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2014 (10) TMI 561 - HC - VAT and Sales TaxImposition of purchase tax on sugarcane - Tax exemption - principle of promissory estoppel and legitimate expectation - Held that - The petitioner, upon the assurances and promises contained in the sugar industry promotion policy, 2004 and the steps taken by the government to provide employment and in furtherance to the notification issued under Section 14 of the Act, decided to make investment in the sugar industry in the State of Uttar Pradesh. Based on the eligibility certificates, the petitioner claimed exemption from purchase tax on cane which was duly granted. In addition to the aforesaid, the petitioner was given benefit which the petitioner availed of under other statutes as per the sugar policy such as exemption from entry tax for sale of non-levy sugar produce by the petitioner, exemption from U.P.Trade Tax on sale of molasses, exemption from administrative charges on molasses, reimbursement of charges of cane transportation, reimbursement of additional cost on transport of sugarcane etc. The aforesaid exemption was duly availed of by the petitioner in terms of the sugar policy. Petitioner made a huge investment in the State of U.P. under a promise to it that it would be granted an exemption from payment of purchase tax, etc. under various statutes for a period of 10 years. The petitioner was granted an eligibility certificate. Exemption was also availed of by the petitioner. Consequently, it is not open for the State Government to resile from its promise and deprive the petitioner the benefit of the tax exemption in view of the substantial investments made by the petitioner. We find that the State Government was also benefited by the investment made by the petitioner in the form of industrial development in the State and increase in employment which is in the larger interest of the State. Consequently, the impugned action on the part of the respondents is patently unreasonable, arbitrary and violative of Article 14 of the Constitution. 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 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. - notifications are still existing and are in force. The sugar policy may have been revoked but the notifications issued under the statutes still continues to be operative. The benefit accrued under a notification is still available to the petitioner and can be availed of since the same has not been withdrawn. The exemption from purchase tax on purchase of sugarcane was granted to the petitioner company vide notification no. 502/S.Chi.U.Ana-1-06-2528-2004 dated 16.05.2006 issued under Section 14(1) of the Act, which are still in existence and is operative. Thus, the respondent State is bound to provide exemption and benefit of purchase tax to the petitioner. Even though the withdrawal of the sugar policy is arbitrary and has been passed without any application of mind, we are not inclined to quash the said order dated 04.06.2007 as we are of the opinion that the petitioner would get the relief even without the quashing of the order dated 04.06.2007. The impugned demand notices demanding payment of sugarcane purchase tax from all the petitioner s existing units are quashed. The petitioners are entitled for the incentive/remission/exemption etc. as per the sugar policy and the notifications issued under the statutes for the remaining period. In so far as Maqsudapur unit is concerned, the petitioner will produce necessary documents before the State Government, in support of their claim which would be examined by the State Government or its Committee constituted for this purpose and pass appropriate orders for exemption/remission, etc. or otherwise within six weeks thereafter. - Decided in favour of assessee.
Issues Involved:
1. Validity of demand notices for purchase tax on sugarcane. 2. Applicability of the Sugar Industry Promotion Policy, 2004. 3. Principle of promissory estoppel. 4. Legitimate expectation of the petitioner. 5. Withdrawal of the sugar policy by the State Government. Detailed Analysis: 1. Validity of Demand Notices for Purchase Tax on Sugarcane: The petitioner, a public limited company engaged in the manufacture and sale of sugar, challenged the demand notices issued by the respondents for the realization of purchase tax on sugarcane. The petitioner argued that they were entitled to exemptions under the Sugar Industry Promotion Policy, 2004, and the subsequent notifications issued under various statutes, including the Uttar Pradesh Sugarcane (Purchase Tax) Act, 1961. 2. Applicability of the Sugar Industry Promotion Policy, 2004: The Sugar Industry Promotion Policy, 2004, was introduced to promote and encourage investment in the sugar industry in Uttar Pradesh. The policy provided various incentives, including exemption from purchase tax on sugarcane, for companies investing a minimum of Rs. 350 crores for five years and Rs. 500 crores for ten years. The petitioner claimed that they had made substantial investments and were granted eligibility certificates by the State Government, entitling them to these exemptions. 3. Principle of Promissory Estoppel: The petitioner argued that the State Government's withdrawal of the sugar policy violated the principle of promissory estoppel. The doctrine of promissory estoppel is well-established in administrative law, ensuring that a promise made by the government, which induces the promisee to act upon it, must be honored. The court cited several precedents, including Motilal Madampat Sugar Mill Vs. State of U.P. and Union of India Vs. Godfrey Philips India Ltd., affirming that the government is bound by its promises if the promisee has acted upon them, altering their position. 4. Legitimate Expectation of the Petitioner: The petitioner contended that they had a legitimate expectation of being treated fairly based on the government's policy and promises. The doctrine of legitimate expectation is part of the principles of natural justice, ensuring that the government honors its commitments. The court referenced cases like National Buildings Construction Corporation Vs. S. Raghunathan and others and Navjyoti Coop. Group Housing Society Vs. Union of India, supporting the petitioner's claim that the withdrawal of the policy without proper justification was arbitrary and unreasonable. 5. Withdrawal of the Sugar Policy by the State Government: The State Government withdrew the sugar policy on 04.06.2007, arguing that it was causing a loss to the public exchequer and was not in public interest. However, the court found that the withdrawal was not supported by sufficient evidence or detailed reasons. The court emphasized that the government cannot arbitrarily change its stand, especially when the policy had led to substantial investments and benefits for the state. The court highlighted the State Government's previous admissions in its counter affidavit, justifying the sugar policy and its benefits. Conclusion: The court concluded that the State Government's withdrawal of the sugar policy and the subsequent demand notices for purchase tax were arbitrary, unreasonable, and violative of Article 14 of the Constitution. The petitioner was entitled to the exemptions and incentives as per the original policy and the notifications issued under various statutes. The court quashed the demand notices and directed the State Government to honor the exemptions for the remaining period as per the policy. The petitioner was also allowed to produce necessary documents for the Maqsudapur unit to avail the incentives, which the State Government would examine and pass appropriate orders within six weeks. The writ petitions were allowed with costs.
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