Rajeshwar Thakur & ANR. Vs.
Electricity Board & Ors.  INSC 976 (16 May 2008)
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE
JURISDICTION CIVIL APPEAL NO. 3940 OF 2008 [Arising out of SLP (Civil) No.
23809 of 2005] Tamil Nadu Electricity Board & Anr. ...Appellants Versus
Status Spinning Mills Ltd. & Anr. ...Respondents WITH
CIVIL APPEAL NOs.
3993,3994,3995,3996,3997,3998,3999,4000,4001,4002,4003,4004,4005,4006,4007,4008,4009,4010,4011,4012,4013,4014,4015,4017,4018,4019,4020,4021,4023,4024-4033,4036,4035,4034,4037,4038-4041,4042,4043,4044-51,4052,4054,4055,4056,4057,4058,4060,4061,4062,4063, 4064,4065,4066,4067-71,4072,4073,4075,4076,4077,4078,4080, 4081,4083,4084 OF
2008 [Arising out of SLP (Civil) Nos. 26309, 26387, 26382, 26368, 26345, 26355,
26372, 26366, 26378 of 2005, SLP(Civil) Nos. 2026, 1942, 1941, 1954, 1949,
1951, 1953, 1944, 1930, 1946, 1938, 1947, 1950, 1932, 1945, 1428, 1952, 1935,
1927, 1937, 1955, 1948, 1940, 1919, 1925, 1933, 2242, 2246, 2287, 2286, 2285,
2282, 2279, 2276, 2273, 2274, 2249, 2253, 2255, 2281, 2252, 2254, 2257, 2258,
2268, 2264, 2269, 4278, 4280, 4281, 4282, 4283, 4284, 4285, 4286, 4287, 4288,
4289, 4290, 4291, 4292, 6660, 6724, 6757, 6763, 6761, 6767, 6765, 18803, 18804
to 18818, 21338, 21340 to 21343, 21347, 21348, 21350 to 21357, 16509, 16510,
21723, 21600, 21604, 21602, 21605, 21616, 21613, 21631, 21633, 21608, 5299,
5300 to 5303, 4108, 4109, 4111, 21681, 21682, 21683 of 2006, SLP (Civil) Nos.
2385, 2387, 2388, 2391 of 2007)
S.B. SINHA, J :
2 1. Leave granted.
2. These appeals at the instance
of the Tamil Nadu Electricity Board (for short "the Board") and State
of Tamil Nadu are directed against a judgment and order dated 19.07.2005 passed
by a Division Bench of the Madras High Court dismissing the writ appeals filed
by the appellants herein arising out of a judgment and order dated 23.04.1999
passed by a learned Single Judge of the said Court.
3. The basic fact of the matter is
not in dispute.
4. The State of Tamil Nadu despite
the Parliamentary enactment of the Electricity (Supply) Act, 1948 (for short
"the 1948 Act") enacted the Tamil Nadu Revision of Tariff Rates on
Supply of Electrical Energy Act, 1978 (for short "the 1978 Act"); the
relevant provisions whereof are as under:
"3. Tariff rates for
consumption of electrical energy Not-withstanding anything contained in the
Tamil Nadu Essential Articles Control and Requisitioning (Temporary Powers)
Act, 1949 (Tamil Nadu Act XXIX of 1949), the tariff rates payable to the Tamil
Nadu Electricity Board by any consumer on the electrical energy supplied by the
Board shall be as specified in the Schedule to this Act.
4. Power of the State Government
to amend the Schedule - The State Government may after taking into account the
Cost of production of energy, and such other matters as may be prescribed by
notification, amend the provisions of the Schedule to this Act."
5. Pursuant thereto and in
furtherance thereof, High Tension Supply tariff was prescribed. The State
issued a G.O. bearing No. G.O.Ms No. 29 dated 31.01.1995 providing for tariff
concession for High Tension industries; the relevant portions whereof are as
"a) In the case of new High
Tension Industries to be set up in the areas other than the Madras Metropolitan
areas, the following concessional tariffs shall be charged for the first three
years from the date, the consumer is given service connection under high
tension tariff -I- For the first year 60 per cent of the High Tension rates.
For the second year 70 per cent of
the High Tension rates.
For the third year 80 per cent of
the High Tension rates.
For the fourth year Full Tariff.
The above concession shall apply
to both unit rates and maximum demand chares. This concession shall not
however, be applicable to an industry set up before the 3rd May, 1989. The
concession shall not also be applicable to a consumer, who utilizes power from
his own generating units or makes other arrangements for 4 production purposes
and utilizes the power supplied by the Board for auxillary purposes only."
6. A memorandum was issued on or
about 23.08.1995 to specify the time limit required for dealing with the
applications for grant of electrical connections as and when applications
therefor are filed which are in the following terms:
"Adverting to the above, the
following further instructions are issued regarding disposal of H.T.
The Superintending Engineers of
all Elecy. Dist. Circle are requested to
bestow their efforts and thrive for clearing pending applications wherever
The delays in processing the H.t. applications should be strictly
avoided at all stages. The revised flow chart showing the various stages of
processing of the H.T. applications is enclosed.
scrutinizing the applications the defects observed in the application may be
conveyed to the applicants at the first instance itself and not on piece meal
with a view to speed up the disposal.
It is further to be reiterated
that those H.T. applications for which supply
could not be extended within 18 months may be returned immediately to the
applications with a request to renew after a specific date.
5 If supply could be extended
to applicants within 18 months but requires enhancement of transformer
capacity, improvement of existing lines etc., the load sanction may be accorded
pending execution of such improvement works stipulating the above conditions.
