State of Haryana
& Others Vs M/s. Mahabir Vegetable Oils Pvt. Ltd
issue that falls for our consideration in this appeal is whether the Respondent
is entitled to the benefit of Sales Tax exemption on the entire investment made
by them in setting up the industrial unit i.e. Solvent Extraction Plant, or on the
investments made up till 16.12.1996, the date on which the exemption granted
under Rule 28A of the Haryana Sales Tax Rules ("HSTR" for short) was
withdrawn by the State by putting the Solvent extraction plant in the negative
basic facts which are not in dispute, are as follows:-The State enacted the
Haryana General Sales Tax Act, 1973 (for short "the Act"). Section 64
of the Act provides for rule-making power. The said provision was amended by inserting
sub-section (2-A) therein which reads as under: "64. (2-A) The power to
make rules under sub-sections (1) and (2) with respect to clauses (ff) and (oo)
of sub-section (2) shall include the power to give retrospective effect to such
rules i.e. from the date on which policy for incentives to industry is
announced by the State and for this purpose Rules 28-A, 28-B and 28-C of the
Haryana General Sales Tax Rules, 1975, shall have retrospective effect i.e. with
effect from 1st April, 1988, 1st August, 1997 and 15th November, 1999 respectively,
but such retrospective operation shall not prejudicially affect the interest of
any person to whom such rules may be applicable."
(ff) of sub-section (2) of Section 64 of the Act provides for the class of industries,
period of exemption and conditions of such exemption, under Section 13-B;
whereas clause (oo) thereof provides for class of industries, period of deferment
and the conditions to be imposed for such deferment under Section 25-A.
to or in furtherance of the said rule-making power, the State made rules known as
the Haryana General Sales Tax Rules, 1975 (for short "the Rules"). Rule
28-A occurring in Chapter IV-A of the Rules provide for the class of industries,
period and other conditions for exemption/deferment from payment of tax as
envisaged both under Sections 13-B and 25-A of the Act. "Operative period"
has been defined in sub-rule (2)(a) of Rule 28-A of the Rules to mean "the
period starting from the 1st day of April, 1988 and ending on the 31st day of March,
1997". Sub-rule (2)(c) thereof defines "New industrial unit" to
mean: "a unit which is or has been set up in the State of Haryana and comes
or has come into commercial production for the first time during the operative period
and has not been or is not formed as a result of purchase or transfer of old machinery
except when purchased in the course of import into the territory of India, or when
the cost of old machinery does not exceed 25% of the total cost of machinery re-establishment,
amalgamation, change of lease, change of ownership, change in constitution, transfer
of business, reconstruction or revival of the existing unit".
list" has been defined in sub-rule (2)(o) to mean "a list of class of
industries as specified in Schedule III appended to these Rules".
State of Haryana announced an industrial policy for the period 1-4-1988 to
31-3-1997 wherein inter alia incentive by way of sales tax exemption was to be
given for the industries set up in backward areas in the State. Schedule III appended
to the Rules provides for a negative list of the industries and/or class of industries
which were not to be included therein. At the initial stage the Solvent extraction
plant was admittedly not included in the negative list.
or about 3-1-1996, notice was given as regards the intention of the State to amend
the Rules in respect whereof a draft was circulated for information of persons
likely to be affected thereby so as to enable them to file objections and suggestions
thereto. Amendments in the terms of the said draft rules were notified on
16-12-1996 substituting Schedule III appended to the Rules whereby and where under
the solvent extraction plant was included therein. Note 2 appended thereto
reads as under: "The industrial units in which investment has been made up
to 25% of the anticipated cost of the project and which have been included in
the above list for the first time shall be entitled to the sales tax benefits related
to the extent of investment made up to 3-1-1996. Only those assets will be included
in the fixed capital investment which have been installed or erected at site and
have been paid for. The anticipated cost of the project will be taken on the basis
of documents furnished to a financial institution or banks for drawing a loan and
which have been accepted by the financial institution or bank concerned for
sanction of loan."
or about 28-5-1997 the said Rules were amended inter alia by omitting Note 2
deeming to have always been omitted.
again on 3-6-1997 in clause (a) of sub-rule (2) of Rule 28-A of the Rules instead
and in place of "31-3-1997" the words "date on which new policy
for incentive to industry is announced by the Government of Haryana in
Industries Department" was substituted.
