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TMI Blog1973 (12) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... ction (1) of that section on the ground that they, having substantially expanded, were entitled, to the extent of such expansion, to exemption from the payment of tax. The Government of Andhra Pradesh having refused that request these writ petitions have been filed before this Court contending that the decision denying them exemption is contrary to section 21(3) which does not countenance any classification and that the classification adopted is based on no nexus to the object of the Act. The appeal is against the decision of the Andhra Pradesh High Court dismissing a writ petition filed for similar relief. Two contentions, one regarding promissory estoppel and another regarding the exemption given to Sarvaraya Sugars Ltd was not pressed before this Court. Though in the beginning it was urged that the grant of exemption under the section was obligatory, later the only contention, raised was that the application of each of the factories should have been considered on its merits and the State should not have fettered its discretion by laying down a policy of granting exemption only to co-operative sugar factories and that the policy had no nexus to the object of the Act. Section 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prescribe a more rigid standard for the guidance of the Government. We hold that s. 21 does not violative Art. 14." Though, as we have stated, it was sought to be urged originally that under the provisions of this section it was obligatory on the part of the Government to grant exemption, it was later argued based on the above observations that the question whether the exemption should be granted to any factory and if so for what period and the question whether any factory has substantially expanded and if so the extent of such expansion, has to be decided with reference to the facts of each individual case. It was also further argued that the Government could not by laying down a policy to exempt only co-operative sugar factories fetter their hands from examining the merits of each individual case. Reliance was placed on the observations in S.A. de Smith's Judicial Review of Administrative Action (2nd Edn.) where at page 294 it is observed : "A tribunal entrusted with a discretion must not, by the adoption of a general rule of policy, disable itself from exercising its discretion in individual cases. But the rule that it formulates must not be based on consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate from other sugar factories. In view of the abandonment at a later stage of the contention that it was obligatory on the part of the Government to grant the exemption contemplated under section 21(3) to every new factory or expanded factory for the period mentioned in the section it is unnecessary to consider whether the word "may" found in that section should be interpreted to mean "shall" except to indicate that the policy behind the whole of section 21 does not indicate- that it is obligatory on this part of the' State to grant exemption. Quits clearly the discretion has been left to the State to decide whether any particular factory should be granted exemption or not. This is what this court stated in its earlier decision. In deciding this question it is open to a Government to take into consideration the state of the industry at any particular period. At one period the industry may be in a very prosperous condition and might not need this concession. It may also be that factories in a particular area are in need of this concession but not factories in another area. How a Dower vested in an authority is to he exercised has not to be decided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst. The only question that arises is whether the Government would be justified in refusing to consider the question of exemption to all factories other than cooperative sugar factories. In its counter affidavit the State of Andhra Pradesh has stated that application of each one of the petitioners was considered on its merits and it was refused. On the other hand the petitioners referred to the letter (Annex.III) written by the Government of Andhra Pradesh to the appellant in Civil Appeal No. 1453 of 1969 which reads "I am to invite reference to your letter cited and to stated that the Government have given careful consideration to your request for exemption from payment of purchase tax to the extent of expansion for two crushing seasons in respect of Bobbili and Seethanagaram Units. The present Policy of the Government is to grant exemption from payment of purchase tax to new and expanded sugar factories in the Co-operative Sector only. Besides Bobbili and Seethanagram Sugar Factories, there are a few other sugar factories in the private sector which have also embarked on expansion programmes. Any concession given in one case will be a precedent for others and it cannot be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en these two classes.' The present cases come under the earlier part and not the latter, The case in Rex v, London County Council (1918 1 KB 68) is distinguishable on the facts of the case. The policy behind the Act there under consideration was obviously to permit sale, of any article or distribution of bills or like things and in deciding that no permission would be granted at all the London County Council was rightly held not to have properly exercised the discretion vested in it. In the decision in Padfield v. Min. of Agriculture etc. (1968 1 All ER 694) the refusal of the, Minister to exercise the power vested in him was considered as frustrating the object of the statute which conferred the discretion and that is why a direction was issued to the Minister to consider the appellants' complaint according to law. We have already discussed the background and the purpose of the Act under consideration and are unable to hold that in refusing to grant exemption in these cases the State of Andhra Pradesh was acting so as to frustrate the purpose of the Act. In a recent case, British Oxygen v. Minister of Technology (1970 3 All ER 165) the whole question has been discussed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efusal to exercise the discretion entrusted to the authority or tribunal but the distinction between a policy decision and a rule may not be easy to draw.. In this case it was not challenged that it was within the power of the Board to adopt a policy not to make a grant in respect of such an item. That policy might equally well be described as a rule. It was both reasonable and right that the Board should. make known to those interested the policy that it was going. to follow. By doing so fruitless applications involving expense and expenditure of time might be