Depending on the readiness
reported and also based on the merits of the each case of H.T. extension, supply may be effected
applicants using the powers
delegated to the Chief Engineers (Distribution) vide
memo.no.SE/IEMC/EE3/AEE1/802/91 dated 8.11.91.
Engineers/Elecy. Distn. Circle are once again informed to ensure that delays do
not occur beyond a reasonable time for processing the H.T. applications as H.T.
services constitute major source of revenue for the Board and to bestow all
efforts to achieve the target fixed for the year 95-96 without fail."
7. The flow chart annexed thereto
specified the maximum period of 18 months' time to be taken from the date of
filing of the application till the date of grant of connection.
8. The G.O. dated 31.01.1995 was
amended on 14.02.1997 in the following terms:
"H.T. Tariff - I 6 There is
increase in both demands and energy charges.
For consumption of energy during
peak hours viz. 6.00 AM to 9.00 AM and 6.00 PM to 9.00 PM, the energy charges
are to be billed at 20% extra. This will be implemented on installation of
`Time of Day' meters.
New industries set up on or after
15.2.97 are not eligible for any tariff concession. However, in respect of H.T.
industries set up in areas other than Chennai Metropolitan area before 15.2.97
shall continue to avail the tariff concession until the expiry of 3 years
period reckoned from date of service concession."
By a G.O. issued on 14.02.1997,
the Schedule appended to the 1978 Act was amended as under:
"(a) New High Tension
Industries set up in any area on or after 15th February 1997, shall not be
eligible for tariff concession:
Provided that the High Tension
Industries set up in any area other than Chennai Metropolitan area before 15th
February 1997 shall continue to avail themselves of the said tariff concession
until the expiry of the period of three years from the date on which the
consumer is given service connection.
(b) New industry to be set up in
the areas other than the Chennai Metropolitan area which will work night shift
only and existing industry which has only night shift between 9.30 p.m. of a
day and 5.30 a.m. of the next day, shall be given a concession of 40 per cent
of the appropriate rate for energy consumed during night shift only for a 7
period of seven months from July to January during a period of five years from
the date of giving service concession. This concession shall apply to energy
rate arrived at after fixing the concession if any:
Provided that in respect of those
having one day shift and one night shift, the night shift concession shall
stand reduced from 40 per cent to 20 per cent."
9. By a letter dated 1.08.1997
addressed to the Chairman of the Board, the State Government purported to
clarify the meaning of the word "set up", stating:
"I am to state that the words
"set up" would mean "obtained service connection". The
"New High Tension Industries set up in any area or after 15th February,
1997 would mean new High Tension Industries for which power service connection
was actually extended on or after 15.2.97."
10. Questioning the validity of
the said notification dated 14.02.1997 as also the letter dated 1.08.1997, a
large number of writ applications were filed contending that the same was
barred under the doctrine of promissory estoppel. Writ petitions were also
filed contending that the petitioners had set up their industries before 14.02.1997
and they were entitled to the benefit of tariff concession in terms of the
proviso appended to Clause (a) of 8 High Tension Tariff - I. By a judgment and
order dated 23.04.1999, a learned Single Judge of the High Court disposed of
the said batch of writ applications directing:
a) Writ petitions which challenged
the validity of the Notification dated 14.2.1997 withdrawing the concessions
b) Those petitioners who had
informed the Electricity Board on or before 14.2.1997 about their readiness for
getting power connection or made applications to the Board would be entitled to
enjoy the tariff concessions for the full period of three years, from the date
of power connection as stipulated in the Notification dated 31.1.1995.
c) Those writ petitioners who had
not made applications or sent intimation to the Electricity Board regarding
their readiness to got power connection on or before 14.2.97 but have altered
their position by establishing the industry on or before 14.2.97 would be
entitled to the tariff concessions as stipulated in the Notification dated
31.1.95 "provided if they are able to establish the same before the 2nd
respondent - Electricity Board.
11. Appeals were preferred
thereagainst both by the Board and the State Government. Some of the industries
who have challenged the notification on the plea of applicability of the
doctrine of promissory estoppel also preferred appeals. Indisputably, during
pendency of the said appeals before the Division Bench of the High Court, the
Schedule to the 1978 Act was further amended by a notification dated 7.01.2000
whereby and whereunder the following Explanations were added:
9 "Explanation 1. - For the
purpose of this clause, an industry may be considered to be set up on the date
of obtaining High Tension Service Connection.
Explanation 2. - For the purpose
of this clause "Existing Industry" means an industry, which has not
completed five years from the date, the consumer is given service connection
and which is still eligible to the concessional tariff rate."
12. The Division Bench of the High
Court disposing of the said batch of appeals by a judgment and order dated
19.07.2005 opined that it was not necessary to discuss the individual fact of
each of the respondents' case on the premise that the Secretary to the
Government could not clarify the amendments to the Schedule which were made by
the Governor. The said appeals were disposed of holding:
i) "...In the present case,
the meaning of the words "set up is clear.
These words mean "erect or establish",
as pointed out by the Supreme Court. If the high tension industry has been
erected or established before 15.02.1997, then it is entitled to the benefit of
the tariff concession, even though electricity connection may not have been
given to it prior to 15.02.1997.
ii) We do not agree that it is the
date on which the application for electricity supply is received by the
electricity board that is the relevant date. An application can be made even
before setting up the industry or it can be made after setting up the industry,
but that is wholly irrelevant. It is the date when the industry has been set up
that is the relevant date.
