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TMI Blog1977 (1) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... aid in easy instalments, interest being calculated at 4 per cent; the facility to be extended, in exceptional cases, to places within a radius of five miles from the focal point; (2) Capital participation by the Government or the Punjab Financial Corporation upto 20 per cent of the paid up capital of new ventures; (3) Loans equal to the cost of a generating set, 20 per cent of which to be treated as a subsidy and the balance to be repaid in 20 annual instalments; (4) Refund of purchase and sales tax including inter-State Sales Tax for a period of five years to new and expanding units; (5) 50 per cent of the cost of feasibility report to be met by Government If project was established. (6) Price preference of 2 1/2 per cent over the existing rate of 5 per cent for large industries to be allowed for a period of ten years on purchases made by the Government. (7) No electricity duty to be charged for a period of five years. 3. Amrit Banaspati Co. Ltd. (Respondent in the Letters Patent Appeal and the petitioner in the Civil Writ Petition) who was already engaged in the business of manufacture of Vanaspati at Ghaziabad was attracted by the concessions and incentives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shrimati Grewal assured the Company that the concessions and incentives referred to in the Policy Statement would be available to the Company. She persuaded the Company to set up the Vanaspati plant at Rajpura where the Government was encountering difficulties in attracting entrepreneurs to set up industries. It was slated that Shrimati Grewal told the Company that since a plot of the extent of 12 to 15 acres which was required by the Company was not available in the area already acquired by the Government, the Company itself might purchase the land within the focal point at Rajpura. If necessary, it was stated, she assured the Company that the plot purchased by the Company would be included in the focal point at Rajpura. On these assurances, the Company agreed to set up a factory for the manufacture of Vanaspati of the capacity of 100 tonnes per day at Rajpura within the focal point. The averments of the petitioner were not admitted in the returns filed by Shri Khosla on behalf of the Government of Punjab. Shri Khosla stated that with reference to the meeting held on 16-10-1968, the only note by the Secretary was Meeting held. pi. Put up. Sd/- Sarla Grewal 17-10-1968. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of land themselves as we were not sure whether we would be able to have enough funds to acquire more land at Rajpura particularly when our earlier plots had not been sold out. 6. On 25-10-1968, the Company wrote to the Secretary of Industries undertaking to set up the factory for the manufacture of Vanaspati at Rajpura, one of the focal points mentioned in the Policy Statement. It was mentioned in the letter that a site had been shown to them by the representatives of the Industries and Town planning Departments and that they were assured that it would be included within the focal point at Rajpura. The Company wanted it to be made clear whether the concessions relating to refund of purchase and sales tax including Inter-State Sales Tax and the exemption from electricity duty would be available for a period of five years from the date of commencement of production. The Company suggested that instead of refunding the amount of purchase and sales tax including Inter-State Sales Tax, the Government might consider the desirability of making a capital grant every quarter for a period of five years of an amount equivalent to the amount of purchase and sales tax including Inter-Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector of Industries, Punjab, Chandigarh, in the form prescribed. It is further provided that after such investigation as may be considered necessary, a certificate of approval would be issued by the Director of Industries to the applicants in the prescribed form. Rule 4, para. III deals with 'Refund of Sales/Purchase Tax and Inter-State Sales Tax'. An industrial concern desiring to obtain refund of sales/purchase tax is to get itself registered with the Director of Industries by making an application in the prescribed form. An application for refund is required to be made to the Director of Industries every financial year through the District Excise and Taxation Officer in the prescribed: form accompanied by various documents. The District Excise Taxation Officer is required to verify the particulars given in the application and thereafter forward the same to the Director of Industries. The Director of Industries is then authorised to sanction payment of refund. 9. On 25-1-1969, the Director of Industries wrote to the Secretary, Industries Department that the Company which had established the Vanaspati Industry in the Rajpura focal point, was eligible for the various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with him. 12. On 2-5-1969, there was a meeting between the Joint Secretary, Finance Department, Secretary, Industries Department and the State Town Planner and it was decided that the concessions and incentives applicable to a focal point would be given to M/s. Amrit Banaspati Co. Ltd. only in respect of 12 acres of land to be utilised by them for setting up Vanaspati Industry and not in respect of the remaining land purchased by them. It was noted that there would be no harm in giving concessions applicable to focal points- to Amrit Banaspati Co. Ltd. since tbe Company would have been entitled to the concessions as a matter of right if they had been accommodated in the focal point. It was because they could not be accommodated in the already-acquired area of 70 acres that they had to go out and purchase the land on their own account. It was decided that the Company should be asked to agree formally to the development plans. The Finance Minister also gave his approval to the decision so taken. This appears from the note made by the Under-Secretary, Finance Department on 27-5-1969. On 29-5-1969, the Finance Department wrote to the Director of Industries conveying the sanction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21-8-1970 'for the grant of refund of sales/purchase tax under the focal point scheme'. The Company went into production in December 1969. During the period January to March. 