2021 (2) TMI 959 - HC - VAT and Sales Tax

Doctrine of Promissory Estoppel - Withdrawal of subsidy granted on account of change of opinion - whether the benefits already granted to the petitioner as promised under the Industrial Policy 2004-09 can be withdrawn later on only in the light of change of opinion of the respondents? - definition of captive power plant - benefit of exemption of capital investment made in the captive power plant. Whether the petitioners would be entitled for the benefit of promised subsidy as per the industrial policy of 2004-09 is concerned? - HELD THAT - In order to attract more and more Business Enterprises establishing industrial units in the State of Chhattisgarh, the State Government had given certain incentives in the industrial policy. One such policy was that of granting State Infrastructure Cost Fixed Capital Investment Subsidy. Granting of the subsidy is a sort of financial assistance provided to the new establishment which is to be setup and the financial assistance is in the from of subsidy. Initially the Government decided to grant 25% of total capital investment made in the establishment of a Captive Power Plant as subsidy. Finding the industrial policy and the incentives provided therein, the petitioners sought of setting of a plant in the State of Chhattisgarh and which they did foreseeing the incentives so provided in the policy - The petitioners thereafter having made the investment in a Captive Power Plant approached the authorities claiming for the benefit of subsidy. The State Level Committee in its meeting on 18.02.2009 took a decision to grant eligibility certificate entitling the petitioners the benefit of subsidy to the extent of ₹ 12,81,44,310/- as subsidy. Though the State Level Committee took a decision and the authorities in the State Government issued eligibility certificate, but the petitioners were never provided with the refund of subsidy or adjustment of the same against the subsequent liability. The petitioners had been repeatedly approaching the authorities claiming for adjustment of the tax liability against the incentives that the petitioners are entitled for, which the respondents did not respond and meanwhile the respondents raised the demand notice against the assessment order dated 27.02.2009 and later on the authorities also were able to get a revenue recovery certificate issued against the petitioners against the assessment order dated 27.02.2009 and similar demand notices have raised by the respondents in the subsequent years also. The provisions regarding grant of subsidy subsequently stood amended on 10-08-11, to the extent of the State Government introducing an upper cap of ₹ 300 Lacs (i.e. ₹ 3 Crores) as subsidy to the companies. Later on the State Level Committee in its 23rd meeting held on 31.05.2013 reviewed its earlier decision dated 18.02.2009 and recalled the order and held that the petitioners would not be entitled for the benefit of subsidy at all. Whether the decision of the State Level Committee concluding that subsidy to a captive power plant would be paid only to those captive power plants where the generated electricity is only for its own use and not as defined under Central Legislation i.e. Electricity Act 2003 and Electricity Rules framed thereunder of 2005? - HELD THAT - What has to be visualized at this juncture is that the power that is generated cannot be stored. Whatever power that is generated has to be consumed or else the power would get wasted. What is also to be visualized is the fact that the requirement of power may fluctuate from one month to another depending upon various factors primarily the climatic conditions and also the production, that is to be made in a particular period of time and therefore it would not be possible for any establishment to decide the fixed amount of power that has to be generated and in a given month in case, if the demand falls, the only option available to the petitioner would be to give it to some third agency, which could also be the State Government and in that circumstances if the arguments advanced by the respondents are to apply then this Court has no hesitation in presuming that the benefit of subsidy would not be reaped by any person or any establishment. The policy thus framed would be a redundant or a policy only for name sake, the benefit of which cannot be availed by any establishment as such - in the opinion of the Court was never the intention and the object, firstly while framing the industrial policy, 2004-2009 and secondly while also framing the aforementioned Vidyut Aapurti Nivesh Rules, 2004. There being no specific definition of captive power plant in the industrial policy under which the petitioner s claims were being processed, the safest recourse that could be resorted to was to rely upon the definition of captive power plant as is provided under the Electricity Act as also the Rules framed therein. It is always a legitimate expectation of an investor of getting certain extra benefit in the course of making huge investment in a particular State. At the same time, the benefit so extended is for giving the booster to the investors by the State Government and while framing the policy, the respondents have not felt that the definition of captive power plant would not be what it is under the Electricity Act or it would be a different interpretation that would be given. Therefore it was assumed by the petitioner that the meaning would be the same as that is reflected in the Electricity Act and to add with it applying the same interpretation the State authorities at the first instance had issued the eligibility certificate. Another aspect which needs consideration is that it is not a case of the respondents of the petitioner playing fraud of any manner while seeking the benefit or while obtaining the eligibility certificate. Having granted the eligibility certificate once, it could not have been lightly recalled without a fair and reasonable opportunity of explanation to the petitioner. From the proceedings drawn by the authorities it clearly reflects that though there is a reference of notice having been issued, there is no evidence of the notice being duly served and further it would also reflect that even on the admitted factual dates that are reflected when the notice was issued and the date of the impugned order would again give a clear indication that the authorities had not granted reasonable time to the petitioner to explain - Yet another ground which needs consideration is the fact that there cannot be a definition given to a captive power plant contrary and violative to the definition as provided under the Electricity Act and the Rules framed therein. The withdrawal of the benefit granted to the petitioner by the State level committee through its decision dated 31.5.2013 (Annexure P-7) and the order of the State Appellate Forum dated 9.10.2015 (Annexure P-21) is illegal and unjustified and is liable to be and is accordingly set aside/quashed with consequences to flow - Petitioner would be entitled for the benefit of subsidy in terms of the policy prevalent on the date of issuance of the eligibility certificate, that is, to the extent of ₹ 12,81,44,310/- - Petition allowed.

