2020 (8) TMI 606 - HC - VAT and Sales Tax

Grant of reimbursement equal to the amount of taxes deposited by the petitioner by way of subsidy - Industrial Incentive Policy, 2006 - transfer the funds on the head of subsidy towards admitted tax paid on account of Bihar VAT Act, Bihar Entry Tax Act as also the Central Sales Tax Act to the Sales Tax Department - It is the submission of the learned senior counsel for the petitioner that the clarification to clause 2 (vi) of the Industrial Incentive Policy, 2006 read with Annexure-III of the said Incentive Policy makes it amply clear that the subsidy/ incentive is to be granted both on VAT as also on Bihar Entry Tax. HELD THAT - It is found from a bare perusal of the Industrial Incentive Policy, 2006 and the Annexures thereto that the said Policy, as notified in the gazette on 25.07.2006, under clause-2(vi) provides for availing 80% reimbursement by the new units, against the admitted VAT amount deposited in the account of the Government, for a period of ten years and the clarification thereof admittedly postulates that incentive would not be payable on the amount imposed as penalty and the difference of amount between tax assessed and accepted under the Central Sales Tax/Bihar Value Added Tax Act, 2005 and Bihar Entry Tax Act, meaning thereby that the incentive would be payable on the rest of the amount under the aforesaid three types of taxes i.e. Central Sales Tax, Bihar Value Added Tax and the Bihar Entry Tax. Moreover, Annexure-III to the Industrial Incentive Policy, 2006 contains the format of pass-book to be maintained for the purposes of claiming the incentive under clause-2(vi) and the same takes into consideration the amount of tax admitted under the Bihar Value Added Tax Act as also the amount paid against the amount of tax admitted under the Bihar Entry Tax Act, hence, there is nothing left for either speculation or determination or adjudication and the plain meaning thereof would definitely have only one connotation i.e. subsidy/ incentive would not only be available on VAT but also on Entry Tax. It is amply demonstrable that the State Government has envisaged to give subsidy/incentive, under the Industrial Incentive Policy, 2006, qua the amount of admitted VAT, which apparently also includes Bihar Entry Tax. This Court is of the view that merely the heading of a provision/clause cannot be relied upon since the same is not always determinative in the matter of interpretation of the policy and the language of the provision coupled with the policy as a whole must be looked into and if the language employed is clear, unambiguous and unequivocal, it must be given effect to, notwithstanding the fact that certain portion of the heading may be inconsistent with the substantive provision. Thus, upon a wholesome reading of the entire Industrial Incentive Policy, 2006 along with its Annexures, this court finds that the provisions contained in the Industrial Incentive Policy, 2006 regarding grant of subsidy/incentive on VAT/Entry Tax is clear, unambiguous as also unequivocal and the only meaning and effect thereof is that subsidy/incentive is to be granted on payment made towards admitted Tax on account of Bihar VAT Act, Bihar Entry Tax Act as well as the Central Sales tax Act - It is a well settled law that the doctrine of promissory estoppel is applicable against the government in exercise of its governmental, public or executive functions and the doctrine of executive necessity on the freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel. The writ petition stands allowed with a direction to the respondents to grant subsidy / reimbursement to the petitioner under the Industrial Incentive Policy, 2006, qua the payments made by it towards admitted Tax under the Bihar VAT Act, Bihar Entry Tax Act and the Central Sales tax Act, for the relevant period for which the petitioner is entitled to, within a period of three months of receipt/production of a copy of this Order.

Issues Involved:

1. Interpretation of the Industrial Incentive Policy, 2006, specifically regarding the inclusion of Entry Tax for subsidy/incentive.
2. Applicability of the doctrine of promissory estoppel against the State Government.
3. Validity of the executive circular dated 31.09.2007 altering the format of the passbook for subsidy claims.

Issue-wise Detailed Analysis:

1. Interpretation of the Industrial Incentive Policy, 2006:

The petitioner sought a directive for the State Government to reimburse taxes paid under the Bihar VAT Act, Bihar Entry Tax Act, and Central Sales Tax Act as per the Industrial Incentive Policy, 2006. The petitioner argued that the policy, as notified in the official gazette, included reimbursement for Entry Tax. Clause 2(vi) of the policy specified that new units would receive 80% reimbursement of the admitted VAT amount deposited, with a clarification that the incentive would not cover penalties or differences between assessed and accepted tax under the Central Sales Tax/Bihar VAT Act and Bihar Entry Tax Act. Annexure-III of the policy, detailing the passbook format, included columns for VAT, Central Sales Tax, and Entry Tax, supporting the petitioner’s claim that Entry Tax was integral to the admitted VAT. The court found that the policy’s language was clear and unambiguous, indicating that the subsidy/incentive covered payments made under all three tax acts.

2. Applicability of the Doctrine of Promissory Estoppel:

The court held that the doctrine of promissory estoppel applied against the State Government. The State had made a clear and unequivocal promise in the Industrial Incentive Policy, 2006, regarding the grant of subsidy/incentive on admitted VAT, which included Entry Tax. The petitioner, relying on this promise, had altered its position by making investments and paying taxes. The court cited several precedents affirming that the government could be held to its promises if the promisee had acted upon them, and the doctrine of executive necessity could not defeat the applicability of promissory estoppel.

3. Validity of the Executive Circular Dated 31.09.2007:

The court found that the executive circular dated 31.09.2007, which altered the passbook format to exclude Entry Tax, was invalid. The Industrial Incentive Policy, 2006, had been approved by the Legislature and notified in the official gazette, and thus could not be amended by an executive fiat. The circular lacked the necessary approval from the Council of Ministers and was not published in the official gazette, rendering it inapplicable for altering the policy. The court emphasized that the policy’s provisions, as originally notified, must be given effect, and any executive action attempting to amend it without proper authority was void.

Conclusion:

The court allowed the writ petition, directing the respondents to grant subsidy/reimbursement to the petitioner under the Industrial Incentive Policy, 2006, covering payments made towards admitted tax under the Bihar VAT Act, Bihar Entry Tax Act, and Central Sales Tax Act. The reimbursement was to be processed within three months of receiving the court’s order. The judgment underscored the importance of adhering to the clear and unambiguous terms of the policy and the binding nature of government promises under the doctrine of promissory estoppel.

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