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TMI Blog2022 (1) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... f paragraph 18.4 of IPR 2007 to avail the incentives. That is why the sanction order dated 6th June 2017 was issued in the first place. No valid justification has been provided by the Opposite Parties for retrospectively cancelling the said sanction order and that too well over a year after it was issued. In the present case, no material whatsoever has been placed on record by the Opposite Parties to establish that the impugned resolution retrospectively amending the heading to paragraph 18.4 of IPR 2007 is in public interest - there was no justification in singling out cement manufacturing units for denial of the SGST reimbursement. The Court sets aside the order dated 6th October 2018 issued by the Director of Industries withdrawing the earlier order dated 6th June 2017 granting Petitioner No.1 the exemption. The Court also sets aside the resolution dated 18th August 2020 retrospectively amending IPR 2007 - Petition allowed. - W.P.(C) Nos. 29253 of 2020 and 12435 of 2019 - - - Dated:- 4-1-2022 - DR. S. MURALIDHAR) CHIEF JUSTICE A.K. MOHAPATRA, JUDGE Petitioners Dr. A.M. Singhvi, Senior Advocate with Mr. B.P. Das, Advocate Opposite Parties Mr. P.K. Muduli, Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IPR 2007 spelt out the general policy framework whereby the State was to pursue a multi-pronged approach for industrial promotion. Efforts were to be made to incentivise investment in thrust and priority sectors with a view to maximizing the triple objectives of value addition, employment generation and revenue augmentation . In paragraph-4.4, certain thrust sectors were identified for providing tailor made incentive packages and additional incentive for the pioneer industries in these sectors . Paragraph-19 of the Annexure-I to the IPR 2007 spelt out what industries qualified as being in the thrust sector . This included agro processing, automobiles, auto components, textile, apparel, ancillary and downstream industries. Industrial units operating the said categories were required to meet specified minimum capital investment and employment generation criteria. For instance, ₹ 10crores minimum capital investment and a direct employment generation of 100 persons was specified for a downstream industry in order to avail incentives meant for the thrust sector . Paragraph-2 of Annexure-I of the IPR 2007 defined downstream industry to mean an industrial undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increased commercial production over and above the existing installed capacity provided that the VAT reimbursement shall be applicable only to the net tax paid, after adjustment of input tax credit against the output tax liability. Facts pertaining to Petitioner No.1 11. Reverting to the facts of the present case, Petitioner No.1 had an existing industrial unit for manufacturing Pozzolana Portland Cement (PPC) at Jharsuguda, Odisha with an installed capacity of 1.00 million tons per annum (MTPA). This unit commenced its commercial production on 14th September, 1993. 12. Petitioner No.1 proposed to expand its installed capacity from 1 to 3 MTPA in 2011. It is stated that it decided to do so relying on the assurances and promises held out in IPR 2007 as noted hereinbefore. It sought permissions from the State authorities for the proposed expansion. On 9th September 2011, the State Level Single Window Clearance Authority (SLSWCA) headed by the Chief Secretary, Government of Odisha, granted permission to Petitioner No.1 for expansion of its production capacity at its Jharsuguda cement manufacturing unit from 1 to 3 MTPA. 13. The Petitioners state that from 2011 onward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intend to debar such industry from availing incentives under IPR. The [Empowered] Committee decided to accept the clarification submitted by the D.I., Odisha and allowed to extend the benefit under IPR-2007 to such units. 17. It is stated that a joint inspection was conducted by the Director of Industries and a State Level Nodal Agency IPICOL in 2016. IPICOL issued an eligibility certificate on 3rd May 2016 in the prescribed Form-E under IPR 2007 in favour of Petitioner No.1. Thereafter, the Director of Industries (Opposite Party No.3) issued a certificate of verification dated 30th July 2016 certifying that Petitioner No.1 satisfied the criteria in relation to capital investment and employment generation for qualifying as a thrust sector industrial unit under IPR 2007. The certificate specifically noted that the Jharsuguda cement manufacturing unit of Petitioner No.1 was not included in the activities enlisted at Sl.3 of Annexure-II of IPR 2007 . Opposite Party No.3 then on 1st September 2016 issued the certificate of thrust sector certifying that Petitioner No.1's cement manufacturing unit fulfills the eligibility criteria as a thrust sector industy and ..may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he state component of GST i.e. the SGST to eligible industries, instead of VAT reimbursement as originally envisaged. 