26-6-2001 in Section 13-B after the words "for such period", the
words "either prospectively or retrospectively" were inserted.
is only after the notice dated 3.1.1996 that the respondent Mahabir Vegetable Oils
(P) Limited purchased land measuring 30 kanals 17 marlas in the month of August
1996 to set up a solvent extraction plant. It also obtained registration under the
provisions of the Act and the Central Sales Tax Act, 1956 on 6-9-1996. On 13-8-1996
it applied for a no-objection certificate from the Haryana State Pollution
Control Board which is a condition precedent for setting up a solvent
On 15-8-1996, the appellant
entered into an agreement with M/s Saratech Consultants and Engineers, Karnal
for supply and erection of the plant for a sum of Rs. 55,55,000.00 and Rs
22,75,000 respectively and advances were paid on different dates. Furthermore, on
6-9-1996, civil construction work started at site. Plans submitted by the
appellant for getting permission for storage of hexane were sanctioned by the
Explosives Department on 19-9-1996 and licence was finally given on 11-3-1997.
On 26-9-1996, process of installation of the plant started at the site. On or
about 18-11-1996, a 250 kVA power-generating set costing Rs 9,91,000 was
installed, no-objection certificate where for was granted on 22-11-1996.
The appellant applied
to the Haryana State Electricity Board for release of the power connection vide
application dated 12-12-1996 and also deposited the security of Rs. 68,700 for the
same. On 26-3-1997, the appellant started the trial production and commercial production
commenced on 29-3-1997.
respondent had applied for grant of exemption from payment of sales tax as on 16-12-1996
which was rejected the following terms: - "... The solvent extraction plants
were included in the negative list with effect from 16-12-1996. The industrial unit
has made 45% of total investment. In the notification it was stipulated that
the industrial unit in which investment has been made up to 25% of the anticipated
cost of the project which has been included in the negative list for the first
time shall be entitled to sales tax benefit, however, this condition has been deleted
vide notification dated 28-5- 1997.
The Committee was of the
view that this condition has already been deleted and certain parties have challenged
it in the Punjab and Haryana High Court. The Director of Industries was of the view
that in case a particular industry is put in the negative list, benefit on account
of investment made before the date of putting the unit in the negative list
should be available to the unit for sales tax exemption/deferment. Though the Higher
Level Screening Committee broadly agreed with this view, yet in view of the fact
that such cases were not covered in the existing notification of the Commercial
Taxation Department, it was decided to reject the claim of the party." And
the writ petition filed by the Respondent before the High Court was dismissed
power to grant exemption from the payment of sales tax is an exercise of the powers
conferred by the statute on the State Government and is, thus, a delegated legislative
function. The delegated legislation can be struck down if it is established that
there is manifest arbitrariness. It must be shown that it was not reasonable or
per the records made available, a Standing Committee was constituted by the State
of Haryana for revising the negative list periodically keeping in view the industrial
scheme of the State and its neighbourhood. Such Standing Committee considered the
revision of negative list in its meeting held on 15-9-1995 wherein it was
decided to include highly polluting industries, power- intensive industries,
conventional type of industries where sufficient capacity has already come up and
any further increase in the capacity would jeopardise the health of existing
industry in the negative list. There is no challenge to the decision or proceedings
of such Committee on any ground indicating arbitrariness, bias, mala fide or any
such like reason.
view of certain decisions of this Court, the benefit of exemption can be
withdrawn in public interest.
is no allegation of exercise of such power to include solvent extraction plant
which is actuated by any mala fides, fraud or lack of bona fides. It is a matter
of fiscal policy of the State Government as to which industries should be
Vegetable Oils (P) Ltd. only invested Rs. 4,44,000 in the land and purchased
machinery worth Rs.16,90,000 on 14-12-1996.
we hold that there is no representation on behalf of the State Government that the
scheme of granting incentives by way of exemption or deferment will not be modified,
amended or varied during the operative period.
There cannot be any
restraint on the State Government to exercise the delegated legislative functions
within the parameters laid down by the statute."
the said dismissal the Respondent approached this Court by filing Special Leave
Petition which was converted into Civil Appeal 1635 of 2006. The said Appeal of
the respondent was allowed by this Court vide its judgment dated 10-3-2006 which
was reported at (2006) 3 SCC 620. This Court by applying the Doctrine of Promissory
Estoppel held that the promises/representations made by way of a statute,
continued to operate in the field. This Court noted that it may be true that
the Respondent altered their position only from August 1996 but it has neither been
denied nor disputed that during the relevant period, namely, August 1996 to 16-12-1996
not only have they invested huge amounts but also the authorities of the State
sanctioned benefits, granted permissions.
