9911796707
TMI Blog1993 (6) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... processing and refining edible and nonedible oils in the State of West Bengal. The applicant No. 2, who happens to be one of the promoter-directors of the applicant No. 1, had discussions with the Director of Cottage and Small Scale Industries, Government of West Bengal, for setting up of such a unit. He was given a booklet containing. "Guidelines for Cottage and Small Scale Industries" by the Directorate of Cottage and Small Scale Industries, Government of West Bengal. It was stated in the booklet that new small-scale units which had started production for the first time after March 31, 1975, had been exempted from the liability to pay sales tax under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter referred to as "the Act", for the sake of convenience), on the goods manufactured by them for a period of three years from the date of commencement of their first sales, in terms of the Finance (Taxation) Department's Notification No. 1823 F.T. dated April 1, 1975 read with that department's Notification No. 1810 F.T. dated April 1, 1976. The promoterdirectors of the applicant No. 1 prepared a feasibility report, keeping in view the various facilities, concessions and incentives w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 15,000 for supply of the pump. On February 12, 1983, order was placed by the applicants with M/s. Texmaco Ltd. for supply of some equipments for a sum of Rs. 49,104. The applicants made advance payment of Rs. 20,000 for the purpose. These orders along with the advances were accepted by M/s. Texmaco Ltd. by a letter dated February 17, 1983 and by M/s. Ingersoll Rand by a letter dated February 25, 1983. All on a sudden, the Government of West Bengal by notification, bearing No. 1185 F.T. dated March 31, 1983, withdrew the exemption from sales tax in respect of newly set up small-scale industrial unit, if such unit was for manufacture, inter alia, of mustard oil, coconut oil, groundnut oil, rape oil and mixtures thereof. The applicants contend that the exemption from payment of sales tax in respect of newly set up small-scale industrial units in the State of West Bengal, as earlier provided for in rule 3(66) of the Rules, cannot be taken away by such notification dated March 31, 1983. The applicants allege that this notification dated March 31, 1983, is violative of article 14 of the Constitution. According to them, provisional certificate under rule 3(4) of the Rules was granted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mall-scale industrial unit of the applicant No. 1 as well as for issuing the required eligibility certificate to the applicant No. 1 and supplying the required declaration forms to the applicant No. 1. There is also a prayer for issuance of a writ in the nature of prohibition commanding the respondents to forbear from giving any effect to or taking any step whatsoever in furtherance of the Notification No. 1185 F.T. dated March 31, 1983. 4.. The case of the applicants in RN-263(T) of 1989 is the same as in Case No. RN-509(T) of 1989 as regards non-granting of eligibility certificate to the applicants on the basis of their application dated September 15, 1984. The applicants allege that during December, 1988 the applicants placed orders with various parties at Sitapur for supplying groundnut oil for the purpose of further processing in West Bengal and thereafter sale in West Bengal. Subsequently, the applicant No. 1 made an application for permit before the respondent No. 1, Commercial Tax Officer, Shyambazar Charge, under rule 93 of the Rules. The applicants contend that the issue of permit has been withheld because of nongranting of eligibility certificate by the departmental au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cottage and Small Scale Industries, the respondents contend that the applicants did not rely on the alleged promises by the Government regarding tax exemption for setting up their factory. The respondents further contend that the applicants purchased the boiler, installed the same, obtained provisional certificate, obtained registration certificate under the Rules and applied for eligibility certificate much after April 14, 1983, on which date the operation of rule 3(66) of the Rules ceased. Though concession or exemption from payment of tax was granted subsequently under rule 3(66a) of the Rules, no concession regarding payment of tax was allowed under Schedule X of the Notification No. 1185 F.T. dated March 31, 1983, in respect of several articles including mustard oil, coconut oil, groundnut oil and rape oil and mixtures thereof. As such, the applicants were not entitled to get exemption from payment of sales tax on sales of mustard oil, groundnut oil or rape-seed oil and mixtures thereof. The respondents contend that as the applicants started production on August 25, 1984, after rule 3(66) of the Rules became inoperative after April 14, 1983, the applicants are not entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppel. No argument has been advanced by Mr. Bajoria for the applicants regarding the alleged violation of article 14 or article 19 of the Constitution. Rule 3(66) of the Rules was inserted by Notification No. 1823 F.T. dated April 1, 1975. Subsequently, sub-rule (66) to rule 3 of the Rules was re-numbered as clause (i) of sub-rule (66) with effect from April 1, 1980, by Notification No. 1659 F.T. dated April 1, 1980. On the basis of this Notification No. 1659 F.T. dated April 1, 1980 and subsequent Notification No. 1353 F.T. dated April 1, 1981 and Notification No. 1185 F.T. dated March 31, 1983, rule 3(66) of the Rules stood as follows: "3. In calculating his taxable turnover a dealer liable to pay tax under section 4 or 8(3) of the Act may deduct from his gross turnover his turnover on the following, namely: (66)(i) Sales by a newly set up small-scale industry of goods manufactured by it during the period of five years, if the said industry is situated within the area of the Calcutta Metropolitan district as described in the Schedule to the Calcutta Metropolitan Planning Area (Use and Development of Land) Control Act, 1965, * * * Explanation.