10 iii) We also do not agree that
where the industries have not been set up, but are in the process of being set
up, yet, the benefit of the concession will be available, on the basis of the
principle of promissory estoppel. There is no question of promissory estoppel
because the language of the Notification is very clear and there is no estoppel
against a Statute."
13. It is, thus, evident that two
points were determined against the respondents. No appeal has been preferred
therefrom by the industries in question.
14. The core questions which arise
for our consideration are as under:
i) What is the connotation of the
expression "set up" in the context of the concessional tariff granted
in favour of High Tension Industries for the first three years "from the
date, the consumer is given service connection?.
ii) Whether the expression
"set up" appearing in the proviso to clause (a) of High Tension
Tariff would have to be construed in the context of the expression "shall
continue to avail themselves of the said tariff concession" appearing in
the proviso? 11 iii) Whether the expression "set up" would also takes
its colour from the context that the continued tariff concession could be
availed by the High Tension Industries "until the expiry of the period of
three years from the date on which the consumer is given service connection.?
iv) Whether the expression "set up" be not construed to ensure
certainty amongst the consumers who could continue to avail of the tariff
concession and whether the date on which the consumer is given a service
connection provides such certainty? v) Whether the Notification conferring
tariff concessions could be construed liberally to extend the benefit thereof
by construction of the expression "set up" and by introducing the
element of uncertainty?
15. Mr. A.K. Ganguly, learned
senior counsel appearing on behalf of the appellants would submit that the
State of Tamil Nadu intended to confer benefit on a class of people. Such
classes of people having been identified as consumers of High Tension
Electrical Energy, it was permissible for the State not only to fix a cut-off
date but also to specify the same so as to enable the industries to take the
benefit only from the date when they start consuming electrical energy. It was,
however, submitted that there can be 12 some exceptional cases where despite
filing of applications for grant of electrical connection, there had been some
avoidable delays on the part of the Board.
It was urged that for the purpose
of grant of benefit of concession in tariff rate, the Board must know who the
The learned counsel further
submitted that the Division Bench of the High Court committed a serious error
insofar as it failed to take into consideration that a High Tension industry
gets ready to discharge the functions for which it was set up, only with
certain formalities as provided for in the Indian Electricity Act, 1910 (for
short "the 1910 Act") and the Rules framed thereunder, viz, the
Indian Electricity Rules, 1956 (for short "the 1956 Rules") are
complied with. An industry starts functioning, according to the learned
counsel, only when it is ready to operationalise its machinery which can only
be done when the power connection is granted.
One of the essential pre-requisite
therefor is certification and approval by the Inspector in terms of Section 37
of the 1910 Act and Rule 63 of the 1956 Rules.
The said Rule reads as under:
13 "63. Approval by
Inspector.-- (1) Before making an application to the Inspector for permission
to commence or recommence supply after an installation has been disconnected
for one year and above at high or extra-high voltage to any person, the
supplier shall ensure that the high or extra-high voltage electric supply lines
or apparatus belonging to him are placed in position, properly joined and duly
completed and examined. The supply of energy shall not be commenced by the supplier
unless and until the Inspector is satisfied that the provisions of rules 65 to
69 both inclusive have been complied with and the approval in writing of the
Inspector has been obtained by him:
Provided that the supplier may
energise the aforesaid electric supply lines or apparatus for the purpose of
tests specified in rule 65..."
Compliance of Rule 63 of the 1956
Rules, Mr. Ganguly submitted, is a definite parameter to assess the readiness
of industry to discharge the functions for which it had been set up. The
Government letter dated 1.08.1997 being clarificatory in nature, the same
should be given effect to.
It was furthermore contended that
the subsequent notification dated 7.01.2000 whereby two Explanations were
introduced is also clarificatory in nature as a bare perusal of Explanation 1
would demonstrate that it merely clarified what was inhered/ implied in the
said proviso which also reflects 14 the undertaking of the government which
alone was competent to grant exemptions to concerned industries and/ or to
withdraw or modify the same.
It was urged that the operative
part of the order of the Division Bench should be suitably modified to reflect
that the setting up of an industry prior to 15.02.1997 implies that such
industry was ready to discharge all the functions for which it had been set up
and that it has already become a consumer having obtained High Tension service
connection from 15.02.1997 and only those industries which have been set up
before 15.02.1997 shall continue to avail themselves of the said tariff
concession until the expiry of the period of three years from the date on which
the consumer is given a service connection.
16. Mr. K. Parasaran and Mr. S.
Ganesh, learned senior counsel and other learned counsel appearing on behalf of
some of the respondents, on the other hand, would contend that the amendments
to the Schedule carried out by the notification are unreasonable being in
contravention of the statute.
The word "set up" having
been interpreted by this Court in Commissioner of Wealth Tax v. Ramaraju
Surgical Cotton Mills, Ltd. [1967 (1) SCR 761] which in turn having been
followed in Kabini Minerals (P) Ltd. and another v. State of Orissa and others
[(2006) 1 SCC 54], it must be held that the said 15 word is in contra-distinction
of the word "commence". Some of the High Tension industries having
already set up their business and having gone for commercial production by
reason of generators, it cannot be said that they had not been set up. For the
said purpose, not only the doctrine of promissory estoppel should be applied,
the wordings of the Section should be read down to mean that those industries
are entitled to the tariff concession who were not only granted connection but
who ought to have been granted connection.
It was pointed out that in most of
the cases, not only the entrepreneurs altered their position pursuant to or in
furtherance of the promise made by the State in terms of the notification dated
31.01.1995. They had applied for grant of communication much prior to the cut
off date fixed by the notification dated 14.02.1997. The entrepreneurs who had
acted pursuant to the promise made by the State should not be allowed to suffer
for no fault on their part.
