TaxTMI 
TaxTMI 
TaxTMI 
2023 (9) TMI 1355
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....otification dated 7th March, 2019 (Annexure-4) by the Department of Industries, Government of Jharkhand to Clause 7.5 of The Jharkhand Industrial Investment and Promotion Policy, 2016 (for short 'Policy of 2016'), wherein an 'Explanation' has been inserted to define the term 'State GST paid on Intrastate sale subject to tax realization in the State Government Treasury' in alleged exercise of power under Clause 10.7 of the Policy of 2016, has an effect of imposing additional restriction and/or condition nullifying the effect of the Policy of 2016 and is, thus, wholly without jurisdiction and beyond the power of the Department of Industries which is only entitled under Clause 10.7 to lay down guidelines and/or issue statutory Notification for giving effect to the provisions of the Policy. (ii) In alternative to prayer (i) above, Petitioner prays for issuance of an appropriate writ/order/direction including Writ of Declaration declaring that purported amendment carried out under Clause 7.5 (aa)(v) of The Jharkhand Industrial Investment and Promotion Policy, 2016 vide Notification 7th March, 2019 (Annexure-4) wherein an 'Explanation' has been inserted to define the term 'State GST pa....
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....e State of Jharkhand, through Department of Industries, Mines and Geology promulgated Jharkhand Industrial Investment and Promotion Policy, 2016 (for short 'I.P. 2016'), which was notified vide Notification dated 16th February, 2016. The policy was aimed at creating industry-friendly environment for maximizing investment especially in mineral and natural resources-based industries, MSMEs, infrastructure development and rehabilitation of viable sick units. The objective under the I.P. 2016 was to maximize the value addition to States natural resources by setting-up industries across the State, generating revenue and creating employment. The policy proposed to provide attractive package to industry and investment opportunities, which lead to growth in industrialization and investment having multiplies effect on economy, like employment generation, increase income level, higher tax multiplies effect on economy, like employment generation, increase of income level, higher tax revenue etc. 4. I.P. 2016, vide clause 7.5 prescribes provisions for subsidy/incentive on Value Added Tax (in short, VAT) and Clause 7.5 (a)(2) provides, inter alia, that New large projects will be given reimburs....
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....018) to the period 2022-23 and claimed total incentive for an amount of Rs. 117,13,33,199/-, which is enumerated herein in a tabulated chart:- Period Date of filing of application Amount claimed 2017-18 20.09.2018 7,66,58,223/- 2018-19 28.09.2019 30,24,75,473/- 2019-20 25.09.2020 33,93,76,443/- 2020-21 18.06.2021 19,31,21,714/- 2021-22 23.07.2022 12,52,16,514/- 2022-23 24.06.2023 13,44,84,833/- Total 117,13,33,199/- 9. The claim of the petitioner for SGST subsidy for the periods 2017-18 to 2020-21 under I.P.2016 was considered by High Powered Committee constituted under the policy and in the meeting held on 6th January, 2022, as against the claim of subsidy of the petitioner for the period 2017-18 to 2020-21 amounting to Rs. 91,16,31,853/-, an amount of Rs. 53,17,97,670/- was approved by the High Powered Committee and direction was given to the Petitioner to obtain No Dues Certificate from Commercial Taxes Department for payment of Incentive amount to the Petitioner-Unit. 10. It is the case of the Petitioner that though it produced "No Dues Certificate" issued by Commercial Taxes Department, but the amount sanctioned towards subsidy/incentive for th....