22. The Petitioners pointed out that while the erstwhile unamended heading of paragraph 18.4 of the IPR was simply titled VAT reimbursement , the amended heading of paragraph 18.4 IPR 2007 reads as under: Net SGST Reimbursement for Industrial units which were receiving net VAT Reimbursement except for cement manufacturing/grinding units and Blast Furnace Slag based units w.e.f. 01.07.2017. 23. Consequently, the second writ petition i.e. W.P.(C) No.29253 of 2020 was filed in which notice was issued on 23rd November 2020 by this Court. It was ordered that the impugned resolution dated 18th August 2020 shall remain subject to the outcome of the writ petition. Stand of the Opposite Parties 24. A counter affidavit has been filed on behalf of Opposite Party Nos.1 to 4 in W.P.(C) No.12435 of 2019 where it is, inter alia, contended that at the High-Level Committee meeting under the Chairmanship of the Chief Secretary, it was decided that the activity of Petitioner No.1 fell under the Sl. No.51 of Annexure-II of the negative list of IPR 2007. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department were complied after a joint inspection of the unit was conducted by officials of DI CCT. Thereafter, FD concurrence was obtained to extend VAT reimbursement in favour of KCMW as a separate unit but part of integrated facility of OCL for manufacturing cement. In view of the above, the committee observed that VAT reimbursement in favour of M/s Kapilash Cement Manufacturing Works, Cuttack will continue until June 30, 2017. As regards, the VAT reimbursement in favour of M/s Ultratech Cement Ltd, Jharsuguda, the committee observed that it is a standalone cement grinding unit and attracts Sl No.51 of the Annexure-2 of the negative list under IPR 2007. Accordingly, it will not be eligible for VAT reimbursement under IPR 2007. The Industries Department was advised to proceed with the amendment of IPR-2007 and IPR-2015 after getting due concurrence of Finance Department on Cabinet Memorandum. Additional affidavit of the Opposite Parties 27. Specific to one of the main contentions in the petitions about the case attracting the doctrine of promissory estoppel, the Opposite Parties filed an additional affidavit on 2nd December 2021 seeking to just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e promise of post production incentives in the form of VAT/ SGST reimbursement as set out in paragraph 18.4 of IPR 2007. Acting on the said representations, Petitioner No.1 made significant fixed capital investments of ₹ 183.75 crores and successfully expanded its installed capacity from 1 MTPA to 2.6 MTPA. It commenced commercial production with effect from 15th October 2013 and was issued all the certificates referred to hereinbefore. It was, therefore, not open to the State to deny the vested right and entitlement to Petitioner No.1 on a completely untenable and irrational basis. The impugned decisions were contrary to the doctrines of promissory estoppel and legitimate expectation. Reliance is placed on the decisions in MRF Limited, Kottayam v. Asst. Commissioner (Assessment) Sales Tax (2006) 8 SCC 702; State of U.P. v. Birla Corporation Ltd., 2019 SCC Online SC 1569; Manuelsons Hotels Pvt. Ltd. v. State of Kerala (2016) 6 SCC 766; State of Punjab v. Nestle India (2004) 6 SCC 465; Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (1979) 2 SCC 409 and KM Refineries Infraspace Ltd. v. State of Maharashtra, 2020 (1) Mh.L.J. 904. (ii) Cement manufacturing indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner No.1 to discriminatory treatment vis- -vis an identical cement manufacturing unit like KCMW. There was no explanation offered for subjecting only cement manufacturing/grinding units and blast furnace slag-based units for denial of SGST reimbursement. Submissions on behalf of the Opposite Parties 33. Mr. P.K. Muduli, learned Additional Government Advocate, appearing for the State on the other hand largely relied on the contentions already urged on behalf of the Opposite Parties in the counter affidavit filed in W.P.(C) No.12435 of 2019 and the second writ petition i.e. W.P.(C) No.29253 of 2020 as well as the additional affidavits filed to contend that the State is well within its rights to review the policy and amend it from time to time. He maintained that there was no vested right in the Petitioners to avail the incentives and that the amendment was in the larger public interest. It must be mentioned here that State has also filed a reply to the rejoinder where the above averments have been reiterated. 