17. The learned counsel in most of
these matters have drawn our attention to the factual matrix involved in each
of the cases to contend that it is the Board and/or the State who is
responsible for delay in granting electric energy. They have not only set up
the industry and ready for commercial production but, in fact, some of them,
pursuant to or in furtherance of the 16 permission granted by the State
Electricity Board in terms of the provisions of the Indian Electricity Rules,
1956 had set up diesel generating sets for the purpose of running the factory which
even stands accepted by the Board.
It was urged that although no
appeals have been preferred from the judgment of the Division Bench of the High
Court, this Court in exercise of its jurisdiction under Order 41, Rule 33 of
the Code of Civil Procedure may permit the respondents to raise the said
contention. Reliance in this behalf has been placed on UCO Bank v. Rajinder Lal
Cooper [(2007) 6 SCC 694].
18. The High Court unfortunately
did not go into the fact of each case. It proceeded on the basis that the word
"set up" should be given its dictionary meaning, i.e., erect or
establish in view of a decision of this Court in Ramaraju Surgical Cotton Mills
Ltd (supra). The effect for a clarificatory order has also not been considered
stating that the Secretary of the Government cannot clarify an amendment to the
Schedule which has been made by the Governor.
19. We wish that the Division
Bench would have bestowed serious considerations on the issues, as has been
done by the learned Single Judge.
20. The validity of the 1978 Act
is not in question. It overrides the provisions of the 1948 Act. It empowered
the State Government to amend the provisions contained in the Schedule to the
Act prescribing tariff rates payable by different classes of consumers for supply
of electrical energy by the Board taking into account the cost of production of
energy and such other matters as may be prescribed by notification.
Indisputably, the Schedule appended to the Act had been amended from time to
time. The notification dated 31.01.1995 was issued amending the Schedule. It
for all intent and purport substituted the then existing Schedule; Part A
thereof dealt with tariff for High Tension supply. It is only in that
notification some concession, as noticed hereinbefore, had been granted. The
concession was to apply to both unit rates and maximum demand charges. Certain
limitations for grant of the said concession had also been specified.
21. The Schedule was amended by
the notification dated 14.02.1997 reflecting the operation of grant of
concession tariff to those who had set up the new High Tension industries on or
after 15.02.1997. What is, therefore, significant for our purpose is the
meaning of the word "set up" vis-`-vis "commencement".
22. A word cannot be assigned a
meaning in vacuum. It has to be read in the context in which it has been used.
A decision which has been rendered on a different act dealing with a different
subject matter may not be apposite while construing the same term in another
statute. We may, however, at the outset notice the decision of this Court in
Ramaraju Surgical Cotton Mills, Ltd. (supra) wherein this Court in the context
of interpretation of Section 5 (1)(xxi) of the Wealth Tax Act held:
"...A unit cannot be said to
have been set up unless it is ready to discharge the function for which it is
being set up. It is only when the unit has been put into such a shape that it
can start functioning as a business or a manufacturing organisation that it can
be said that the unit has been set up..."
The decision centered round an
exemption provision in respect of a portion of net wealth of a company
established with the object of carrying on an industrial undertaking in India,
as is employed by it in a new and separate unit set up after the commencement
of the Act. Although different terms "setting up" and
"commencement" were used, this Court opined that the word "set
up" is equivalent to the word "established" and that a business
is established when it "is ready to commence business". It was furthermore
19 opined that an establishment could not be set up to be ready to commence
business if it not "set up".
The said view was reiterated by
this Court in Kabini Minerals (P) Ltd.
"9. The expression
"setting up" means, as is defined in the Oxford English Dictionary,
"to place on foot" or "to establish", and is in
contradistinction to "commence". The distinction is this that when a
business is established and is ready to commence business, only then it can be
said of that business that it is set up. But before it is ready to commence
business it is not set up.
(See CWT v. Ramaraju Surgical
Cotton Mills Ltd.)
10. In the said case, it was
further held that the word "set up" is equivalent to the word
"established" but operations for establishment cannot be equated with
the establishment of the unit itself of (sic or) its setting up."
23. What is necessary to take into
consideration is that the Schedule appended to Section 3 of the 1978 Act is a
part of the Act. It provides for High Tension tariff. It fixes up cut-off
dates. It is a piece of subordinate legislation. A subordinate legislation
validly made may have to be read in the same manner as if it is a part of the
Act. For the said purpose, although the same would be amenable to constitutional
challenge on well-settled principles of law, as noticed by this Court in Bombay
Dyeing & Mfg. Co.
20 Ltd. (3) v. Bombay
Environmental Action Group and Others [(2006) 3 SCC 434], Vasu Dev Singh and
Others v. Union of India and Others [(2006) 12 SCC 753] and State of Kerala and
Others v. Unni and Another [(2007) 2 SCC 365], the validity thereof is not
24. The notification dated
31.01.1995 postulated concession to the new High Tension industries "to be
set up" for the first three years from the date the consumer is given a
service connection. It did not speak of commencement of production. It intended
to attain a certainty as to from which date such concession would be available.
Grant of service connection was considered to be a pre-requisite for grant of
It is in the aforementioned
context, the impugned amendment will have to be construed. It fixes a cut off
date beyond which the concession shall not be available to the industries,
viz., those who had set up in any area on or after 15.02.1997.
25. The proviso appended thereto,
however, saves the cases of those who had availed themselves of the said tariff
concession and they who would continue to get the benefit thereof until expiry
of the period of three years from the date on which the consumer is given
service connection. The date on which the service connection is given,
therefore, plays an important role.
