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2019 (12) TMI 61 - SC - VAT and Sales TaxPower of the State to rescind the notification with retrospective effect - doctrine of promissory estoppel - notification providing for rebate in respect of tax payable under the Uttar Pradesh Trade Tax Act, 1948 - withdrawal of facility even in respect of industrial units, which had commenced production and had complied with the conditions for grant of such rebate in terms of Notification dated 27th February, 1998, with retrospective effect - Doctrine of Promissory Estoppel. HELD THAT - The parties have proceeded on the premise that the State Government or the Executive is competent to rescind the earlier notification and the doctrine of promissory estoppel can be no impediment in that behalf. That, however, is hedged or laced with condition that the burden is upon the Government to show that it acted in furtherance to public interest in issuing such a notification otherwise than in accordance with the promise and that the public interest is so overwhelming that it would be inequitable to hold the Government bound by the promise. It is well established that the Court would not act on mere ipse dixit of the Government and must insist on a highly rigorous standard of proof in discharge of its burden by the Government. Resultantly, it is not necessary for us to dilate on the precedents pressed into service by the respondents on the application of doctrine of promissory estoppel of the State Government like any other private party or individual. On a bare reading of provision of Section 5 of the Uttar Pradesh Trade Tax Act, 1948, it is evident that there is no express authority given to the Executive to issue notification for withdrawing or rescinding the rebate facility from a date prior to the date of notification. Section 5(2) merely constrict that power only for allowing rebate with effect from a date prior to the date of notification. That does not include, by necessary implication or otherwise, power to withdraw or rescind the rebate from a date prior to the date of the notification - also, Section 21 of the 1904 Act, is pari materia to the above provision and will be of no avail for withdrawing the rebate from a date prior to the date of the notification. In the present case, it is not necessary to dilate further on this aspect as the plain language of the notification dated 14th October, 2004, itself expressly rescinds notification dated 27th February, 1998 with effect from 14th October, 2004. There is no express or tacit intent manifested from this notification, so as to construe it as bestowing power to withdraw the rebate facility with effect from a date prior to the date of notification as such. On this finding, nothing more is required to be said as the concomitant of this finding would necessarily be that all the industrial units set up after 27th February, 1998 and before 14th October, 2004 which had commenced commercial production, must continue to qualify for rebate for specified term mentioned in notification dated 27th February, 1998, subject to fulfilling all other conditions specified therein. The question of future revenue loss would not arise as the industrial units established in the neighbouring States would not be eligible to avail of the rebate because of rescinding the earlier notification. Suffice it to observe that the argument about future revenue loss cannot be invoked against the industrial units who had already established and commenced production after 27th February, 1998 and before 14th October, 2004. For, it can be safely presumed that the policy makers were fully conscious about the so-called loss of future revenue due to rebate to those units when they had issued notification dated 27th February, 1998. That ground cannot be set up against the industrial units who qualify in all other respect under the notification dated 27th February, 1998 and have made substantial investment running into crores much less as being supervening public interest, as is being placated by the State in these proceedings. Thus, the impugned notification dated 14th October, 2004 can have no application to the settled enforceable right accrued to industrial units who fulfill all other conditions specified in the notification dated 27th February, 1998, having commenced commercial production of the specified goods before 14th October, 2004 - the stand of the State Government about the supervening public interest qua the respondents herein and similarly placed persons, is hereby rejected. The notification dated 14th October, 2004 cannot be construed as having retrospective or retroactive effect to whittle down the accrued rights in favour of such industrial units. Appeal dismissed.
Issues Involved:
1. Power of the State to rescind the notification providing for tax rebate under the Uttar Pradesh Trade Tax Act, 1948. 2. Application of the doctrine of promissory estoppel against the State. 3. Validity of the rescission notification dated 14th October 2004. 4. Impact of the High Court's judgment and subsequent Supreme Court affirmation on the rebate scheme. 5. Supervening public interest as a ground for rescinding the notification. 6. Retrospective or retroactive effect of the rescission notification. 7. Entitlement of the industrial units to the rebate for the period before the rescission notification. Detailed Analysis: 1. Power of the State to Rescind the Notification: The State issued a notification on 27th February 1998, providing a tax rebate for goods with fly ash content. However, due to the lack of new industrial units and increased consumption of fly ash, the State rescinded this notification on 14th October 2004. The Supreme Court examined whether the State had the power to rescind the notification and concluded that Section 5 of the Uttar Pradesh Trade Tax Act, 1948, does not confer express authority to withdraw or rescind the rebate facility from a date prior to the notification. 2. Doctrine of Promissory Estoppel: The respondents argued that they had commenced production based on the representation made in the 1998 notification, and the rescission violated the principle of promissory estoppel. The Supreme Court affirmed that the doctrine of promissory estoppel applies to the State like any other party. The State must justify any deviation from its promise by showing overwhelming public interest. 3. Validity of the Rescission Notification: The Supreme Court found that the rescission notification dated 14th October 2004, could not be given retrospective or retroactive effect. The notification explicitly stated that it would take effect from the date of issuance, thereby not affecting the rights accrued to industrial units that commenced production before this date. 4. Impact of the High Court's Judgment: The High Court had earlier ruled that the rebate scheme discriminated against producers outside Uttar Pradesh, violating Articles 301 and 304(a) of the Constitution. The Supreme Court affirmed this decision, leading the State to rescind the rebate scheme. However, the Supreme Court clarified that this rescission could not apply retrospectively to industrial units that had already commenced production. 5. Supervening Public Interest: The State argued that supervening public interest justified the rescission, citing logistical issues and future revenue loss. The Supreme Court rejected this argument, stating that the reasons provided did not constitute overwhelming public interest. The original intent of the 1998 notification—to promote industrial activity and address environmental issues—remained relevant. 6. Retrospective or Retroactive Effect: The Supreme Court held that the rescission notification could not have retrospective or retroactive effect. The industrial units that commenced production before 14th October 2004 were entitled to continue receiving the rebate for the specified period under the 1998 notification. 7. Entitlement to Rebate: The respondents were entitled to the rebate for the period specified in the 1998 notification, subject to verification of their claims and ensuring they had not passed on the tax burden to consumers. The rebate for Birla Corporation Limited was to continue until 13th December 2008, and for Jai Prakash Associates Limited until 17th September 2014. Conclusion: The Supreme Court dismissed the State's appeals, upholding the respondents' entitlement to the tax rebate as per the 1998 notification. The rescission notification was held not to have retrospective or retroactive effect, and the doctrine of promissory estoppel was applied against the State. The State's argument of supervening public interest was rejected, and the respondents' rights to the rebate were affirmed.
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