TaxTMI 
TaxTMI 
2020 (12) TMI 1241
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....ition instituted by the Respondents Under Article 226 of the Constitution, the Division Bench: (i) struck down the last paragraph of a notification dated 8 January 2015 issued by the State government in its Department of Commercial Taxes, giving prospective effect to the rebate/deduction from electricity duty offered under the Jharkhand Industrial Policy, 2012^1; (ii) directed that the notification shall be deemed to be in effect from 1 April 2011, when the Industrial Policy 2012 was enforced with retrospective effect; and (iii) upheld the claim of the Respondent that it was entitled to a rebate/deduction from electricity duty in terms of the representation held out in the Industrial Policy 2012, and that the denial of the exemption by the State government for FYs 2011-12, 2012-13 and 2013-14 was contrary to the doctrine of promissory estoppel. The State is in appeal to challenge the judgment dated 11 December 2019. B The issue 3. The issue for determination is whether the Respondent is entitled to claim a rebate or deduction of 50 per cent of the amount assessed towards electricity duty for FYs 2011-12, 2012-13 and 2013-14. The Respondent claims its entitlement o....
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....e issued within a period of one month by the Departments of the State government: 38. Monitoring and Review (b) All concerned departments and organizations would issue necessary follow up notifications within a month to give effect to the provisions of this Policy. The implementation of this policy will be duly monitored by Government at the level of Chief Secretary at least once in a quarter, so that the State Government may carry out a mid-term review of this Policy. E Exemption from Electricity Duty 6. Though the Industrial Policy 2012 which was notified on 16 June 2012 envisaged that notifications by the Departments of the State government would be issued within one month, there was a failure to comply with the time schedule. In order to give effect to the exemption from electricity duty, a notification Under Section 9 of the Bihar Act 1948 was necessary. Section 9 recognizes the power of the State government to grant exemptions^4. 7. Rule 6 of the Bihar Rules 1949 casts a duty on every Assessee to pay the duty which falls due within two calendar months of the month to which it relates. Rule 9 requires the submission of a return in Form-III within a period of two....
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....ght a direction that it would be entitled to an exemption from electricity duty for a period of five years from the date of the issuance of the notification (the period of five years being the envisaged period under the Industrial Policy 2012). 11. The High Court accepted the first of the two courses of action noted above, placing reliance on the decisions of this Court in State of Bihar v. Kalyanpur Cement Limited (2010) 3 SCC 274 ("Kalyanpur Cement Ltd.") and Manuelsons Hotels Private Limited v. State of Kerala (2016) 6 SCC 766 ("Manuelsons Hotels Pvt. Ltd."). These decisions are premised on the doctrine of promissory estoppel enunciated in Motilal Padampat Sagar Mills Co. Ltd. v. State of UP (1979) 2 SCC 409 ("Motilal Padampat"). The High Court held that a promise was made by the State government to give the benefit of an exemption of 50 per cent in electricity duty for a period of five years, for self-consumption or captive use, to all new and existing industrial units setting up captive power plants in the State of Jharkhand. The High Court observed that it was not the case of the State government that it did not intend to give the benefit to these industrial units since, a....
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....dmissible under the Industrial Policy 2012, the Respondent was required by Column 6(iv) of Form-III to raise a claim for exemption from the payment of electricity duty; (ii) In all the three returns which were furnished by the Respondent, a rebate/deduction was sought only towards "auxiliary consumption", which was accepted and allowed by the assessing officer; (iii) In the absence of a claim for rebate/deduction sought before the assessing officer, the assessing officer could not have granted a concession to the Respondent; (iv) The three assessment orders demonstrate that the Respondent paid electricity duty without protest or demur, and the computation made by the assessing officer of the payable amount was accepted; (v) The three returns filed by the Respondent for the corresponding assessment years were belated and an amount of Rs. 2000/- was levied as penalty; (vi) The submission that the notification Under Section 9 of the Bihar Act 1948 was belatedly issued on 8 January 2015 is not available to the Respondent since two of the three assessment orders were issued eleven months and twenty-three months after the issuance of the notification. Hence, in the assessm....
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....wards in favour of the Respondent". 15. On the other hand, opposing these submissions on behalf of the Respondent and in support of the judgment of the High Court, Mr. Devashish Bharuka, learned Counsel urged the following submissions: (i) The act of the State government in making the exemption notification prospective in effect from 8 January 2015 is in derogation to the promise held out by the State in its Industrial Policy 2012. The High Court in placing reliance on the doctrine of promissory estoppel has correctly relied upon the decisions of this Court in Motilal Padampat (supra), Kalyanpur Cement Ltd. (supra) and Manuelsons Hotels Pvt. Ltd. (supra); (ii) As regards the claim of exemption by the first Respondent: (a) The benefit of a rebate/deduction could not have been claimed in the returns for FYs 2011-12, 2012-13 and 2013-14. The exemption notification was issued only on 8 January 2015, and that too with prospective effect; (b) The first Respondent has, as a matter of fact, received a rebate/deduction only for the period 8 January 2015 to 31 March 2015 and for FY 2015-16; (iii) As regards the submission that there has been a delay in instituting the writ ....
