Bakul Oil Industries & ANR Vs.
State of Gujarat & ANR [1986] INSC 230 (11 November 1986)
NATRAJAN, S. (J) NATRAJAN, S. (J) THAKKAR,
M.P. (J)
CITATION: 1987 AIR 142 1987 SCR (1) 185 1987
SCC (1) 31 JT 1986 801 1986 SCALE (2)750
CITATOR INFO: F 1991 SC1456 (13)
ACT:
Gujarat Sales Tax Act, 1969: ss. 15 &
49(2)--Tax exemption for a period o f five years from commissioning of
industry--Withdrawal Effect and validity of Government notification.
Promissory estoppel--Doctrine of--Grant of
exemption from sales tax to new industry-Withdrawal of--Whether permissible.
HEADNOTE:
By a notification dated April 29, 1970 issued
under s. 49(2) of the Gujarat Sales Tax Act. 1969 the State Government exempted
wholly or partly from payment of sales tax or purchase tax certain specified
classes of sales and purchases described in entries 1 to 52 in the Schedule.
This notification was subsequently amended by another dated November 11, 1970
by adding a new entry No. 53 in the Schedule exempting a manufacturer, who
established a new industry, from the whole of (a) purchase tax under s. 15 of
the Act, (b) sales tax leviable under the Act, for a period of five years from
the date of commissioning the industry. By another notification issued on July
17, 1971 the Government amended the explanation contained in the second
notification thereby taking out certain industries, including oil mills, out of
the purview of the Act.
The appellants' oil mill set up in a
conforming area, was commissioned on May 14, 1970. Their application for
eligibility certificate for claiming exemption from payment of sales tax as per
the second notification having been rejected by the Industries Commissioner,
they filed a special civil application under Art. 226 of the Constitution for
an order directing the Industries Commissioner to grant them eligibility
certificate. It was contended for them that the notification dated July 17,
1971 would have no effect on the eligibility already acquired by them in terms
of the second notification.
The High Court took the view that the
notification dated July 17, 1971 was only prospective in operation and not
retrospective, that it did not affect the exemption enjoyed by the petitioners
under the second notification in respect of the purchases and sales effected
prior-to July 17, 1971 and that the second notification created only existing
rights and not vested rights and such existing rights could he taken away by
186 the subsequent notification. It, therefore, held that the appellants were
entitled to exemption from payment of tax only for the period anterior to July
17, 1971, and for the period thereafter they had no rights to claim exemption.
In this appeal by certificate under Art.
133(1)(c) of the Constitution it was contended for the appellants that by
virtue of the first and the second notifications they had acquired a vested
right to a tax holiday for a period of five years and the Government acting in
exercise of the delegated powers did not have competence to nullify the
exemption by giving retrospective effect to its notification dated July I7,
1971, and that in any event they were entitled to the benefit of tax exemption
for a period of five years on the ground of promissory estoppel and the Government
was obligated to give tax exemption for the full period of the claim.
Dismissing the appeal, the Court,
HELD: 1. The appellants are entitled to the
benefit of tax exemption. only for the limited period during which the
concession was offered by the Government. [194F]
2. Since the first notification dated April
29. 1970 did not stipulate as to how long the exemption from sales tax would
remain in operation the concession granted thereunder was to have operative
force only till such time that it was allowed to remain in force before being
withdrawn by the subsequent notification. The second notification dated
November 11, 1970 which set out that the exemption granted would be operative
for a period of five years from the date of commissioning of the industry at
any time during the period from April 1, 1970 to March 31, 1975, was
prospective in operation. It would, therefore, apply only to those new
industries which were commissioned subsequent to issuance thereof. As the
appellants' unit was commissioned several months before the second notification
the same cannot be invoked by them for claiming benefit of tax exemption for a
period of five years from the date of commissioning of their mill. [191E-192A]
3. The State Government was under no
obligation in any manner known to law to grant exemption from sales tax. What
was granted under the first notification was only by way of concession for
encouraging entrepreneurs to start industries in rural and undeveloped areas.