34. Mr. Muduli, learned Additional Government Advocate placed reliance on the following decisions to urge that the doctrine of promissory estoppel would not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the elaborate manufacturing process using high-end technology is to merely state that it is incorrect and denied herewith . At no point in time, prior to the impugned cancellation orders, the Opposite Parties came to the conclusion that Petitioner No.1 unit was only undertaking the activity of mixing and grinding . 39. There is merit in the contention of the Petitioners that the 'negative list attached to the IPR 2007 was actually meant to cover units such as flour mills, confectionaries, brick grinding, book binding, etc. It was intended to identify small units for the purposes of assisting them to avail loans and working capital. It was not meant to exclude thrust sector units like Petitioner No.1. There is no denial by the Opposite Parties that Petitioner No.1 was in fact recognized as a downstream thrust sector industrial unit. Clauses 2 and 11 of the IPR 2007 defines downstream industry and industrial unit as under: 2. 'Downstream Industry' means an Industrial undertaking, which is engaged or proposed to be engaged in value addition of the intermediate or final produce or waste product of one or more industrial undertakings. 11. 'Industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. These included exemption from payment of sales tax for a period of 7 years. (b) MRF commenced commercial production at expanded unit with effect from 31st December, 1996. The state government issued in favour of MRF, an Eligibility Certificate dated 10th November, 1997 after inspection and verification of its manufacturing process. Having found MRF eligible for sales tax exemption, the State Government issued an Exemption Order dated 30th June, 1998 granting tax exemption for 7 years i.e., from 30th December, 1996 to 29th December, 2003. (c) Vide SRO 38/98 dated 15th January, 1998 (2nd Notification), certain processes were excluded from the scope of 'manufacture' for the purposes of 1st Notification, and thereafter vide SRO 1092/99 dated 31st December, 1999 (3rd Notification), the tax exemption under 1st Notification was withdrawn altogether with effect from 1st January, 2000. (d) In 2001, the Assistant Commissioner proposed to impose penalty on MRF from availing purchase tax exemption, on the premise that tax exemption granted under 1st Notification had been withdrawn under 2nd 3rd Notifications. MRF challenged said action before Kerala High Court, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for more than 5 years out of a total period of 7 years, in our opinion, is highly arbitrary, unjust and unreasonable and deserves to be quashed. In any event, the State Government has no power to make a retrospective amendment to SRO No.1729/93 affecting rights already accrued to MRF thereunder. 43.2. Finally in the said decision, the Supreme Court held as under: 43. .Amendment notification SRO 38/98 (2nd Notification) has to be read so as not to take away or disturb any manufacture's pre-existing accrued right of exemption for a period of 7 years ..' under 1st Notification 45. [The] State Govt. is restrained from initiating any proceedings against MRF contrary to or inconsistent with Eligibility Certificate Exemption Order issued in terms of 1st Notification. 44. In the case on hand, without cancelling the eligibility certificate and thrust sector certificate, the Opposite Parties have recalled the sanction order by the impugned cancellation order dated 6th October, 2018. Admittedly, the Opposite Parties recognized expanded cement manufacturing unit of Petitioner No.1 as eligible for the production incentives as a downstream industrial unit under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenged before the Allahabad High Court, inter alia by invoking the doctrine of promissory estoppel. It was contended that industrial units that had acted upon the promises made vide 2nd Notification and commenced commercial production prior to issuance of 3rd Notification had a vested right and entitlement to avail tax rebates for 10 years as envisaged under 2nd Notification. The Allahabad High Court allowed the writ petition following which the State of UP filed an appeal in the Supreme Court of India. 45.1. Dismissing the appeal, the Supreme Court in the said decision held as under: 23. the State Government or the Executive is competent to rescind the earlier notification and the doctrine of promissory estoppel can be no impediment in that behalf. That, however, is hedged or laced with condition that the burden is upon the Government to show that it acted in furtherance to public interest in issuing such a notification otherwise than in accordance with the promise and that the public interest is so overwhelming that it would be inequitable to hold the Government bound by the promise. It is well established that the Court would not act on mere ipse dixit of the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial units who qualify the conditions