-For the purpose of this clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative, filed on November 19, 1992 xerox copies of the application for registration and the certificate of registration under the Act [vide Order No. 22 dated November 19, 1992 in Case No. RN-509(T) of 1989]. A scrutiny of these documents filed during the course of hearing as well as the annexures to the writ petitions and the affidavits-inopposition goes to show that at the time of applying for provisional registration certificate under rule 3(4) of the Rules on January 31, 1983, the applicants mentioned that they had established a business of manufacturing in West Bengal for sale of refined oil. It was stated in that application that the applicants had already completed all the necessary formalities for starting of production by March 31, 1983. In this application [annexure P to the affidavit-in-opposition in Case No. RN-509(T) of 1989] it was not mentioned as to whether the applicants wanted to produce refined edible oil or any other type of refined oil which would not be edible. Be that as it may, on the basis of the papers supplied by the applicants the provisional certificate was granted under rule 3(4) of the Rules on May 3, 1983, for the period from May 3, 1983 to A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te all the required formalities before the expiry of the validity of the registration, they should apply for getting the period of validity extended one month before the date of expiry of the validity of the registration. The absence of allotment of permanent S.S.I. number to the applicants has called for comments by Mr. T.N. De, the learned State Representative. During the course of hearing Mr. Bajoria, learned Senior Advocate for the applicants, filed the permanent registration certificate as S.S.I. unit from October 4, 1985, on showing amendment of the original processing activity shown in the provisional certificate as "refining of edible oil". The processing activity was amended in the permanent registration certificate as "refining of edible oil including solvent extracted rape seed oil". All these facts have led to the contention by Mr. T.N. De, the learned State Representative, that the applicants did not know about the concessions declared by the State Government under rule 3(66) of the Rules before September 15, 1984, when the applicants applied for granting of eligibility certificate. Considering the materials on record, I am not inclined to state that before September 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the applicants would be entitled to get eligibility certificate on the basis of the doctrine of promissory estoppel. Mr. Bajoria has referred, in this connection, to the cases of Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh [1979] 44 STC 42 (SC); [1979] 118 ITR 326 (SC), Shri Bakul Oil Industries v. State of Gujarat [1987] 64 STC 304 (SC), Pournami Oil Mills v. State of Kerala [1987] 65 STC 1 (SC) and State of Bihar v. Usha Martin Industries Ltd. [1987] 65 STC 430 (SC). 11.. Mr. T.N. De, the learned State Representative, has contended that the doctrine of promissory estoppel cannot be invoked in case of statutory rules like rule 3(66) or 3(66a) of the Rules, framed on the basis of the provisions in section 26(2)(d) of the Act. He has referred to the cases of Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory [1972] 29 STC 169 (SC), Kailash Nath v. State of U.P. [1957] 8 STC 358 (SC), Bombay Conductors and Electricals Ltd. v. Chandramouli [1984] 55 STC 162 (Delhi) [FB], Bansal Exports (P.) Ltd. v. Union of India [1984] 55 STC 256 (Delhi) [FB], Excise Commissioner v. Ram Kumar AIR 1976 SC 2237 as well as a decision of this Tribunal in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 STC 358 (SC) have been discussed in the case of Bombay Conductors and Electricals [1984] 55 STC 162 (Delhi) [FB]. The divergence of opinion in the case of Jit Ram Shiv Kumar AIR 1980 SC 1285 has since been resolved by the decision of the Supreme Court by a larger Bench in the case of Union of India v. Godfrey Philips India Ltd. [1986] 158 ITR 574; AIR 1986 SC 806. The latest view of the Supreme Court, as stated in the case of Godfrey Philips India Ltd. [1986] 158 ITR 574, is that the doctrine of promissory estoppel is applicable against the Government in the exercise of its governmental, public or executive functions and the doctrine of executive necessity or freedom of future executive action cannot be invoked to defeat the applicability of the doctrine of promissory estoppel. There cannot be, however, any promissory estoppel against the Legislature in the exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. The doctrine of promissory estoppel cannot also be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Assessing Authority [1992] 85 STC 432 (SC)]. (3) To invoke the rule of promissory estoppel the project must have been undertaken and construction work itself should have started in response to the notification granting exemption and if an industry is commissioned within a few days or weeks of such notification, the doctrine of promissory estoppel cannot be invoked as the issuance of the notification constitutes only a fortuitous circumstance [See Shri Bakul Oil Industries v. State of Gujarat [1987] 64 STC 304 (SC)]. 