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TMI Blog1997 (1) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... said notification the cumulative sales tax exemption concession granted to a unit at any point of time shall not exceed 90 per cent of the cumulative gross fixed capital investment of the unit. It is also provided that the said notification shall be deemed to have come into force with effect from April 1, 1979. 3.. The present small-scale industrial unit was set up after April 11, 1979 and it started production from June 9, 1980. The first sale was effected on July 7, 1980. Though the petitioner was entitled to full exemption from payment of sales tax in view of the first notification, the first respondent assessed the petitioner for the years 1980-81 to 1983-84. The total liability as per the above assessments would come to Rs. 73,484.80. As against those assessment orders the petitioner filed appeals before the Appellate Assistant Commissioner. The appellate authority after hearing the appeals remanded the matter to the assessing authority to re-assess the petitioner with a direction to give the petitioner benefit of exemption available to small-scale industrial units for a period of five years. The second respondent further directed the assessing authority to examine the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principles of promissory estoppel would apply. 6.. What is promissory estoppel? The origin of doctrine of promissory estoppel may well be found in Thomas Hughes v. Metropolitan Railway Co. [1877] 2 AC 439 and Birmingham and District Land Co. v. London and North Western Rly. Co. [1888] 40 Ch. D. 268 which were decided by the House of Lords about a century ago. The said doctrine was rediscovered by Lord Denning in the year 1947 in a famous case called "High Trees case". That was a historical necessity in the march of law and justice. Sir Henry Maine said: "Social necessities and social opinion are always more or less in advance of law. We may come indefinitely near to the closing of the gap between them, but it has a perpetual tendency to reopen.... The greater or less happiness of a people depends on the degree of promptitude with which the gap is narrowed." Lord Denning in Central London Property Trust Ltd. v. High Trees House Ltd. [1947] 1 KB 130 analysed the earlier decisions in Jorden v. Money [1854] 5 H.L.C. 185, Fenner v. Blake [1900] 1 QB 426, In re Wickham [1917] 34 TLR 158, Re William Porter Co. Ltd. [1937] 2 All ER 361 and Buttery v. Pickard [1946] WN 25 and held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration' and 'estoppel'. These strict rules had survived the Judicature Act, 1873 and were capable of causing injustice in many cases. There was a gap between those strict rules and the social necessities of the 20th century. The High Trees case [1947] 1 KB 130 helped to narrow that gap." 8.. That a representation of existing fact is necessary for the foundation of a true estoppel but the words or conduct necessary to support a promissory estoppel are essentially different in quality. They consist of a promise or assurance as to the future conduct of a promiser on which the promisee relies to act to his detriment. They are really "promises intended to be binding, intended to be acted Here italicised. (6) [1877] 2 AC 439. (7) [1988] 40 Ch. d 268 upon and in fact acted upon". The substance is this. "When a man, by his words or conduct, has led another to believe that he may safely act on the faith of them and the other does act on them-he will not be allowed to go back on what he has said or done when it would be unjust or inequitable for him to do so." This is the embodiment of the principles of promissory estoppel distinctly different from the cases of estoppel in the stri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eulogizing the decision in Anglo Afghan Agencies case AIR 1968 SC 718 as its "eternal glory" the Supreme Court observed: "............There was a time when the doctrine of executive necessity was regarded as sufficient justification for the Government to repudiate even its contractual obligations, but, let it be said to the eternal glory of this Court, that this doctrine was emphatically negatived in the Anglo-Afghan Agencies' case AIR 1968 SC 718 and the supremacy of the rule of law was established. It was laid down by this Court that the Government cannot claim to be immune from the applicability of the rule of promissory estoppel and repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promisee and the promisee would alter his position relying upon it. But if the Government makes such a promise and the promisee acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC 42 (SC); AIR 1979 SC 621 and introduce reservations cutting down the full width and amplitude of the propositions of law laid down in that case." 12.. Ultimately the Supreme Court said in Godfrey Philips India Ltd.'s case [1986] 158 ITR 574 (SC); AIR 1986 SC 806, while expressing its full agreement with Motilal Padampat Sugar Mills case [1979] 44 STC 42 (SC); AIR 1979 SC 621 in paragraph 14 of the judgment thus: "Of course, we must make it clear, and that is also laid down in Motilal Sugar Mill's case [1979] 44 STC 42 (SC); AIR 1979 SC 621, that there can be no 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. It is equally true that promissory estoppel cannot be used to compel the Government or a public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically issued under section 10 of the Act. The Supreme Court observed that in response to the notification dated April 11, 1979 and in consideration of the concession made applicable many small-scale industrial units had been set up within the State of Kerala and they were entitled to plead the rule of estoppel in their favour when the State purported to act differently. After applying the ratio of the decision in Motilal Padampat Sugar Mills' case [1979] 44 STC 42; AIR 1979 SC 621 the Supreme Court held thus: "..........All parties before us who in response to the order of April 11, 1979, set up their industries prior to October 21, 1980, within the State of Kerala would thus be entitled to the exemption extended and/or promised under that order. Such exemption would continue for the full period of five years from the date they started production. New industries set up after October 21, 1980, obviously would not be entitled to that benefit as they had notice of the curtailment in the exemption before they came to set up their industries." (Emphasis* supplied). 15.. However, it was pointed out that the doctrine of promissory estoppel could not be regarded now as a good la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same or to reduce the extent of exemption by a subsequent notification in which case the subsequent notification does not take effect from an anterior date. In this case the total exemption as per first notification was available in respect of the small-scale industrial units set up prior to October 21, 1980. That being so, the assessments/revised assessments as against the petitioner for the aforesaid years are without any authority of law. Those proceedings are therefore liable to be set aside. 