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TMI Blog2011 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006, the new tax regime now been legislated across the country in a bid to have a common national taxation system - the special tax dispensation made available to cement units by the issuance of the notification dated 2.12.05 lated but for just about five months - Held that: Applicant Company cannot retain tax subsidy in excess of the provisions of the amended RIPS 2003 Regarding principles of promissory estoppel - The amending notification dtd.2.12.2005 nor the RIPS, 2003 itself sought initiation of effective steps just after such notification and the only condition imposed was that the option should be given within the stipulated period and commercial production should be commenced during the operative period of the Scheme and subject to investment being over 200 crores and employment provided to more than 100 persons, and all the conditions admittedly and undisputedly were satisfied by the petitioner company - Held that: The orders granting increased benefit of 75% rebate or subsidy against additional tax liability to the petitioner company were neither erroneous nor prejudicial to the interest of State in any manner - Decided in favor of the assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... id MOU, the petitioner company made investment of over Rs.200 crores for setting up its 3rd, 4th and 5th Units at Bangur City, village Ras, Tehsil Jaitaran, Dist. Pali and another grinding unit at Kushkhera, Tehsil Bhiwadi, Dist. Alwar. Both the units had already commenced commercial production on 21.12.2005 at Pali and 26.3.2007 at Bhiwadi respectively. 6. The State of Rajasthan issued "Rajasthan Investment Promotion Scheme, 2003 (for short "RIPS, 2003)" vide notification dtd.28.7.2003 and operative period of the said Scheme was from 1.7.2003 till 31.3.2008 and inter alia sub-clause 7 of the said Scheme provided for grant of subsidy to the eligible units making new investment during operative period of the said scheme in the form of interest subsidy and wage subsidy subject to a maximum limit of 50% of the tax payable and deposited under the Rajasthan Sales Tax Act, 1994, the Central Sales Tax Act, 1956 and the Value Added Tax Act as and when introduced in the State, which Value Added Tax Act, 2003 came into force in the State of Rajasthan with effect from 1.4.2006. In case of investment made in Modernization/Expansion/Diversification, the amount of subsidy shall be subject to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of actual tax liability; and (b) The remaining subsidy to the extent of 30% of Rajasthan Sales Tax or Value Added Tax and Central Sales Tax liability shall be allowed in form of interest subsidy, wage/employment subsidy out of which interest subsidy shall be limited to 5% of the documented rate of interest and the amount actually paid as interest shall not include penal interest, and wage/employment subsidy. A unit not claiming any interest subsidy can claim wage/employment subsidy to the extent of 30% subject to other conditions under this amendment. 4. The claim of subsidy shall be as per the provisions of this Scheme. (vii) Notwithstanding anything contained in sub clauses (i) to (v) above, in case of investments for expansion of existing cement unit having investment exceeding Rs. 200 crores and with a minimum regular employment of 100 persons, the amount of subsidy shall be subject to a maximum limit of 75% of the additional tax (calculated by taking the average of last 3 years) payable or deposited under Rajasthan Sales Tax Act, 1994 or Value Added Tax Act (as and when introduced in the State) and Central Sales Tax Act, 1956 for a period of 7 years from the date of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.2005 as against total project cost of Rs.490.41 crores. The said option for both the units was again reiterated vide Annex.13 communication dtd.9.2.2006 addressed to the Commissioner of Industries, Member Secretary of SLSC, Jaipur for clinker unit at village Ras, Tehsil Jaitaran, Dist. Pali and grinding unit of village Kushkheda, Tehsil Bhiwadi with total new investment of approximately Rs.450 crores. 9. By another notification Annex.15 dtd.28.4.2006 Clause (vi) and clause (vii) inserted in RIPS, 2003 by previous notification Annex.8 dtd.2.12.2005 were deleted after about 5 months of said clauses being inserted and this one liner amendment only says "Sub-clause (vi) and (vii) of clause 7 of the said Scheme shall be deleted." Neither any reason nor any preamble containing such reasons for such deletion of these clauses was brought on record and that seems to be turning point in the present case giving rise to this litigation. 10. That even though said deletion was made vide notification dtd.28.4.2006, a copy of which was addressed to all the concerned authorities including the Commissioner, Commercial Taxes Department, in the 10th meeting of SLSC on 29.7.2006 after about 3 mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2006, deleting Clauses (vi) and (vii) from clause 7, the said SLSC took a deliberate and conscious decision that since the petitioner company had exercised its option prior to deletion of clause 7(vii) vide notification dtd.28.4.2006, it would be covered by the previous amending notification dtd.2.12.2005 and would thus, be entitled to increased benefit of subsidy to the extent of 75% under the first amending notification dtd.2.12.2005 and fulfilling the conditions therein of having made investment of more than Rs.200 crores and employed more than 100 persons, the petitioner - company was held entitled to the benefit of 75% of subsidy for a period of 7 years. Again another Entitlement Certificate in prescribed form No. 6 under clause 9(B)(iii) was issued in favour of the petitioner - company for its Bhiwadi unit for a period of 7 years from 26.3.2007. 