specified in notification dated 27th February, 1998 in all other respects and had commenced commercial production of the specified product before 14th October, 2004. Indubitably, an enforceable right had accrued to and crystallised in favour of such industrial units which could not be truncated or snapped unless the dominant purpose for which the notification dated 27th February, 1998 came to be issued had ceased to exist, namely generation of fly ash by the thermal power stations situated within the State and consumption of that fly ash by the industrial units established within the designated areas of the State as per the specified quantity to become entitled for rebate for the duration mentioned therein Suffice it to observe that the argument about future revenue loss cannot be invoked against the industrial units who had already established and commenced production after 27th February, 1998 and before 14th October, 2004. For, it can be safely presumed that the policy makers were fully conscious about the so-called loss of future revenue due to rebate to those units when they had issued notification dated 27th February, 1998. That ground c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conscionable departure by one party from the subject-matter of an assumption which has been adopted by the other party as the basis of a course of conduct which would affect the other party if the assumption be not adhered to. The assumption may be of fact or law, present or future. And two, that the relief that may be given on the facts of a given case is flexible enough to remedy injustice wherever it is found. And this would include the relief of acting on the basis that a future assumption either as to fact or law will be deemed to have taken place so as to afford relief to the wronged party. .though the power to grant exemption under a statutory provision may amount to subordinate legislation in a given case, but being in the domain of exercise of discretionary power, is subject to the same tests in administrative law, as is executive or administrative action, as to its validity one of these tests being the well-known Wednesbury principle [Associated Provincial Picture Houses Ltd. V. Wednesbury Corpn., (1948) 1 KB 223 (CA)] under which a court may strike down an abuse of such discretionary power on grounds that irrelevant circumstances have been taken into account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer were challenged by contending that the Petitioner had set up its industries of manufacturing groundnut oil as a small scale industry unit acting on the promises held out in the IPR dated 18th July 1979 by the Industries Department, Government of Odisha. However, the difference as far as the case is concerned is that there was no notification under Section 6 of the Orissa Sales Tax Act, 1947 granting exemption on payment of tax on purchase or sale of ground nut, mustard seeds etc during the relevant period. It was therefore contended that in the absence of such notification the Petitioner could not avail the incentives. The reasons why the Supreme Court in that case did not extend the principle of promissory estoppel have been spelt out as under: 13. There are several reasons why we are unable to uphold the contention based on the principle of promissory estoppel raised by the respondents in this case. No particulars have been given by the respondents as to when the decision was taken to set up the industry, the date when the loan was obtained from the bank, and exactly when land was purchased or the plant and machinery were acquired for setting up of the small-scale i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the incentives. Conclusion and directions 54. For all of the aforementioned reasons, the Court sets aside the order dated 6th October 2018 issued by the Director of Industries withdrawing the earlier order dated 6th June 2017 granting Petitioner No.1 the exemption. The Court also sets aside the resolution dated 18th August 2020 retrospectively amending IPR 2007. It is clarified that the said amendment would have only prospective effect and would not affect the entitlement of Petitioner No.1 to the incentives for the period prior to the said amendment. 55. In terms of the interim order passed by this Court on 23rd July 2019 in W.P. (C) No.12435 of 2019 to the effect that if the Petitioners succeed in the writ petition, any payment of tax would be refunded along with interest, a direction is issued to the State to refund to Petitioner No.1 within a period of four weeks the tax paid by it together with interest in terms of the applicable Rules. 56. The writ petitions are allowed in the above terms with costs of ₹ 10,000/- in each writ petition which shall be paid by the Opposite Parties to Petitioner No.1 within a period of four weeks. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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