21 The clarification issued by the
State during pendency of the appeals should have, therefore, been considered by
the High Court in its proper perspective. If it is clarificatory in nature, it
could be given a retrospective operation. Such a question, however, should have
been posed and answered. Furthermore, the letter dated 1.08.1997 was issued as
some confusion arose. When a subordinate legislation is made by the State
Government, it must be done in terms of the constitutional provision. An
executive order is also issued keeping in view the rules and executive
business. It may not have the force of law but the same may come within the
purview of the well-known principle of contemporaneous exposito.
Rules of executive construction
are also relevant.
26. The Government placed the
entire record before the learned Single Judge. In his judgment, the learned
Single Judge recorded :
"14. The learned Senior
Counsel has produced the note file of the Government. From the file, I am able
to see that the Chairman, Electricity Board himself while constructing the said
expression `set up' has stated that `withdrawal of tariff concession to the
industries set up with respect to the industries during 1994 the date of load
sanction was taken into account'. The Chairman has also recommended to the
effect that tariff concession which prevailed prior to 14.2.1997 can be extended
to consumers who have informed 22 readiness on or before 14.2.1997 and
certified as such all Field Superintending Engineers on inspection of the
industry after receipt of readiness report, and after 15.2.1997, due to the
reason that it was not informed prior to 14.2.1997."
27. It does not appear that the
Chief Secretary of the State had issued the letter in question upon following
the procedure laid down in the Rules of Executive Business framed under Article
166 of the Constitution of India.
We are, however, not much
concerned therewith. It is not a case where the opinion of the Chief Secretary
and/or for that matter the State was decisive.
In the matter of interpretation of
statute, the Court has the last say.
We have, therefore, to consider
the issues raised before us independently.
28. Furthermore, concession is to
be given in respect of payment of the charges for electrical energy. When can
it be given would be a question of fact. When it has been given would be known
to everybody. The bills are required to be paid only after electrical energy is
consumed. Question of availing the benefit of concession would not arise unless
a service connection is granted. For the said purpose, the definition of
consumer, as contained in Section 2(1)(c) of the 1910 Act would be relevant.
The benefit can be availed by the consumer keeping in view the nature of
concession 23 granted. Exemption notifications, therefore, require construction
depending upon the tenor of the statute/ notification. Whether it should undergo
a strict construction or a liberal construction is one thing but it is another
thing that whether a person is entitled to concession on a plain reading of the
It may be true that the exemption
notification should receive a strict construction as has been held by this
Court in Novopan India Ltd. Hyderabd v. Collector of Central Excise and
Customs, Hyderabad [1994 Supp. (3) S.C.C. 606], but it is also true that once
it is found that the industry is entitled to the benefit of exemption notification,
it would receive a broad construction. [See Tata Iron & Steel Co. Ltd. v.
State of Jharkhand (2005) 4 SCC 272 and A.P. Steel Re-Rolling Mill Ltd. v.
State of Kerala (2007) 2 SCC 725].
A notification granting exemption
can be withdrawn in public interest. What would be the public interest would,
however, depend upon the facts of each case.
29. In State of Jharkhand v. Tata
Cummins Ltd. [(2006) 4 SCC 57], this Court held:
"6. Before analysing the
above policy read with the notifications, it is important to bear in mind the
connotation of the word "tax". A tax is a payment 24 for raising
general revenue. It is a burden. It is based on the principle of ability or
capacity to pay.
It is a manifestation of the
taxing power of the State. An exemption from payment of tax under an enactment
is an exemption from the tax liability.
Therefore, every such exemption
notification has to be read strictly. However, when an assessee is promised
with a tax exemption for setting up an industry in the backward area as a term
of the industrial policy, we have to read the implementing notifications in the
context of the industrial policy. In such a case, the exemption notifications
have to be read liberally keeping in mind the objects envisaged by the
industrial policy and not in a strict sense as in the case of exemptions from
tax liability under the taxing statute."
30. The word "set up",
therefore, was also required to be construed keeping in view the provisions of
the statute operating in the field, viz., the 1910 Act, the 1948 Act and the
31. Validity of the notifications
on the ground they are unreasonable has not been raised before the High Court.
We, therefore, cannot go into the issue. If that be so, it is difficult to
agree with Mr. Parasaran that we should undertake an exercise to interpret the
notifications in a manner which would not lead to unreasonableness. For the
purpose of declaring a statute unconstitutional, foundational facts have to be
laid therefor. [See M/s.
Seema Silk & Sarees & Anr.
v. Directorate of Enforcement & Ors. Criminal 25 Appeal @ SLP (Crl.) No.
6812 of 2007 decided on 12th May, 2008].
Grounds are required to be raised
therefor. In absence thereof it would not be possible for us to enter into the
debate of constitutionality of the said provisions. The Division Bench of the
High Court had rightly or wrongly opined that the doctrine of promissory
estoppel has no application. The fact that the said doctrine may apply even in
relation to a statute is beyond any dispute as has been held by this Court in
Mahabir Vegetable Oils (P) Ltd.
and Another v. State of Haryana
and Others [(2006) 3 SCC 620], A.P. Steel Re-Rolling Mill Ltd. (supra), Pawan
Alloys and Casting Pvt. Ltd. v. U.P.
State Electricity Board and others
[(1997) 7 SCC 251] and Southern Petrochemical Industries Co. Ltd. v.