12. The petitioner was accordingly given 75% subsidy under clause 7(vii) inserted vide amending notification dtd.2.12.2005 for a period of about 2 ½ years, out of 7 years entitlement when on 22.5.2008 vide Annex.29, a clarification in RIPS, 2003 came to be issued by the Finance Department, Tax Division of Government of Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy granted to the petitioner - unit; a vested right, cannot be withdrawn. However, the petitioner after the said clarification does not appear to have been paid any subsidy under the RIPS, 2003 even reduced quantum of 50% and that is why the relief in this respect has also been claimed in the present writ petition. 14. That two separate revision petitions under clause 13 of the RIPS, 2003 appear to have been filed by the Commissioner, Commercial Taxes Department before the Secretary to the Government, Finance Department on 18.7.2008 vide Annex.38 in which the concerned Secretary was requested to invoke revisional powers for setting aside SLSC decisions dtd.29.07.2006 and 27.06.2007 under clause 13 of the RIPS, 2003 which provision is akin to section 263 of the Income Tax Act and Clause 13 and 14 are reproduced hereinbelow for ready reference:- "13. Revision by the State Government:- (a) The State Government in Finance Department may suo motu or otherwise revise an order passed by any Screening Committee wherever it is found to be erroneous and prejudicial to the interest of the State revenue, after affording an opportunity of being heard to the beneficiary industrial unit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther officer of the State Government. vi. The Revisionist, i.e. the CCT has no locus standi to file the revision and the application is, therefore, liable to be dismissed. vii. The revisionist (CCT), though himself present at the Committee meeting as one of its members, has not disclosed any justifiable reason to impugn the decision of the SLSC, which has been implemented for the last two and a half years, except for nonmention of the order dated 28.4.06. The plea that the members of the SLSC were not aware of the order dated 28.4.06 is not sustainable in view of the fact that the SLSC, in its second decision dated 27.06.07 (also under revision), had found the expansion project as entitled to avail subsidy, even after noting the deletion/amendment order dated 28.4.06. viii. The decision of the SLSC was unanimous and the pleading that all the members were ignorant of the material fact of deletion is unwarranted. ix. No clarification can curtail the scope and applicability of the provisions of the Scheme. All the conditions of sub-clause (vii) of 7 of the Scheme have been fulfilled by the applicant, including submission of option, commencement of commercial production etc. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.05 increased by 650 owing to expansion. Accordingly, the Applicant company became entitled to avail the subsidies as provided in sub-clause (vii) of Clause 7 of RIPS 2003. xix. The compliance report on the suggestions made in the meetings of the State Level Tax Advisory Committee held on 7.2.05 and three different meetings of 11.2.05, circulated by the Finance Department on 15.2.05, state that the special package for cement was announced on 2.12.05. Thereafter, the Applicant Company firmed up its investment plans for early implementation of the second phase of expansion. Accordingly, the company registered its option for setting up an expanded unit and a 30 MM Captive Power Plant with a proposed investment of Rs.450 crores for availing benefits under the notification dated 2.12.05. xx. The Company took steps for implementation of its project including placing orders for supply of plant and machinery, equipments etc. xxi. One more option for registration was submitted on 9.2.06 stating that fresh investment would be made for its expanded cement plant at Ras and for a grinding unit at Khushkhera; this was received in the office of Commissioner Industries on 16.2.06. The opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75% of additional tax for a period of seven years from 26.3.07. xxxiii. The SLSC granted the Entitlement Certificate after considering the provisions of RIPS 2003. xxxiv. The SLSC deemed it proper to mention in its order that despite the deletion of the sub-clause 7 (vi) and (vii), in view of the fact that option had been filed before such deletion, the Company was liable to be granted subsidy under the scheme. In this connection two citations were given:- a. Commissioner of Income Tax vs. Max India Limited reported in I.T.A. 39 of 2004 reported in 286 ITR page 128; and b. Malabar Industrial Co. vs. CIT (2000) 243 ITR page 83. xxxv. The Applicant company has filed the above options on the assurance given in Clause 7 (vii) of RIPS 2003 : even if the said clauses are deleted, the vested right of the company cannot be denied once it has commenced commercial production. Loans had been taken by the company to the tune of Rs.991 crores and repayment of Rs.184 crores has been made by utilizing the upfront subsidy, without which it would not have been possible to repay. There are still loans of Rs.807 crores secured loans outstanding and continuation of up front subsidy cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " ...during the period August 1996 to 16, December 1996, the appellant had invested huge amounts. By operation of the rule of estoppel, the promises/representations made in the Industrial Policy continued to operate in the field and the appellant had also taken steps which could be only taken for the purpose of setting up a new industrial unit. The State had accepted that equity operated in favour of entrepreneurs by making the amendment in the notification dated December 16 1996, whereby solvent extraction plant was for the first time inserted in the negative list. The amendment carried out in 1996 ... could not have taken away the rights of the appellant with retrospective effect." e. MRF Ltd. vs. Assistant Commissioner (Assessment) Sales Tax reported in 6 VAT Reporter 159:- "Promi ssory estoppel operates on equity and public interest. What is granted cannot be withdrawn by the government unless the Government is precluded from doing so on the ground of promissory estoppel ... The action of the State Government in depriving the benefit of tax exemption to the petitioner ... was held to be highly arbitrary and unjust and unreasonable based on the principle of legitimate exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entrepreneurs to claim the benefits of the scheme." e. In TF Jose vs. General Manager, District Industries Centre (1995) 97 STC 484, the High Court of Kerala pronounced judgment in the mater of coconut oil mills which were declared ineligible for the incentives under sales tax exemption subsequent to the announcement of the scheme. The Court held that:- " ...oil mills which have been set up before March, 31 1991 and which were existing as on that date cannot be deprived of benefits which they were enjoying." f. As reported in 16 Tax world page 222 (RHC) M/s Mohnot Stainless Steels Ind. Pvt. Ltd. vs. State of Rajasthan which was decided in DB 392 of 1992 and DB CWP 468 of 1992, the Rajasthan High Court held that for:- " ...those persons who started making fixed capital investment on the basis of earlier annexure C appended to Incentive Scheme, 1987 ... Sales Tax Incentive will be available to the extent of eligible fixed capital investment and it will not be restricted." g. The clarification as issued by the Tax Division in the Finance Department as last as on 22nd May 2008 cannot alter this legal position. h. Later, the State Government amended the Scheme by amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment of the tax liability of the petitioner company and make necessary steps to recover tax in excess of its eligibility in terms of new eligibility certificates to be issued by the SLSC. Reasons and Finding of Principal Secretary in the impugned Order dtd.31.3.2009:- The relevant extracts from the impugned revisional order dtd.31.3.2009 to understand the reasons given therein are quoted below for ready reference:- "25. Substantial Issue A:- Now, I come to the first of the substantial issues involved in this revision, namely whether the Applicant Company has been adversely affected in financial terms as a result of the order dated 28.4.06, whereby clauses 7 9 (vi) and (vii) of RIPS 2003 deleted. To answer this question we have to examine two related questions, namely:- (i) the effective rate of tax payable to the State Government and; (ii) the quantum of tax subsidy retained by the Applicant Company. (A) Effective rate of tax:- When RIPS 2003 was originally introduced on 28.7.03, it provided for a 50% rebate in sales tax in the case of those units eligible for the same by virtue of the new investments made after the issuance of the scheme. At the point of time when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (vii) from RIPS 2003. The benefit of Clause 7 (vi) and (vii), therefore, becomes unavailable henceforth. As a result, the special dispensation granted to cement companies came to an end, although the original provisions of RIPS 2003 for investment beyond certain levels of investment continued to get the benefit of 50% tax exemption. As a consequence, for the Applicant Company, the effective tax rate became 6.25%, i.e. 50% of 12.5%. It may thus be seen that there have been fluctuating levels of tax exemption benefits for the Applicant Company, namely, 6.25% (after 1.4.06) and 6.25% (post 28.4.06). It is in this context that we have to examine whether the Applicant Company has lost any financial advantage as a result of the withdrawal of the notification dated 2.12.05 along with the Clauses 7 (vi) and (vii) of RIPS 2003. 28. As already stated, the said advantage for cement companies, introduced on 2.12.05 by specifying a maximum of 75% tax exemption, had brought down the effective tax rate on cement to 7%. After the introduction of VAT in Rajasthan front 1.4.06, and the tax rate on cement was placed at 12.5%, the Applicant Company was blessed with an especially low effective tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidy enjoyed by the Applicant Company. Prior to 2.12.05, and the insertion of two clauses 7 (vi) and (vii) in RIPS 2003, the quantum of tax retained or retainable was 50% of the then rate on cement i.e. 19%. However, with the insertion of the two above stated clauses into the Scheme, w.e.f. 2.12.05 and the simultaneous increase in the tax rate on cement from 19% to 28%, the maximum quantum of tax subsidy rose to 75% of 28% i.e. 21%. This leads us to an important point of law, namely that the quantum of tax payable is directly related to the rate of tax leviable. As and when the rate of tax on cement undergoes change, the quantum of tax subsidy must also necessarily vary. The scheme of things does not contemplate of a principle of a fixed quantum of subsidy irrespective of, or independent of, the tax rate on cement. Once this principle is accepted, then it also stands to reason that as and when the tax rate on cement further changes, the quantum of tax subsidy would also change in tandem. Consequently, when the tax rate on cement was brought down to 12.5% as a result of the introduction of VAT and the national consensus for a tax rate of 12.5% on this commodity, the maximum quantum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pournami Oil Mills vs. State of Kerala (1987) 65 STC 1 etc. 32. According to the legal definition of the term promissory estoppl, section 115 of the Indian Evidence Act 1872 reads as follows. When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe such a thing to be true and act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing. 33. The true principle of promissory estoppel is where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or effect a legal relationship to arise in the future, knowing or intending that if would be acted upon by the other party to whom the promise is made, and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it. 34. Applicability of promissory estoppel on Government:- there is, of course, much debate on the applicability of the principle of promissory estoppel on Government. Indeed, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery strongly held by Supreme court in its judgment in the case of Bakul Oil Industries vs. State of Gujarat (SC 1987 (1) 31). The view of Supreme Court is directly applicable in the referred cases. Para 11 of the said judgment states:- "It is not sufficient to rely on the commissioning of an industry after completion of construction which had been commenced long before the notification was made by the government. In respect of such an industry as the present one, the issuance of a notification granting tax exemption would only fortuitous circumstances and by no stretch of imagination can it ever be said that the commissioning of the industry was directly the outcome of the government's notification granting tax exemption." 