Such a concession could be withdrawn or revoked at any time and no time limit could
be insisted before doing so. The State Government was, 187 therefore, fully
within its powers to revoke the exemption by means of a subsequent
notification. [192C, 193A, 192B, 192D]
4. 1 The Government could withdraw an
exemption granted by it earlier only if such withdrawal could be made without
offending the rule of promissory estoppel and without depriving an industry
entitled to claim exemption. If the Government grants exemption to a new
industry and if on the basis of the representation made by the Government an
industry is established in order to avail the benefit of exemption then the new
industry can legitimately raise a grievance that the exemption could not be
withdrawn except by means of legislation having regard to the fact that promissory
estoppel cannot be claimed against a statute. [193B-D]
4.2 In order to claim the benefit of
promissory estoppel it was necessary to establish: (i) that a representation
was made to grant the exemption for a particular period to a new industry established
in view of the representation held out by the State Government, and (ii) that
the new industry was established acting upon the representation made by the
State Government. In the instant case, however, the appellants have failed to
prove that but for the concession offered in the, first notification they would
not have established the industry in question and that the entire venture was
attributable only to the inducement offered by the Government.
That notification was made on April 29, 1970
while the oil mill constructed by the appellants came to be commissioned on May
17. 1970 itself. The issuance of the notification granting tax exemption only
constituted a fortuitous circumstance in appellants' case and it could not be
said that the commissioning of their industry was directly the outcome of the
Government's notification granting tax exemption. [193FG,H, 194AB,D]
CIVIL APPELLATE JURISIDICTION: Civil Appeal
No. 2061 of 1972 From the Judgment and Order dated 8/9.3. 1972 of the Gujarat
High Court in Spl. Civil Appl. No. 562 of 1971.
S.T. Desai. H.S. Parihar. M.N. Tandan and
Vipin Chandra for the Appellants.
G.A. Shah, Mrs. H. Wahi and M.N. Shroff for
the Respondents.
The Judgment of the Court was delivered by
188 NATARAJAN, J. In this appeal by certificate under Article 133(1)(c) of the
Constitution two questions fail for consideration viz;
(1) Whether the appellants had acquired a
vested right of exemption from payment of sales tax under the Gujarat Sales Tax
Act, 1969 (for short the 'Act') for a period of 5 years from the date of
commissioning of their oil mill in respect of purchases and sales relating to
the business of their oil mill? and (2) whether in any event the appellants are
entitled to claim tax exemption for a period of 5 years under cover of the
doctrine of Promissory Estoppel? In order to achieve dispersal of industries to
rural areas and to provide fillip to accelerate development of industries the
Government of Gujarat ('Government' in short) issued a Notification on 29.4.1970
in exercise of its pOwers under Section 49(2) of the Act exempting wholly or
partly from payment of sales tax or purchase tax, as the case may be, certain
specified classes of sales and purchases described in the entries at Serial
Nos. 1 to 52 in the Schedule. The said Notification was subsequently amended by
another Notification dated 11.11.1970 and a new Entry, Entry No. 53, was added
in the Schedule below Entry at Serial No.
52. The new entry consisted of two parts, one
part giving exemption from purchase tax and the other, from sales tax.
The Notification provided that subject to the
conditions specified therein a manufacturer who establishes a new industry
would be given exemption of "the whole of purchase tax under Section 15 of
the Act" in respect of "purchase of raw materials, processing
materials, machinery or packing materials from a person who is not a registered
dealer". It was similarly provided that subject to the conditions prescribed
in the Notification a manufacturer who establishes a new industry would be
given exemption of the whole of sales tax leviable under the Act in respect of
"sales of raw materials, processing materials by a registered
dealer". One of the conditions impOsed was that the new industry should have
been commissioned on or after 1.4.1970 in areas beyond 24 kilometers from the
Municipal limits of the cities of Ahmedabad and Baroda and 16 kilometers from
the Municipal limits of Surat, Bhavnagar, Rajkot and Jamnagar and that the
manufacturer should obtain an eligibility certificate from the Industries
Commissioner, Gujarat State certifying the fulfilment of these conditions. The
Notification provided that a certified manufacturer "shall be entitled to
the exemption for a period of five years from the date of commissioning of 189
the industry as certified by the Industries Commissioner in the eligibility
certificate". There was an Explanation in the Notification to define what
a "new industry." means and it was in the following terms:-"For
the purpose of items (1) and (2) above 'new industry' means and includes an
industry which has been commissioned at any time during the period from 1st
April, 1970 to 31st March, 1975(both days inclusive); but shall not include
such industrial undertaking established by transferring or shifting or dismantling
an existing industrial unit".
