9911796707
TMI Blog2008 (12) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into force of the Gujarat Value Added Tax Act, 2003 on the same terms as the exemption earlier granted under the provisions of the Gujarat Sales Tax Act, 1969. It is also prayed to quash and set aside Notification No. (GHN-27) GST2006 (section 49)(404)TH dated March 31, 2006 and Notification No. (GHN-27) GST-2006 (section 49)(405) dated March 31, 2006. It is further prayed that the respondents may be directed to extend the effect of entry 95 under section 49(2) and entry 74 of the Schedule of the Gujarat Sales Tax Act, 1969 to the provisions of the Gujarat Value Added Tax Act, 2003 from the date of coming into force of the Gujarat Value Added Tax Act, 2003. It is also prayed that the respondents may be directed to refund the tax paid or payable by the petitioners for the purchase of goods and remit the tax paid or payable by the petitioners on sale of goods with effect from coming into force of the Gujarat Value Added Tax Act, 2003 and also stay the operation and implementation of Notification No. (GHN-27) GST2006 (section 49)(404)TH dated March 31, 2006 and Notification No. (GHN-27) GST-2006 (section 49)(405) dated March 31, 2006. The facts of the case, briefly summar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, it has been challenged in the present group of petitions contending, inter alia, that such action is arbitrary and ultra vires the Constitution of India and also ultra vires the provisions of the Sales Tax Act and also that it is against the Directive Principles of the State Policy as enshrined in the Constitution of India. It is also challenged on the ground of arbitrariness, discrimination and principles of promissory estoppel. It has been contended that some of the village industries have been extended the exemption by various notifications which include the units under the khadi industries and village industries for the purpose of the VAT Act and the petitioners are denied the same benefit though they are on the same footing and fall within the same homogeneous class. Therefore, it has been contended that the impugned action of the respondents is discriminatory and violative of the mandate of the Constitution of India and the impugned notifications, which have been issued withdrawing/rescinding the exemption granted under the Sales Tax Act, are arbitrary and illegal. It has been contended that at least the notifications which have been issued under the erstwhile Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 lakhs plus 10 per cent of the balance. Project cost beyond Rs. 25 lakhs was not eligible under the said scheme. Various sections of the village population, particularly, SC, ST, OBC, women, physically handicapped, ex-servicemen were entitled to above benefit on a higher scale and the scheme was made applicable to all viable village industries projects except negative list stated in the scheme. There is a provision in the general category for extending such benefit. The Scheme has been produced at annexure B to Special Civil Application No. 23720 of 2006. It is also stated that the development of village industries is also an activity to be carried out by the respondents in furtherance of the Directive Principles of State Policy enshrined in the Constitution of India which speak of the efforts to be made by the respondents to minimize inequality in income and facilitate opportunities amongst individuals as well as groups residing in different areas. This, will provide the citizens right of adequate means of livelihood and in turn it would avoid concentration of wealth and promote rural employment and ultimately it would promote not only cottage industries but it would als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 49. Various notifications were issued under the aforesaid two sections of the Sales Tax Act for extending benefit of exemption. It is also contended that the exemption granted under section 5 of the Sales Tax Act was originally under entry 35 of the Schedule to the Sales Tax Act which was subsequently amended to entry 74 of the Schedule to the Sales Tax Act, which has been produced on record. It is also contended that the petitioners were also given protection vide notification under section 49(2) of the Sales Tax Act and the said protection has been given vide entry 95 which has been inserted in the list of entries referred in section 49(2), which is also produced on record. Therefore, it has been contended that the respondents had, vide the impugned notifications dated March 31, 2006, cancelled all earlier exemptions and entries granted under section 49(2) of the Sales Tax Act before the VAT Act came into force. The said notifications are also produced on record. It is contended that the benefit of exemption under the Sales Tax Act would remain and continue when the VAT Act came into force on the next date, i.e., April 1, 2006. It has been contended that the effect of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned village industries for getting the exemption of sales tax under the Sales Tax Act. However, it is denied that the respondents have held out any promise or representation as alleged and it has been denied that the petitioners have set up their industries on the basis of any purported promise or representation regarding grant of exemption to the industries as alleged. It is also contended that a reference could be made to the relevant enactments/laws and the REGP for its proper meaning and interpretation. It is contended that the broad objective of the REGP floated by the Ministry of Agro and Rural Industries, Government of India, was to generate employment in rural areas, to develop entrepreneurial skills among the rural unemployed and also to facilitate participation of the village population for the purpose of employment and also other goals. It has referred to the broad outline of the schemes as to how it would work out extending the benefit and it has been specifically contended that as per the policy of REGP subsidy for margin money to the tune of approximately Rs. 2.81 lakhs has already been received by the petitioners in Special Civil Application No. 23720 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is denied that the certificate of exemption granted or issued to the petitioners are valid or operative even under the VAT Act as alleged. It is contended that the exemption has been granted under the relevant provisions of the Sales Tax Act and it is well established that the Government has the power to rescind, amend or annul such notifications which would therefore not amount to a representation at all. It is contended that the petitioners have not taken any action pursuant to any representation or promise and