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TMI Blog2010 (8) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... tries Department, in the year 1997, in order to take advantage of the liberalized economic scenario in the country and also to keep pace with the development in the national industrial sector framed a new Industrial Policy with the following objectives: (a) To generate employment opportunities for the local people in the industries and allied sectors. (b) To encourage the setting up of selective medium and large scale industries by utilizing the resource base of the State but compatible and hence encourage positive efforts towards the regeneration of the environment. (c) To encourage need based development of local entrepreneurial skills through investment and training programmes in District, subdivisional and block levels. (d) To simplify rules and procedures by providing a single window clearance facility at the district levels for the small-scale sector and at the State level for medium and large scale industries. (e) To promote and encourage high value, low volume products in view of the transportation bottlenecks in the State. It appears that as per this Industrial Policy, the State of Meghalaya, assured to provide subsidies, incentives and assistance to the small ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployment certificate. (h) Fit to render services for which the units were set up, in case of tourism units, only. In so far as sales tax exemption to eligible units in respect of large and medium scale industries is concerned, clause 4(3) of the scheme indicated the nature of exemption as well as the period of exemption in the following manner - Large and medium scale industries: Nature of exemption Period of exemption Total sales tax exemption on sale of finished products within the State or in the course of Inter-State trade or commerce which are otherwise taxable under the Meghalaya Sales Tax Act or Meghalaya Finance (Sales Tax) Act, limited to goods actually produced in the industrial unit not exceeding its install capacity Seven years from the date of commercial production as reported and recorded by the Meghalaya Industrial Development Corporation. In terms of clause 5 of the scheme, the period of validity of eligibility certificate was for seven years from the date of commercial production as reported and recorded by the Meghalaya Industrial Development Corporation in respect of large and medium scale industries. Another notification dated April 12, 2001, was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Meghalaya State Electricity Board for installation of 100 KVA DG Set vide letter dated January 24, 2005. (iv) MIDC-Single window clearance vide letter dated February 3, 2004. (g) it started its commercial production on March 25, 2005. According to the petitioner, in setting up this industry, it had spent huge amounts of money and thereby changed its position on the basis of the assurance made by the respondent-authorities in the said Industrial Policy and the Scheme issued thereunder. The relevant particulars of the investment are as under: PROJECT COSTS Sl. No. Particulars Amount in rupees (lakhs) up to 31.03.2005 Amount in rupees (lakhs) up to 31.03.2006 1. Land and site development 3.49 37.97 2. Building and civil works 17.17 9.99 3. Plant and machinery and utility installation 94.90 113.62 4. Miscellaneous fixed assets 0.82 5.41 5. Preliminary and preoperative expenses 9.15 1.41 6. Margin money for working capital 89.00 100.31 Total 214.53 268.71 It is the further case of the petitioner that respondent No. 4 had issued the eligibility certificate under the Meghalaya Industrial Policy, 1997, in which it was stated that the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment is prospective in nature and it can in no way be held applicable to sales tax exemption already allowed under or in accordance with the pre-amended section 8(5) of the Central Sales Tax Act, 1956. It is also contended by the petitioner that the impugned notification is in violation of the principles of natural justice and the doctrine of promissory estoppel. It is the case of the petitioner that the newly amended section 8(5) of the Central Sales Tax Act, 1956, confining the powers of granting exemption by a notification to registered dealers and the Government will have no effect on past exemption. The contention of the petitioner is that the notification dated September 5, 2005 superseding the earlier notification dated April 12, 2001 is not applicable to the petitioner and is hit by the doctrine of promissory estoppel. It is contended by the petitioner that in terms of the Industrial Policy, 1997, sales tax exemption was available to any dealer and not only to registered dealers and the Government and as such, the sales tax exemption for a period of seven years from the date of commercial production enjoyed by the petitioner cannot be set at naught by the impugned notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 8(4) of the Act. According to the State respondents, the exemption of Central sales tax on the sales of finished products manufactured by eligible industrial units under the Meghalaya Industries (Sales Tax Exemption) Scheme, 2001, had remained valid without any restriction up to May 10, 2002, but following the amendment of section 8(5) by the Finance Act, 2002, such benefit came to be confined only to sales of goods to a registered dealer or the Government subject to fulfilment of the requirement laid down under section 8(4) of the Act. As the impugned notification has been issued in terms of the amended section 8(5) of the Central Sales Tax Act, 1956, the question of invoking promissory estoppels cannot and does not arise inasmuch as the impugned notification was issued in conformity with the Central Sales Tax Act: the State Government has no option but to follow and implement the Central legislation. The promise held out by the State respondents with good intention under the Industrial Policy, 1997 regrettably failed due to the amendment of section 8(5) of the Central Sales Tax Act, in the year 2002, by the Parliament of India and that levying of sales tax on sales o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nequivocal declarations/promises made by the State-respondents in the policy and the scheme, took steps for establishment of its industry by investing huge amounts of money, and the State-respondents are, therefore, bound by the doctrine of promissory estoppel to fulfil their promises: a clear case of the doctrine of promissory estoppel is made out by the petitioner. As the impugned notification violates the legal and fundamental and legal rights of the petitioner guaranteed under articles 14, 19(l)(g) and 300A of the Constitution, submits the learned senior counsel, the petitioner is entitled to a writ of certiorari and a writ of