1969, the Company sold iis Vanaspati products in the State of Punjab and was assessed to sales tax of ₹ 8,85,139/-under the provisions of the Punjab General Sales Tax Act. The whole of the tax was paid by the Company. During the same period, the Company also paid an amount of ₹ 35,141.32 by way of Inter-State Sales Tax under the Central Sales Tax Act. Claiming to be entitled for refund of the two amounts of ₹ 8,85,139/-and ₹ 35,141.32, the Company applied for refund of the amounts on 16-7-1971 and 6-4-1972. As prescribed by the rules, the applications were submitted to the District Excise and Taxation Officer, Patiala. Thereafter, the Company addressed several reminders to the authorities concerned to grant the refund but all to no purpose. Finally, the Company filed C.W.P. No. 1558 of 1972, for a declaration that the Government of Punjab and the Director of Industries were bound to comply with and carry out the representations and assurances contained In the Policy Statement is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Company in purchasing land and ordering machinery from January 1969 onwards, the speech of the Governor of Punjab on the occasion of the laying of the Foundation Stone of the factory and the letter dated 16-6-1969 from the Government to the Company created an equitable estoppel against the Government from denying to the petitioner the refund of sales/purchase tax and Inter-State Sales Tax. The learned Single Judge also held that the assurances had been made by the Government and investments had been made and expenditure incurred by the Company prior to 14-5-1969, the date of the revised policy. On those findings, the learned single Judge issued a writ of mandamus directing the Director of Industries to decide the applications of the Company for refund of sales tax and Inter-State Sales Tax in the light of the observations made in the judgment. The Government was further directed to refund the amount of sales tax and Inter-State Sales Tax declared by the Director of Industries as refundable. The Government of Punjab has preferred L.P.A. No. 368 of 1975 against the judgment of the learned Single Judge . 17. Subsequent to the decision of the learned Single Judge in C.W. No, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l submission of Shri Nehra was that the entire legal basis of the learned Single Judge's judgment was wrong. He said that there could be no estoppel against Government and that the doctrine of Equitable Estoppel in its applicability to bind the Government had been abandoned by the Supreme Court since it was first enunciated in Union of India v. Indo-Afghan Agencies Ltd. AIR 1968 SC 718. He relied primarily on certain observations of the Supreme Court in Excise Commr. U.P. v. Ram Kumar, AIR 1976 SC 2237, to which we shall refer presently. 20. First, we may know how the principle of Equitable Estoppel is applied against Government and other Public Authority in the countries from where the doctrine has been borrowed. The position in the United States of America can be gathered from the statements of the law in American Jurisprudence and Corpus Jurig Secundum. In American Jurisprudence, 1st Edition, Vol. 19, page 818, para 166, it is stated, A sovereign State is not subject to an estoppel to the same extent as an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in government. The doctrine of estoppel is not applied to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Public Authority has been much asserted and applied by Lord Denning in Robertson v. Minister of Pensions: 1949 (1) KB 227, in Falmouth Boat Construction Co. Ltd. v. Howell, 1950 (2) KB 16, in Wells v. Minister of Housing and Local Government, 1987 (1) WLR 1000, in Lever Finance Ltd. v Westminster (City) London Borough Council, 1970 (3) WLR 732 and in Re: Liverpool Taxi Owners' Association, 1972 (2) All ER 589. In Robertson's case, he said, The Crown cannot escape by saying that estoppels do not bind the Crown, for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action..... In my opinion, the defence of executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract . The War Office letter is clear and explicit and I see no room for implying a term that the Crown is to be at liberty to revoke the decision at its pleasure and without cause. 23. When Lord Denning said that the doctrine that estoppels do not bind the Crown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s observations. But what is worthy of notice is that the criticism was confined to the observations second extracted by us and not the observations first extracted. The criticism was with regard to the statement that a subject was entitled to rely even upon a misleading assumption of authority by a government department. There was no criticism of his other observations : The Crown cannot escape by saying that estoppels do not bind the Crown, for that doctrine has long been exploded etc. Sir Alexander Turner in his second edition of Spencer Bower's Estoppel by Representation notices this and says A more recent authority is Robertson v. Minister of Pension, (1949-2 KB 227), a promissory estoppel case, whose authority, though lessened by criticism much as appear in Howell v. Falmouth Boat Construction Ltd. may be regarded as untouched on this point. The point stated by Sir Alexander Turner was, The Crown, regarded simply as a Corporation Sole, is amenabale to the law of estoppel by representation in the same way as other Corporation Sole. He referred to the cases of A.G. of Victoria v. Ettershank : LR 6 PC 354, Plimmer v. Wellington Corporation: (1884) 9 AC 69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal validity to certain transactions by certain persons. This may be for their own protection as in the case of the infant or other category of persons enjoying what is to some extent a protected status, or for the protection of others who may come to be engaged in dealings with them, as, for instance, the creditors of a bankrupt. In all such cases there is no room for the application of another general and familiar principle of the law that a men may if he wishes, disclaim e statutory provision enacted for his benefit, for what is for a man's benefit and what is for his protection are not synonymous terms. Nor is it open to the Court to give its sanction to departures from any law that reflects such a policy, even though the party concerned has himself behaved in such a way as would otherwise tie his hands, 29. Thus, it appears that in England the doctrine that estoppels do not bind the Crown was 'exploded' long ago. The present position is that the Crown may be bound by the representation of an officer acting within the scope of his authority but not Jf it prevents the performance of a statutory duty or hinders the exercise of a statutory discrelion or allows so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The words generally , to the same extent and general show that estoppel is not ruled out altogether against a Stale and that estoppel may be permissible to some extent in exceptional cases, though not to the same extent as against an individual since different considerations, including considerations of the public interest and public policy, arise in the application of the doctrine of estoppel against a State. 31. In the case of Ramanathan Pillai v. State of Kerala. (AIR 1973 SC 2641), the question was whether Ramanathan Pillai who had been appointed as Vigilance Commissioner, pursuant to an agreement with the Government could claim that the Government was estopped from abolishing the post of Vigilance Commissioner thereby terminating his services. The, High Court held that the power to create or abolish a post was a governmental function which the Government had to discharge as a duty owed to the public. There could be no estoppel in respect of a discretion which was to be exercised for the benefit of the public. The Supreme Court affirmed the decision of the High Court holding that the power (o create or abolish a post was a matter of governmental policy to be decided ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the doctrine that the Crown can escape by saying that estoppels do not bind the Crown had long been exploded but with reference to the view expressed by Lord Denning that even the representation of an officer acting beyond the scope of his authority would bind the Crown. The House of Lords was emphatic that an act induced by a misleading assumption of authority cannot create an estoppel. That was all. 34. Reference was then made to the decision in Asst. Custodian, Evacuee Property v. B.K. Agarwala, AIR 1974 SC 2325, where it was held that a reply given by the Assistant Custodian to an enquiry that the property in question was not evacuee property did not bind the department in the exercise of its duties under the Evacuee Property Act . The automatic vesting of evacuee property in the Custodian by virtue of the Act could not be undone by the reply given by the Assistant Custodian in answer to a query. 35. The Supreme Court then referred to a decision of High Court of Jammu and Kashmir in Malhotra and Sons v. Union of India, AIR 1976 J K 41 and quoted the following observations with approval:-- The Court will only bind the Government by its promise to prevent manifest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere an estoppel was negatived against the right of the legislature to make laws under the Constitution. The observations in Howell v. Falmouth Boat Construction Co., (1951 AC 837), were made to deny an estoppel being raised against the Crown on the basis of an act induced by misleading assumption of authority by an officer of the Crown. Asst. Custodian of Evacuee Property v. B.K. Agarwala, (AIR 1974 SC 2325) was a case where the Court refused to raise an estoppel against the perfomance of statutory functions by the Evacuee Department. The case of Federal Crop Insurance Corporation ((1947) 232 US 380), was again a case where the representation made by the officer of the Corporation was in breach of the statute. Thus, the precedents noticed by the Supreme Court in Ram Kumar's case do not sustain the wide submission of the learned counsel that there can never be any estoppel against the Government. The observation of the Supreme Court that there can be no question of estoppel against the Government in the exercise of its legislative, sovereign or executive powers must, therefore, be read in the light of the facts of the case and the precedents noticed with approval by the Court. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn, the Government granted another site to the municipality adding that the Government did not consider that any rent should be charged to the municipality as the markets will be, like other buildings, for the benefit of the whole community. Thereafter the Corporation invested huge sums of money to erect and maintain markets on the new site. More than half a century later, the Government sought to assess the new site under Section 8 of the Bombay City Land Revenue Act, which enabled such assessment if the Corporation did not have a right in limitation of the right of the Government. The Supreme Court held that though there was no factual grant by the Government to the Corporation because of non-compliance with statutory formalities, nontheless, the Corporation had acquired the limited right to hold the land In perpetuity free of rent and assessment. Chandrasekhara Aiyer J. observed:-- The accident that the grant was invalid does not wipe out the existence of the representation of the fact that it was acted upon by the Corporation .....Invalidity of the grant does not lead to the obliteration of the