, which is extracted below : "16. The Governor may during the continuous of aid impose such condition as may in its opinion be necessary or expedient to safeguard the interest of the Government." At the very outset, it is to be noted that the said provision only enables the Governor to impose 'such condition as may be necessary or expedient to safeguard the interest of the Government' "during the continuance of aid". This presupposes of courses the extension / continuance of aid i.e. the granting of concession as mentioned in the Agreement. The Agreement clearly says under 'Clause 8', that the aggregate extent of benefit is to the tune is Rs. 6,08,39,669/-. The said clause reads as follows : "8. In consideration of the Government agreeing to give to the entrepreneur under the aggregate amount of (Six Crores eight lakhs thirty nine thousand six hundred and sixty nine rupees only) as and by way of the Infrastructure Development Capital Investment subsidy on the entrepreneurs creating the fixed assets of Rs. 243358677/- (Rupees Twenty four Crores thirty three Lacs fifty eight Thousand six....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vestments under the firm belief that they were entitled to have the benefit of investment subsidy to an extent of 25% of the infrastructure cost, subject to maximum of the Sales Tax / CST paid in the State during the first 'five' years. The open invitation in this regard having been accepted on the strength of the consideration offered (in the nature of concessions) it became a concluded contract, which got crystallised by virtue of specific terms incorporated in the Agreement executed in this regard. No tenable ground, sustainable in the eye of the law, is pointed out from the part of the State to make the said Agreement void or voidable in any manner. Obviously, there is a cap / ceiling fixed already with regard to the extent of benefit payable as per the Industrial Policy notified at the first instance, as incorporated in the Rules notified subsequently, to the effect that it would be 25% of the infrastructure cost made by the entrepreneurs subject to maximum of the Sales Tax / CST paid in the State for the first 'five' years. 30. As illustrated in the case of the Petitioner-Company in WPT No. 92/2012, they had already effected payment of a total tax of Rs. 7,4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ended the 'Rules' framed and notified in this regard and in fact, amendment of the Rules came only in the year '2012'. By the time the amended Policy / Rules was issued, the Petitioners had already acted upon the promise/concessions offered by the Respondent-State and had pumped in necessary investments and set up the Industry in the State by virtue of which, they had acquired the right to get the investment subsidy in terms of the subsisting Policy / Rules which governed the field during the Policy period. After expiry of the Policy period, a new Policy for the year '2009-2014' was notified by the Government w.e.f. 17.01.2015. It was after notification of the 'new Policy', that the Government thought of introducing a 'further cap' to the already expired Policy (2004-2009), simply stating that it was an omission or mistake to be rectified. In other words, the attempt of the Government was to re-write the terms of the Policy / Rules which were formulated and notified (specifically incorporated in the Agreement), making the industrialists like the Petitioners to have acted upon it. After having acquired the desired results in the State, it was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms of benefit were offered in the Industrial Policy originally notified for the period 2001-2006, in respect of which, no plea is raised from the part of the State as to any mistake having occurred therein. Admittedly, the said Policy was prematurely terminated and a new Policy was introduced for the period 2004-2009; when also the need to fix any "additional capping of benefit" was never felt by the Government. As such, the explanation now offered from the part of the Government, that it was only a mistake, which required to be rectified in 'public interest' does not hold any water at all. 34. In the above facts and circumstances, we are of the firm view that the course of action pursued by the Respondent-State in the case of the Petitioners herein, curtailing the benefit of Investment Subsidy, which ought to have been extended to them on the strength of the original Industrial Policy 2004-2009 and declared in the Investment Subsidy Rules, 2005 (as originally notified in the Gazette) is not correct or proper. It is declared that the Petitioners are entitled to have the benefit of Investment Subsidy to an extent of 25% of the infrastructure cost , subject to a ceiling of ....