TaxTMI 
TaxTMI 
2024 (1) TMI 509
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....997 of 2016, CWP No. 101 of 2019, CWP No. 1547 of 2019, CWP No. 1548 of 2019, CWP No.1549 of 2019, CWP No. 3237 of 2019, CWP No.7984 of 2021, CWP No.7320 of 2022, CWP No.7335 of 2022, CWP No.1927 of 2023 For the Petitioner(s): Mr. Vishal Mohan, Sr. Advocate with Mr. Praveen Sharma & Mr. Aditya Sood, Advocates; Mr. Amar Pratap Singh, Advocate & Mr. Goverdhan Lal Sharma, Advocate and; Mr. Janesh Gupta, Advocate, for the respective petitioner(s), in the respective petitions. For the Respondent(s): Mr. Anup Rattan, Advocate General with Mr. Rakesh Dhaulta & Mr. Pranay Pratap Singh, Additional Advocate General, Mr. Arsh Rattan & Mr. Sidharth Jalta, Deputy Advocate General and Mr. Rakesh Sharma, Assisting Counsel, for the respondents-State. JYOTSNA REWAL DUA, JUDGE All these petitions raise common questions of law and facts, hence are being taken up together for decision. For convenience, documents from CWP No. 9131 of 2013 are being referred to hereinafter. The core question around which all these petitions are centered, is whether tax incentives granted to the petitioner-industrial units under specific Rules and statutory Notifications framed & issued pursuant to the State Industr....
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....national markets and to encourage setting up of innovative industry based on local skills, local raw materials and employing local people, the State Government would give fiscal incentives to Companies set up and having their registered offices in H.P. for patenting their inventions and its commercialization, especially for activities such as drafting the patent application, filing the patent application In India, filing the patent application in Patent Tribunals, prosecution of the patent application outside India, maintenance fee of the granted patent application, and obtaining non-infringement opinion. Fiscal Incentive by the State Government would also be provided to such companies so as to meet with the fees charged by the private lawyers/law firms located within the country having a reference from any Ministry/ Deptt. of Government of India of having successfully assisted such Companies in the country." 2(i)(b) Clause 18 of the 2004 Policy pertaining to State Taxes runs as under: - "18 State Taxes: "18.1. Introduction of VAT at the earliest to regulate, administer and Improve collection of taxes to be paid by Industry would be top priority of the Government. It would be ....
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....bstantially to the overall economic prosperity and welfare of our people. It is with this clear and emphatic statement of intent that the State Government of Himachal Pradesh sincerely extends an invitation to entrepreneurs, from within and outside the country, to set up their projects in the State. The Government of Himachal Pradesh on behalf of its people assures investors in the State of their whole hearted support." 2(ii) In tune with the Industrial Policy, 2004, the respondents notified "Rules, Regarding Grant of Incentives, Concessions and Facilities to Industrial Units in Himachal Pradesh, 2004" (Annexure P-2). The Rules came into force w.e.f. 31.12.2004. 2(ii)(a) Under the Incentive Rules, 2004, area of the State was categorized into three categories i.e. 'A', 'B' and 'C'. Category 'C' areas (Tax Free Zone) included all Tribal Development Blocks as also the Development Blocks under this category and all the Backward Panchayats located in Blocks under 'A' and 'B' category areas. The categorization as done under Rule 5 is as under: - "5. CATEGORISATION OF THE STATE: a) The State is being now classified into three categories of Areas as "A", "B", C as per Annexure I of t....
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....Zone for the purpose of Sales Tax incentive. The relevant Rules 10.1 and 10.4 read as under: - "10.1 The following Sales Tax Incentives would be provided subject to their fulfilling the eligibility conditions as laid down elsewhere under these Rules: (1) Sales Tax incentives, that is, exemption from payment of C.S.T/G.S.T. for 10 years from the date of their commencement of production in the Tax Free Zone (now classified as Category 'C' areas under these Rules) shall be continued, as provided for under the 1999 Incentive Rules. This incentive will be admissible to New Industrial Units and or existing industrial units as on 7/01/2003 (for the purpose of this incentive only) which undertake substantial expansion after 7/01/2003. This incentive will be available to all eligible units listed in the negative List (Annexure-111) also. In other words, no Negative List will be applicable in Tax Free Zones for the purpose of this incentive. 10.4 The concessions provided under this rule will commence from the date of commencement of commercial production or from the date of notification issued by the Department of Excise and Taxation (wherever required), whichever is later." ....