38. As investment predates the issue of notification dated 2.12.05, and particularly in one of the two cases the production commenced only 19 days after 2.12.05, therefore, be no doubt at all that the Applicant Company had started investment for expansion at Ras long before the new scheme was ever conceived. By a fortuitous coincidence the new revised tax exemption scheme came into existence on 2.12.05 and the Applicant Company was fortunately placed at the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would not be collected would not bind the Government, when it chooses to collect the taxes. Thus it was held that when there was a clear and unambiguous provision of law that provides for a certain level of taxation, (even though lowered to a reasonable level by the device of subordinate legislation through the notification), no question of estoppel arises. The sovereign authority of the State to levy taxes cannot be abridged on the principle of promissory estoppel since the levy of tax is for the purposes of the governance and the development of the State, which is greater than the rights of any individual person or entity. " ...it is clear that there can be no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law." In other words, when applied to the case in hand, when the State Government is acting on the strength of the authority vested in it in the management and administration of taxes, estoppel cannot and does not apply. 41. The judgment quoted by the Applicant Company at AIR 1993 MP 202 in the case of Shri Bajrang Extraction P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and amend any clause cannot create an unmodified right. (e) A project should qualify for promised benefits if the project comes into existence in consequence to promise made. (f) There cannot be any estoppel against law/state. 44. Examination of two cases under consideration here reveal that, neither the insertion of Clause 7 (vi) and (vii) in RIPS 2003 on 2.12.2005 nor its subsequent deletion on 28.4.2006 were iniquitous in any manner. Rather, making an exception by continuing the benefits, despite deletion of enabling clauses and despite reduction of net incidence of tax from 7% to 6.25%, will actually be iniquitous. 45. This principle of equity in administering an incentive scheme has actually concertized in case of Motilal Padmapat Sugar Mills (AIR) 1979 SC 621. In this case, Supreme Court has also pronounced clearly that if public interest suffers, the promise cannot be enforced; however, Government cannot claim exemptions from the liability to honor the promise on some indefinite and undisclosed ground of necessity or expediency. Under the light of the above it is evident that the scheme based on public money promised 75% exemption on the basis of tax rate of 28%, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om doing so on the ground the promissory estoppel. The principle itself is subject to consideration of equity and public interest." Further, Supreme Court observed that the 'exemption being a creature of the scheme is subject to the scheme. If any right under the scheme is held to be unmodified it would be contrary to the scheme itself'. 48. The above observation of Supreme Court is not only unambiguous and cogent but also makes it fundamentally clear that a scheme cannot create a right which is unmodifiable. In RIPS 2003, Clause 14 empowers the Government to modify and amend the scheme at any point of time. 49. The question of public interest:- Yet again it has been held that when the Government is able to show that facts have transpired subsequent to the promise being made, public interest would be prejudiced should Government carry out the promise made, then it would be necessary to balance the public interest with the promise made to a person or any other entity. In the case quoted by the Applicant Company, Mahavir Oil Mills Pvt. Ltd. vs. State of Harayana (145 STC 350 Supreme Court), a new industry was set up on the basis of an incentive scheme from the Government wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite the withdrawal of the scheme on 28.4.06, the effective tax rate on cement as far as the Applicant Company is concerned, remains at 6.25%. 51. Clarification sought by CCT:- It is a matter of some concern as to why the SLSC granted such benefits when the notification withdrawing the benefits of Clause 7 (vi) and (vii) had already been withdrawn earlier on 28.4.06. Indeed in the proceedings of the SLSC dated 29.7.2006, there is not even a mention of the order dated 28.4.06 whereby the benefits announced on 2.12.05 had been withdrawn. In the order of the SLSC dated 27.6.2007, there is mention of the rescinding notification dated 28.4.06, but the SLSC nevertheless decided to grant the benefit of such tax exemption. Since several applications were filed and were pending for disposal or were disposed of as pointed out above, the issuance of grant of benefits under the deleted clause 7 (vi) and (vii) and its bearing on such cases was referred by Commissioner, Commercial Taxes Department to the Finance Department of Governance of Rajasthan for clarification. CCT had sought clarification under six scenarios as detailed below:- (a) Where the option was submitted before 28.04.06 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the effective tax rate to 6.25% w.e.f. 1.4.06 because of the promulgation of the Rajasthan Value Added Tax Act and the determination of the basic tax rate on cement at 12.5%. The Applicant Company cannot retain tax subsidy in excess of the provisions of the amended RIPS 2003. Accordingly, I hold that the principle estoppel has not been violated by the State Government. 