13.. The aforesaid principles go to show that the applicants are not entitled to invoke the doctrine of promissory estoppel. Rule 3(66) or rule 3(66a) of the Rules has been made by the State in exercise of power under section 26(2)(d) of the Act. Such rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act. Such statutory rules cannot be described as, or equated with, administrative directions (State of U.P. v. Babu Ram Upadhyay AIR 1961 SC 751 and State of Tamil Nadu v. Hind Stone AIR 1981 SC 711). Such statutory rule by the dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1185 F.T. dated March 31, 1983, when it was competent to issue it in exercise of rule-making power under section 26 of the Act of 1941 [Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory [1972] 29 STC 169 (SC)]. 14.. Mr. Bajoria for the applicants has contended that alteration of position for invoking the doctrine of promissory estoppel does not mean complete setting up of any unit. According to him, steps taken for setting up of a unit in the shape of taking tenancy and placing orders for purchase of equipments will be sufficient for invoking the doctrine of promissory estoppel, when such steps were taken on the basis of the promise of tax holiday offered by the Government. This contention cannot be accepted. I have already referred to the relevant portions of rule 3(66) of the Rules. Item (iii) below the explanation to rule 3(66)(i) of the Rules, prior to its amendment by Notification No. 1185 F.T. dated March 31, 1983, stood as follows. at the relevant period: "3(66)(i) ........................ Explanation.-For the purpose of this clause 'newly set up small-scale industry' means a new industrial unit,- (i) to (ii) ....................... (iii) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. Rule 3(66) of the Rules stipulated that the tax holiday would remain in force for a period of 5 years from the date of sale of the manufactured product of the applicants. The subsequent Notification No. 1185 F.T. dated March 31, 1983, would be prospective. The applicants would be governed by rule 3(66a) for starting production long after rule 3(66) ceased to be in operation. It has been held by this Tribunal in the case of B.D.J. Stamping Industries Ltd. v. Commercial Tax Officer [1994] 93 STC 494; [1992] 25 STA 319 that the last date for application for eligibility certificate by registered dealers under rule 3(66) is not open-ended but April 14, 1983. The applicants must have started production by April 14, 1983 for invoking the doctrine of promissory estoppel. This was not done by the applicants as production was started on August 25, 1984 and the first sale of manufactured product was on August 29, 1984. The applicants had not altered their position by acting on the representations and assurances of the Government regarding tax holiday. They have not started production by April 14, 1983. The result will be that the applicants will not be able to invoke the doctrine of prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved at in accordance with law after granting an opportunity to the applicants of being heard. 16.. Cases Nos. RN-509(T) of 1989 and RN-263(T) of 1989 are accordingly dismissed with the rider that the question of granting eligibility certificate to the applicants, on the basis of their application dated September 15, 1984 to the Assistant Commissioner of Commercial Taxes, North Circle, for refining linseed oil should be decided and disposed of, in accordance with law, within a period of three months from this date, after giving an opportunity to the applicants of being heard in the matter. No order is made as to costs. 17.. L.N. RAY (Judicial Member).-I agree. 18.. P.C. BANERJI (Technical Member).-The existing law of promissory estoppel in its present form was laid down by the Supreme Court in Motilal Padampat Sugar Mills' case [1979] 44 STC 42 (SC); [1979] 118 ITR 326. Subsequently, in the case of Jit Ram Shiv Kumar AIR 1980 SC 1285, the Supreme Court expressed certain reservations with regard to some of the propositions in Motilal Padampat's case [1979] 44 STC 42 (SC); [1979] 118 ITR 326. It was observed in Jit Ram's case AIR 1980 SC 1285 that the principle of estoppel w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the detailing to the Government. It is like painting by broad strokes across the canvas to be finished later on by detailing. The enabling Act first grants power to make Rules in general terms "to carry out the purposes of the Act" and then to say that "in particular and without prejudice to the generality of the foregoing provisions", such Rules may provide for a number of enumerated matters. Here the Rules in question were made by the State Government in exercise of powers under section 26 of the Bengal Finance (Sales Tax) Act, 1941. The said section at clause (d) of sub-section (2) provides for prescription of "the other sales, a turnover in respect of which may be deducted from a dealer's gross turnover in computing his