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....e Rules. The petitioner-industrial units are covered by the exemption notifications referred to above from the dates of commencement of commercial production by them tabulated as under: - Writ Petition No. Name of the Petitioner Date of Commercial Production CWP No. 4599 of 2013 M/s Jaiprakash Associates Ltd. Date of commencement of Commercial Production is Clinker is 24.02.2010 Cement is 16.01.2012. CWP No. 9131 of 2013 Ms. Shiv Vani Electronics LLP 25.03.2010. CWP No. 24 of 2014 Ms. S.P.A. and Surfactants 25.03.2010. CWP No. 30 of 2014 MS Manuspaa heritage Pvt. Ltd 16.10.2009. CWP No. 62 of 2014 MS Videotex International Pvt. 25.03.2010. CWP No. 63 of 2014 Ms. Ajanta Enterprises 16.10.2009. CWP No. 64 of 2014 Bright Metal Works 25.03.2010. CWP No. 75 of 2014 Ms. Anuja Foods International 16.10.2009. CWP No. 7537 of 2014 MS New Pulkit Industries 31.03.2010. CWP No. 2577 of 2015 Ms. Sai Refinery 30.03.2010. CWP No. 4802 of 2015 MKS Rail Coach Engineers 23.03.2010. CWP No. 911 of 2016 Ms. New Pooja Steel Industries. In the year, 2012 CWP No. 997 of 2016 ....
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...., by this time, petitioner unit was not only established in this Panchayat but had also started its production as would be apparent from the table. Petitioner unit was eligible and was being allowed tax exemption in terms of Industrial Policy, 2004, the Incentive Rules, 2004 and the exemption notifications dated 30.03.2005 and 19.01.2006. After the withdrawal of backward status from 'Mangal' Panchayat, petitioner unit was directed to deposit CST/VAT etc. 2(vii)(b) Petitioner filed CWP No. 4599 of 2013 assailing actions of the State, the demand raised by the State Excise & Taxation Department and also laid challenge to the Notification dated 30.03.2013 withdrawing backward status from 'Mangal' Panchayat. During pendency of the petition, the impugned 'de-notification' dated 30.03.2013 was withdrawn by the State vide notification dated 26.11.2014 with 'immediate effect'. Another notification was issued on 27.02.2015, de-notifying backward status of 'Mangal Panchayat', and re-notifying it as non-backward Panchayat with immediate effect. This was followed by yet another notification issued on 24.03.2015 deleting the words 'with immediate effect' from the notification dated 27.02.2015 a....
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....d the promised incentives in form of specified tax exemptions. The incentives being granted to them could not be withdrawn during the validity/promised period. Further contention was raised that the impugned directions of the respondents to the petitioners to pay VAT/CST are without any legal force as no notification withdrawing the exemptions granted to the petitioner units from payment of VAT/CST was ever issued. The exemption notifications had not been withdrawn by the State for the units which had already commenced production prior to the date of de-notification. The impugned communications, directing the petitioners to pay VAT/CST, were in contradiction to the Industrial Policy, 2004, the Incentive Rules, 2004 framed thereunder and the consequent notifications which granted them 100% exemption from such payment for ten years. The petitioners are entitled to enjoy the tax incentives till the enforcement of GST regime in the year, 2017. 3(ii) On behalf of the respondents-State, the factual position of individual cases as put forth in the petitions was not disputed by the learned Advocate General. The stand taken, however, was that the Panchayat areas where the petitioners had e....
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.... a decision will be entertained." Placing reliance upon (2020) 20 SCC 59, Union of India and another vs. V.V.F. Limited and another with Barak Valley Cement Limited Versus Union of India and others; (2022) 5 SCC 62, Krishi Upja Mandi Samiti, New Mandi Yard, Alwar Versus Commissioner of Central Excise and Service Tax, Alwar and; 2019 (10) SCC 575, Union of India and others Versus Unicorn Industries, it was contended that promissory estoppel is an equitable doctrine, which can be moulded to suit a particular situation. That there is primacy of public interest over promissory estoppel. Withdrawal of exemptions in public interest is permissible. Hence, prayer was made for dismissing the writ petitions. 4. Consideration We have heard learned counsel on both sides and considered the case files. The pivotal question that needs to be adjudicated in these writ petitions is whether the respondents are estopped from directing the petitioners to pay VAT/CST during the currency of the exemption period promised to them under the Industrial Policy, 2004, the Incentive Rules, 2004 framed in furtherance of the Industrial Policy, 2004 and the statutory exemption notifications dated 30.03.2005 (H....
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....e that, in this case, the Court observed that "19......it is now well settled by a catena of decisions that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers." But for reasons which we shall presently state, we do not think this observation can persuade us to take a different view of the law than that enunciated in the Indo-Afghan Agencies case. ... It will thus be seen from the decisions relied upon in the judgment that the Court could not possibly have intended to lay down an absolute proposition that there can be no promissory estoppel against the Government in the exercise of its governmental, public or executive powers. That would have been in complete contradiction of the decisions of this Court in the Indo-Afghan Agencies case, Century Spinning and Manufacturing Co. case and Turner Morrison case and we find it difficult to believe that the Court could have ever intended to lay down any such proposition without expressly referring to these earlier decisions and overruling them. We are, therefore, of the opinion that the observation made by the Court in Ram Kumar case does not militate against the ....