55. Another peripheral issue would also require to be addressed in this decision. The passing reference to the notification dated No. F.12 (20) FD/Tax/2005 on 30.9.08 whereby a proviso was added under Clause 7 (iii) pertaining to investments made or committed before 22.05.08 or under MOU signed during the Rajasthan Resurgent Summit. It is correct that by a notification No. F(12) (20) FD/Tax/2005 dated 22.05.08, the cement industry was placed in the negative list for the purposes of available benefits under RIPS 2003. In the light of the investments already made, or were promised to be made by the singing of MOUs during the Rajasthan Resurgent Summit, it was decided that these cement units would continue to avail benefits under RIPS 2003: it is in this context that the above mentioned notification was inserted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment of the tax liability of the Applicant Company as mentioned above and take necessary steps to recover tax in excess of its eligibility in terms of the new eligibility certificates to be issued by the SLSC. Pronounced on 31.3.09. Sd/- C.K. Mathew Principal Secretary, Finance Government of Rajasthan 17. Being aggrieved by the said order, against which, apparently, no alternative remedy is available to the petitioner company, the petitioner company has invoked the writ jurisdiction of this Court under Article 226 of the Constitution of India. Contentions of Petitioner before this Court:- 18. Mr. S. Ganesh, Sr. Advocate assisted by Mr. Ramit Mehta submitted that the impugned order passed by the Principal Secretary is liable to be quashed by this Court for following reasons:- i) The impugned order of Principal Secretary quashes the order of SLSC in favour of the petitioner company on the reasons other than the reasons mentioned in the show cause notice or the reasons given in the application moved by the Commissioner, a copy of which was supplied to the petitioner company and this being beyond of the power of revision under Clause 13 of RIPS, 2003 is not sustaina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to go down with the reduction of rate of tax and therefore, the quantum of subsidy was never and could not be relatable to the rate of tax applicable on the sale of cement. Moreover, when the rate of subsidy for other commodities also having gone down with the introduction of VAT w.e.f. 1.4.2006, their subsidy was not reduced from 50% to further down below percentage, therefore, the reduction in rate of sales tax on cement cannot be a reason for reduction of percentage of subsidy from 75% to 50% in case of cement industries. vi) Higher incentive to the cement industries of 75% of subsidy of the total additional tax liability due to higher turn over due to expansion made by it was only to give competitive edge to such new units making investment within the State of Rajasthan, which has large deposits of lime stone, the basic raw material for cement manufacturing industries and the same would get lost, if the subsidy percentage is reduced contrary to the principles of promissory estoppel from 75% to 50% as new units made much higher capital investment for undertaking such expansion projects in the State of Rajasthan in comparison with the old existing units and their capital inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion dated 2.12.2005, as in the first case and also in respect of second expansion where after registering options, the Petitioners had taken effective steps to implement the same and obtained even concession towards stamp duty before the purported deletion on 28.4.2006 as in the present case. This issue is directly and squarely covered in favour of the Petitioner by the Judgments of the Hon'ble Supreme Court in the cases of MRF Ltd. Kottayam vs. Asstt. Commissioner (Assessment) Sales Tax and Ors. reported in 2006 (8) SCC 702 and S.L. Srinivasa Jute Twine Mills (P) Ltd. vs. UOI and Anr. reported in 2006 (2) SCC 740. (b) In any event, Clause 13 of RIPS, which is identical to Section 263 of the Income tax Act, does not authorise a revision of the SLSC's Orders if the issue is debatable or if the SLSC has adopted one of the two possible views. This issue is also squarely covered in favour of the Petitioner by the Judgments of the Hon'ble Supreme Court in Malabar Industries Co. Ltd. vs. Commissioner of Income Tax, Kerala : 2000 (243) ITR 83 (SC) = 2000(2) SCC 718 and Commissioner of Income Tax vs. Max India Ltd. 2007 (295) ITR 282 (SC). In the present case, the SLSC, which consisted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not valid economic justification for the withdrawal of the additional 25% subsidy by the said Order dated 28.4.2006, by deletion of sub-clauses (vi) and (vii) of Clause 7 of RIPS. (e) Without prejudice to the above and in the alternative, it is also submitted on a demurer, that in any event, the said so-called economic justification for reduction in the rate of subsidy from 75% to 50% on the ground of reduction in the rates of Sales-tax leviable on cement, is devoid of any substance or merit and the said ground or reason, it is respectfully submitted, is only a red herring which is meant to obscure and confuse the real issue which arises for consideration in the present case. This is so inter alia, for the following reasons. (f a) At the outset it needs to be clearly understood that Sales- Tax, at whatever rate, was applicable, was required to be recovered by the manufacturer and paid over to the Sales-tax authorities. The rate of Sales Tax was the same for manufacturers covered by RIPS and also for manufacturers not covered by RIPS. The general fall in rates of tax, therefore, does not result in any special gain to a unit covered by RIPS, because such a unit would be requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerated by it. The rate of subsidy was thus not in any manner dependent on or linked to the rate of Sales tax charged from time to time on the product in question. In the entire Scheme, there is no mention of "rate of sales tax" having any relevance to the quantum or percentage of incentives. (f c) Para 3 of RIPS states that the Scheme shall be applicable not only to all new investments; but also investments made by existing units and enterprises for modernisation/expansion/diversifications, subject to the condition that such unit shall commence commercial production and operation