taxable turnover as defined in section 5". The rules in question have been made in terms of the specific prescription in section 5(2)(a)(iv) of the Bengal Finance (Sales Tax) Act. 23.. It is true that the power to legislate when delegated by Legislature differs from Legislature's own power to legislate. Legislature is supreme in its own field and its power to legislate is, therefore, unlimited to that extent. Any power delegated by Legislature is necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in a representative Government by the Executive, as taxation is based on the principle that there can be "no taxation without representation". In this connection the following observations of the Supreme Court in Narinder Chand Hem Raj v. Lt. Governor, Administrator, Union Territory [1972] 29 STC 169 are relevant: "The power to impose a tax is undoubtedly a legislative power. That power can be exercised by the Legislature directly or, subject to certain conditions, the Legislature may delegate that power to some other authority. But the exercise of that power, whether by the Legislature or by its delegate, is an exercise of a legislative power. The fact that the power is delegated to the executive does not convert that power into an executive or administrative power. No court can issue a mandate to a Legislature to enact a particular law. Similarly, no court can direct a subordinate legislative body to enact or not to enact a law which it may be competent to enact." 28.. This is the position that emerges from the decisions of the Supreme Court discussed above. Mr. R.N. Bajoria, the learned Senior Advocate, however, contended that the nature of the power remains the same whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust, 1984 after delivery and installation of plant and machinery. Production started on and from August 25, 1984. It was registered as a dealer on August 29, 1984. It applied for eligibility certificate on September 15, 1984. 33.. The main challenge of the applicant is directed against Notification No. 1185 F.T. dated March 31, 1983. Its case is that the unit set up on the promise should have been given exemption under rule 3(66) as it stood prior to the amendment made by the said notification. Its contention is that the said notification cannot be given retrospective effect and hence could not apply to entrepreneurs, who acted on the promise contained in the unamended rule. If Government revokes the earlier order of exemption it should be subject to promissory estoppel. In this connection reference was made to the following observations made by the Supreme Court in Pournami Oil Mills [1987] 65 STC 1. "The power of revocation and withdrawal will be subject to one limitation, viz., the power cannot be exercised in violation of the rule of promissory estoppel. " 34.. The case of the respondents may be summed up thus: The applicant prayed for eligibility certificate under rule 3(6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take steps for setting up new units, a new scheme was introduced after abolishing the old scheme with due notice. Had the said abolition been made retrospectively there could have been a prima facie charge of resiling from a promise in appropriate cases. 37.. The main question is whether the applicant acting on the promise altered its position. The applicant claims that it entered into an agreement to take on rent certain premises; it placed orders with two firms for supply of vacuum pump and mild steel dished ends with advance; a company was incorporated and a feasibility report was prepared. These are the only actions it had taken prior to April 1, 1983 when the benefit of rule 3(66) was made unavailable to new applicants. The applicant had notice of discontinuance of the scheme contained in the rule 3(66) as it stood prior to April 1, 1983. It had not set up the industry by that date; it had only taken certain preliminary steps towards that end. One cannot equate these operations to set up the unit with the establishment of the unit itself. Mr. De, the learned State Representative, argued that unless the unit is set up, it cannot be held that the applicant has altered its posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, if any, thus took place after April 14, 1983 when the applicant had notice of the changed position of law in respect of tax holiday. 42.. Mr. Bajoria asserted that the initiatives, which the applicant took in the matter of setting up the unit, Amounted to alteration of position on the part of the applicant. He particularly emphasised the point that for alteration of position, actual setting up of the unit is not necessary. He forcefully advocated the proposition that the initiatives taken in pursuance of the promise, which without abandonment of the project, ultimately culminated in fructification or establishment of the said project, amounted to alteration of position on the part of the applicant. 43.. It is difficult to accept this proposition for various reasons. The initiatives taken before the scheme was closed were not tangible, concrete and substantial enough; these were just a few preliminary steps, which did not indicate that the project has been undertaken or any construction work started. Nor were *Here italicised. these steps irretrievable. The steps were rather half-hearted, hesitant and halting without indicating any serious commitment to the early completi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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