Electricity Inspector & ETIO and Others [(2007) 5 SCC 447]
32. Strong reliance has been
placed by Mr. Parasarn on Shah v. Shah [2002 Q.B. 35 : (2001) 4 All ER 138] to
contend that the doctrine of promissory estoppel is applicable even in the
field of the statute. Therein, it was held:
"In the Godden case 
NPC 1 an attempt was made to defeat by an estoppel the provision in section
2(1) of the 1989 Act that "a contract for the sale or other disposition of
an interest in land can only be made in writing and only by incorporating all
the terms which the parties have expressly agreed in one document or, where 26
contracts are being exchanged, in each". Simon Brown LJ stated that the
argument that "although Parliament has dictated that a contract involving
the disposition of land made otherwise than in compliance with section 2 is
void, the defendants are not allowed to say so" was "an impossible
argument". Simon Brown LJ regarded the principle stated in Halsbury's Laws
as a "cardinal rule" the "absolute nature" of which cannot
be "outflanked by one of the equitable techniques or types of estoppels
sought to be deployed in the present case". Thorpe LJ and Sir John
Balcombe agreed with Simon Brown LJ.
Yaxley v Gotts  Ch 162 was
also concerned with section 2 of the 1989 Act. An oral agreement purporting to
grant an interest in land, though void and unenforceable under section 2, was
held still to be enforceable on the basis of a constructive trust under section
2(5) which provides that "nothing in this section affects the creation or
operation of resulting, implied or constructive trusts". Robert Walker LJ
stated, at p 175:
that any contract for the disposition of an interest in land must be made in a
particular documentary form, and will otherwise be void, does not have such an
obviously social aim as statutory provisions relating to contracts by or with
moneylenders, infants, or protected tenants. Nevertheless it can be seen as
embodying Parliament's conclusion, in the general public interest, that the
need for certainty as to the formation of contracts of this type must in
general outweigh the disappointment of those who make informal bargains in
ignorance of the statutory requirement. If an estoppel would have the effect of
enforcing a void contract and subverting Parliament's purpose it may have to
yield to the statutory law which confronts it, except so far as the statute's
saving for a constructive trust 27 provides a means of reconciliation of the
Clarke LJ stated, at p 182, that
where a particular estoppel relied upon would offend the public policy behind a
statute it is necessary to consider the mischief at which the statute is
Where a statute had been enacted
as the result of the recommendations of the Law Commission it *44 is
appropriate to consider those recommendations. He stated that in his opinion:
"the contents of that report
[Transfer of Land:
Formalities for Contracts of Sale
etc of Land (1987) (Law Com No 164)] will be of the greatest assistance in
deciding whether or not the principles of particular types of estoppel should
be held to be contrary to the public policy underlying the Act. In this regard
it seems to me that the answer is likely to depend upon the facts of the
Beldam LJ stated, at p 191, that
"The general principle that a party cannot rely on an estoppel in the face
of a statute depends upon the nature of the enactment, the purpose of the
provision and the social policy behind it."
The said decision has also been
referred to Actionstrength Ltd.
(trading as Vital Resources) v.
International Glass Engineering IN.GL.EN SpA and another [2003 (2) All. E.R.
615 at 619], but therein it was held that the doctrine of promissory estoppel
may not be applicable in case of a statute. As would appear from the
discussions hereinafter, applicability of the said doctrine would depend upon
various factors including the nature 28 and purport of the Statute, the object
it seeks to achieve, the purpose for grant of concession/exemption etc.
33. It, therefore, depends on the
nature of the statute as also applicability of the doctrine. As noticed
hereinbefore, even such a question had not been raised before the High Court.
34. The GOMs dated 31.01.1995
granted concession for the new high tension industries to be set up. The
eligibility for grant of concession therefore was for the industries which were
to be set up after the said date.
The exemption does not stop at that.
It is given a retrospective effect. It is extended to those industries which
were set up after 3.05.1989. However, exception therefor is sought to be curved
out in respect of those industries who had been utilizing power from their own
generating units or making other arrangements for production for the purposes
and utilizing the power supplied by the Board in auxiliary purposes only. The
said notification, therefore is a broad based one. It not only is to apply to
those industries which were to be set up on or from 31.01.1995 but also to
those which were set up after 3.05.1989.
We may notice that concessional
tariffs, however, were to be granted only for three years. Those three years of
concessional tariffs, therefore, 29 were available to any industry which had
been set up after 3.01.1989 till the concession is withdrawn. Unlike other
notifications, no period is fixed.
This Court, in a number of
decisions, has considered the effect of the notifications which were applicable
for a fixed period, may be three years or five years. The concession, although
was to apply for a period of three years both in respect of unit as also
maximum demand charges, the same was meant to be applied to all those
industries who intended to set up their industries in the areas other than
Madras Metropolitan areas.
Indisputably, the respondents
before us have started setting up their industries after the said date. It is
on the aforementioned backdrop, the impugned notification dated 14.02.1997
requires interpretation. Those who had set up their industries have acquired a
right, viz. the right to obtain the tariff concession once a right is accrued
in their favour. What was promised to them was that they would be granted the
tariff concession for a period of three years @ 60%, 70% and 80% of the
35. Whether by reason of the said
notification dated 14.02.1997, an accrued or vested right has been taken away
or not is the question. The core question, therefore, is as to whether by
reason of the said notification dated 31.01.1995, the entrepreneurs who had set
up new high tension industries after the said date have acquired any right
30 The notification dated
31.01.1995 must be interpreted in a broad based manner, as a promise was made
to grant the concessional tariff not only for the new industries which were to
be set up thereafter but also to the pre-existing industries. The right accrued
to them is sought to be taken away w.e.f. 15.02.1997. Those who were eligible
upto 14.02.1997 to avail the benefit of the notification dated 31.01.1995
became ineligible. It is in the aforementioned context, the proviso appended to
clause (a) is required to be interpreted. It has used the term `set up' in any
area other than Chennai Metropolitan area before 15.02.1997. Should the rule of
liberal interpretation be applied? In our opinion, it should not be. An accrued
right ordinarily cannot be taken away with retrospective effect. It is not a
case where the notification has a retroactive operation. A person may apply on
a particular date for grant of electrical connection. He may get the electrical
connection within a few days or a few weeks or a few months.