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....ending, inter alia, that Notification dated 7th March, 2019 issued by Department of Industries, Government of Jharkhand, wherein an Explanation has been inserted to define the term 'State GST paid on intrastate sale subject to tax realization in the State Government Treasury' in alleged exercise of power under Clause 10.7 of the I.P. 2016 has an effect of imposing additional conditions and restrictions nullifying the effect of I.P. 2016 and is, thus, wholly without jurisdiction and beyond the power of the Department of Industries, which is only entitled under Clause 10.7 to lay down guidelines and to issue statutory notification for giving effect to the policy. Learned Counsels for the Petitioner have invited our attention to Clause 7.5 of the Industrial Policy, which is quoted herein under for the sake of ready reference:- "7.5 Subsidy/Incentive on VAT This facility will be available to all industries including MSME, Handloom, Sericulture, Handicraft, Khadi and village industries products, as given below: (a) Incentive on VAT: 1) New MSME units will be given incentive of 80% NET VAT payable p.a. for five years from the date of Production with a ceiling of maximum 100% of t....
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....after the expiry of incentive. Note: Notwithstanding anything contained in this Industrial and Investment Promotion Policy, the State reserves its right, to take appropriate direction including amendment, deletion or substitution of any incentives as granted in this Policy after the implementation of the Goods and Services Tax System into the State." 14. By referring to Clause 7.5 of the Industrial Policy, it has been contended that the policy, which was effective from 01.01.2016, promised incentive of 75% of net VAT per annum for seven years to new large projects (like, Petitioner-Unit) subject to a ceiling of maximum 100% of total fixed capital investment made. By specifically referring to the 'Note' appended to Clause 7.5, it was argued that State of Jharkhand was aware that GST regime is likely to be implemented shortly in the country including the State of Jharkhand and, thus, in order to give confidence to the proposed investors, the 'Note' was specifically incorporated under the Policy enabling the State Government to amend the policy and to substitute the VAT incentive granted under the Policy with GST incentive after implementation of GST regime. 15. By referring to No....
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....th May, 2018, an Industry was entitled for incentive of 75% reimbursement of State GST paid on intrastate sale subject to actual realization in the State Government Treasury for seven years. It has been contended that the term 'tax actual realization in the State Government Treasury' meant Net GST payable by an Industry i.e. GST (-) ITC = Net GST. 18. It has been contended that after aforesaid amendment carried out by the State of Jharkhand and deletion of the enabling provision of amendment of the incentive under Clause 7.5 of the policy, the Department of Industries, Government of Jharkhand, in order to give effect to the Industrial Policy, in exercise of the power under Clause 10.7 of I.P. 2016, issued Notification dated 7th March, 2019. Clause 10.7 of I.P. 2016 is quoted herein-under:- "10.7 Procedure for operationalization of the provision of the policy. Implementation of various provisions covering the incentives, concessions etc. will be subject to the issue of detailed guidelines/statutory notifications, wherever necessary in respect of each item by the concerned Administrative Department." 19. It has been submitted that from bare perusal of the Notification dated 7th....
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....oses sought to be achieved. Reliance in this regard has been made to the decisions of the Hon'ble Apex Court in the case of 'Amara Raja Batteries Ltd,' reported in (2009) 24 VST 536 (S.C.) (Paras 24,30,31), 'Belapur Sugar & Allied Industries Ltd.', reported in (1999) 108 E.L.T. 9 (S.C.) (Para-9), 'Tata Cummins Ltd.', reported in (2006) 4 SCC 57 (Para-16) and 'M. Ambalal and Company', reported in (2011) 2 SCC 74 (Para 16). 23. Reliance has also been placed to recent decision of Hon'ble Supreme Court in the case of Government of Kerala and Anr. Vs. Mother Superior Adoration Convent, reported in (2021) 5 SCC 602, to contend, inter alia, that a beneficial exemption notification is to be interpreted keeping the object for which the said notification has been issued. 24. It has been submitted that even if, for the sake of argument, it is presumed that amendment carried out vide Notification dated 7th March, 2019 has been carried out by Respondent-State of Jharkhand for amending the Industrial Policy, said amendment seeks to curtail and to take away and/or nullify and/or make illusionary the SGST incentive promised under Clause 7.5(aa) of I.P. 2016 and leads to absurdity and anomaly. It....