therefore the petitioners are not entitled to invoke the doctrine of promissory estoppel or legitimate expectation. It is, therefore, contended that the claim of the petitioners based on the doctrine of promissory estoppel is misconceived because the exemptions have been rendered ineffective because of the enactment by the Legislature in the form of the new Act, i.e., the VAT Act, which has repealed the earlier Sales Tax Act under which the exemptions were granted to the petitioners. It is, therefore, contended that the question of applying the doctrine of promissory estoppel or legitimate expectation does not arise. It is denied that the representations of the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned Senior Counsel Mr. Shelat, for that purpose, referred to the Government Resolution dated April 4, 2006 by which the Gujarat Khadi and Village Industries Act, 2006 has been enacted, and referring to the definition of "village industry" at 2(g), he emphasized the basic idea and the purpose of the said Act. Similarly, the learned Senior Counsel has also referred to the "rural area" which has been referred to in clause (2) of the Explanation. Learned Senior Counsel Mr. Shelat submitted that the petitioners established an industry in village Harshadpur, Jamnagar District, and the capital investment made by the petitioner is Rs. 50,000 per worker as per the requirement and a total of 14 employees are employed by the petitioners (in case of SCA No. 23720 of 2006). The certificate of registration dated December 21, 2005 has been granted which is at annexure A and the certificate of exemption from the sales tax at annexure G. He emphasized, referring to this certificate, that the certificate is granted under entry 74 of Schedule I of the Sales Tax Act and the conditions specifically provided that the certificate shall be effective from December 1, 2005 to November 30, 2008. It als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 49 provides,- "Subject to such conditions as it may impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or of specified sales or of purchases from payment of the whole or any part of the tax payable under the provisions of this Act." Therefore, learned Senior Counsel Mr. Shelat submitted that the exemption from the payment of sales tax has been granted as per entry 74 of Schedule I to the Sales Tax Act in exercise of powers under the Sales Tax Act referred to hereinabove. However, he referred to the Government notifications dated March 31, 2006 at annexure I and submitted that by these notifications, the Government is empowered under section 49(2) of the Sales Tax Act read with section 21 of the Bombay General Clauses Act, 1904 to rescind the earlier Government notifications and pursuant to such exercise of power, the earlier notifications dated April 29, 1970 and April 1, 1992 have been rescinded. He referred, again, to notifications at annexure I and also annexure J regarding the exemption granted under the VAT Act. He also referred to page 138 and refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under the newly enacted VAT Act, which has replaced the erstwhile Sales Tax Act, which also has the power of exemption. He further submitted that, therefore, the benefit or concession which has been granted under the Sales Tax Act, which has been repealed and replaced by the VAT Act, would remain in force, particularly when there is a specific notification issued in favour of the petitioners at annexure L which provides that such an exemption granted in exercise of power under the Sales Tax Act and would remain in force till November 2008 could not have been cancelled or rescinded or withdrawn when the newly enacted VAT Act has been brought into force. He emphasized that the new VAT Act, which has replaced the earlier Sales Tax Act, has also a power of granting exemption. Therefore, learned Senior Counsel Mr. Shelat submitted that if a benefit of exemption is granted under the previous law, can the party claim the same exemption under the new or substituted law? He also emphasized that there is a similar power of granting exemption under the VAT Act, but the exemptions qua the petitioners have been withdrawn and, therefore, the moot question before the court is whether such a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the newly substituted VAT Act, the State Government has continued the exemptions granted under the old Sales Tax Act and it would imply that the petitioners can claim the same benefit as there is a power to grant exemptions under the new law. However, the respondent-State Government has, in spite of such power of exemptions under the newly substituted VAT Act, exercised its power, by adopting a policy of pick and choose, denying similar benefits or treatment to the petitioners, which is the bone of contention or grievance. Learned Senior Counsel Mr. Shelat emphasized that once the Legislature has granted an exemption under an earlier Act, which has been repealed when the newly substituted law came into force and the repealed provision as well as the new Act clearly provide for exercise of power of granting exemption and which have been also exercised in some cases, then, can persons like the petitioners, in whose favour there is already an exemption or the certificate granting exemption for a particular period, be denied of the exemption even before expiry of the period? Learned Senior Counsel Mr. Shelat, referring to the scheme of both the Sales Tax Act and the VAT Act whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided in section 6 of the General Clauses Act, the position will remain or apply as it is. He emphasized, quoting sub-section (2) of section 30 of the Act of 1988, "Notwithstanding such repeal, but without prejudice to the application of section 6 of the General Clauses Act, 1897 (10 of 1897), anything done or any action taken or purported to have been done or taken under or in pursuance of the Acts so repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under or in pursuance of the corresponding provision of this Act." Therefore, learned Senior Counsel Mr. Shelat submitted that while construing and interpreting the repeal and saving clause of the substituted law, unless a different intention is expressed, the court is required to consider the provisions of the repealing Act which again provide for saving of the right, title, interest and also benefits under the notification issued under the erstwhile Sales Tax Act. Learned Senior Counsel Mr. Shelat also referred to the judgment in the case of Gammon India Ltd. v. Spl. Chief Secretary reported in [2006] 145 STC 1 (SC) with particular reference to paras 14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable in the facts of the present