TaxTMI 
TaxTMI 
2020 (5) TMI 391
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....4; unilaterally re-writing the terms of the expired 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 te....
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.... Industrial Policy for the period '2004-2009', to be effective from 01.11.2004. According to the Petitioner, there was no much 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 Cl....
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....garh State Infrastructure Cost Fixed Capital Investment Subsidy Rules, 2004 (for short, 'the Rules, 2004') (Annexure-P/2) were framed and published with retrospective effect from 01.11.2004. As per the above Investment 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.....
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....2009), the Petitioner-Company got attracted to the offer and accordingly, a manufacturing unit was set up at rural village Manuwapali in District of Raigarh (Chhattisgarh). The investment was below 100 crores and hence the unit of the Petitioner-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 co....
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....mind, the Respondents issued two letters dated 11.05.2012 (Annexure-P/11), intimating the Petitioner that, in view of Annexure-P/1 Notification dated 10.08.2011, the Infrastructure Subsidy claim of Rs. 6,08,39,669/- of the Petitioner-Company 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 retrospec....
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..... Mangalam Timer Products Ltd.); (2008) 13 SCC 213 (Kusumam Hostels Pvt. Ltd. vs. Kerala State Electricity Board and Others) and that of the Division Bench Judgment of this Court reported in (2014) 53 TLD 215 (State of Chhattisgarh and Another 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'....
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....khs of quintals of sugar will have to be released as incentive levy-free sugar which otherwise meant for public distribution system. We agree with the learned Judges of the High Court when they observed that 'the petitioners who availed of the resulting benefit 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 Contro....
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.... clear that grant of licence depends upon the policy prevailing as on the date of the grant of the licence. The Court, therefore, would not bind the Government with a policy which was existing on the date of application as per previous policy. A prior decision would not bind the Government 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 legit....
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....on except to state that the obligation not to act arbitrarily and to treat employees equally is binding on the Union of India because it functions under the Constitution and not over it. In this view, we agree with the submission of the Union of India that there is no bar to its changing the policy formulated in 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 t....
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....ther that, change of Policy in public interest is to be upheld. 25. The doctrine of promissory estoppel was explained further by the Apex Court in Kasinka Trading (supra). It was a case where the Appellants, who were manufacturers of certain products (requiring 'PVC resin' as one of the raw materials) were importing 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, r....
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....ts flowing from the 2004-2009 Policy / Rules as it existed earlier should be restored and released in the cases of the Petitioners. 28. With regard to the submission made by the learned Advocate General seeking to place reliance on 'Clause 16' of Annexure-P/8 Agreement, to sustain the course of action pursued by them in resetting 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....
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....e of events. It was based on the specific need felt of the newly formed State that the 'Industrial Policy (2001-2006', later substituted by 2004-2009) was formulated and notified inviting entrepreneurs to set up industries in the State to achieve rapid economic growth offering to make use of the advantages available in the State and the concessions assured. This offer was acted upon by the Petitioners to set up the industries, making huge investments 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 exten....
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....n't guide or navigate a course of action already implemented based on the terms of the 'Policy' existed at that time. The benefit provided under the Policy '2004-2009', as it existed earlier and as covered by the Rules notified in this regard were sought to be altered by the State only after expiry of the said Policy period, by issuing a Notification in the year '2011'. No 'Notification' or 'instruction' could have amended 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 Governme....
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....e State, in its attempt to generate revenue, can tap any source, but care has to be taken, to see that the source itself is not let to be dried up. 33. We are of the view that the Petitioners have made out a case that they were having 'Legitimate Expectation' to have had the benefits flowing from the Industrial Policy for year 2004-2009 and incorporated as part of the Rules notified and existed throughout the Policy period. This is more so since, similar terms 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-....