owing to such investments during the operative period of the Scheme (2003-2008), which was later on extended till 31.3.2011. The applicability of or eligibility to the benefit of the Scheme is nowhere dependant on the rates of Sales Tax charged from time to time during the 7 years' period commencing from the date of commercial production. This position is further made clear by Clause 5 of RIPS (at page 102 of writ petition paper book) which states that the benefit of subsidy under Clause 7 of RIPS shall be available to all the units other than those covered by the list of ineligible units. The list of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.05.2008 (at page 244) nor in the Departmental letters dated 27.01.2009 (Page 267); 09.02.2009 (page 269) and 13.03.2009 (P 316-319) nor in the applications for revision (at pages 272 to 275), is there any reference made to or reliance placed on general reduction in the Sales- Tax for the purpose of denying the additional 25% subsidy to the Petitioner. This clearly shows the contemporaneous understanding of the provisions of RIPS in the minds of the most highly placed officials in the Industries Department and also the Commercial Tax Department of the State Government, that the amount of subsidy has nothing to do with the prevailing rate of Sales-tax. The rates of subsidy were not linked in any way to the current prevailing rates of Sales-tax. There has been a significant reduction in the VAT w.e.f. 1.4.2006 as compared to Rajasthan Sales-tax earlier chargeable in respect of other product groups viz Air-conditioners, refrigerators, firearms, Pan masala, Transmission Towers, ASCR Conductors, Cables, Railway Wagons and sleepers, Nonferrous metals etc., to name few. However, the rate of subsidy available to the units engaged in the manufacture of these products has not in any manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a statutory scheme, therefore, the amendment of 28.4.2006 which is statutory amendment will prevail and principles of promissory estoppel cannot be invoked against such statutory exercise of powers. iv) That as far as unit 1 at Ras, Tehsil Jaitaran, Dist. Pali of the petitioner company is concerned, the same commenced commercial production on 17.12.2005, only 15 days after the notification dtd.2.12.2005, giving increased subsidy of 75% and it is not possible for any cement unit to claim promissory estoppel on the ground that it set up such expansion unit on the faith/promise of increased subsidy of 75% within a short period of 15 days and as far as 2nd unit at Bhiwadi is concerned, except taking the land on lease from RIICO for its expansion unit there, the petitioner company did not take any effective steps on the basis of promise allegedly made by the notification dtd.2.12.2005 and consequently, the petitioner is not entitled to increased amount of subsidy. However, the petitioner was entitled to 50% of subsidy of additional tax liability after 28.4.2006 and at the most only for the period between 2.12.2005 to 28.4.2006 for a period of 5 months, the petitioner can be give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication subject to the condition that they shall commence commercial production during the operative period of the Scheme. 2.12.2005:- Clause 7(vi) and 7(vii) inserted in RIPS, 2003 increasing the quantum of subsidy for cement manufacturing units to 75% subject to stipulated conditions which inter alia require the option to be exercised within 180 days and that unit shall start commercial production within 5 years of filing such option and such 75% of subsidy to comprise of (i) 45% upfront subsidy on the basis of actual tax liability, 5% interest subsidy and 25 % wage/employment subsidy. 2.12.2005:- The rate of sales tax on cement increased to 28%. 10.12.2005 The option of the petitioner company for cement expansiuon unit at Ras, Tehsil Jaitaran, Dist. Pali. 17.12.2005:- The commercial production of the unit first expansion Unit of clinker at village Ras commenced. 28.1.2006:- The letter of the petitioner to register the cement unit for availing the increased benefit under the notification dtd.2.12.2005. 30.1.2006:- The letter of the petitioner company for grant of subsidy as it has invested 285.98 crores upto 31.12.2005. 9.2.2006:- The option letter for the second uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment quashing the two orders of SLSC. 5.5.2009:- The present writ petition filed in this Court. Findings and Reasons of Judgment:- 23. Having heard the learned counsel for the parties and given my thoughtful consideration to the rival submissions and the judgments cited at the Bar, this Court is of the considered and firm opinion that not only the principle of promissory estoppel and legitimate expectation are attracted in the present case, but also the petitioner got a sort of vested right in receiving incentive in the form of increased rebate/subsidy under the amending notification dtd.2.12.2005 inserting clause 7(vi) and (vii) in RIPS, 2003 which despite deletion of these clauses (vi) and (vii) w.e.f. 28.4.2006 could not deprive the petitioner company of such continued benefit of increased subsidy/rebate against the "additional tax liability" over and above its average tax liability for base years for the complete period of seven years. 24. The principles of promissory estoppel and legitimate expectation having been discussed in large number of judgments even by the Hon'ble Apex Court of the country and various High Courts, is not a new phenomenon and as the same oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of the Scheme and there has been no default in repayment of dues against term loan of the concerned financial institution(s) and/or Bank(s) etc. 26. Clause 7 of the RIPS, 2003 providing for subsidies in for the form of interest subsidy and wage/employment subsidy provides that a maximal limit of 50% of the tax payable and deposited under the Rajasthan Sales Tax, 1994, the Central Sales Tax Act, 1956 and Value Added Tax Act as and when introduced in the State. Same amount of 50% of subsidy was made available in case of investment made in modernization/expansion/diversification though provided that maximum limit of 50% may be raised by BIDI (Board of Infrastructure Development and Investment Promotion, Government of Rajasthan) to 60% in such cases were the investments exceed Rs.100 crores but are less than or equal to Rs.200 crores and this maximum limit may be raised further to 75% in cases were the investments exceed Rs.200 crores. Clause 7(iii) provides that the subsidy shall be available to the investors for seven years from the date of first repayment of interest in case of Interest Subsidy and first payment of wages/employment in case of wage employment subsidy. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requests, the State Government had looked into the matter and thereafter they had granted sales tax exemption to the extent of 35% only. Since our project was not becoming economically viable at 35% incentive, we had again requested for 75% sales tax incentive." In the same representation, the petitioner - unit had given out its plan of investing more than Rs.200 crores in its expansion unit. In the meeting of the State Level Advisory Committee on 7.2.2005 under the Chairmanship of Hon'ble Chief Minister, the Rajasthan Cement Manufacturing Association suggested inter alia for 75% incentives for 11 years to new cement plants to be given vide Annex. 4. It would again appear from the representation of the petitioner - company to the Chief Minister vide Annex.5 dtd. 12.4.2005 that upon representation of the petitioner - company, the Chief Minister had assured of looking into the matter besides allowing 75% Sales Tax Exemption to make the Expansion Project economically viable. Again in another representation dtd.5.5.2005 vide Annex.7 to the Hon'ble Industries Minister, the petitioner - company brought it to the notice of the State Government that they intended to make capital investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted before 28.4.2006 and benefits were granted by SLSC after 27.4.2006; (iii) where the option was submitted before 28.4.2006 and benefits have not been granted by SLSC; (iv) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and benefits has not been granted by SLSC; (v) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and the case has not been considered by SLSC; and (vi) where the option was submitted after 27.4.2006 but within 180 days of 2.12.2005 and the unit has still not applied for the benefits. By this clarification, it was therefore, directed that for all these aforesaid six categories, none of the categories enumerated would qualify for benefits under deleted sub clause (vi) and (vii) of Clause 7 of RIPS, 2003 on or after 28.4.2004. Thus, under the garb of this clarification issued on 22.5.2008, the State Government effectively put down all the cases to be deprived of increased benefit of 75% of subsidy after 28.4.2006 but in fact only one single unit was sought to be deprived of increased subsidy of 75% under category (ii) aforesaid, that of the petitioner company. 30. Though the petitioner compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise duty paid on compound rubber of Rs.177 crores within the State of Kerala. The impugned action on the part of the State Government is highly unfair, unreasonable, arbitrary and therefore, violative of Article 14 of the Constitution. The action of the State cannot be permitted to operate if it is arbitrary or unreasonable. Equity that arises in favour of a party as a result of a representation made by the State is founded on the basic concept of "justice and fair play". The attempt to take away the said benefit of exemption with effect from 15.1.1998 and thereby deprive MRF of the benefit of exemption for more than 5 years out of a total period of 7 years is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event the State Government has no power to make a retrospective amendment to SRO No.1729/93 affecting the righs already accrued to MRF thereunder." The Apex Court further held as under:- "On a conjoint reading of SRO No.1729/93, SRO No.38/98 and SRO No.1092/99 the intention of the Government does not seem to take away the benefits of exemption in respect of manufactured products including compound rubber after 15.1.1998 (the date on which SRO No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances and ultimately by Act 10 of 1998. The appellants filed writ petitions before the A.P. High Court for a declaration that the omission of Section 16(1)(d) would not affect their right to exemption for the balance of their infancy period in terms of the erstwhile Section 16(1)(d). The High Court dismissed the writ petitions. The appellants, then filed the present appeals." Allowing the appeals, the Supreme Court held:- "In terms of Section 6(c) of the General Clauses Act, 1897, unless a different intention appears the repeal would not affect any right, privilege or liability acquired, accrued or incurred under the repealed enactment. The effect of the amendment in the instant case is the same. The appellants would be entitled to the protection as had accrued to them prior to the amendment in 1997 for the period of 3 years starting from the date the establishment was set up irrespective of repeal of the provision for such infancy protection." 33. That principles of promissory estoppel which were first unequivocably propounded by the Hon'ble Supreme Court in the case of Union of India V/s Indo-Afghan Agencies reported in AIR 1968 SC 718, were further concretized and glorifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the arguments of learned Advocate General Sh. G.S. Bafna that the principle of promissory estoppel and legitimate expectation could not be invoked by the petitioner - company in the present case and reliance placed by him on the case of Shree Sidhbali Steels Limited and Ors. vs. State of Uttar Pradesh and Ors., reported in (2011) 3 SCC 193 and the decision of Hon'ble Supreme Court in the case of Shree Bakul Oil Industries vs. State of Gujarat and Ors. reported in 1987 (6) SCC 31 do not demolish the case of the present petitioner-company in any manner. 