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....promise made by it, the Court will not raise an equity in favour of the promisee. It will not be enough for the government just to say that the public interest requires that the government should not be compelled to carry out the promise or that the public interest would suffer if the government were required to honour it. For resisting liability, the government will have to disclose to Court the fact & circumstances on account of which the government claims to be exempted from liability and it would be for the Court to decide whether the facts and circumstances are such as to render it inequitable to enforce the liability against the government. It is only if the Court is satisfied on proper and adequate material placed by the government that overriding public interest requires that the government should not be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to enforce the promise against the government. The burden would be upon the government to show that the public interest in the government acting otherwise than in accordance with the promise, is so overwhelming that it would be inequitable to hold the government bound by the pr....
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....the rule of estoppel in their favour when the State of Kerala purports to act differently. Several decisions of this Court were cited in support of the stand of the appellants that in similar circumstances the plea of estoppel can be and has been applied and the leading authority on this point in the case of M.P. Sugar Mills v. State of U.P. On the other hand, reliance has been placed on behalf of the State on a judgment of this Court in Bakul Cashew Co. v. S.T.O.. In Bakul Cashew Co. case this Court found that there was no clear material to show any definite or certain promise had been made by the Minister to the concerned persons and there was no clear material also in support of the stand that the parties had altered their position by acting upon the representations and suffered any prejudice. On facts, there- fore, no case for raising the plea of estoppel has been made out. This Court proceeded on the footing that the notification granting exemption retrospectively was not in accordance with section 10 of the State Sales Tax Act as it then stood, as there was no power to grant exemption retrospectively. By an amendment that power has been subsequently conferred. In these appeal....
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....ine of legitimate expectation and referred to various Judgments on the issue in the timeline. It was observed that the State had held out a solemn representation founded on its stated desire to encourage industrialization in the State. Having made a solemn representation, it was manifestly unfair and arbitrary to deprive industrial units of their legitimate entitlement. 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. The State is bound to act fairly, in a transparent manner in its action. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. The relevant paras of the judgment are extracted hereinafter: - "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 ....
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....tration, we would like to extract this Court's observations in National Buildings 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 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 hol....
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....fidence of the investors and catalyze industrial expansion in the backward areas of the State. With that aim, tax exemptions were promised. The tax concessions were not only promised, but the duration of such concession was also laid out. It was also spelt out that the policy statement was an expression of Government's intent and commitment to accelerate growth of the industrial sector in backward areas. The State of Himachal Pradesh, on behalf of its people had assured the investors in the State of their wholehearted support. Clause 8.3 of the Industrial Policy, 2004, provided framing of Rules to govern incentives, concessions and facilities as part of the Industrial Policy, 2004, which were to remain operative till the next Rules governing the incentives, concessions and facilities were announced or the Rules got amended. Clause 8.3 also stipulated that even in case of amendments, efforts would be made to enable the existing units to avail the incentives which they would be already availing for the periods they were entitled to. Clause 18.1 of the Policy provided for exemption from payment of CST/VAT/Sales Tax in terms of the Rules to be framed under the policy. 4(iii)(b) It i....
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.....03.2015 (Annexure P-23 with CWP No. 4599 of 2013) whereby Incentive Rules, 2004 were amended. For deciding present issue, it will be appropriate to refer to following two rules as amended on 12.03.2015:- "10.1(1) For existing industrial units set up and commencing commercial production up to the date of this notification Sales Tax Incentives, that is, exemption from payment of CST/VAT for 10 years from the date of their commencement of production in the Category 'C' areas shall be provided as per the provision of the 2004 incentive rules as amended up to the date of this notification. This incentive will be admissible to New Industrial Units and or existing industrial units (set up or commencing commercial production up to the date of this notification for the purpose of this incentive only) which commences commercial production (New Units) or undertake substantial expansion after the date of this notification, as per the provision made under rule 19 of these rules. This incentive will not be available to units listed in the negative List (Annexure-III) also. 19(13) Any dealer who was enjoying the benefit of exemption under the notification No. EXN-F(1)2/2004 (i) dated 30.03.2....
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....es and can certainly be successfully invoked by the petitioners in such circumstances to compel the State to adhere to its side of bargain promised under the Industrial Policy, 2004 and the Rules framed thereunder. The action of the respondent in withdrawing tax concessions granted to the petitioner units is not in consonance with law. We have refrained from examining the validity of the notifications withdrawing backward area status of the concerned Panchayats. Nonetheless, the notifications withdrawing the backward area status from the concerned Panchayats will have only prospective effect i.e. will be applicable to industries being set up/expanded after the date of withdrawal notifications. These cannot be applied retrospectively to the petitioner units which had already come into production by the time the backward areas status was withdrawn from such Panchayats. These Panchayats shall have to be construed as backward areas/ tax free zone for the purpose of grant of tax incentives to the petitioners for specific period as per the promise extended by the State. The three judgments cited by learned Advocate General are distinguishable on facts. In VVF Ltd. case, the Industrial ....