2020 (12) TMI 1241 - SC - Indian Laws

Rebate/deduction from electricity duty offered under the Jharkhand Industrial Policy, 2012 - prospective or retrospective effect of notification dated 8 January 2015 issued by the State government in its Department of Commercial Taxes - whether to be in effect from 1 April 2011, when the Industrial Policy 2012 was enforced with retrospective effect? - rebate/deduction from electricity duty in terms of the representation held out in the Industrial Policy 2012 - doctrine of promissory estoppel - whether the Respondent is entitled to claim a rebate or deduction of 50 per cent of the amount assessed towards electricity duty for FYs 2011-12, 2012-13 and 2013-14? A State in breach of policy commitments - HELD THAT - It is time for the State government to take notice of the observations of the High Court in regard to administrative lethargy. If the object of formulating the industrial policy is to encourage investment, employment and growth, the administrative lethargy of the State apparatus is clearly a factor which will discourage entrepreneurship. The policy document held out a solemn representation. It contemplated the grant of a rebate/deduction from the payment of electricity duty not only to new units but to existing units as well who had or would set up captive power plants. The State, in the present case, held out inter alia a solemn representation in terms of Clauses 32.10 and 35.7(b) of the entitlement of the exemption for a period of five years from the date of production - The State government was evidently inclined to grant the exemption. This is not a case where due to an overarching requirement of public interest, the State government decided to override the representation which was contained in the Industrial Policy 2012. Building on Motilal Padampat 1978 (12) TMI 45 - Supreme Court - HELD THAT - The policy contained a provision for monitoring and reviewing and envisaged that all departments and organizations would issue a follow-up notification to give effect to the policy within one month. This was similar to Clause 38(b) of the policy in the present case. No notification was issued by the State of Bihar to give effect to the industrial policy, which lapsed on 31 August 2000. The claim to sales tax exemption by the unit was rejected by the State government on the ground that it had decided not to grant an incentive to a sick industrial unit. A follow-up notification was issued during the pendency of the case before this Court. Promissory estoppel - origins and evolution - HELD THAT - This Court has given an expansive interpretation to the doctrine of promissory estoppel in order to remedy the injustice being done to a party who has relied on a promise. In Motilal Padampat 1978 (12) TMI 45 - Supreme Court , this Court viewed promissory estoppel as a principle in equity, which was not hampered by the doctrine of consideration as was the case under English Law. From estoppel to expectations - HELD THAT - Under English Law, the doctrine of legitimate expectation initially developed in the context of public law as an analogy to the doctrine of promissory estoppel found in private law. However, since then, English Law has distinguished between the doctrines of promissory estoppel and legitimate expectation as distinct remedies under private law and public law - Consequently, while the basis of the doctrine of promissory estoppel in private law is a promise made between two parties, the basis of the doctrine of legitimate expectation in public law is premised on the principles of fairness and non-arbitrariness surrounding the conduct of public authorities. This is not to suggest that the doctrine of promissory estoppel has no application in circumstances when a State entity has entered into a private contract with another private party. Rather, in English law, it is inapplicable in circumstances when the State has made representation to a private party, in furtherance of its public functions. Indian Law and the doctrine of legitimate expectations - HELD THAT - The Court held that the doctrine of legitimate expectation cannot be claimed as a right in itself, but can be used only when the denial of a legitimate expectation leads to the violation of Article 14 of the Constitution - the doctrine of substantive legitimate expectation is one of the ways in which the guarantee of non-arbitrariness enshrined Under Article 14 finds concrete expression. Expectations breached by the State of Jharkhand - HELD THAT - The State having held out a solemn representation in the above terms, it would be manifestly unfair and arbitrary to deprive industrial units within the State of their legitimate entitlement. The State government did as a matter of fact, issue a statutory notification Under Section 9 but by doing so prospectively with effect from 8 January 2015 it negated the nature of the representation which was held out in the Industrial Policy 2012. Absolutely no justification bearing on reasons of policy or public interest has been offered before the High Court or before this Court for the delay in issuing a notification - the State had made a representation to the Respondent and similarly situated industrial units under the Industrial Policy 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, it is held that such a course of action by the State is arbitrary and is violative of Article 14. Assessment and recourse to Article 226 - HELD THAT - The fact remains that so long as the Clause in the exemption notification granting it prospective effect continued to hold the field, the assessing officer as a creature of the statute was bound to enforce the terms of the exemption and accordingly denied any exemption for a period prior to 8 January 2015. The only remedy which was available to the Respondent, was to challenge the terms of the exemption notification which it did by instituting writ proceedings before the High Court Under Article 226. The argument of delay - HELD THAT - The delay of the Respondent in filing a writ petition by itself should not defeat the claim unless the position of the State has been so altered that it cannot be retracted on account of a lapse of time or the inaction of the writ Petitioner. The State has not in the present case either pleaded or argued any hardship if the Respondent were to be granted relief - the Petitioner has come before this Court due to arbitrariness in State action which led to the non-fulfillment of their legitimate expectations. The defence of unjust enrichment - HELD THAT - Nor is the court inclined to accept the plea of unjust enrichment - the High Court has not ordered a refund at all since the duty has been paid. The Respondent cannot be deprived of an adjustment of the excess duty paid. Further, the State's submission that there was no pleading by the Respondent in the High Court on whether the amount being claimed as rebate/deduction had been passed on by the Respondent to its customers is factually incorrect. In the writ petition filed before the High Court, the Respondent specifically asserted that the burden of differential amount of electricity duty, realized by the State from the Respondent herein, was not passed by the latter to its customers, either directly or indirectly or in any other manner. Respondent is entitled to a rebate/deduction from electricity duty - It is necessary, however, to clarify that the Respondent would not be entitled to a rebate/deduction for FY 2011-12. In terms of Clause 35.7(b) of the Industrial Policy 2012, the entitlement ensues from the financial year following the commencement of production. The Respondent commenced production on 17 August 2011. Hence, the order of the High Court would have to be confirmed for FYs 2012-13 and 2013-14. Appeal disposed off.