cases. Learned Senior Counsel Mr. Shelat referred to and relied upon the judgment of the honourable apex court in the case of U.P. Power Corpn. Ltd. v. Sant Steels & Alloys (P) Ltd. reported in AIR 2008 SC 693. Referring to para 18 of the said judgment, the learned Senior Counsel has submitted that the doctrine of promissory estoppel would be attracted because the notification issued under section 49(2) of the Sales Tax Act granting benefit of exemption was in the nature of delegated legislation. Learned Senior Counsel Mr. Shelat also referred to and relied upon the judgment of the honourable apex court in Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42; [1979] 2 SCC 409, and referring to the aspect of promissory estoppel, it was submitted that the honourable apex court has considered the doctrine of promissory estoppel whether the State is bound by it, and if it is bound, to what extent it will apply and it has been observed: "It is an equitable principle evolved by the courts for doing justice and there is no reason why it should be given only a limited application by way of defence. There is no reason in logic or principle why promiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer reported in [2005] 139 STC 86 (SC); [2004] Lawsuit 1382 (SC), and submitted, as observed in para 9, that even though there may be a discretion to change the policy it has to be examined in light of article 14. Mr. Shelat, learned Senior Counsel, emphasized the observation: (page 95 of STC) "...The wide sweep of article 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of article 14 is fairness in action by the State, and nonarbitrariness in essence and substance is the heart beat of fair play..." Learned Senior Counsel Mr. Shelat submitted that in this case also the arguments regarding the applicability of promissory estoppel were negatived when the benefit of exemption granted was sought to be withdrawn and such an action was examined by the honourable apex court invoking the principle of promissory estoppel. Mr. Shelat, learned Senior Counsel, submitted that in the facts of this case also, the benefit of exemption which was already granted were sought to be withdrawn, which has been challenged. The learned Senior Counsel also submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstwhile Sales Tax Act to the petitioners has been sought to be rescinded by issuing notifications in exercise of power under the said Act and thereafter exemption under the newly enacted VAT Act has been granted to selected units, and though the notification is issued under the VAT Act for grant of exemption from payment of tax, the entries in the Schedule omits a number of industries or units like the petitioners and thereby denied such a benefit or equal treatment, which is arbitrary and illegal and is sought to be challenged in these petitions. Learned Counsel Mr. J.P. Shah appearing with learned advocate Mr. Manish Shah for the petitioners in Special Civil Application Nos. 19723 to 19727 of 2006 submitted that in a fiscal law even if the law is substituted by another law, what has been done is not totally done away with and, therefore with the experience and necessity, the repeal and saving provision has been evolved, which has been incorporated in the newly substituted law. He, therefore, referred to section 100 of the newly substituted VAT Act and submitted that it has been so elaborately drafted which takes care of the acts done under the prevalent Sales Tax Act. He ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers have relied upon, cannot be withdrawn or rescinded and any such action would be arbitrary, illegal and would attract the doctrine of promissory estoppel. Learned Counsel Mr. Shah, referring to the evolution of the concept and doctrine of promissory estoppel, referred to and relied upon the judgment of the honourable apex court in the case of Union of India v. Anglo Afghan Agencies reported in AIR 1968 SC 718, and he extensively referred to the observations made therein and submitted that this very principle has been gradually developed and accepted and it has been also fully accepted till recently. For that purpose, he referred to the judgment in Khazan Chand Nathi Ram v. State of Haryana [2004] 136 STC 261 (P&H). Learned Counsel Mr. Shah referring to the judgment in the case of Bannari Amman Sugars Ltd. [2005] 139 STC 86 (SC); [2004] Lawsuit 1382 (SC); [2005] 1 SCC 625 submitted that this doctrine is applicable even in the legislative field to which he again referred extensively, which has been referred to earlier, and therefore it is not being extensively referred to here. He has also referred to the judgment in the case of Motilal Padampat Sugar Mills Co., Ltd. [1979] 44 ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners, the intention is required to be inferred as expressed clearly otherwise and, therefore, section 100 of the VAT Act providing for repeal and saving will not have any application. Learned Government Pleader Mr. Shah also referred to the judgments cited by learned Senior Counsel Mr. Shelat and emphasized the observations made to the effect that it clearly provides that section 6 of the General Clauses Act would be attracted only if there is no express intention otherwise. Therefore, he emphasized that the language used by the Legislature has to be read and the provision of the statute may be read as a whole and the court may not read into something which is not provided or may not add anything. The learned Government Pleader submitted that while interpreting or construing a statute, particularly a fiscal statute, there is very little scope for judicial review. He also submitted that it is a legislative function and, therefore, it is within the domain of the Legislature and the court may not interfere and even if the Legislature is harsh or has not provided for something, it cannot be substituted by the opinion of the court as it will not be within the domain of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales Tax Act provides that the State Government may enlarge such benefits and it is an enabling or empowering provision for the purpose of adding or deleting any entry, which is again a legislative power. Therefore, it was submitted that entry 74 of Schedule I of the Sales Tax Act, by which such benefit of exemption was granted, was pursuant to the provisions of section 5 read with section 49(2) of the Sales Tax Act. However, that would not mean that the newly substituted VAT Act should also have the same benefit or the same provision. Learned Government Pleader Mr. Shah referred to the pleadings and also the Sales Tax Act as well as the VAT Act and referring to the pleadings and the VAT Act, it was submitted that while introducing the VAT Act, 42 