35. In the case of Shree Sidhbali Steels Ltd. (supra), the petitioner industrial units, which were located in hill area in the State of Uttrakhand, claimed continued grant of Hill Development Rebate of 33.33% on the power tariffs for a period of five years but the same was prematurely withdrawn upon enactment of U.P. Electricity Reforms Act, 1999 and when new tariff notifications were issued under Section 49 of the 1948 Act, the same were challenged by direct writ petition under Article 32 of the Constitution of India and negativating the said claim and while overruling the earlier decision of two Judges bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government to the promise made by it, the court would not raise an equity in favour of the promisee and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute (including delegated or subordinate legislation which is deemed to be a part of the parent statute). Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law." 37. The said case relied upon by the respondents is not applicable to the facts of the present case for more than one reasons. Firstly, RIPS 2003 is an executive policy decision of the State Government involved here in this case; whereas upon enactment of U.P. Electricity Reforms Act, 1999, uniform tariffs for supply of electricity were introduced in the case before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the exemption was prospective in operation. That notification was, therefore, to apply only to those new industries which were commissioned subsequent to issuance thereof and not to those commissioned prior to its issuance. Moreover, the State Government was under no legal obligation to grant the tax exemption. What was granted by the first notification was only by way of a concession for encouraging entrepreneurs to start industries in rural and undeveloped areas. A concession can be withdrawn at any time and no time limit can be insisted upon before the concession is withdrawn. It was, therefore, fully within the power of the Government to withdraw or revoke the exemption by means of a subsequent notification." The said case law as well as others relied by the State are also of little avail to the respondents in the present case for the same reasons, which distinguish the case of Shree Sidhbali Steels Ltd. (supra) as aforesaid. The facts obtaining in these cases relied upon by the learned Advocate General were quite different. 39. It has to be noticed here that RIPS, 2003 in the first instance is exclusively within the domain of executive and the Scheme itself was anno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsidy and its reduction consequent upon increase and fall in rate of sales tax is misconceived and without any substance. Had it been so, subsidy for all other sectors manufacturing different items had also been reduced, when rates of tax had been reduced across the board for all such goods with the introduction of VAT in the State w.e.f. 01.04.2006. But, it was not to be and only petitioner's unit was chosen to be hit by notification dated 28.04.2006. The said argument, therefore, is liable to be rejected and is accordingly rejected. 41. As far as factual foundation for invoking principles of promissory estoppel is concerned, this Court is of the opinion that both the units by way of expansion project undertaken by the petitioner - company at Ras, Dist. Jaitaran, Dist. Pali and at Khushkheda, Bhiwadi, Dist. Alwar satisfied the criteria for invoking the principles of promissory estoppel. As far as unit No.1 is concerned, even though investment in the same started prior to notification dtd.2.12.2005, but the MOU was signed with the State Government right after the issuance of RIPS, 2003 itself and constant efforts were made by the petitioner company for giving it increased rebate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om operative period of the Scheme is not even disputed by the respondent - State. 43. Consequently, this Court is of the firm and clear opinion that the petitioner company satisfied all the conditions for binding down the respondent - State by the assurance and promise of increased subsidy of 75% of additional tax liability for entire period of 7 years especially in view of the fact that SLSC after being duly aware of the withdrawal of notification dtd.28.4.2006 granted such benefit and even the Entitlement Certificates issued for a period of 7 years for availing subsidy at the increased rate of 75%. Therefore, the question is whether the withdrawal notification dtd.28.4.2006 can be applied to the petitioner company giving it virtually retrospective effect and whether the purported clarification issued after 2½ years of the withdrawal notification dtd.28.4.2006 on 22.5.2008 can really shut up the increased subsidy of 75% for the petitioner company. The answer has to be in clear negative. Lest the promise as made by the welfare State is allowed to be tinkered and withdrawn lightly and so casually especially ignoring that such withdrawal is going to affect only the single in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby deleted" also, the fact remains that increased benefit continued for 2½ more years upto 22.5.2008, when under the purported clarification in all the six contingencies of exercise of option and consideration by SLSC, the Finance Department chose to deny such benefit of increased subsidy to only a single large scale manufacturing unit, that of the petitioner - company in the State. This Court is at loss to understand why for adversely affecting the single large scale manufacturing cement unit, such withdrawal of clauses (vi) and (vii) was even considered necessary by the State. No overriding public interest has been shown behind that much-less established. However, even though a prayer has been made in the writ petition for quashing of the said notification dtd. 28.4.2006, since it was not pressed during the course of arguments by the learned counsel appearing for the petitioner company and only its retrospective application was challenged, this Court would not quash the said notification in the absence of any prayer to this effect being made. 45. Therefore, on an analysis of factual matrix and legal position, this Court is of the opinion that the present writ petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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