TaxTMI 
TaxTMI 
2019 (2) TMI 2125
X X X X Extracts X X X X
X X X X Extracts X X X X
....on No. 2679 of 2008 in Mawana Sugars Limited Versus State of Uttar Pradesh and Others for deciding this bunch of writ petitions. 2. In order to appreciate the gamut of submissions advanced, it is imperative to extract the crucial and necessary facts leading to the present controversy. 3. The State Government of Uttar Pradesh vide G.O. No. 1631(1)SC/18-2-2004-57/2004 dated 24th August 2004 declared a Sugar Industry Promotion Policy, 2004 (the Policy) to attract investments by private entrepreneurs to establish new sugar mills in the State to ensure better utilization of sugar cane produced in the State and also to provide direct employment to at least 1000 persons by each of the investor. To attract such fresh investments, the State Government promised to provide various benefits in the form of exemptions/remissions in taxes, reimbursements of duties and cash subsidy etc. for varying periods depending upon the level of investment made. 4. Investments made upto Rs. 350 crore (Level-1) for setting up of new sugar mills would entail the benefits for a period of five years from the date of commencement of commercial production from the new facility and investment of Rs. 500 cro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d meticulous procedure to consider and examine the eligibility of the applicant for grant of benefits under the Policy. A High Powered Committee under the Chairmanship of the Chief Secretary to the Government was constituted by the State Government vide G.O. No. 1614 SC /18-2-200457/2004 dated 23.06.2005, with other senior officers of the rank of Principal Secretary/Secretary to the Government as members, to examine the applications for declaration of an applicant to be Eligible for claiming/availing benefits promised under the Policy. This High Powered Committee would examine those applications which were recommended to it by another Committee constituted vide G. O. No. 1625/18-2-2005-57/04 dated 18.07.2005 under the Chairmanship of the Cane Commissioner of the State Government. The Committee headed by Cane commissioner would do the preliminary scrutiny/examination of the application to ensure compliance with the requirements of the Policy to claim benefits. All applications were mandated to be accompanied with various documents including the details of item wise investment in the projects duly certified by a Chartered Accountant, a certificate relating to employment of 1000 perso....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e State Government. 12. Aggrieved by such sudden withdrawal of the Policy and upon denial of benefits already accrued to various petitioners under the Policy, the petitioners filed the present writ petitions. A co-ordinate Bench of this Court vide an Order dated 08.05.2008 granted interim relief to the petitioners who had been granted Eligibility Certificate by inter-alia holding that: "Considering the arguments of the parties counsel and the question involved, we are prima facie, satisfied that the State has not been able to indicate any supervening public interest, which required the scheme to be withdrawn and that the petitioners are entitled to the limited protection of the exemptions at this stage, which they were enjoying on the date when the policy is said to have been revoked i.e. 4th June, 2007. So far as the further benefits/incentives are concerned, that is the matter which is to be considered at the time of hearing of the case". 13. During the pendency of these writ petitions in this Court, the State Government revoked and cancelled various notifications issued by it from time to time even though the utility of such Notifications had come to an end after ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....relying upon the solemn and unequivocal promise and assurance of the State Government to allow the promised benefits to eligible companies/units, most of the petitioners raised loans from the banks and financial institutions to make investments for setting up of new sugar mills and/or expanding the existing crushing capacities of sugar mills and establishing ancillary industries like distilleries for production of Ethanol and for co-generation of power. Some of the petitioners like Mawana Sugars were able to complete and commission their projects of setting up of new mills/enhancing crushing capacities and ancillary units of distillery and power generation and were therefore granted 'Eligibility Certificate' by the State Government under the Policy to enable them to avail the promised benefits under the Policy as per the level of investment made by them. Some other petitioners continued to make the investments in new projects under the Policy in the hope that these would be able to complete and commence commercial production on or before 31.03.2008; the period of validity of the Policy. Such companies/units who were granted Eligibility Certificate indeed availed the benefits under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n No. 4031 of 2006) in which the State Government has stoutly defended the Policy being in the 'public interest', non-discriminatory and in the interest of the farmers and workers and for the benefit of the State in the long run. It is contended by him that the State Government cannot be allowed to now resile from the stand taken by it on an affidavit in this Court. He contends that there can be no quarrel with the proposition that the promissory estopple must yield to overriding public interest except that in present case there is no such overriding public interest. Mr. Bhalla would further submit that the impugned order dated 04.06.2007 is an executive order and is subject to the same tests in administrative law as to its validity and one of these tests being the well known 'Wednesbury principle' under which a court may strike down an abuse of discretionary power on grounds that irrelevant circumstances have been taken into account or relevant circumstances have not been taken into account. Shri Bhalla referred to the Counter affidavit and supplementary Counter affidavit which have been filed by the State Government in reply to the petitions and various other supplementary affida....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitioner responded and invested Rs. 3000.00 crores and gave employment to over 1,000 persons. The exemption granted by the State Government was availed of by the petitioner. The State Government, at this stage, cannot resile and contend that since the policy has been discontinued, the exemption would no longer be made available to the petitioner. Having acted on the promise made by the State Government , the action of the respondent in issuing the demand notice on the ground that no further exemption would be granted is wholly arbitrary and cannot be sustained. The petitioner has been benefited by the promise made by the State Government. The petitioner has been granted exemption which the petitioner availed of in the past. The petitioner should be permitted to continue to enjoy the exemption till the remainder of the period as per the original promise. This is part of the legitimate expectation which is reasonable and which has to be given due weight failing which the action of the respondents in denying the exemption would be unreasonable and arbitrary. The petitioner has a legitimate expectation of being treated in a certain way on account of the promise made by the State G....