entries are deleted for which examples are stated at pages 292 and 293. He again referred to the notification at page 292 of April 1, 2006 and submitted that it is this notification by which the exemption has been granted, which has been withdrawn. He also referred to the notification of August 18, 2006 at page 142 which refers to the eligibility criteria under the VAT Act and submitted that it provides for eligibility criteria for the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that it is a legislative function and the scope of judicial review is very limited. It was submitted that even if the benefit of exemption which was granted under the erstwhile Sales Tax Act was for a specific time-limit, it still cannot be argued that the same cannot be withdrawn. If the Government, by virtue of exercise of power under the statute, has granted exemption, it has also a right to withdraw, in exercise of such power, any such exemption or benefit, which is again a legislative function and also a matter of policy. Therefore, it was submitted that the notification granting exemption has been cancelled before the VAT Act was brought into force and thereafter the benefit of exemption under the newly substituted VAT Act has been granted as desired by the Legislature for which the petitioners cannot make a grievance, nor the court should interfere with it. Referring to the observations made in para 12 of the said judgment, he emphasized that, "...the doctrine of promissory estoppel cannot be pressed into aid to compel the Government or the public authority 'to carry out a representation or a promise which is contrary to law or which was outside the authority or powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quivocal promise knowing and intending that it would be acted upon by the promisee; 2.. such acting upon the promise by the promisee so that it would be inequitable to allow the promisor to go back on the promise. Further, referring to para 36, learned Government Pleader Mr. Shah emphasized with regard to the limitations to the doctrine of promissory estoppel, which has been discussed, referring to the earlier judgment in the case of Motilal Padampat Sugar Mills Co., Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCC 409 that "...there can be no promissory estoppel against the Legislature in exercise of its legislative functions nor can the Government or public authority be debarred by promissory estoppel from enforcing a statutory prohibition." He further emphasized, referring to observations made in this para, that: "...the 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." Further, the learned Government Pleader also submitted, referring to the scheme of the newly substi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fiscal law like the Sales Tax Act is a concession and it cannot be claimed as a matter of right when the Act itself under which such benefit or exemption is granted, has been repealed and it will go and it will not survive any longer. Therefore, the submissions made by the learned counsel for the petitioners on the ground that the benefit which was granted under the erstwhile Sales Tax Act has to be continued or has to be granted under the newly substituted VAT Act may not be believed. He further submitted that by doing so, the court would be stepping into the domain of the Legislature as to grant of a concession or a benefit of exemption under the VAT Act, which the Legislature has not granted. The learned Government Pleader also strenuously submitted that, for that purpose, as pointed out referring to the pronouncement of the honourable apex court, that the court cannot interfere and the court should not enter in the domain of the Legislature by giving any direction to exercise a discretion for grant of exemption under the newly substituted VAT Act, which is a legislative function. Further, the learned Government Pleader also submitted that the exemption which was granted und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o and relied upon the judgment in the case of Khazan Chand Nathi Ram v. State of Haryana reported in [2004] 136 STC 261 (P&H), which is also referred to and relied upon by the learned counsel for the petitioners. The learned Government Pleader also referred to the judgment in the case of Hotel Madhuvan International Private Limited v. State of Karnataka reported in [2006] 147 STC 619 (Karn), referred to and relied upon by the learned counsel for the petitioners, and submitted that in that case the Government had not withdrawn any notification, whereas in the facts of the present case, the notification has been rescinded, which would make the difference and therefore it will not have any application to the facts of the present case. The learned Government Pleader also referred to and relied upon the judgment of the honourable apex court in the case of S.L. Srinivasa Jute Twine Mills (P) Ltd. v. Union of India reported in [2006] 2 SCC 740, referred to by the learned counsel for the petitioners, and submitted that the facts of the case before the honourable Supreme Court and the present case are different and therefore it will not have any application. The learned Government Pleader ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manipulation, arbitrariness and like infirmities do not defile the equation for integration. Therefore, it was submitted that when the Legislature has not deemed it proper to grant or continue the exemption, the court, while interfering with such a fiscal statute, would be slow and the scope of judicial review is very limited. Again, the learned Government Pleader referred to and relied upon the judgment of the honourable apex court in the case of U.P. Power Corpn. Ltd. AIR 2008 SC 693 and submitted that in the said judgment distinction has been made between the primary legislation and delegated legislation and, as observed, again, it is a matter of policy. The learned Government Pleader referred to the judgment in the case of Khadi Grama Vyavasaya Association (State Committee) v. State of Kerala reported in [2006] 145 STC 601 (Ker), and submitted that though observations have been made, it has to be considered in light of provisions of the statutes like the Sales Tax Act and the VAT Act. He also referred to the Gujarat Sales Tax Act and submitted that what has been provided in the Gujarat Sales Tax Act is not provided or covered in the newly substituted Gujarat VAT Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is brought into force and when similar benefit of exemption has not been continued or granted afresh, persons like the petitioners cannot claim the benefit. Otherwise, it would be adding to the statute, which is a legislative function. Learned Government Pleader Mr. Shah, again, summarizing