Summary

Issues Involved:
1. Whether the benefits already granted to the petitioners under the Industrial Policy 2004-09 can be withdrawn later due to a change of opinion by the respondents.
2. Definition and interpretation of "captive power plant" for determining eligibility for subsidy under the Industrial Policy 2004-09.

Detailed Analysis:

Issue 1: Withdrawal of Subsidy Benefits
The primary issue is whether the benefits promised under the Industrial Policy 2004-09 can be withdrawn later. The court referenced a Division Bench judgment in WPT 36/2013, which settled this issue by stating that a policy cannot retroactively alter benefits already granted. The judgment emphasized that policies are meant for the present or future and cannot change past transactions. The court held that the benefits provided under the Industrial Policy 2004-09 were based on the rules existing at that time, and any subsequent policy or notification cannot retroactively alter these benefits. The petitioners had a "Legitimate Expectation" to receive the benefits as promised, and the State cannot curtail these benefits after the policy period has expired. The court concluded that the petitioners are entitled to the subsidy as promised under the Industrial Policy 2004-09.

Issue 2: Definition of Captive Power Plant
The second issue pertains to the definition of "captive power plant" and whether the petitioners' plants qualify for the subsidy. The State Level Committee had decided that the subsidy would only be granted to captive power plants generating electricity solely for their own use. This decision was challenged by the petitioners, who argued that the definition under the Electricity Act 2003 and the Electricity Rules 2005 should apply. According to these laws, a captive generating plant is one where at least 51% of the electricity generated is consumed by the plant itself, allowing for some surplus to be sold. The court found that the State's restrictive interpretation was not aligned with the central legislation and would lead to impractical and absurd results. The court emphasized that the policy's intention was to promote investment and development, and the restrictive interpretation would undermine this goal. The court held that the definition under the Electricity Act should prevail, and the petitioners' plants qualify as captive power plants eligible for the subsidy.

Conclusion:
The court concluded that the benefits under the Industrial Policy 2004-09 could not be withdrawn retroactively and that the petitioners are entitled to the subsidy as initially promised. The definition of "captive power plant" under the Electricity Act 2003 and the Electricity Rules 2005 should apply, making the petitioners' plants eligible for the subsidy. The court set aside the State Level Committee's decision and the State Appellate Tribunal's order, directing the State to adjust the subsidy against the petitioners' tax liabilities. The introduction of an upper cap of ?3 Crores in 2011 was deemed prospective and not applicable to the petitioners' claims. The writ petitions were allowed with the consequences as discussed.