According to the State Electricity
Board, keeping in view the role played by all the three players, namely, the
consumer, the Board and the State, an outer limit of 18 months is taken for
grant of supply.
36. There are cases before us
wherefrom it appears that electrical connections had not been provided owing to
default on the part of the Electrical Inspector who is an officer of the State
and/or authorities of the 31 Board, although prompt action had been taken in
the matter of depositing of money and/or complying with directions by the
37. A statute, even a subordinate
legislation, may have to be construed reasonably. A subordinate legislation
ordinarily would not be given a retrospective effect. Retrospective effect can
be granted only if there exists any power in that behalf. There is nothing to
show that such a power has been conferred upon the State in terms of the Act.
While saying so, we are not oblivious of the situation that the State has a
statutory power to fix the tariff. It may also be true that when a statutory
power is conferred, the State would have power to amend, alter, modify or
rescind the same. The Court must also bear in mind that it may not cause undue
hardship. What we mean to say that if construction of a statute is possible as
a result of hardship is avoided, vis-`-vis, an undue hardship would be created,
the court will prefer the former interpretation. The proviso is an exception to
the main clause whereas all industries which were set up on or after 15th
February become wholly ineligible for any tariff concession but those who had
set up prior thereto shall continue to avail themselves of the said tariff
concession. Legally, those who had not become consumer of electrical energy,
but were the potential consumers, they had not only applied for it but they
were and, in fact, some of them has also been gone into commercial 32
production. Once they have set up the high tension industries and who had gone
up for commercial production must be held to have set up the high tension
industries. Once they have set up the high tension industries after 31st March,
1995, they became entitled to the benefit of concessional tariff for a period
three years. Such concession was to be availed by them from the date of grant
of service connection. If they had already been granted service connection,
they would continue to avail themselves of the said tariff concession. However,
the difficulty arises only in cases where despite applying for grant of
electrical communication, actual service connection had not been granted. If a
literal interpretation of the proviso is taken recourse to, the same may result
in an anomaly in the sense that in one case, connection may be granted in one
day and in another case, connection may not be granted for a long time. Because
of the acts of discrimination on the part of the officers of the Board or the
State, the entrepreneurs would suffer.
It is in the aforementioned
limited sense, the doctrine of promissory estoppel will have application. If
doctrine of promissory estoppel applies, the right accrued in terms thereof
cannot be withdrawn with a retrospective effect. [See Mahabir Vegetable Oils
(P) Ltd. (supra) Southern Petrochemical Industries Co. Ltd. (supra)] 33
38. In MRF Ltd., Kottayam v.
Asstt. Commissioner (Assessment) Sales Tax and others [(2006) 8 SCC 702], this
Court held :
"In any event, the appeal preferred
by the State of Kerala was dismissed and the judgment of the High Court has
therefore become final.
Accordingly, it was held that
Section 10(3) does not confer the power to withdraw an exemption with
retrospective effect. Effect of this is that the amendment Notification SRO No.
38/98 has to be read so as not to take away or disturb any manufacturer's
pre-existing accrued right of exemption for a period of 7 years. If SRO No.
38/98 is construed as now
contended by the respondent, then the inevitable consequence would be that SRO
No. 38/98 would itself be rendered ultra vires Section 10(3) of the Act, and
therefore, illegal, bad in law and null and void."
39. Yet again, in Tata
Teleservices Ltd. v. Commissioner of Customs [(2006) 1 SCC 746], this Court
"10. We are of the view that
the reasoning of the Bombay Bench of the Tribunal as well as that of the Andhra
Pradesh High Court must be affirmed and the decision of the Delhi Tribunal set
aside insofar as it relates to the eligibility of LSP 340 to the benefit of the
The Andhra Pradesh High Court was
correct in coming to the conclusion that the Board had, in the impugned
circular, predetermined the issue of common parlance that was a matter of
evidence and should have been left to the Department to establish before the
adjudicating authorities. The Bombay Bench was also correct in its conclusion
34 that the circular sought to impose a limitation on the exemption
notification which the exemption notification itself did not provide. It was
not open to the Board to whittle down the exemption notification in such a
manner. The exemption notification merely reproduced the language of Entry 8525
20 17 and since the exemption notification merely reproduced the tariff entry,
the limitation sought to be imposed by the Board would tantamount also to
reading the limitation into the classification itself."
40. In State of Orissa and Others
v. Tata Sponge Iron Ltd. [(2007) 8 SCC 189], this Court held:
"20. In view of the clear
legal provision as also the aforementioned Notification dated 23-9-1992, there
cannot be any doubt whatsoever that the exemption in respect of deferment of
sales tax having been provided for under the Orissa Sales Tax Act as also the
notification issued thereunder, the High Court, in our opinion, is correct in
taking its view."
41. In State of Kerala and Others
v. Kurian Abraham (P) Ltd. and Another [(2008) 3 SCC 582], it was opined :
"23. Tax administration is a
complex subject. It consists of several aspects. The Government needs to strike
a balance in the imposition of tax between collection of revenue on one hand
and business-friendly approach on the other hand. Today, Governments have
realized that in matters of tax collection, difficulties faced 35 by the business
have got to be taken into account.