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....ng investment especially in mineral and natural resource based industries, MSMEs, infrastructure development and rehabilitation of viable sick units. The objective here is to maximize the value addition to state's natural resources by setting up industries across the state, generating revenue and creating employment. Clause 1.13 stipulates that the policy was drafted after intensive interaction with stakeholders and to accommodate their views. It was expected that the policy would, upon implementation, facilitate industrialization of the State, generate employment and add to its overall growth. 20. As an integral component of the policy, Clause 32.10 envisages the grant of an exemption from the payment of 50 per cent of the electricity duty for a period of five years both for new and existing industrial units setting up captive power plants for self-consumption or captive use The period of five years was to be reckoned from the date of the commissioning of the plant. Under Clause 35.7(b), the entitlement would ensue from the financial year following the date of production. The State government was cognizant of the need to implement the policy immediately to secure the ben....
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....eld out inter alia a solemn representation in terms of Clauses 32.10 and 35.7(b) of the entitlement of the exemption for a period of five years from the date of production. Besides this, it also contemplated in Clause 38(b) that a follow-up exemption notification would be issued within one month. That period of one month stretched on interminably with the result that the purpose and object of granting the exemption would virtually stand defeated. The net result was that when belatedly, the State government issued a notification Under Section 9 of Bihar Act 1948 on 8 January 2015, it was prospective. As a consequence, by the time that the exemption notification was issued, a large part of the term for which the exemption was to operate in terms of the Industrial Policy 2012 had come to an end. 23. The State government was evidently inclined to grant the exemption. This is not a case where due to an overarching requirement of public interest, the State government decided to override the representation which was contained in the Industrial Policy 2012. To the contrary, it sought to implement the representation albeit in fits and starts. Firstly, there was a delay of three years in ....
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.... Hotels Private Limited v. State of Kerala (supra), speaking through Justice Rohinton F Nariman, the Court had to construe a notification dated 11 July 1986 of the Government of Kerala enabling those engaged in tourism promotional activities to become automatically eligible for concessions/incentives as provided to the industrial sector from time to time. An amendment to the Kerala Building Tax Act 1975 was made with effect from 6 November 1990 giving an exemption as promised in 1986 and the amendment was deleted with effect from 1 March 1993. Relying on the earlier decision of this Court inter alia in Motilal Padampat (supra), this Court held: 3... The non-exercise of such discretionary power is clearly vitiated on account of the application of the doctrine of promissory estoppel in terms of this Court's judgments in Motilal Padampat [Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409 : 1979 SCC (Tax) 144 : (1979) 2 SCR 641] and Nestle [State of Punjab v. Nestle India Ltd., (2004) 6 SCC 465]. This is for the reason that non-exercise of such power is itself an arbitrary act which is vitiated by non-application of mind to relevant facts, namely, the fact....
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....fication had been issued at all until the policy lapsed. In sum and substance, the objection was that the writ Petitioner - the Respondent here-had no vested right to claim that a follow-up notification should be issued and that the doctrine of promissory estoppel would not, in the facts, apply. 27. In order to analyze the contentions relating to the doctrine of promissory estoppel in the present case, it is necessary to discuss the origin of the doctrine and the evolution of its application. The common law recognizes various kinds of equitable estoppel, one of which is promissory estoppel. In Crabb v. Arun DC [1976] 1 Ch 179 (Court of Appeal)., Lord Denning, speaking for the Court of Appeal, traced the genesis of promissory estoppel in equity, and observed: The basis of this proprietary estoppel - as indeed of promissory estoppel - is the interposition of equity. Equity comes in, true to form, to mitigate the rigours of strict law. The early cases did not speak of it as "estoppel". They spoke of it as "raising an equity" If I may expand that, Lord Cairns said: "It is the first principle upon which all Courts of Equity proceed", that it will prevent a person from insisting on....