on the aspect of the doctrine of promissory estoppel, submitted that it has no application as the condition precedent for attracting the doctrine, that is, there has to be a promise, and there is nothing to show that a promise was held out, and the decision was altered to the detriment of the petitioners. He, therefore, referring to the provisions of section 49(2) of the Sales Tax Act, submitted that the notification was issued granting the benefit of exemption under the erstwhile Sales Tax Act, which has been repealed, and, therefore, the notification cannot have any effect and it cannot survive. The learned Government Pleader also submitted, again referring to section 49(2) of the Sales Tax Act, that the certificate of exemption cannot be construed as a promise. Further, it was submitted that it does not lay down any period of validity and therefore, in exercise of the same power, it was wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication under the newly substituted VAT Act and, therefore, it cannot be said or argued that the Legislature had not desired to confer any such benefit under the newly substituted VAT Act. Learned Senior Counsel Mr. Shelat also referred to the judgment of the honourable apex court in the case of Southern Petrochemical Industries Co. Ltd. [2007] 5 SCC 447, and referring to para 100, he again emphasized the observations and submitted that the honourable apex court has dealt with the submissions and the contentions raised by the respondent-Government that exemption from tax is a mere concession defeasible by the Government and does not confer any accrued right to the recipient, and such issue of a contention has been negatived by observing, right of exemption with a valid notification gives rise to an accrued right. It is a vested right. Such right had been granted to them permanently. Learned Senior Counsel Mr. Shelat submitted that the word "permanently" does not mean all time to come, but at least till the expiry of the period of the certificate issued, i.e., up to November 30, 2008. It is observed in the same para that "permanence" would mean unless altered by statute. Thus, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C); [2006] 3 SCC 620 and emphasized, as observed in para 26, referring to the observations made in the case of Motilal Padampat Sugar Mills Co., Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCC 409, that the doctrine of promissory estoppel operates even in the legislative field. Referring to the observations made in the case of U.P. Power Corpn. Ltd. AIR 2008 SC 693, he again emphasized the honourable apex court's observation about the role of the Government in the changing scenario of the global economy and that therefore the submissions made by the learned Government Pleader emphasizing the limited scope of judicial review or non-applicability of promissory estoppel cannot be accepted. Learned Senior Counsel Mr. Shelat, therefore, submitted that the present petitions may be allowed and the reliefs as prayed for may be granted and the notifications dated March 31, 2006 by which the earlier certificate granting exemption has been rescinded may be quashed and set aside. In view of the rival submissions, it is required to be considered whether the doctrine of promissory estoppel would be applicable or attracted. Again, whether it would have application to the legislative field. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the honourable apex court by a Constitution Bench in the case of I.R. Coelho (dead) by L.Rs. v. State of Tamil Nadu reported in AIR 2007 SC 861. From the history of judicial pronouncements and the observations made from time to time, it has been well accepted that the judicial review is an integral part of the basic feature of the Constitution. It is also required to be emphasized that the courts have at the same time exercised and shown self-restraint while undertaking judicial review in the matters brought before the courts. Therefore, it is more a matter of discretion and restraint and also caution rather than total lack of power or limitations on the power on the part of the court. In this connection, a useful reference can be made to the observations made by the honourable apex court in a judgment reported in the case of Rajendra Singh Rana v. Swami Prasad Maurya reported in AIR 2007 SC 1305. Similarly, though it has been much emphasized referring to the fact that the scope of interference or judicial review when it is a fiscal statute, again, it is a matter of sound discretion normally exercised by the courts and, therefore, it cannot be argued or accepted as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [1979] 44 STC 42 (SC); [1979] 2 SCC 409 that if the detriment is caused as a result of promisor receding from his promise, it would certainly be a detriment attracting promissory estoppel. Another scheme, to which reference has been made by the learned Government Pleader while referring to the exemption granted to the industrial houses which have established similar units for manufacturing many other products and which have been extended the benefit of exemption under the VAT Act is also required to be considered. A close scrutiny would broadly suggest that the central idea, as reflected in the objects and reasons of the KVIC Act, and the scheme which is sought to have been referred to or which is sought to have been a policy matter of the Government for the purpose of development in the rural areas, that they have granted exemptions to some of the units and at the same time not thought it desirable to extend similar benefit under the newly substituted VAT Act to several other units by deleting the entries, is required to be examined. Both have the central theme of promoting industries for the purpose of development in the rural areas. Again, for the purpose of development or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption, which was to be valid from December 1, 2005 to November 30, 2008 has been rescinded as per notification at annexure I dated March 31, 2006 in exercise of the same powers under section 49(2) of the Sales Tax Act. There is no quarrel with the submission that if the statute empowers the Government to exercise discretion for grant of the benefit of exemption, the same powers can be resorted to for withdrawal of those exemptions also. However, once such a benefit has been extended in exercise of statutory power like those under section 49(2) of the Sales Tax Act granting the benefit of exemption for the period from December 1, 2005 to November 30, 2008, there has to be justification for rescinding or withdrawing such benefit of exemption. There is no justification or public interest explained, except an argument that the same powers have