The appellants had set up a plant for
decorticating and crushing cotton and groundnut seeds for manufacture of oil at
a place called Kadi beyond 24 kilometers from Ahmedabad and commissioned the
plant on May 17, 1970. On the strength of the location of the oil mill at a
place more than 24 kilometers from the Municipal limits of Ahmedabad and the
commissioning of the plant on May 17, 1970, the appellants applied to the
Industries Commissioner for an "eligibility certificate" for claiming
exemption from payment of sales tax as per the Notification dated November 11,
1970. The Industries Commissioner rejected the application giving certain
reasons therefor. The appellants thereupon filed Special Civil Application No.
562 of 1971 under Article 226 of the Constitution for an order directing the
Industries Commissioner to grant them an eligibility certificate in terms of
the Notification.
During the pendency of the petition, the
State Government issued another Notification dated July 17, 1971 amending the
Explanation contained in the Notification dated November 11, 1970. The
amendment provided inter alia that "new industry" shall not include
"any of the industries, whether so commissioned or not, mentioned in the
table appended hereto". The table set out some 14 industries of which the
twelfth was "decorticating, expelling, crushing, roasting, parching,
frying of oilseeds and coloring, decolouring and scenting of oil". It
would appear that the effect of the exemption was reviewed by the Government
and on such reconsideration "the Government was satisfied that certain
industries and the oil industries in particular were sufficiently dispersed in
rural areas, in respect of which the existing capacity of the existing
industries was also more than adequate" and "the Government reached
the conclusion that certain industries required to be excluded from the purview
of the Act". As the oil mill commissioned by the appellants fell within
the denotified industries the appellants obtained the leave of the court and
amended their peti190 tion suitably in order to contend that the Notification
dated July 17, 1971 would have no effect on the eligibility already acquired by
them to claim exemption from payment of sales tax in the fight of the
provisions contained in the second Notification dated November 11, 1970.
The appellants' petition and a connected
matter viz.
Special Civil Application No. 1307 of 1971
filed by a third party came to be considered together by a Division Bench of
the Gujarat High Court. The High Court, by its judgment dated 8-9/3/72, held
that the Notification dated 17.7.71 was only prospective in operation and not
retrospective, that it did not affect the exemption enjoyed by the petitioners
under the Notification dated 11.11.1970 in respect of purchases and sales
effected prior to 17.7.1971, that the Notification dated 11.11.1970 created
only existing fights and not vested rights and such existing rights could be
taken away by the Notification dated 17.7.1971. The High Court, therefore,
ruled that the appellants were entitled to exemption from payment of tax only
for the period anterior to 17.7.1971 and for the period thereafter they had no
right to claim exemption. Being aggrieved by the non-grant of relief of tax
exemption for the full period of 5 years the appellants have preferred this
appeal after obtaining a certificate under Article 133(1)(c) of the
Constitution.
Mr. Desai, learned counsel for the appellants
formulated his arguments under three heads to contend before us that the High
Court ought to have granted relief to the appellants to the full extent of
their claim and it should not have restricted the relief of tax exemption only
for the period 17.5.1970 to 17.7.1971. The propositions put forward were in the
following terms:-
1. By virtue of the Notifications dated
29.4.70 and 11.11.70 the appellants had acquired a vested right to a tax
holiday for a period of 5 years and the Government, acting in exercise of its delegated
powers did not have competence to nullify the exemption by giving retrospective
effect to its Notification dated 17.7.71.