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....orcement by the promisor of previously existing rights against the promisee. Such rights can arise only out of a legal relationship existing between these parties before the making of the promise or representation. To apply doctrine where there was no such relationship would contravene the Rule (to be discussed in para. 4-099 below) that the doctrine creates no new rights. 29. Generally speaking under English Law, judicial decisions have in the past postulated that the doctrine of promissory estoppel cannot be used as a 'sword', to give rise to a cause of action for the enforcement of a promise lacking any consideration. Its use in those decisions has been limited as a 'shield', where the promisor is estopped from claiming enforcement of its strict legal rights, when a representation by words or conduct has been made to suspend such rights. In Combe v. Combe [1951] 2 K.B. 215 ("Combe"), the Court of Appeal held that consideration is an essential element of the cause of action: It [promissory estoppel] may be part of a cause of action, but not a cause of action itself. ...... The principle [promissory estoppel] never stands alone as giving a cause of acti....
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....dividual to believe that they will be a recipient of a substantive benefit. The doctrine of substantive legitimate expectation has been explained in R v. North and East Devon Health Authority, exp Coughlan [2001] QB 213 in the following terms: 55.... But what was their legitimate expectation?" Where there is a dispute as to this, the dispute has to be determined by the court, as happened in In re Findlay. This can involve a detailed examination of the precise terms of the promise or representation made, the circumstances in which the promise was made and the nature of the statutory or other discretion. ...... 56....Where the court considers that a lawful promise or practice has induced a legitimate expectation of a benefit which is substantive, not simply procedural, authority now establishes that here too the court will in a proper case decide whether to frustrate the expectation is so unfair that to take a new and different course will amount to an abuse of power. Here, once the legitimacy of the expectation is established, the court will have the task of weighing the requirements of fairness against any overriding interest relied upon for the change of policy. (emphasis....
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....ham London Borough Council [2002] 1 W.L.R. 237, the Court of Appeal held: 55 The present case is one of reliance without concrete detriment. We use this phrase because there is moral detriment, which should not be dismissed lightly, in the prolonged disappointment which has ensued; and potential detriment in the deflection of the possibility, for a refugee family, of seeking at the start to settle somewhere in the United Kingdom where secure housing was less hard to come by. In our view these things matter in public law, even though they might not found an estoppel or actionable misrepresentation in private law, because they go to fairness and through fairness to possible abuse of power. To disregard the legitimate expectation because no concrete detriment can be shown would be to place the weakest in society at a particular disadvantage. It would mean that those who have a choice and the means to exercise it in reliance on some official practice or promise would gain a legal toehold inaccessible to those who, lacking any means of escape, are compelled simply to place their trust in what has been represented to them. (emphasis supplied) 35. Consequently, while the basis of....
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.... practically synonymous with promissory estoppel. Legitimate expectation may arise from conduct of the authority; a promise is not always necessary for the purpose. 37. While this doctrinal confusion has the unfortunate consequence of making the law unclear, citizens have been the victims. Representations by public authorities need to be held to scrupulous standards, since citizens continue to live their lives based on the trust they repose in the State. In the commercial world also, certainty and consistency are essential to planning the affairs of business. When public authorities fail to adhere to their representations without providing an adequate reason to the citizens for this failure, it violates the trust reposed by citizens in the State. The generation of a business friendly climate for investment and trade is conditioned by the faith which can be reposed in government to fulfil the expectations which it generates. Professors Jain and Deshpande characterize the consequences of this doctrinal confusion in the following terms: Thus, in India, the characterization of legitimate expectations is on a weaker footing, than in jurisdictions like UK where the courts are now w....
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....vernment and its departments, in administering the affairs of the country, are expected to honour their statements of policy or intention and treat the citizens with full personal consideration without any iota of abuse of discretion. The policy statements cannot be disregarded unfairly or applied selectively. Unfairness in the form of unreasonableness is akin to violation of natural justice. It was in this context that the doctrine of "legitimate expectation" was evolved which has today become a source of substantive as well as procedural rights. But claims based on "legitimate expectation" have been held to require reliance on representations and resulting detriment to the claimant in the same way as claims based on promissory estoppel. (emphasis supplied) However, it is important to note that this observation was made by this Court while discussing the ambit of the doctrine of legitimate expectation under English Law, as it stood then. As we have discussed earlier, there was a substantial conflation or overlap between the doctrines of legitimate expectation and promissory estoppel even under English Law since the former was often invoked as being analogous to the latter. H....