Exemption, undoubtedly, is a
matter of policy.
Interpretation of an Entry is
undoubtedly a quasi- judicial function under the tax laws. Imposition of taxes
consists of liability, quantification of liability and collection of taxes.
Policy decisions have to be taken by the Government. However, the Government
has to work through its senior officers in the matter of difficulties which the
business may face, particularly in matters of tax administration. That is where
the role of the Board of Revenue comes into play. The said Board takes
administrative decisions, which includes the authority to grant Administrative
Reliefs. This is the underlying reason for empowering the Board to issue
orders, instructions and directions to the officers under it."
42. It is not a case where
decisions were altered pursuant to any representation made by the State.
Concessions in tariff had been granted by reason of a statutory provision. Such
concessions could also be withdrawn.
If the appellants have not altered
their position pursuant to any promise, the doctrine of promissory estoppel
would not apply. If that be so, the question of any right being vested in the
appellants would also not apply. In any event, the reasonableness of the
statute was not the subject matter of the writ petition. The provisions have
not been sought to be declared ultra vires. Even otherwise, the State while
amending statute stated about the public interest necessitated the same. When a
statute is amended keeping in 36 view the public interest even the concession
can be withdrawn with retrospective effect.
43. In Kasinka Trading & Anr.
v. Union of India & Anr. [(1995) 1 SCC 274], the power of the State to
change its policy decision in public interest was emphasized. It was held that
the power which can be used for grant of concession, namely, Section 25(1) of
the Customs Act itself is the source to rescind the earlier notification,
"Since, the notification had
been issued under Section 25(1) of the Act, the very same power was available
to the authority for rescinding or modifying that notification and appellant
ought to have known that the said notification was capable of or liable to be
revoked, modified or rescinded at any time even before the expiry of 31.3.1981
if the `public interest' so demanded. To hold that after the Government had
issued the Notification No.66 of 1979 indicating that it was to remain
operative till 31.3.1981, it could not be rescinded or modified before the
expiry of that date would amount to prohibiting the Government from discharging
its statutory obligation under Section 25(1) of the Act, if it was satisfied
that it was in the `public interest' to withdraw, modify or rescind the earlier
notification. The plain language of Section 25 of the Act is indicative of the
position that it is the public interest and public interest alone which is the
dominant factor. It is not the case of the appellants that the withdrawal of
Notification No.66 of 1979 by the impugned notification was not in `public
interest'. Their case, however, is that relying upon the earlier 37
notifications they had acted and the Government should not be permitted to go
back on its assurance as otherwise they would be put to huge loss. The courts
have to balance the equities between the parties and indeed the courts would
bind the Government by its promise `to prevent manifest injustice or
It was further held :
"23. The appellants appear to
be under the impression that even if, in the altered market conditions the
continuance of the exemption may not have been justified, yet, Government was
bound to continue it to give extra profit to them.
That certainly was not the object
with which the notification had been issued. The withdrawal of exemption
"in public interest" is a matter of policy and the courts would not
bind the Government to its policy decisions for all times to come, irrespective
of the satisfaction of the Government that a change in the policy was necessary
in the "public interest". The courts, do not interfere with the
fiscal policy where the Government acts in "public interest" and
neither any fraud or lack of bona fides is alleged much less established. The
Government has to be left free to determine the priorities in the matter of
utilisation of finances and to act in the public interest while issuing or
modifying or withdrawing an exemption notification under Section 25(1) of the
Kasinka Trading (supra) has been
followed in many cases including, Shrijee Sales Corporation & Anr. v. Union
of India [(1997) 3 SCC 398], Bannari Amman Sugars Ltd. v. Commercial Tax
Officer & Ors. [(2005) 1 38 SCC 625], Kuldeep Singh v. Govt. of NCT of
Delhi [(2006) 5 SCC 702], M.P. Mathur & Ors. v. DTC & Ors. [(2006) 13
SCC 706] and Ramchandra Murarilal Bhattad & Ors. v. State of Maharashtra
& Ors. [(2007) 2 SCC 588].
44. A distinction must be made
between a policy decision and a statute.
Whereas prima facie a policy
decision may not have any retroactive operation, a statute may have. Only
because it affects a past transaction the same, by itself, would not come in
the way of the legislature in enacting an enactment or the executive government
to exercise its power of subordinate legislation.
45. We have noticed hereinbefore
that some of the industries had even installed generators. They had to do it.
They inevitably had to do it because the Board would not supply power. Would it
not be too much to contend that even those industries have not been set up as
they have not become consumers? We think that for the said purpose, the proviso
has to be read down. It must be made applicable to them who not only had
started commercial production before the said date, namely, 14.02.1997 but also
had applied and were otherwise ready to take electrical connections having
deposited the amount asked for.
46. Those hard cases, even
according to Mr. Ganguly, should be brought within the purview of the proviso.
We, therefore, hold:
concession had been granted by the State, it had the power to withdraw the same.
It is not a case where in view
of the doctrine of promissory estoppel, the State could not have in law amended
In view of existence of public
interest the doctrine of promissory estoppel would have no application.
otherwise the appellants having not preferred appeals against the judgment of
the Division bench of the High Court, the said questions cannot be permitted to
be raised before us.
appended to the main provision should be read down as stated in paragraphs 44
and 45 supra.
In view of
our findings aforementioned, we have not gone into the merit of the matter
involved in each case separately.
40 We direct accordingly. The
matters would now be examined by the Appropriate Authority of the Board, as
directed by the High Court in individual cases. The appeals are allowed with
the aforementioned directions. No costs.
[Lokeshwar Singh Panta] New Delhi;
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