representation. Can the Government be now allowed to go back on the represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :-- We hold that the claim of the respondents is appropriately found upon the equity which arises in their favour as a result of the representation made on behalf of the Union of India under the Export promotion Scheme and the action taken by the respondents acting upon that representation under the belief that the Government would carry out the representations made by it. On the facts proved in this case, no ground has been suggested before the Court for exempting the Government from the equity arising out of the acts done by the exporters to their prejudice relying upon the representation The Supreme Court then referred to its earlier decision in Collector of Bombay v. Municipal Corporation of the City of Bombay, (AIR 1951 Bom 469), and observed that that case was a clear authority that even if the facts did not fall within the terms of Section 115 of the Evidence Act, it was still open to a party which had acted on a representation made by the Government to claim that the Government should be bound to carry out the promises made by it, even though the promise was not recorded in the form of a formal contract as required by the Constitution. Finally, they said-- Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of facts and promises made by them, relying on which other persons have altered their position to their prejudice. The obligation arising against en individual out of his representation amounting to a promise may be enforced ex contractu by a person who acts upon the promiset when the law requires that a contract enforeable a 'law against a public body shall be in certain form or be executed in the manner prescribed by statute, the obligation if the contract be not in that form may be enforced against It in appropriate cases in equity..... 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. 41. In Mathra Parshad and Sons v. State of Punjab, AIR 1962 SC 745, by a press note, the Government announced that no sales tax will be charged in respect of sales of tobacco which fell under the Tobacco Vend Fees Act and that any tax already recovered from a dealer would be refunded. Notwithstanding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of us was a member held that a representation made by the Board of Revenue would not estop the assessing authority acting under the General Sales Tax Acl from discharging the statutory duly to determine whether a commodity was taxable or not. We had said :-- There can be no estoppel, legal or equitable, against the statute. What the legislature has prescribed must be done and no authority can contract itself or others out of what is prescribed by the legislature. We are firmly of the opinion that the statutory right and duty to levy tax entrusted by the legislature to the assessing authority cannot be the subject-matter of a bargain and if there is such a bargain, the Court will not enforce a bargain on any alleged ground of estoppel, it would be again the public policy to do so. Reference was made by us to the decision of Lord Denning in Robertson v. Minister of Pensions, (1949) 1 KB 227, and we observed :-- Under our constitution, it is imossible to conceive of a legislative mandate being subordinated to an executive assurance on any theory of agency. Will any Court uphold an assurance given by a Minister to an industrialist that if he started an industry in the Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to some of the observations of the Jammu and Kashmir High Court in the walnuts case necessarily implied the disapproval by the Supreme Court of the judgment under appeal. We cannot agree with this submission. We mention the submission only to reject it. 46. This kaleidoscope of precedents, Indian. American and English, shows us that in the final analysis the doctrine of equitable estoppel is but a rule of fair-play founded on the principle of justice, equity and good conscience. Good administration demands that rules of fairplay should be observed by all Governmental and Public Authorities. Good administration requires that the Government end other public authorities should be bound by promises made by them, upon which others have acted as much as parties are bound by similar promises. But, there is a difference. The Government acts for the people. It acts in the public interest. The people, for whom the Government acts, require to be protected against the unauthorised, prejudicial or mischievous acts of the persons who act for the Government. The people cannot be bound by promises which are unauthorised, or, which are prejudicial to the public interest or which are productive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me detail the facts leading upto the setting up of the Vanaspati factory by the Company at Rajpura. The letter dated 2-7-68 from the Director of Industries to the Company along with which was sent the Government's brochure on its New Policy in regard to industrial Development shows that there was at that stage a general representation that Purchase and Sales Tax and Inter-State Sales Tax would be refunded for a period of five years to any one selling up selected industries at any of the three focal points. The preliminary correspondence was followed by the meeting on 16-10-1968 between Shri Khaitan and Shrimati Grewal, representing the Company and the Government, respectively. Shri H.L. Sibal, learned counsel for the Company, urged that final decisions were taken at that meeting, and that Shrimati Grewal, on behalf of the Government, persuaded Shri Khaitan to purchase land at Rajpura and set up a Vanaspati plant there, assuring him that the land so purchased would be included within the Rajpura, 'focal point' and that the Company would be entitled to all the concessions and incentives mentioned in the Policy Statement issued by the Government. 