Summary

Issues Involved:
1. Captive power plant: assessment to electricity duty
2. Industrial Policy 2012
3. Exemption from Electricity Duty
4. Doctrine of Promissory Estoppel
5. Legitimate Expectations
6. Delay in issuance of notification
7. Technical defenses to the claim
8. Unjust enrichment

Detailed Analysis:

Captive power plant: assessment to electricity duty
The Respondent commenced commercial production on 17 August 2011 and was liable to pay duty for distribution and/or consumption of energy from 1 October 2011. Assessment orders were passed for FY 2011-12, 2012-13, and 2013-14 based on returns submitted by the Respondent.

Industrial Policy 2012
The Industrial Policy 2012, notified on 16 June 2012, provided an exemption from the payment of 50% of electricity duty for five years for captive power plants established for self-consumption. Clause 35.7(b) stipulated that entitlements would begin from the financial year following the Date of Production (DoP).

Exemption from Electricity Duty
Despite the policy's stipulation that notifications enforcing its terms should be issued within one month, the State failed to comply. An exemption notification was eventually issued on 8 January 2015, but it was made effective prospectively, contrary to the policy's representation.

Doctrine of Promissory Estoppel
The High Court relied on the doctrine of promissory estoppel, holding that the State's failure to issue a timely exemption notification was contrary to the representation in the Industrial Policy 2012. The doctrine was applied based on precedents like Motilal Padampat and Kalyanpur Cement Ltd., which emphasize that a promise made by the State must be honored to prevent injustice.

Legitimate Expectations
The State's representation in the Industrial Policy 2012 created a legitimate expectation for the Respondent to receive a 50% rebate on electricity duty for five years. The High Court noted that the delay in issuing the notification was due to "bureaucratic lethargy," and the prospective application of the exemption negated the legitimate expectation created by the policy.

Delay in issuance of notification
The State's delay in issuing the exemption notification was unjustified. The High Court found no specific reason for the delay and held that the State's lethargy should not deprive the Respondent of the promised benefit. The notification was deemed effective from the date of the Industrial Policy 2012 (1 April 2011).

Technical defenses to the claim
The State argued that the Respondent did not claim the exemption in its assessment returns and paid the duty without protest. However, the Court noted that the Respondent's only remedy was to challenge the terms of the exemption notification, which it did through writ proceedings. The issue of delay in filing the writ petition was not raised before the High Court or in the Special Leave Petition, and thus could not be a ground for denying relief.

Unjust enrichment
The High Court did not order a refund but allowed an adjustment of future payments. The Respondent had specifically pleaded that the burden of the differential amount of electricity duty was not passed on to its customers, negating the State's claim of unjust enrichment.

Conclusion
The Court affirmed the High Court's judgment that the Respondent was entitled to a rebate/deduction from electricity duty for FYs 2012-13 and 2013-14. The Respondent would not be entitled to a rebate/deduction for FY 2011-12, as the entitlement ensues from the financial year following the commencement of production. The appeals were disposed of accordingly, with no order as to costs.