been exercised by which the benefit was extended for the purpose of withdrawal or rescinding the benefit under the statute, i.e., the Sales Tax Act and thereafter a newly substituted law, i.e., VAT Act, has been introduced which does not confer the same benefit of exemption. The submissions have been made that if the newly substituted law, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of exemption and has also a reference to entry 36B under Schedule I referring to the similar items of production, the notification qua the petitioner-industries has not been issued, meaning thereby, the newly substituted legislation also does not preclude the Government from exercise of such power for grant of extension of the benefit of exemption. On the contrary, the Legislature has provided for such discretion for the benefit of exemption to be extended and the power of exemption has not been curtailed under the newly substituted VAT Act. Be that as it may, as rightly submitted and emphasized, the court may not substitute its opinion or interfere with the grant of exemption or exercise of discretion for grant of the benefit of exemption under the newly substituted VAT Act. However, it is very much necessary and relevant to examine the justification for exercise of power for rescinding the same benefit granted earlier under the statute like the Sales Tax Act, though the benefit of exemption by virtue of the certificate or the notification was for the period from December 1, 2005 to November 30, 2008. Thereafter, when the newly substituted VAT Act has been brought into forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the repeal of the main statute under which the benefit has been granted. These submissions that as newly substituted VAT Act was to be brought into force in place of the erstwhile Sales Tax Act and, therefore, when the Sales Tax Act itself has been repealed, the benefit of exemption or such notifications were sought to be rescinded in exercise of the same power under the Sales Tax Act, as otherwise it would have remained in force even after the repeal of the Sales Tax Act is also misconceived. Even if the Sales Tax Act has been repealed, the benefit granted under the erstwhile Sales Tax Act for the exemption by notification which was to remain valid from December 1, 2005 to November 30, 2008 could have continued or remained and it is only for taking care of such eventualities section 100 of the VAT Act providing for repeal and saving clause has been made to take care of such situation. Further, as rightly emphasized by learned Senior Counsel Mr. Shelat referring to the Notification dated April 1, 2006 issued under the VAT Act which itself clearly provides in no uncertain terms that the Government of Gujarat continues the tax exemption granted to sale or purchase of goods by indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2005 to November 30, 2008 has been issued, it will remain in force and if it has been withdrawn or rescinded before the expiry of the validity thereof, then, there has to be a justification shown or it can be only justified that for such a legislative function powers are exercised in public interest and then perhaps it could be argued that the doctrine of promissory estoppel has no application. However, there is no such justification shown except the fact that the newly substituted VAT Act has been brought into force and, therefore, even if such a law has been brought into force, with section 100 providing for repeal and saving clause, it may not be necessary to examine on that aspect inasmuch as the court is required to examine the impugned notifications dated March 31, 2006 at annexure I by which the earlier certificate granting benefit of exemption has been rescinded under the same statutory powers under the erstwhile Sales Tax Act. It is in this context, when there is no explanation or justification coming forth, for rescinding the benefit of exemption granted earlier for a period from December 1, 2005 to November 30, 2008 before the expiry then, it would certainly attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aborating on this aspect in this very judgment, referring to the facts of the case there also, where the Government had rescinded the earlier decision which was challenged, and in light of this doctrine, the honourable apex court observed: (page 72 of 44 STC) "...The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the courts and the Legislatures must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires..." Further, elaborating on this, referring to the earlier judgment of the honourable apex court in the case of Anglo Afghan Agencies [1968] 2 SCR 366; AIR 1968 SC 718 it is observed: (page 72 of 44 STC) "...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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervations made by Lord Denning, J. in Robertson v. Minister of Pensions [1949] 1 KB 227 (KB) rejecting the doctrine of executive necessity and held them to be applicable in India: (page 74 of 44 STC) "If our nascent democracy is to thrive, different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representations made by it relying upon which a citizen has altered his position to his prejudice." Thus, the doctrine of promissory estoppel is a rule of equity which has gained new dimensions and it has also developed over a period of time. Therefore, the submissions made by the learned Government Pleader with regard to invocation or the applicability of the doctrine of promissory estoppel and the scope of judicial review are thoroughly misconceived. It is required to be mentioned that though it has been much emphasized by the learned Government Pleader referring to the judgment in the case of State of Punjab v. Nestle India Ltd. [2004] 136 STC 35 (SC); [2004] 6 SCC 465 that it must be first proved that there was a promise made or position was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one hand, submission is made by the learned Government Pleader that in exercise of the powers under the same statute, i.e., section 49(2) of the Sales Tax Act, the certificate granting the benefit of exemption was issued and in exercise of the same power under the same statute the subsequent notifications at annexure I dated March 31, 2006 have been issued by which the earlier notification granting exemption has been rescinded, meaning thereby that before the Sales Tax Act was repealed, they have resorted to the same powers under the statute by which the exemption was granted. There is no quarrel with regard to the exercise of power for grant of exemption or withdrawal of exemption and even the executive necessity or policy which the Government may decide. The real crux of the matter is, once having granted the benefit of