48. We do not think tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed themselves to the Company to grant concessions and incentives. The concessions and incentives were to be the- same as were admissible to a Unit in the 'focal point' of industrial growth, But, by that time, according to the Government, the policy of the Government had been revised on 14-5-1969 and the Company was entitled only to those concessions as were available under the revised policy. 49. Considerable argument was advanced by Shri H.L. Sibal to the. effect that the so-called revised policy did not come into force on 14-5-1969 as claimed by the Government. He argued that the document said to contain the revised policy was nothing but an inter-departmental memorandum which was not released to the public on 14-5-1969. The argument was based on the circumstances thai the memorandum which was addressed to all the concerned departments including the Accountant General contained a direction that the departments should examine, if instead of first collecting the tax and then reimbursing it, the Sales Tax Act itself could not be suitably amended to provide for direct exemption. It was also directed that until the Act was so amended the department wag to refund Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference to the material which was placed before the learned single Judge. However, there is some further material which also requires our consideration. After Shri Sibal had concluded replying to the arguments of Shri Nehra, when the case appeared to have come to a close, Shri Nehra produced before us certain records, supported by the affidavit of Shri O.P. Jain, Deputy Director of Industries. As the records appeared to us to be vital for a decision of the case, we allowed Shri Nehra to produce the records and gave the Company an opportunity to inspect the records. After inspecting the records, Shri Khaitan filed an affidavit on behalf of the Company. We regret to have to mention that those incharge of the conduct of this case on behalf of the Government of Punjab were seriously remiss in not producing these vital records before the learned single Judge. The learned counsel for tho Government of Punjab was unable to explain why the records were not produced before the learned single Judge and why no reliance was placed upon them despite the plea in the affidavit of Shri Khosla that the Cabinet Sub-Committee had decided on 15-12-1966 that no refund of Sales Tax should be given on i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und of Sales Tax on purchase of raw material (PurchaseTax) by new or expanding industrial units for five years from the date of licence or registration of the unit. No change. Decision already taken by the Government last year. Provision for refund will be made under the focal points scheme included in the plan. (b) Refund of Sales Tax on finished products for five years from the date of licence or registration of the unit. No change. It only needs to be clarified that the refund would apply to the Sales Tax on products of industries in the focal points in all the following three types of cases : (i) Direct sales to consumers (ii) Inter-State sales (iii) Indirect sales made through registered dealers where actual tax is collected by the dealers but the benefit of the incentive of refund will be given to manufacturing unit in the focal unit. (c) Exemption from octroi/terminaltax for five years to new and expanding units. No burden on the State Govt. is competent to grant exemption under the law. Indirect sales made through registered dealers where actual lax was collected by the dealers. The Cabinet Sub-Committee approved the proposal except in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(1) provides that no tax shall be payable on the sale of goods specified in Schedule 'B' subject to the conditions and exceptions set out therein. Section 6(2) enables the State Government to add or delete from Schedule 'B' but this can only be done after giving, by notification, notice, of not lesa than 20 days, of its intention to do so. Apparently, the provision regarding notice is introduced to enable interested members of the public, including dealers, to make representations. Section 30 enables the State Government to exempt any class of Co-operative Societies or persons from the payment of tax if the Government is satisfied that it is necessary or expedient to do so in the interests of cottage industry. Such exemption has to be granted by a notification and such notification is required to be laid before the State legislature. Section 12 enables the assessing authority to refund any amount of tax which has been paid by him in excess of the amount due from him under the Act. The refund has, however, to be claimed within a period of 3 years. Thus the declaration of goods as tax free, the exemption granted to dealers and the refund to be paid to assessees is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Company would be raising revenues for itself instead of for the public. Public revenues would become private revenues. And, again, such diversion of public revenues to large industry may even be considered to be contrary to the directive principle contained in Article 39(c) which enjoins a duty on the State to direct its policy towards securing 'that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.' There are then Articles 265 and 266 of the Constitution which provide that no tax shall be levied or collected except by authority of law, that all revenues received by the State shall form one consolidated Fund to be entitled the consolidated Fund of the State and that no moneys out of the Consolidated Fund of a State shall be appropriated except in accordance with law and for the purposes and in the manner provided in the Constitution. No provision of any Appropriation Act or other law sanctioning the refund of tax has been brought to our notice. A refund, if granted, would be entirely without legislative sanction. 56. It is true that the promotion of large industry is also, in one sens ..... X X X X Extracts X X X X X X X X Extracts X X X X
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