2. The High Court was not justified in
drawing a fine distinction between vested rights and existing rights and
holding that the Notifications created only existing rights and such rights are
subject to defeasance by means of subsequent Notifications.
3. In any event the appellants are entitled
to the benefit of 191 tax exemption for a period of five years on the ground of
Promissory Estoppel and the Government is obligated to give tax exemption for
the full period of claim.
Elaborating the first two 'contentions Mr.
Desai argued that the Government by virtue of the first and second.
Notifications had irretrievably committed
itself to grant exemption from payment of sales tax and purchase tax to the
notified industries commissioned at any time after 1.4.1970 and before
31.3.1975 at places beyond the prescribed distances from the Municipal limits
of the cities named in the Notification. Inasmuch as the appellants had
established their oil mill at a place more than 24 kilometers away from the
Municipal limits of Ahmedabad City and had commissioned the plant on 17.5.1970
Mr. Desai argued that the appellants had acquired a vested right of exemption
and it was not, therefore, open to the Government under law to nullify the
exemption by issuing the Notification dated 17.7.1971 in exercise of its
delegated powers.
The merit of these contentions has to be
determined with reference to the date of commissioning of the appellants' oil
mill as well as the dates of the Notifications and their contents. Admittedly,
the appellants' oil mill was commissioned on 17.5. 1970 and, therefore, it
follows that the oil mill was commissioned after the first Notification but
long before the second Notification. It is indisputable that the first
Notification, though it provided for exemption of tax under the Act, did not
provide any period of exemption. In other words, the Notification did not stipulate
as to how long the exemption from sales tax' would remain in operation. The
position emerging therefrom is that the exemption granted under the
Notification was to have operative force only till such time that the exemption
was allowed to remain before being withdrawn by a subsequent Notification. The
second Notification no doubt set out that the exemption granted would be for a
period of 5 years from the date of the commissioning of the industry at any
time during the period from 1st April, 1970 to 31st March, 1975 (both days
inclusive). But this provision cannot be invoked by the appellants for claiming
the benefit of tax exemption for five years because the second Notification was
prospective in operation as has been rightly pointed out by the High Court in
its judgment. Since the second Notification was prospective in operation the
period of 5 years mentioned therein would apply only to those new industries
which. were commissioned subsequent to the issuance of that Notification. As
admittedly, the appellants' unit was commissioned several months before the
second Notification was made, the second Notification cannot 192 afford a basis
to the appellants to raise a claim for exemption for a period of 5 years from
the date of the commissioning of their plant.
Viewed from another perspective, it may be
noticed that the State Government was under no obligation to grant exemption
from sales tax. The appellants could not, therefore, have insisted on the State
Government granting exemption to them from payment of sales tax. What
consequently follows is that the exemption granted by the Government was only
by way of concession. Once this position emerges it goes without saying that a
concession can be withdrawn at any time and no time limit can be insisted upon
before the concession is withdrawn. The Notifications of the Government clearly
manifest that the State Government had earlier granted the exemption only by
way of concession and subsequently by means of the revised Notification issued
on 17.7.1971, the concession had been withdrawn. As the State Government was
under no obligation, in any manner known to law. to grant exemption it was
fully within its powers to revoke the exemption by means of a subsequent
Notification. This is an additional factor militating against the contentions
of the appellants.
Much of the arguments of the appellants'
counsel proceeded on the assumption that the appellants had acquired a vested
right under the Notification issued by the Government on 11.11. 1970 to claim
exemption from payment of sales tax for a period of five years and consequently
the Government had no right to take away the appellants' vested right. The
contentions are untenable because of the fallacy contained in them viz. the
wrong assumption that the appellants had acquired a vested fight. The High
Court has rightly repelled the plea that the appellants had acquired a vested
right and were, therefore, entitled to claim exemption from payment of tax for
a period of five years notwithstanding the revocation of the exemption under
the Notification dated 17.7.1971. The High Court has further taken the view
that the earlier Notifications granting exemption of tax only created existing
rights and such existing fights can always be withdrawn by means of a
revocation Notification and that is exactly what has happened in this case.
