2010 (8) TMI 838 - HC - VAT and Sales Tax

Issuance of a writ of mandamus directing the respondents to release reimbursement due to the petitioner under the Freight Neutralization Scheme with effect from April 1, 2003 - also to adjust interest-free loan instalment due from the petitioner to the respondents against the aforesaid reimbursement due and restraining them from seeking repayment of instalments of interest-free loan on balance amount Held that - It is not the case of the petitioner that it is going through the lean phase or has financial problems in returning the interestfree loan. The petitioner does not intend to return the loan, which was disbursed to it during the period 1993 to 1995, which it had utilized till December, 2004, without paying any interest. It has harvested fruits of interest-free investment and the claims made by the petitioner show that it is doing good business. The effort is, thus, not to return the loan, but to usurp the same. The State which is facing a financial crunch and is unable to fund the development schemes cannot be burdened with such unjustified claims especially when the agreements entered into between the petitioner and the State Government at the time of disbursement of loan are very clear and specific, which the petitioner and respondent/State are bound to comply with. Despite violating the terms and conditions of the agreements, the petitioner is resorting to ways and means to avoid repay ment of interest-free loan. The court cannot be a tool and means in such an unholy endeavour, which the petitioner has intended to venture through the present writ petition. Appeal dismissed.

Summary

Issues Involved:
1. Entitlement to reimbursement under the Freight Neutralization Scheme.
2. Adjustment of interest-free loan instalments against the freight subsidy.
3. Applicability of the doctrine of promissory estoppel.

Issue-wise Detailed Analysis:

1. Entitlement to reimbursement under the Freight Neutralization Scheme:
The petitioner, a registered small-scale industrial unit, sought reimbursement under the Freight Neutralization Scheme effective from April 1, 2003. The Scheme was part of the "Industrial Policy Statement-2003" to offset additional freight costs for export units in Punjab. The petitioner claimed Rs. 30,94,063 for the period from April 1, 2003, to September 30, 2005. Despite applying for the subsidy, no amount was released, prompting the writ petition. The respondents acknowledged the Scheme but cited financial constraints and lack of budgetary allocation from the State Government for non-disbursement. The court noted that no funds were provided during the financial years 2003-04, 2004-05, and 2005-06, resulting in the lapse of claims. Consequently, the petitioner was not entitled to the claimed subsidy.

2. Adjustment of interest-free loan instalments against the freight subsidy:
The petitioner also sought to adjust the interest-free loan instalments against the freight subsidy. The interest-free loan, sanctioned under the Industrial Policy Statement-1978, amounted to Rs. 16,90,300, disbursed in four instalments from 1990 to 1995. The petitioner proposed deducting the loan instalments from the subsidy due. However, the court found no provision in the agreements or the Scheme allowing such an adjustment. The agreements explicitly required repayment of the loan in three annual instalments, with penal interest for defaults. The court held that the petitioner's claim for adjustment was misplaced and legally untenable.

3. Applicability of the doctrine of promissory estoppel:
The petitioner invoked the doctrine of promissory estoppel, arguing that the State could not deny the subsidy once the Scheme was in place. The court, however, clarified that promissory estoppel applies when a party alters its position based on a State's promise. In this case, the interest-free loan was granted under a different policy (Industrial Policy Statement-1978), and the Freight Neutralization Scheme came into effect in 2003. The court concluded that the doctrine was inapplicable, as the petitioner's claim for adjustment was not based on any promise made under the Freight Neutralization Scheme.

Conclusion:
The court dismissed the writ petition, emphasizing that the petitioner was not entitled to the freight subsidy due to the lack of budgetary allocation. The request to adjust the interest-free loan instalments against the subsidy was also rejected. The court highlighted that the petitioner's attempt to avoid loan repayment was unjustified, especially given the clear terms of the agreements. The State was directed to recover the dues from the petitioner immediately.