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....ts, that State of Jharkhand was entitled under law to curtail the benefits as promised under the Industrial Policy, said curtailment would apply only prospectively and since Petitioner-Unit has already commenced its commercial production on 20th February, 2017, its accrued and acquired right under the Policy cannot be taken away. To buttress the aforesaid contention, petitioner relied upon the decision of the High-Powered Committee dated 6th January, 2022 wherein despite issuance of Notification dated 7th March, 2019, the High-Powered Committee took decision to sanction subsidy in favour of the petitioner for the period 2017-18 to 2020-21. It was submitted that High Powered Committee was aware that subsequent Notification dated 7th March, 2019 cannot apply retrospectively and, hence, benefit under I.P.-2016 which has already been accrued to the Petitioner on its coming into commercial production with effect from 20.02.2017, cannot be denied and it is in the said background that benefit of subsidy was sanctioned. 26. However, it was submitted that, subsequently, High Powered Committee, merely on the strength of the letter dated 13.12.2022 issued by Additional Commissioner, Commerci....
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....:- "Actual realization in the state treasury means the goods supplied by the industrial unit and finally consumed within the State and SGST paid thereof realized in the state treasury. If any ITC is claimed on the goods supplied by the unit or by any subsequent taxable person in any manner whatsoever e.g. ITC on inter-state supply, then SGST paid on such goods shall not be eligible for reimbursement." 29. During the course of arguments, we specifically asked the Respondent-State of Jharkhand to clarify as to whether impugned Notification dated 07.03.2019, which has been issued for implementation of the policy, has been issued under Clause 10.7 of I.P.2016 or has been issued under any other provision. Counsel for the Respondent, during the course of argument, relied upon Clause 10.10 of the Policy, 2016 which gives power to the State Government to amend or withdraw any of the provisions and/or scheme under the Policy, but Respondent fairly submitted that in absence of any pleadings made in the Counter Affidavit that Notification dated 7th March, 2019 has been issued in exercise of the power under Clause 10.10 of I.P. 2016, it cannot be argued that said Notification was issued in ....
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.... of Rs. 158.88 crores. Admittedly, date of commercial production of the expanded unit was certified by the Department of Industries as 20.02.2017 and the Petitioner filed application for grant of SGST subsidy for the period 2017-18 to the period 2022-23 and claimed a total Incentive for an amount of Rs. 117,13,33,199/-. 34. The policy was effective from 01.01.2016 for a period of five years and, admittedly, petitioner was falling under the ambit of the policy. The 'Note' appended to Clause 7.5 specifically empowers the State Government to reserve its right to take appropriate decision including amendment, deletion or substitution of any incentive after implementation of Goods & Services Tax system into the State. Admittedly, in exercise of the said power, the State of Jharkhand, through its Council of Ministers, vide decision dated 18.04.2018, decided to make the policy in consonance with the GST regime and the earlier benefit of reimbursement of 'NET VAT' was substituted with reimbursement of 'State GST paid'. This decision of the Council of Ministers was notified vide Notification contained in Memo No. 1335 dated 16.05.2018 which was in consonance with the aims and objectives of....
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.... in consonance with I.P. 2016 including its amendment vide Notification dated 16th May, 2018. However, the second part of the Explanation provides that if recipient of the goods or any subsequent taxable person claims ITC on the goods supplied, then, SGST paid by the eligible Unit under I.P. 2016, would not be available for reimbursement. Thus, an additional condition and/or restriction has been imposed by virtue of aforesaid Explanation, which is in the form of 'End User Restriction'. In substance, second part of the Explanation states that if an eligible Industry sell its products on intrastate sales on which SGST is realized in Government Treasury, but, if the recipient of the goods or any other taxable person avails ITC in any manner whatsoever on the SGST paid on such goods, then, the eligible Industry would not be entitled for reimbursement of SGST paid. This additional condition or restriction which has been imposed by the Department of Industries in exercise of the power conferred under Clause 10.7 of the policy is clearly wholly without jurisdiction and beyond its powers. What has been promised by the State Government cannot be taken away by a Department of the State Gover....