The Respondent had
also taken other steps which could be taken only for the purpose of setting up of
a new industrial unit. This Court further noted that an entrepreneur who sets
up an industry in a backward area unless otherwise prohibited, is entitled to alter
his position pursuant to or in furtherance of the promises or representations
made by the State.
this Court, at that stage, did not interfere with the issue of the quantum of
exemption which can be granted to the Respondent and the said issue was kept
open and the matter was remanded to the Director Industries for fresh adjudication.
The Writ Petition filed by the Respondent under Article 32 was also disposed
off. The relevant portion of the said judgment is as follows:-
made by way of a statute, therefore, continued to operate in the field. It may be
true that the appellants altered their position only from August 1996 but it
has neither been denied nor disputed that during the relevant period, namely, August
1996 to 16-12-1996 not only have they invested huge amounts but also the authorities
of the State sanctioned benefits, granted permissions. Parties had also taken
other steps which could be taken only for the purpose of setting up of a new
industrial unit. An entrepreneur who sets up an industry in a backward area
unless otherwise prohibited, is entitled to alter his position pursuant to or
in furtherance of the promises or representations made by the State. The State accepted
that equity operated in favour of the entrepreneurs by issuing Note 2 to the notification
dated 16-12-1996 whereby and whereunder solvent extraction plant was for the first
time inserted in Schedule III i.e. in the negative list.
Both the provisions contained
in Schedule III and Note 2 formed part of subordinate legislation. By reason of
the said note, the State did not deviate from its professed object. It was in conformity
with the purport for which original Rule 28-A was enacted.
We, in this case, are
not concerned with the quantum of exemption to which the appellants may be entitled
to, but only with the interpretation of the relevant provisions which arise for
consideration before us.
We may at this stage consider
the effect of omission of the said note. It is beyond any cavil that a subordinate
legislation can be given a retrospective effect and retroactive operation, if any
power in this behalf is contained in the main Act. The rule-making power is a
species of delegated legislation. A delegatee therefore can make rules only
within the four corners thereof.
It is a fundamental
rule of law that no statute shall be construed to have a retrospective operation
unless such a construction appears very clearly in the terms of the Act, or arises
by necessary and distinct implication. (See West v. Gwynne14.)
effect to an amendment by way of a delegated legislation could be given, thus,
only after coming into force of sub-section (2-A) of Section 64 of the Act and
not prior thereto.
By reason of Note 2,
certain rights were conferred. Although there lies a distinction between vested
rights and accrued rights as by reason of a delegated legislation, a right cannot
be taken away. The amendments carried out in 1996 as also the subsequent amendments
made prior to 2001, could not, thus, have taken away the rights of the appellant
with retrospective effect.
For the reasons aforementioned,
the impugned judgment cannot be sustained which is set aside accordingly. The
appeals are allowed and the matter is remitted to the Director of Industries to
consider the matter afresh. 46. In view of our findings aforementioned no
direction is required to be issued in the writ petition filed by the appellants.
The writ petition is disposed of accordingly."
Lower Level Screening Committee ("LLSC" for short) After considering the
matter in the light of the abovementioned judgment passed by this Court made a recommendation
for grant of eligibility certificate to the extent of Rs.94,48,911/- for a period
of nine years i.e. from 29.03.1997 to 28.03.2006. The said amount was
calculated with reference to the investment made by the petitioner up to
16.12.1996 i.e. date of amendment, putting the unit in the negative list. On appeal,
the Appellate Authority affirmed the said view with the following observations
:- ".....The Committee examined the judgment relied upon and observed that
the Hon'ble Supreme Court has not found fault with the amendment dated 16.12.1996
whereby the solvent extraction plant have been put into negative list (schedule
III). The effect of enlargement of the negative list is that the unit has ceased
to be eligible for exemption/deferment with effect from 16.12.1996. Besides, it
is further observed that tax concessions, as repeatedly held by the Hon'ble Supreme
Court, are a defeasible, not an indefeasible, right but the withdrawal is always
respondent challenged the said order & judgment before the High Court of Punjab
& Haryana by filling a writ petition. The High Court by the impugned
judgment allowed the writ and held once the Respondent has been treated to be eligible
for exemption, there was no valid reason to further classify the benefit of
investment up to the date of amendment, putting the unit in the negative list.
The relevant paras of the impugned judgment are follows:- "13. Admittedly,
on the date of commercial production and also on the date of issue of entitlement/exemption
certificate, the petitioner was in negative list and could not be considered to
be eligible unless applicability of notification dated 16.12.1996 was confined to
units which started investment before the said date.
