TaxTMI 
TaxTMI 
2023 (9) TMI 1355
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....tion, declaring that amendment carried out vide Notification 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 'Explana....
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....of the case in short, as evident from the instant writ application, are that the 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 Claus....
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....nt of State GST subsidy by filing applications for the period 2017-18 (July, 2017 to March, 2018) 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 Petitione....
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....t Gadodia, learned counsel assailed the impugned action of the State of Jharkhand in denying the benefit of incentive under I.P. 2016 by primarily contending, 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: ....
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....ndustrial units are to maintain tax compliance at similar level in future for the same number of years they have claimed VAT e.g. a unit which has claimed VAT incentive for five years for location, will have to do the tax compliance for another five years 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 pr....
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.... GST regime, the power given to the State Government to amend the benefit of incentive as provided under Clause 7.5 by virtue of the 'Note' was intentionally deleted vide Clause 4(vi) of the said Notification, which reads as under:- 17. It has been submitted that under the amended Notification dated 16th 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. I....
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....of the power under Clause 10.7 of the I.P. 2016 has not been denied by Respondents in their Counter Affidavit and, thus, the said fact stands undisputed and admitted. 22. Further, in alternative, it has been argued that an exemption notification for promotion of industries is to be construed liberally keeping in mind the aims and objectives and the purposes 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....
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....ive to Industrial Units being established in the State of Jharkhand during the period 01.04.2016 to 31.03.2021, cannot deny the said incentive by amending the policy by giving it retrospective effect. In this regard it has been submitted that even otherwise, the Notification dated 07.03.2019 cannot be given retrospective effect and, if at all, it is presumed, for the sake of arguments, 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.-2....
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....arkhand amended Clause 7.5 of Jharkhand Industrial Investment and Promotion Policy, 2016 through Notification vide Memo No. 1335 dated 16.05.2018." "11. That it is stated and submitted that on 07.03.2019 vide Memo No. 512, a notification was issued in which clause 7.5 of Jharkhand Industrial Investment and Promotion Policy, 2016 includes by amendment sub-clause (aa)(v) which is read as follows:- "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 Cl....
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....eaded and/or established by the State of Jharkhand for curtailing the benefits as promised under I.P. 2016? 32. We have already quoted above relevant provisions of the policy including relevant Clause 7.5 and 7.5(aa) as well as Explanation inserted vide impugned Notification dated 7th March, 2019. 33. The Petitioner-unit is a manufacturer of iron and steel and expanded its unit for production of Sinter and Pig Iron with an actual investment 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 ....
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....the term 'actual realization in the State Treasury' was defined to mean 'Goods supplied by the Industrial Unit' and finally consumed within the State and 'SGST paid thereof realized in the State Treasury'. To this extent, there is no difficulty, as in the Notification dated 16th May, 2018, reimbursement of State GST was only to the extent of 'intrastate sale subject to tax actual realization in the State Government'. Thus, the first part of the Explanation is 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 ....
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....o the Industrial Incentive Policy, more particularly, the policy engrafted in clause 10.4(i)(b. Consequently, the High Court was fully justified in striking down that part of the notification which is repugnant to sub-clause (b) of clause 10.4(i) and we do not find any error committed by the High Court in striking down the said notification. We are not persuaded to accept the contention of Mr. Dwivedi that it would be open for the Government to issue a notification in 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 ....
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....would be clear that the said stipulation would relate only to those industries covered under Paras 7.3 and 7.4 of IPT, 1992 and would be limited to apply to those industries only to which 'time periods' have been stipulated in IPR itself and not to the industries/activities covered under Paras 7.2 and 7.5. Since the petitioner's industry is covered in the EMD category under Para 7.5 or IPT 1992 read with Entry 44 of SRO No. 1091 of 1992, Clause 5 of the 'operational guidelines' cannot 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 ....
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....manufactures Pig Iron and Sinter, which necessarily can be used only by a Unit manufacturing Iron and Steel and the manufacturer of Iron and Steel would inevitably be entitled for ITC on the said amount and, thus, in view of the Explanation inserted vide Notification dated 7th March, 2019, benefit of reimbursement of SGST would not be available to the petitioner at any cost. Petitioner has specifically pleaded that the Explanation inserted would make the entire benefit under the policy as nugatory and/or illusionary 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 th....
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....r large industries. In the case of the petitioner, the High-Powered Committee, vide its decision dated 6th January, 2022, considered the claim of the Petitioner for SGST incentive for the period 2017-18 to 2020-21 under I.P. 2016 and even sanctioned an amount of Rs. 53.17 crores for being disbursed to the Petitioner subject to obtainment of "No Dues Certificate" from Commercial Taxes Department. Despite the fact that said decision was taken in January, 2022, the amount of incentive was not disbursed to the petitioner which 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 th....
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....mption prospective, contrary to the terms of the representation held out in the Industrial Policy, 2012. " "53. It is one thing for the State to assert that the writ petitioner had no vested right but quite another for the State to assert that it is not duty bound to disclose its reasons for not giving effect to the exemption notification within the period that was envisaged in the Industrial Policy, 2012. Both the accountability of the State and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion 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....
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....by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench." 46. Definitely, the objective of the Industrial Policy was to promote Industrial Growth and it is in that background provisions were incorporated for reimbursement of 75% of SGST. However, impugned Notification dated 7th March, 2019, in effect nullifies, annuls or makes illusionary benefit under I.P. 2016 by introducing a fresh/new 'End User condition within the State' having an effect of destroying the acquired and/or vested right of the Petitioner. Reliance in this regard may 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....
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....nment. That will shake the faith of the people in the governance. Therefore, in order to keep the faith and maintain good governance, it is necessary that whatever representation is made by the Government or its instrumentality which induces the other party to act, the Government should not be permitted to withdraw from that. This is a matter of faith." 48. Recently, Hon'ble High Court of Odisha, in the case of 'Ultratech Cement Limited and Another Vs. State of Odisha & Ors., reported in 2022 SCC OnLine Ori 13, has held as under:- "44. It was held by the Supreme Court in the said decision as Under:- "32. State and 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 ri....
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.... came into commercial production on 20.02.2017 and there was no stipulation under the Industrial Policy which provided that benefit of reimbursement of NET VAT/SGST would not be paid to it if the recipient of the goods has availed ITC on such goods. In absence of the Notification dated 07.03.2019 being given retrospective effect, the accrued and acquired right of the petitioner cannot be curtailed. In view of the cumulative facts, we hereby declare that the Notification dated 7th March, 2019 having an effect of destroying the acquired and accrued and vested right of the petitioner is without any authority, irrational and unreasonable and violative of Article 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 ....