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2019 (9) TMI 522 - HC - VAT and Sales TaxDoctrine or promissory estoppel - Incentive scheme - issuance of eligibility certificate - the date from which the incentives to be given to the Petitioner were to take effect - HELD THAT - The Incentive Scheme has been framed by the State with a view to ensure equal distribution of wealth and means of production to the common benefit of citizenry of the State. The ostensible purpose was to encourage setting up of industrial units across the State of Maharashtra so that the employment is made available to greater sections of the society and the economy of the State as a whole stands to gain. The object and purpose of the Incentive Scheme is in consonance with the ideals held aloft by the directive principles of State policy contained in Part IV of the Constitution of India, in particular, Article 39(c). In the case of CENTER FOR LEGAL RESEARCH AND ORS. VERSUS STATE OF KERALA 1986 (5) TMI 274 - SUPREME COURT , the Hon'ble Apex Court held that the Court may issue suitable directions so that the Government may perform its duty to implement the directive principles of State Policy. The law so crystallized in relation to the status of the directive principles of State Policy would tell us that if there is any action of the State or any executive order made by the State which dilutes or abridges the mandate of the directives, the Court in exercise of power of judicial review can annul the action or the executive order. The only condition necessary for doing so would be that the executive order or the law underlying the impugned action or order should have a reasonable nexus with the directive principles or should be made for implementing the directive principles and this has to be ascertained by examining nature and character of the basic executive order or the law. Sometimes, even the basic law or order could be in derogation of the directives. The impugned order dated 10th August 2017 is hereby quashed and set aside and the Commissioner of Sales Tax or any authorized Officer is directed to specify the effective date of the Eligibility Certificate without curtailing the validity period in terms of clause 3.1(3) of the Incentive Scheme within a period of four weeks from the date of receipt of this Judgment.
Issues Involved:
1. Curtailment of the validity period of the Eligibility Certificate. 2. Reduction of incentives under the Incentive Scheme and the application of the doctrine of promissory estoppel. Issue-wise Detailed Analysis: Curtailment of the validity period of the Eligibility Certificate: The Petitioner, a registered company involved in the manufacture of vegetable oil and allied products, set up a factory unit in Amravati under the 'New Package Scheme of Incentives, 1993' (Incentive Scheme). The scheme provided monetary and other incentives, including tax subsidies or exemptions, contingent on obtaining an Eligibility Certificate from the District Industries Centre. The Petitioner applied for and received this certificate, valid for nine years, on 20th March 2017. However, when the certificate was sent to the Commissioner of Sales Tax to specify the effective date, the Commissioner curtailed its validity by about three years through an order dated 10th August 2017. The Petitioner challenged this curtailment, arguing that the Commissioner lacked the authority to modify the validity period, which was solely within the purview of the Implementing Agency. The court agreed, stating that the Commissioner’s role was limited to specifying the date of effect and not altering the validity period. Consequently, the order curtailing the validity period was quashed and set aside. Reduction of incentives under the Incentive Scheme and the application of the doctrine of promissory estoppel: The Petitioner also contended that the reduction of incentives under the Incentive Scheme due to a new tax structure violated the principle of promissory estoppel. The Petitioner argued that the incentives promised under the scheme should remain unaffected by the new tax policy, citing the consistent application of promissory estoppel by the Supreme Court in cases like M/s Motiram Padampat Sugar Mills Company Limited v. State of Uttar Pradesh and Gujarat State Financial Corporation v. M/s. Lotus Hotels Pvt. Ltd. The court examined the Incentive Scheme and noted its objective to disperse industries across Maharashtra, providing employment and equitable distribution of wealth. The court emphasized that the doctrine of promissory estoppel binds the State to its promises if the promisee has acted upon them, incurring liabilities. The court found that the Petitioner had relied on the State's promise and made substantial investments. Therefore, the State could not unilaterally reduce the incentives without demonstrating overriding public interest or exceptional circumstances. The court concluded that the reduction of incentives mid-way through the scheme’s operation was not permissible and directed the State to implement the Incentive Scheme as it stood at the time of issuing the Eligibility Certificate. The court allowed the State to modify the scheme to align with the new tax structure, provided it did not reduce the benefits conferred upon the Petitioner. Conclusion: The court allowed the Petition, quashing the order dated 10th August 2017 and directing the Commissioner of Sales Tax to specify the effective date of the Eligibility Certificate without curtailing its validity period. The Respondents were also directed to implement the Incentive Scheme as amended up-to-date, ensuring it aligned with the new tax structure without reducing the benefits conferred upon the Petitioner. The rule was made absolute with no order as to costs.
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