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.... exercise of power under Section 7 of the Bihar Finance Act, which may override the incentive policy itself. In our considered opinion, the expression "such conditions and restrictions as it may impose" in sub-section (3) of Sectio9n 7 of the Bihar Finance Act will not authorize the State Government to negate the incentives and benefits which any industrial unit would be otherwise entitled to under the general policy resolution itself. In this view of the matter, we see no illegality with the impugned judgment of the High Court in striking down a part of the notification dated 4-4-1994." 38. Similar issue came up for consideration before the Hon'ble Apex Court in the case of Tata Sponge Iron Ltd., wherein vide Para 7.4 and 7.5 of IPR 1992, promulgated by the State of Odisha, was under consideration. Para-7.4 of IPR 1992 provided, inter alia, for exemption of deferment of sales tax on raw materials for a period of five years subject to ceiling of 100% of fixed capital investment to new small, medium and large scale industrial units. On the contrary, Para 7.5 provided for exemption or deferment of sales tax to units undertaking expansion, modernization and diversification, wherein n....
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....be said to apply to it. We are of the view that Clause 5 of the 'operational guidelines' and stipulation in the eligibility from (the eligibility certificate), to the extent that it provides for a period of time is not in consonance with IPT, 1992, is clearly without jurisdiction/without sanction of law and is also ultra vires IPT, 1992. (c) The operational guidelines and/or instructions were `made for administration of incentive contained in the policy and not for the purpose of imposing any new stipulation and/or conditions alien to and/or not in consonance with the passing of the 1992 Policy. Such a stipulation cannot in law be read into and allowed to operate since it would frustrate the very objective sought to be achieved by the 1992 Policy Declaration." It was furthermore held: "Drawing an analogy from the aforesaid principles of law, we are of the view that for the incentive under Para 7.5 read with Entry 44 as notified in SRO No. 1091 of 1992, exemption of tax did not provide any period of limitation. Neither IPR, 1992 nor the Finance Department notification in SRO No. 1091 of 1992 provided any stipulation as to how long the exemption from sales tax would remain in f....
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....and, in fact, the benefit stipulated in I.P. 2016 has actually been made illusionary and nugatory for the petitioner, as the High Powered Committee which earlier sanctioned incentive to the petitioner, kept in abeyance its decision vide its subsequent decision dated 06.02.2023. In view of the facts mentioned hereinabove, we answer Issue No.1 in affirmative and declare that amendment carried out vide Notification dated 7th March, 2019, wherein Explanation has been inserted to Clause 7.5(aa) of I.P. 2016, is clearly without jurisdiction, without sanction of law and is also ultra vires I.P. 2016. Issue No. (ii)- 42. Ordinarily, after having rendered our finding on the first Issue, we would have restrained ourselves from giving any further finding on Issue No.2. However, we are persuaded by the counsels of the petitioner during the course of arguments, to even adjudicate the alternative plea raised by them on the basis of their submissions that in the State of Jharkhand, despite attractive Industrial Policy being framed by it, adequate investments are not being made by entrepreneurs due to uncertainty being prevalent among the Industrial Groups regarding actual benefit of incentive r....