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.... the moral values which underlie the private law concept of estoppel and the time has come for it to stand upon its own two feet. (emphasis supplied) 40. In a concurring opinion in Monnet Ispat and Energy Ltd. v. Union of India (2012) 11 SCC 1 ("Monnet Ispat"), Justice H.L. Gokhale highlighted the different considerations that underlie the doctrines of promissory estoppel and legitimate expectation. The learned judge held that for the application of the doctrine of promissory estoppel, there has to be a promise, based on which the promisee has acted to its prejudice. In contrast, while applying the doctrine of legitimate expectation, the primary considerations are reasonableness and fairness of the State action. He observed thus: Promissory Estoppel and Legitimate Expectations 289. As we have seen earlier, for invoking the principle of promissory estoppel there has to be a promise, and on that basis the party concerned must have acted to its prejudice. In the instant case it was only a proposal, and it was very much made clear that it was to be approved by the Central Government, prior whereto it could not be construed as containing a promise. Besides, equity cannot be ....
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....tation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review. 8. The mere reasonable or legitimate expectation of a citizen, in such a situation, may not 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 ne....
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....good faith to effectuate the purpose for which power stood conferred. In this context, "in good faith" means "for legitimate reasons". It must be exercised bona fide for the purpose and for none other...] (emphasis supplied) As such, we can see that the doctrine of substantive legitimate expectation is one of the ways in which the guarantee of non-arbitrariness enshrined Under Article 14 finds concrete expression. H.6 Expectations breached by the State of Jharkhand 43. Applying the abovementioned principles in the present case, we are unable to perceive any substance in the submission of the State which was urged in defense before the High Court. Not only did the State in the present case hold out a solemn representation, this representation was founded on its stated desire to encourage industrialization in the State. The policy document spelt out: (i) The nature of the incentives; (ii) The period during which the incentives would be available; and (iii) The time limit within which follow-up action would be taken by the State government through its departments for implementing the Industrial Policy 2012. 44. The State having held out a solemn representation ....
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....ctively. Unfairness in the form of unreasonableness is akin to violation of natural justice. 46. Therefore, it is clear that the State had made a representation to the Respondent and similarly situated industrial units under the Industrial Policy 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, we hold that such a course of action by the State is arbitrary and is violative of Article 14. H.7 The technical defences to the claim (i) Assessment and recourse to Article 226 47. We have not been impressed with the submission of the State on the technicalities of the Respondent not having filed in its assessment returns, a claim for exemption from electricity duty. What is significant is that since no exemption notifi....
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....on delays and laches alone. This finds support in the judgment of this Court in Dayal Singh v. Union of India (2003) 2 SCC 593, where a three judge Bench, speaking through Justice S.B. Sinha, held thus: 41. It was submitted that the Respondents having filed a writ petition after a period of eight years, the same ought not to have been entertained. Primarily a question of delay and laches is a matter which is required to be considered by the writ court. Once the writ court has exercised its jurisdiction despite delay and laches on the part of the Respondents, it is not for us at this stage to set aside the order of the High Court on that ground alone particularly when we find that the impugned judgment is legally sustainable. Mr. Bharuka is also correct in submitting that the State cannot possibly contend that the result of the delay has led to it altering its position to its detriment. Nor is it a case where third parties may be affected as a consequence of a delay in instituting writ proceedings. This submission finds support in Hindustan Petroleum Corporation Ltd. v. Dolly Das (1999) 4 SCC 450, where a two judge Bench, speaking through Justice S Rajendra Babu, noted thus: ....
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....sed on by the Respondent to its customers is factually incorrect. In the writ petition filed before the High Court, the Respondent specifically asserted that the burden of differential amount of electricity duty, realized by the State from the Respondent herein, was not passed by the latter to its customers, either directly or indirectly or in any other manner. The relevant excerpt of the pleading in the Respondent's writ petition reads thus: 41. That, at this stage, it is most humbly stated and submitted that if the amount of 50% of the electricity duty is refunded to the Petitioner, the same would not lead to unjust enrichment in the hands of the Petitioner as the Petitioner has not passed on the burden of differential amount of electricity duty, realized by Respondent-State from the Petitioner, to its customers either directly or indirectly or in any other manner. 42. That it is most humbly stated and submitted that for the period in question 100% of electricity duty has been realized from the Petitioner by Respondent-State of Jharkhand and, thus, extra 50% of the electricity duty has been borne by the Petitioner out of the own pocket and the burden of the same cannot ....
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....d and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. In the present case, as we have previously held, the present Respondent did not collect the electricity duty from both ends, to deploy the above phrasing. As a result, this doctrine has no application to the facts of the case at hand. 50. In Indian Council for Enviro-Legal Action v. Union of India (2011) 8 SCC 161, a two judge Bench of this Court, speaking through Justice Dalveer Bhandari, outlined the ingredients of unjust enrichment in the following terms: 152. "Unjust enrichment" has been defined by the court as the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. A person is enriched if he has received a benefit, and he is unjustly enriched if retention of the benefit would be unjust. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another. Applying this definition to the f....