mandamus to enforce and protect its rights. Heavy reliance is placed by the learned senior counsel on the following decisions: (a) U.P. Power Corporation Ltd. v. Sant Steels Alloys (P) Ltd. [2008] 2 SCC 777, (b) State of Punjab v. Nestle India Ltd. [2004] 136 STC 35 (SC); [2004] 6 SCC 465, (c) Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. [1979] 44 STC 42 (SC); [1979] 2 SCC 409, (d) Manjushree Extrusions Limited v. State of Assam [2001] 123 STC 366 (Gauhati); [2004] 2 GLR 218 and (e) Union of India v. Shree Ganapati Rolling Mills Pvt. Ltd. [2006] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tives and assistance to the small-scale as well as medium and large scale categories of industry in Meghalaya under "the Meghalaya Incentive Scheme, 1997". One of such incentives envisaged for "large and medium scale industries" is sales tax exemption whereby Meghalaya sales tax as well as sales tax on sale of finished goods in the course of inter-State trade or commerce will be exempted for a period of seven years from the date of commercial production. Pursuant to the Meghalaya Incentive Scheme, 1997, the State of Meghalaya in the Department of Excise, Registration, Taxation and Stamps issued the notification dated April 12, 2001 notifying the scheme called "the Meghalaya Industries (Sales Tax Exemption) Scheme, 2001, which was deemed to have come into force with effect from August 12, 1997. Clause 1(3) of the Schemes provides that the Schemes shall apply to the industrial units in Meghalaya which are considered eligible for sales tax exemption on sale of finished products manufactured by such eligible units within the State of Meghalaya and in the course of inter-State trade or commerce in conformity with the provisions of the Industrial Policy of Meghalaya, 1997. Thereafter, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1956 as amended in 2002 reads thus: "(5) Notwithstanding anything contained in this section, the State Government may on the fulfilment of the requirements laid down in sub-section (4) by the dealer, if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette, and subject to such conditions as may be specified therein, direct, - (a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, to a registered dealer from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in subsection (1) as may be mentioned in the notification; (b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-State trade or commerce, to a registered dealer by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification, to any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the requirements stipulated for availing of the benefits of the tax exemption and has, in fact, availed of such benefits till the date of issuing the impugned notification. The question which falls for determination in this writ petition is whether the impugned notification can be validly issued under the newly amended section 8(5) of the Central Sales Tax Act, 1956. The effect of the legislative change introduced by the amending Act of 2002 is that on the coming into force thereof, the power of the States to grant exemption of sales tax for sale of goods in the course of inter-State trade or commerce came to be restricted to the sale by the dealer to a registered dealer. In other words, if such goods are not sold to a registered dealer, the States are deprived of their power to grant the tax exemption. However, prior to the coming into force of 2002 amendment, no such restriction was placed upon the power of the States to grant the sales tax exemption irrespective of whether the sale of goods by the dealer in the course of inter-State trade or commerce was upon a registered dealer or not. A closer scrutiny of the Central Sales Tax Act, 1956 as amended in 2002 will reveal that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal relationship to arise in the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, the promise, assurance or representation should be binding on the party making it and that party should not be permitted to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings, which have taken place or are intended to take place between the parties. 12.. It has been settled by this court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the 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'. There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The representation was obviously intended to create legal relationship between the petitioner and the State-respondents. The notification dated April 12, 2001 allowing the tax exemption in respect of sales of goods in the course of inter-State trade or commerce not necessarily to a registered dealer did not fall foul of section 8(5) of the Central Sales Tax Act, 1956 prior to its amendment, which came into force only with effect from May 11, 2002: the notification dated April 12, 2001 is, therefore, not contrary to law. No evidence is shown nor is such a plea made by the State-respondents that public interest would be prejudiced if they are required to carry out the promise. Neither is it the case of the State-respondents that the representation was made outside the authority or power of its officials to make. Under the circumstances, I have no alternative but to hold that the State-respondents are barred by the doctrine of promissory estoppel from issuing the impugned notification, which, ex facie, is bad in law. The petitioner has, therefore, made out a clear case for the application of the doctrine of promissory estoppel to the facts of this case warranting the interference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... installation of 100 KVA DG Set vide letter No. IEL/111/16/2004-05/ 334 dated January 24, 2005. (h) The petitioner-company started its commercial production on December 12, 2004." It is stated by the petitioner that for the purpose of setting up the said industry, it has spent huge amounts of money and altered its position on the basis of the aforesaid representation/promise or assurance made by the State-respondents. The particulars of the investments made by it are as under: PROJECT COSTS Sl.No. Particulars Amount in rupees (lakhs) up to 31.03.2005 Amount in rupees (lakhs) up to 31.03.2006 1. Land and site development 1.22 1.22 2. Building and civil works 15.30 28.85 3. Plant and machinery and utility installation 75.20 93.76 4. Miscellaneous fixed assets 1.06 10.76 5. Preliminary and preoperative expenses 1.57 1.39 6. Margin money for working capital 52.47 85.96 Total 146.82 221.94 The petitioner started its commercial production on December 12, 2004. It is thus contended by the petitioner that the State-respondents, contrary to the promise held out by them, issued the impugned notification dated September 5, 2005 withdrawing/set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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