exemption, which has continued, and when the impugned certificate at annexure G by which the benefit of exemption from sales tax has been granted for a period from December 1, 2005 to November 30, 2008, there is no justification shown for premature rescinding of such certificate. Therefore, it is not that the court has indulged in directing the Government to gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption and therefore it has been rightly withdrawn by rescinding the notification. It is required to be considered that the submission that when a statute like the Sales Tax Act has been repealed, it has to be treated as it has never existed and whatever the benefit or exemption is deemed to have gone with the repealed Act, is misconceived. It is well accepted that when a statute is repealed or substituted by a new legislation like the VAT Act, to avoid such a situation which has been canvassed before this court, the new statute provides for repeal and saving clause under section 100 of the present VAT Act, which takes care of such a situation. Further, the main emphasis or argument is that when the Sales Tax Act itself is to be repealed, the notification or the benefit granted by the notification in exercise of the Sales Tax Act could not remain and it has to be done away with is no justification and the purpose or the idea of issuing the impugned notification rescinding the benefit of exemption already granted for the period from December 1, 2005 to November 30, 2008 is that the Sales Tax Act is to be repealed and substituted by the VAT Act. However, this argument itself is misco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onourable apex court and the apex court has also accepted and reaffirmed that the doctrine would be applicable and in a given case it can be invoked or made applicable even in the legislative field also. A useful reference can also be made to the judgment of the honourable apex court in the case of Southern Petrochemical Industries Co. Ltd. [2007] 5 SCC 447. Referring to the issue of promissory estoppel, similar contention advanced by the learned counsel in that case that there cannot be an estoppel against the statute and in any event the exemption granted under sub-section (1) of section 13 of the 1962 Act was subject to cancellation or variation was negatived, and considering the earlier judgments and the doctrine of promissory estoppel, the honourable apex court, referring to the observations in the case of Motilal Padampat Sugar Mills Co. Ltd. [1979] 44 STC 42 (SC); [1979] 2 SCC 409, has observed: "The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al questions arise. The first question is to what has the public authority, whether by practice or by promise, committed itself; the second is whether the authority has acted or proposes to act unlawfully in relation to its commitment; the third is what the court should do." Again, deliberating on whether the authority has acted unlawfully, the court has discussed and observed, "...whether the reneging on a promise would be so unfair as to amount to an abuse of power is an uncertain guide." and has also observed that, "After having established such an abuse, the court has to ask, 'take the legitimate expectation properly into account in the decision-making process'. It does not necessarily follow that a legitimate expectation of a substantive benefit will be satisfied." Expressing a word of caution, it has also observed that this principle is not meant to be applied in exercise of legitimate power by the State. However, there has to be justification. The honourable apex court, in this very judgment, referring to the judgment in the case of Kasinka Trading v. Union of India [1995] 1 SCC 274, which has been distinguished in subsequent judgment in the case of State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted, (page 99 of STC) "...The courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present in the mind of the court." Therefore, as discussed and stated hereinabove, even such an action by which even if it is assumed that it is a legislative function by delegated legislation, whether the grant of exemption is in exercise of power under the statute or not, still, it has to be tested on the touchstone of article 14 which has reference to the fairness, equity and justice. This, again, refers to, as quoted above, Wednesbury's test and, therefore, though submission has been made that issuance of the notification in exercise of power under the statute is a legislative function by way of delegated legislation, nevertheless it could also be viewed as an action by the respondent-Government, which is required to be tested on the aforesaid principles. When the statute confers a power for grant of exemption and exemption has been granted, rescinding of the earlier notification in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extend similar benefit under the newly substituted VAT Act, and as is evident, the Government has not extended by granting the exemption of similar benefit under the newly substituted VAT Act, which would be within the legislative domain. However, still, the court, under the judicial review, is required to examine and scrutinize and appreciate the fact that under the VAT Act itself providing for grant of such benefit of exemption is there. There is an entry 36B also, but the notification extending such benefit of exemption qua the petitioners has not been issued and, therefore, though it could be said that by delegated legislation a notification for grant of exemption the Legislature has not thought it fit to grant the benefit, at the same time, it can be viewed that the Legislature has made a provision for grant of benefit of exemption but while issuing notification some of the entries are deleted and/or where the notification for the units like the petitioners has not been issued may be either a legislative function or it could be purely an executive function. The statute has provided for the grant of benefit of exemption and also entry like entry 36B for similar items, but when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r entries, which suggests that the exemptions are not to be granted and, therefore, the court may not substitute its opinion. For that purpose, the learned Government Pleader has pointedly referred to the scheme. Clause (G) of the scheme, which refers to "village industry", reads as under: "any village industry (except those mentioned in the negative list) located in the rural area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of a full-time artisan or worker does not exceed Rs. 50,000." Therefore, the learned Government Pleader has emphasized the aspect of investment of Rs. 50,000 per head for the artisan/worker and also