avoided. The Board says that it has not refused to consider any application. It considered the appellants'. In these circumstances it is not necessary to decide in this case whether, if it had refused to consider an application on the ground that it related to an item costing less than pound 25, it would have acted wrongly. I must confess that I feel some doubt whether the words used by Bankes LJ in the passage cited above am really applicable to a case of this kind. It seems somewhat pointless and a waste of time that the Board should have to consider applications which are bound as a result of its policy decision to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sugar factories in the cooperative sector. The material provisions of S. 21 of the Act are as follows "21(1) The Government may, by notification, levy a tax at such rate not exceeding five rupees per metric tonne as may be prescribed on the purchase of cane required for use, consumption or sale in a factory. (2)The Government may, by notification, remit in whole or in part such tax in respect of cane used or intended to be used in a factory for any purpose specified in such notification. (3)The Government may, by notification, exempt from the payment of tax under this section- (a) any new factory for a period not exceeding three years from the date on which it commences crushing of cane; (b) any factory which, in the opinion of the Government, has substantially expanded, to the extent of such expansion, for a period not exceeding two years from the date of completion of the expansion." It was contended that looking at the scheme of s. 21 the word may' occurring in sub-section (3) thereof should be read as 'shall' as otherwise the sub-section will be unconstitutional in that it does not provide guideline for the exercise of the discretion to grant or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 1 K.B. 176, at 184 "shut his ears to the application". The question, therefore, is whether the Government shut its ears and fettered its discretion when it said that it will confine the benefit of the exemption provided in clause (b) of sub-section (3) only to factories established in cooperative sector. It was submitted that there is nothing in the provisions of subsection (3)(b) to indicate that the Government could confine the benefit of the exemption only to new and expanded sugar factories in the cooperative sector fulfilling the conditions therein special and if the Government chose to fetter the exercise of its discretion by a self-imposed rule or policy by confining the benefit of the exemption only to new and expanded sugar factories established or owned by cooperative societies, no discretion was exercised by Government in disposing of the individual applications and that, at any rate, considerations foreign to the exercise of the discretion had entered into its exercise. It is therefore to be seen whether the policy decision of the Government to limit the benefit of the exemption to sugar factories owned or established by cooperative societies of sugar can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agaram Sugar Factories, there are a few other sugar factories in the private sector which have also embarked on expansion programmes. Any concession given in one case will be a precedent for others and it cannot be denied to others who will naturally apply for a similar concession. The present financial position of the Government does not permit them to be generous. In the circumstances, the Government very much regret that it is not possible for them to accede to request. With regards, Yours sincerely, sd. S. A. Quader To : Rajah of Bobbili, The Palace, Bobbili, Srikakulam District." We think that by the policy decision the Government had precluded itself from considering the applications of the petitioners and the, appellant on their merits. In fact. the Government. by making the policy decision, had shut its cars to the merits of the individual applications. We see no merit in the contention of Andhra Pradesh Government that it considered the applications for exemption filed by the writ petitioners and the appellant on their merits as, by its policy decision, it had precluded itself from doing so. What are not very much concerned with the question that only a few of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould make no difference in this respect. They all stand on the same footing so far as their claim to the legislative bounty is concerned. We do not also say that it is illegal for the Government to adopt a general line of policy and adhere to it. But the policy it adopts must comfort with and be reconcilable with the provisions of the Act and must have some relevance to its object. Generally speaking. an authority entrusted with a discretion must not by adopting a rule or policy, disable itself from exercising its discretion in individual cases. There is no, objection in its formulating a rule or policy But the rule it frames or the policy it adopts must lot be based on considerations extraneous to those contemplated or envisaged by the enabling Act. It "must not predetermine the issue, as by resolving to refuse all applications or all applications of a certain class or all applications except those of a certain class" (see S.A. de Smith, "Judicial Review of Administrative Action", 2nd ed., p. 295). In R. V. Torouay Licensing, JJ., ex. p. Brockman, [1951] 2 K. B. 784 Lord Goddard C.J. said : "The justices cannot make a rule to be applied in every case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dual cylinders on the sole ground that each cylinder cost less than pound 25, because the discretion conferred was unqualified and the Minister was accordingly not precluded from making such a rule or policy provided that he did not refuse to listen to an application for the exercise of his discretion. After referring to this decision, H. W. R. Wade has said (See "Administrative Law". 3rd ed., pp. (6-67, ") But however firm its policy may be, nothing can absolve a public authority from the duty of forming its judgment on the facts of each case, if that is what the statute intended. A tribunal which has to exercise discretion must therefore be careful not to treat itself as bound by its own previous decisions. Unlike a court of law, it, must not pursue consistency at the expense of the merits of individual cases' (see Merchandise Transport Ltd. v B.T.C. (1962) 2 Q.B. 173)". To sum up, the policy of rule adopted by the State Government to guide itself in the exercise of its discretion must have some' relevance to the object of s. 21(3) which is to provide incentive to the establishment of new industries and substantial expansion of existing industries w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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