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.... compelled the petitioner to file a writ application before this Court being W.P.(C) No. 6476 of 2022 primarily praying therein for grant of subsidy/incentive pertaining to reimbursement of State GST. It is during pendency of the said writ application, petitioner was communicated a decision of the High-Powered Committee headed by the Chief Secretary, Jharkhand, contained in Memo No. 393 dated 17.02.2023, wherein on the opinion of Commercial Taxes Department dated 13.12.2022, the benefit granted earlier of reimbursement of SGST was denied on the ground of Explanation inserted vide impugned Notification dated 07.03.2019. Said benefit was denied on the sole ground that recipient of the goods of the petitioner had availed the benefit of ITC on such goods. It is due to the said action that Petitioner was compelled to approach this Court by filing the instant writ petition. 44. Recently, Hon'ble Apex Court, in its decision rendered in the case of Brahmaputra Metallics Ltd., dealt with Industrial Policy, 2012 notified by the State Government on 16th June, 2012. In the earlier Policy of 2012, certain benefits towards exemption from payment of 50% of Electricity Duty for a period of five y....
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....n of state power. The state must discard the colonial notion that it is a sovereign handing out doles at its will. Its policies give rise to legitimate expectations that the state will act according to what it puts forth in the public realm. In all its actions, the State is bound to act fairly, in a transparent manner. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. A deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest. This conception of state power has been recognized by this Court in a consistent line of decisions. As an illustration, we would like to extract this Court's observations in National Building Construction Corporation (supra): "The Government 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 o....
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....ay also be made to the decision of Hon'ble Supreme Court in the case of Madhya Pradesh & Ors. v. Orient Paper Mills Ltd., reported in (1991) SCC 176, wherein vide Para-7, Hon'ble Supreme Court has held as under:- "7. Whether the respondent was of one mind right from the beginning to set up a power plant, with or without the assurance of the State Government dated August 1, 1961, as asserted by the State, is neither borne out nor is the view of the High Court arrived at from the record. Rather, on the contrary, the view taken is that the respondent's indecision in that regard ended and it became decisive on the announcement of the assurance dated August 1, 1961. Such a view of the High Court was a possible view to be taken on the material placed before it and the inference drawn therefrom could be that the respondent had acted on the basis of the assurance. The effort here to redo the exercise in this regard must inevitably fail, for this Court ordinarily does not interfere with factual findings arrived at by the High Court and this case has not been shown to us to be an exception. In this situation, the view taken by the High Court was unexceptional warranting it to be left un-in....
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....its instrumentalities ....... can be made subject to the equitable doctrine of promissory estoppel in cases where because of their representation the party claiming estoppel has changed its position and if such an estoppel does not fly in the face of any statutory prohibition, absence of power and authority of the promisor and is otherwise not opposed to public interest, and also when equity in favour of the promise does not outweigh equity in favour of the promisor entitling the latter to legally get out of the promise." "34. .... Where a right has already accrued, for instance, the right to exemption of tax for a fixed period and the conditions for that exemption have been fulfilled, then the withdrawal of the exemption during that fixed period cannot affect the already accrued right. Of course, overriding public interest would prevail over a plea based on promissory estoppel, but in the present case there is not even a whisper of any overriding public interest or equity ..." "39. .... MRF made a huge investment in the State of Kerala under a promise held to it that it would be granted exemption from payment of sales tax for a period of seven years. It was granted the eligibi....
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....ticle 14 of the Constitution of India and is unsustainable. 51. The Petitioner, during the course of argument, invited out attention to the Industrial Policy, particularly, Clause 7.5(b) which provides, inter alia, that an industrial unit which has undertaken expansion would be entitled to get similar benefit as any large Project. However, in order to get the benefit, the expanded unit is required to maintain separate records of production, investment, details of VAT/SGST paid/payable after such expansion. Petitioner, in the writ application, has annexed a Certificate issued by Commercial Taxes Department contained in Memo No. 08 dated 10.01.2022, wherein jurisdiction Assessing Authority of the petitioner has certified that the Petitioner maintains separate books of account for its expanded unit. 52. It is the case of the petitioner that although the petitioner, for expanded Unit, has maintained separate books of account, but while considering the claim of incentive of the petitioner by the High Powered Committee on 6th January, 2022, reimbursement of SGST paid was not calculated on the basis of the expanded unit, but was calculated taking into consideration the entire unit i.e.,....