referred to the negative list. Reference was made to the negative list of the activities, which is also to be found in the Schedule which enumerates different groups of activities or industries. The purview of khadi and village industries group has referred to clause (C) which provides "khadi and polyvastra and any project producing yarn and cloth under khadi certification Rules". Therefore, he submitted that the khadi industry as referred to in this provides that "khadi mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer and in which the fixed capital investment per head of an artisan or a worker does not exceed fifteen thousand rupees or which other sum as may, by notification in the Official Gazette, be specified from time to time by the Central Government." Which is also similar to the definition of "village industry" referred to in the Bombay Khadi and Village Industries Act. Section 15 of the KVIC Act refers to the functions of the Commission which have been enumerated and inter alia, clause (f) refers to, "to undertake directly or through other agencies studies of the problems of khadi or village industries". Clause (l) provides, "to carry out any other matters incidental to the above". Therefore, if the broad object of the aforesaid two laws, both the State as well as the Central law, are considered in light of the scheme known as REGP, on which reliance has been placed by the learned Government Pleader, in fact, it has to be in furtherance and for promotion of the objects set out in the statute and, therefore, reference to the village industries specifying the investment or the negative list of activities has to be considered in light of the objects of the statute itself as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the scheme of VAT Act emphasizing that it is a multi-point system, still, it has reference to only the method of taxation, but the ultimate object or the idea behind granting such benefit of exemption has remained the same, and it would not change because the Sales Tax Act has been substituted by the VAT Act. It is in these circumstances this court is of the opinion that on the doctrine of legitimate expectation also the petitioners would be entitled to have similar benefit of exemption granted or extended under the newly substituted VAT Act. Though this court is conscious about the submissions made with much emphasis that the court cannot substitute its own views or direct it to exercise a power, nevertheless, the concept of judicial review still empowers the court to examine the justification and would also require justification from the Government as to why the benefit has not been extended under the newly substituted VAT Act when there is similar power reserved for grant of exemption. It is also required to be mentioned that by making such provision, the Legislature has been conscious and has provided for exercise of such power for grant of exemption to the Government or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly worded. A bare perusal of section 100 of the VAT Act clearly suggests that such notifications and right, title, interest accrued or the liability incurred are sustained or saved. However, but for the impugned notifications dated March 31, 2006 at annexure I issued in exercise of section 49(2) of the erstwhile Sales Tax Act, rescinding the earlier notifications granted under the same statute, the notifications by which exemptions have been granted would have remained in force for the full period even after the main statute, that is, the Sales Tax Act, has been repealed. In other words, even though the Sales Tax Act has been repealed, the notification granting benefit of exemption under the Sales Tax Act would have remained in force and could be given effect to in spite of such repeal of the Sales Tax Act as per section 100 of the newly substituted VAT Act providing for repeal and saving clause read with the notification as issued under the VAT Act itself dated April 1, 2006 clarifying that the benefit of exemption would remain. Therefore, the impugned notifications rescinding the earlier benefit of exemption from the sales tax has been held to be bad in law and if it is allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld become the ultimate beneficiaries of the bounty." This is precisely which is required to be focused as the benefits are granted to other industries or industrial units set up by the industrial groups or the companies. Therefore, by such device of fragmentation, or in the guise of eliminating certain entries from the list under the newly substituted VAT Act and thereby denying the benefit of exemption to the petitioners would, in fact, run counter to the very object and purpose of the statute enacted for promotion and development of the khadi and village industries and also rural employment and the development of industries in the rural areas. As discussed above, therefore, if it is required to be considered in light of the directive principles with regard to transformation of the society or the economic development, then also it would be inconsistent with objects and reasons of the Act. It is required to be mentioned that in the changing scenario of globalization and the economic development, on one hand, special economic zones are sought to be created to provide benefits for encouragement and development of the industries by providing various concessions, exemptions and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 30, 2008 would remain in force till it expires. However, the rest of the prayers regarding issuance of writ of mandamus or writ in the nature of mandamus directing the respondents to grant exemption or to make available to the petitioners the exemption under the newly substituted VAT Act, and also seeking prayer to grant exemption to the industries of the petitioners under the provisions of the VAT Act from the date of coming into force of the VAT Act, cannot be granted, nor any such prayer with regard to extension of benefit granted under entry 95 or entry 74 of the Schedule of the Sales Tax Act to be made applicable to the VAT Act could be granted. However, as the issue regarding grant of benefit of exemption under the newly substituted VAT Act would be either a legislative function by issuance of notification in exercise of power conferred under the statute, or it would be a matter of policy to be decided by the respondent-Government as to how the benefit of exemption should be extended, for which, while substituting the VAT Act, the entries have been deleted and some of the entries are specified, it may not be proper for this court to issue directions granting the reliefs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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