1993 (6) TMI 247 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Eligibility for subsidy under the 10% Central Outright Grant of Subsidy Scheme, 1971.
2. Application of the principle of promissory estoppel.
3. Timely processing and sanctioning of subsidy applications by the State Level Committee.
4. Interpretation and application of relevant case law.

Detailed Analysis:

1. Eligibility for Subsidy under the Scheme:
The petitioner, a company involved in oil extraction, set up its plant in Dhar District, Madhya Pradesh, motivated by the 10% Central Outright Grant of Subsidy Scheme, 1971, which was later amended to provide a 25% subsidy. The company commenced commercial production on 13-4-1988 and applied for the subsidy on 25-6-1988. The application was forwarded to the State Level Committee on 27-8-1989. However, the Government of India issued a circular on 21-7-1989, stating that units whose subsidy was not sanctioned before 30th September 1988 were ineligible, as the Scheme had lapsed.

2. Application of the Principle of Promissory Estoppel:
The petitioner argued that they had set up the industry based on the government's promise of a 25% subsidy, and thus, the principle of promissory estoppel should apply. They cited several Supreme Court decisions, including *Pournami Oil Mills v. State of Kerala*, *Assistant Commissioner Commercial Taxes, Dharwar v. Dharmendra Trading Company*, and *Manglore Chemicals and Fertilisers Ltd. v. Deputy Commissioner of Commercial Taxes*, which upheld the principle that the government could be bound by its promises if entrepreneurs had acted on them.

3. Timely Processing and Sanctioning of Subsidy Applications:
The respondents contended that the petitioner's application was incomplete and that the Scheme had lapsed before the State Level Committee could sanction the subsidy. The petitioner's application was delayed due to procedural issues, and the corrected application was only forwarded on 27-5-1989, by which time the Scheme had ended. The court noted that the essential eligibility conditions were met, and procedural delays should not disqualify the petitioner from receiving the subsidy.

4. Interpretation and Application of Relevant Case Law:
The court reviewed several cases to determine the applicability of promissory estoppel and the substantive versus procedural conditions for subsidy eligibility. In *Manglore Chemical's case*, the Supreme Court emphasized that non-compliance with procedural conditions should not result in the loss of substantive rights. The court also disagreed with the Madras High Court's decision in *M/s. Javkar Fire Works v. Union of India*, which held that there was no promise until the subsidy was sanctioned by the State Level Committee.

Conclusion:
The court concluded that the government could not deny the subsidy based on procedural delays in sanctioning the application. The substantive eligibility conditions were met before the Scheme's expiry. The respondents were directed to decide the petitioner's application on its merits within two months and to pay the subsidy if the petitioner was found eligible. The court emphasized that the principle of promissory estoppel applied, and the petitioner should not suffer due to procedural delays beyond their control. The petition was allowed without any order as to costs, and the security was ordered to be refunded.