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... "...................In the light of the aforesaid admission by the State Government, it is no longer open to the successive Government to take a contradictory stand without supporting it with any documentary evidence. The State Government may be relieved from the liability to carry out its promise on the ground of necessity or expediency. The burden to prove such ground is upon the State Government. The standard of proof required to discharge such burden is strict, heavy and rigorous which the State Government has failed miserably. The State Government has failed to show the material by which action was taken to withdraw the sugar policy. Consequently, we are of the opinion that the principle of promissory estoppel is fully attracted. (emphasis supplied) ".....................The State Government has the competence to float a policy, modify it or to rescind it. That is the executive power given to it by law. The discretion to withdraw the policy is wide enough, but what is imperative is that the withdrawal of the policy must be fairly made on the ground of necessity or expediency and should not be arbitrary. Every action of the State has to be tested on the touc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'. He further submitted that the State Government and the intervener L.H. Sugar Factories had filed Special Leave Petitions in the Supreme Court challenging the above decision of this Court in writ petitions nos. 1853 and 1854 dated 17.09.2014. Hon'ble Supreme Court, after hearing the parties, issued Notice on the said SLPs and these SLPs were converted into Civil Appeals. While the State Government pleaded its power to change/modify the Policy as a policy decision, the Intervener raised various contentions and challenged the Policy being in violation of Article 14 and 19(1)(g) and other constitutional provisions. Hon'ble Supreme Court after hearing the parties in detail on various dates dismissed the Civil Appeals of the State Government and the intervener by its common Order dated 07.03.2018. The Hon'ble Supreme Court in its Order dated 07.03.2018 held as under: "Heard learned counsel for the parties and perused the record. We do not find any ground to interfere with the impugned order. The appeals are accordingly, dismissed" Shri Bhalla submits that following the doctrine of merger, the order of the Co-Ordinate Bench of this Court dated 17.09.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nter affidavit claiming that G.O. dated 04.06.2007 withdrawing the Policy is infact a policy decision by the State Government taken after due application of mind due to huge financial burden and in the larger interest of the public specially the cane growers and the same is not amenable to writ jurisdiction. The petitioners filed rejoinder to the Counter affidavit by the State whereafter the State Government filed a Supplementary Counter Affidavit on the ground that due to oversight, certain relevant facts could not be mentioned in the Counter affidavit filed earlier in the matter. It is stated in the Supplementary Counter Affidavit that as a result of Sugar Industry Promotion Policy-2004, an unhealthy competition has been generated between the sugar factories. It is submitted that the state government was finding it impossible to meet the load of financial outlay required to fund the Policy and therefore the state Government in its wisdom decided to do away the Policy. Hostile discrimination within sugar sector itself was cited another reason for withdrawing the Policy. Various judgments from the Supreme Court were cited in support of the argument that the State Government is c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hri Singh subsequently submitted that the State Government has constituted a Committee to look into the claims of all the petitioners and get it examined by "Vishesh Lekha Parikshan". However, it was not clear whether that Committee would look into the claims of the petitioners by ignoring or without being influenced by the withdrawal of the Policy by the State Government's Order dated 04.06.2007 and the Notifications which have been withdrawn subsequently during the pendency of these writ petitions before this Court. Shri Singh submitted that an affidavit would be filed by the State Government clarifying its stand. The State Government filed an affidavit on 10.09.2018 stating that the State Government vide G.O. dated 15.06.2018 constituted special Audit Team/Committee to examine the claims of the Companies/Units claiming the benefits/exemptions under SIPP-2004 in furtherance of the judgments of the Hon'ble Courts. The G.O. No. 1324/46-2-18-185/06TC dated 15.06.2018 constituting the Audit team was placed on record. It was further stated in the affidavit dated 10.09.2018 that the Special Audit Team /Committee shall examine all Applications/claims preferred in furtherance of the Suga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ane farmers could be a justification for revocation of the Policy, denying the benefit to the petitioners and whether for any default, if any, in an individual case, would be a valid ground for revoking the Policy itself? V) Whether once the Notifications were issued to exempt the sugar industries covered by the policy from payment of various taxes and those Notifications having not been withdrawn during the period upto which benefits could be claimed by the petitioners under the Scheme, mere executive order passed by the State Government, would have the effect of revocation of the Policy as well as nullifying the Notifications already issued? VI) Whether the State Government could have withdrawn the exemptions and revoke the incentive Scheme for no valid reasons and whether these pleas of promissory estoppal or legitimate expectation would render the action of the State government, a nullity or bad in law? VII) Whether the incentives unequivocally promised and exemptions granted could have been taken back without there being any overwhelming public interest, by taking an entirely different stand? Most of the above questions would stand answered by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Everyone is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned: the former is equally bound as the latter. It is indeed difficult to see on what principle can a Government, committed to the rule of law, claim immunity from the doctrine of promissory estoppel. Can the Government say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Government would be only after the applicant had produced such a certificate. The concept of 'timely payment' or 'always in compliance of timely payment' of cane price payment throughout the life time of the Policy was not envisaged in the original or the amended Policy and the only requirement was that the payment of entire cane price including arrears, if any, be made before availing the benefits under the Policy. It is nobody's case that those petitioners who had been granted the 'Eligibility Certificate' did not make the full payment of entire cane price even if there was some delay in making such payment to the farmers. It would be interesting to make a reference to 'Co-generation and Distillery Promotion Policy-2013' attached by the State Government to its affidavit dated 28.11.2017 filed in this Court, which stipulated that the benefits under that policy would be available only if the company/unit has made 'timely payment' of entire cane price. If 'timely payment' was so critical element of the Policy, State Government would have employed similar language as used in the case of Distillery Policy of 2013. The contention of the delay in 'timely payment' of cane price is t....