18.. The next question which calls for determination is whether the sales tax collected from the petitioner is liable to be refunded. In this context it was pointed out at the outset that in view of the decision in Amrit Banaspati Co. Ltd. v. State of Punjab [1992] 85 STC 493 (SC); AIR 1992 SC 1075 no direction can be issued for refund of tax. That was a case where the Supreme Court was considering a representation or assurance given by officials to the appellant that the sales tax paid shall be refunded. The case for refund was negatived by the court holding that a provision or agreement to refund tax due or realised in accordance with law cannot be comprehended since no law can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. This is different from the payment of money by a person with the knowledge of facts that he is not in law bound to pay the tax but he is voluntarily paying it to close the transaction. In the former case he can recover the tax, though money is not paid under coercion in the strict sense of the term, but in the latter case he cannot recover the tax since the transaction cannot be reopened. The payment in such cases would establish that it is not made voluntarily to close the transaction but for the purpose of averting a threatened evil. "Coercion" within the meaning of section 72 of the Contract Act, 1872 is a wrongful act, producing liability to restitution which that section statutorily enjoins. The liability to make that restitution is absolute, and there is nothing in that section which can persuade the view that liability can come to an end if the person compelling the payment parts with the amount received by him. In this context it may be recalled that the Privy Council in Seth Kanhaya Lal v. National Bank of India [1913] ILR 40 Cal. 598 held that the word "coercion" occurring in section 72 is used in its general and ordinary sense and its meaning cannot be controlled by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t further said: "...........We agree that normally in a case where tax or money has been realised without the authority of law, the same should be refunded and in an application under article 226 of the Constitution the court has power to direct the refund unless there has been avoidable laches on the part of the petitioner which indicate either the abandonment of his claims or which is of such nature for which there is no probable explanation or which will cause any injury either to respondent or any third party." The Constitution Bench of the Supreme Court in State of Madhya Pradesh v. Bhailal Bhai [1964] 15 STC 450 declared that the High Courts have power for the purpose of enforcement of fundamental rights and statutory rights to give consequential relief by ordering repayment of money realised by the Government without the authority of law. The special remedy provided in article 226 is however not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defences legitimately open in such actions. The power to give relief under article 226 is a discretionary power and this is specially true in the case of power to issue writs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f tax as below: "In Bhailal's case [1964] 15 STC 450 (SC); [1964] 6 SCR 261; AIR 1964 SC 1006, the question before this Court was whether an amount of money illegally realised as tax under a legally void provision could be ordered to be refunded. This Court held that, if the aggrieved person came to the High Court within the period of limitation prescribed for ordinary suits for challenging an illegal exaction under a void order, the writ could issue. It, however, made it clear that this was not an inflexible rule which could be applied to the exercise of discretionary power under article 226 of the Constitution in every case." Mathew, J. observed in D. Cawasji and Co. v. State of Mysore AIR 1975 SC 813: "In State of Kerala v. Aluminium Industries Ltd. [1965] 16 STC 689 (SC) a Bench of seven Judges of this Court followed the view taken in State of Madhya Pradesh v. Bhailal Bhai [1964] 15 STC 450 (SC); [1964] 6 SCR 261; AIR 1964 SC 1006 on the question of the period of limitation within which the petition has to be filed." 24.. While discussing the issue in hand I do aware of the views expressed by Hegde, J. in his dissenting judgment in Tilokchand Motichand v. H.B. Munshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l-settled that the power to give relief under article 226 is a discretionary power and this is specifically true in the case of power to issue writ in the nature of mandamus. One of the several matters which the court rightly takes into consideration in exercise of that discretion is the delay made by the aggrieved party in seeking this special remedy and what explanation there is for it. Thus in a case where a person claims relief under article 226 on the ground that the tax has been collected unauthorisedly or without any authority of law or under a mistake and even if the court finds so still it is not bound to exercise the discretion directing repayment. Whether the repayment should be ordered in exercise of this discretion is dependent on the facts and circumstances of each case. 26.. Now it is necessary to examine the facts of the present case in the background of the legal premises discussed hereinabove. The present writ petition has been filed before this Court on April 12, 1991 praying to quash the orders of assessments and to refund the amount collected. Exhibits P1, P2, P3 and P4 are the orders of the Appellate Assistant Commissioner in respect of the years 1980-81 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t section 35 of the Act cannot be invoked since the original assessments were the subject-matter of the appeals. However, the Deputy Commissioner has observed: "The assessment records were called for and examined. It is true that the Appellate Assistant Commissioner has directed the assessing authority to examine the argument of the petitioners that the petitioner s unit is eligible for exemption from payment of tax for five years." 28.. Even after exhibit P12, the assessee approached the assessing authority and the Board of Revenue with its claim for refund of tax recovered unauthorisedly. But no action was taken by these authorities so far, that is what the petitioner complains. These facts are not disputed by the respondents. No counter-affidavit has been filed by the respondents as against the claim for refund of tax illegally collected. What is abundantly established from the above facts is that the assessee was all along vigilant in prosecuting its claim for refund of the tax which was collected under invalid assessment orders. In the aforesaid premise, I do not see any justifiable reason for denying discretionary power of this Court in ordering the refund in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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