For the purposes of this appeal we do not
think it necessary to go into the question whether the earlier Notification had
created existing rights and whether the impugned Notification had the effect of
only taking away the existing rights. We are taking this view because we have
already pointed out that the State Government was under no obligation to grant
exemption and that the granting of tax exemption 193 was only by way of a
concession. Having regard to this conclusion there is no need for any probe to
be made to determine whether the Notification had created vested rights or only
existing rights. The exemption granted by the Government, as already stated,
was only by way of concession for encouraging entrepreneurs to start industries
in rural and undeveloped areas and as such it was always open to the State
Government to withdraw or revoke the concession. We must, however, observe that
the power of revocation or withdrawal would be subject to one limitation viz.
the power cannot be exercised in violation of the rule of Promissory Estoppel.
In other words, the Government can withdraw an exemption granted by it earlier
if such withdrawal could be done without offending the rule of Promissory
Estoppel and depriving an industry entitled to claim exemption from payment of
tax under the said rule. If the Government grants exemption to a new industry
and if on the basis of the representation made by the Government an industry is
established in order to avail the benefit of exemption. it may then follow that
the new industry can legitimately raise a grievance that the exemption could
not be withdrawn except by means of legislation having regard to the fact that
Promissory Estoppel cannot be claimed against a statute. In the present case
the appellants had not raised the plea of Promissory Estoppel before the High
Court. This is understandable because the principle of Promissory Estoppel had
not found crystalised acceptance by courts of law when the Special Civil
Application came to be heard by the High Court in the year 1972. Be that as it
may, we find that the appellants have not made out any case of Promissory
Estoppel either on the basis of the averments made in their petition or with
reference to the facts which have emerged from the affidavits filed in the
case. In order to claim the benefit of Promissory Estoppel the appellants must
establish:-(i) that a representation was made to grant the exemption for a
particular period to a new industry established in view of the representation
held out by the State Government; and (ii) that the appellants had established
the new industry acting upon the representation made by the State Government.
The facts in the present case do not go to
establish that the appellants had put up the new industry in question
subsequent to and in pursuance of the promise held out by Notification dated
29.4.1970 granting exemption. Putting it differently the appellants have not
194 proved that but for the concession offered in the first Notification, they
would not have established the industry in question and that the entire venture
was attributable only to the inducement offered by the Government. From the
facts set out supra it may be seen that the first Notification was made on
29.4.1970 while the oil mill constructed by the appellants came to be
commissioned on 17.5. 1970 itself.
It is not the appellants' case and indeed it
can never be so contended that they launched the project and commenced the
construction of the oil mill only after the Notification of 29.4.1970 was made
and that the entire construction was completed in about two weeks' time so as
to enable the appellants to commission the plant on 17.5. 1970. What is
envisaged under the Notification is that the project must have been undertaken
and construction work itself should have been started in response to and acting
on the Notification. It is not sufficient to rely on the commissioning of an
industry after completion of construction work which had been commenced long
before the Notification was made by the Government. In respect of such an
industry as .the present one, the issuance of a Notification granting tax
exemption would only constitute a fortuitous circumstance and by no stretch of
imagination can it ever be said that the commissioning of the industry was
directly the outcome of the Government's Notification granting tax exemption.
The concession offered by the Government under the first Notification dated
29.4.70 did not prescribe any period or time limit, and hence the appellants
cannot claim anything more than the benefit of the Notification for such period
the exemption was in force. Once the Government decided, in exercise of the
powers vested in it, to revoke the original Notification, the benefit of
exemption from sales tax enjoyed by the appellants came to an automatic end.
The period of five years mentioned in the second Notification will have no
reference to the appellants' oil mill commissioned much earlier because the
Notification had only prospective effect. We have, therefore, to affirm the
view of the High Court that the appellants will be entitled to the benefit of
tax exemption only for the limited period during which the concession was
offered by the Government.
We find no merit in the appeal and
accordingly it stands dismissed. No order as to costs.
P.S.S. Appeal dismissed.
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