The respondents themselves
have extended the benefit by not treating the notification dated 16.12.1996 to
be applicable to the petitioner. Once the petitioner has been treated to be
eligible, there was no valid reason to further classify the benefit of investment
up to the date of amendment, putting the unit in the negative list.
In view of above, we
allow this petition and quash the impugned orders to the extent of restricting the
benefit to the date of notification i.e. 16.12.1996.
Authority may now pass a fresh order in accordance with law, within four months
from the date of certified copy of this order.
is against the said judgment that the appellants have approached this Court. We
heard the learned Senior Counsel for the parties. However, before we deal with the
respective submission we may specify that this Court in the year 2006 has
already held that the Respondent is entitled to the exemption, and the only issue
which remains to be decide is whether the exemption has to be granted upon the
entire investment or the investment made up till 16.12.1996 i.e. date of
amendment, putting the unit in the negative list.
learned Senior Counsel appearing for the State vehemently argued that the exemption
granted to solvent extraction plant was legally withdrawn by the State Government
on 16.12.1996 as the same was deemed necessary in the public interest It was
further submitted that it is within the prerogative of the State to withdraw an
exemption if the same is deemed necessary in the public interest. It was also
submitted that the Respondent does not have a vested right in their favour and
the exemption granted cannot go beyond the date of withdrawal by the State. It was
also contented that as now the benefit of exemption has been granted on the
investment made up till 2216.12.1996 the question of retrospective effect also
does not arise.
the other hand, it was submitted by the Learned Senior Counsel appearing for
the Respondent that the respondent has taken a decision to establish its
industrial unit in the said area of the State of Haryana, only on the basis and
footing that the respondent would be entitled to the benefit of sales tax
exemption @ 150% on the total capital investment made in that industrial unit.
In order to supplement the said submission, the learned Senior Counsel placed strong
reliance on the doctrine of promissory estoppel and submitted that once the
Respondent, based on the representation of the State has initiated the steps to
establish the unit and has made substantial investment in that regard, the State
now cannot turn around and deny the said benefit of exemption.
have considered the submission made by the learned senior counsel for the
parties and have also perused the relevant provision, as amended from time to
time and the documents placed on record.
judgment of this Court dated 10-3-2006 in Civil Appeal 1635 of 2006 reported at
(2006) 3 SCC 620 only considered the retrospective operation of the amendments made
on 16.12.1996 and subsequent amendments which sought to take away certain
rights of the Respondents. This Court in the said judgment had only held that
the amendment to Rule 28A could not have any retrospective effect, in the sense
that it could not affect an assessee's pre-existing rights. It is also important
to note that the said judgment clearly clarified that the question of quantum of
exemption to which the appellants may be entitled to was not considered. It may
also be pointed out that this Court did not go into the challenge made to the validity
of the Amendments made which was challenged by the Respondent by way of a Writ Petition.
The reliance placed on the said Judgment is therefore misplaced. The issue that
falls for our consideration in this appeal is on the quantum of exemption to which
the Respondent is entitled and that too for the period subsequent to the date
of the amendment. In other words, the question before us pertains to whether the
Respondent is entitled to the benefit of Sales Tax exemption on the entire
investment made by them in setting up the industrial unit i.e. Solvent Extraction
Plant, made prospectively after 16.12.1996.
has been urged on behalf of the Respondents that benefit of the exemption is
required to be advanced to them on the principle of the Doctrine of Promissory Estoppel.
We are not in agreement with the said argument. This Court in M/s. Motilal
Padampat Sugar Mills Co. (P) Ltd. vs. State of Uttar Pradesh and Ors. Reported
in (1979) held as under:
Court finally, after referring to the decision in the Ganges Manufacturing Co.
v. Sourujmull, Municipal Corporation of the City of Bombay v. Secretary of
State for India and Collector of Bombay v. Municipal Corporation of the City
of Bombay summed up the position as follows: "Under our jurisprudence the Government
is not exempt from liability to carry out the representation made by it as to
its future conduct and it cannot on some undefined and undisclosed ground of necessity
or expediency fail to carry out the promise solemnly made by it, nor claim to
be the Judge of its own obligation to the citizen on an ex parte appraisement
of the circumstances in which the obligation has arisen."
law may, therefore, now be taken to be settled as a result of this decision,
that where the Government makes a promise knowing or intending that it would be
acted on by the promisee and, in fact, the promisee, acting in reliance on it,
alters his position, the Government would be held bound by the promise and the promise
would be enforceable against the Government at the instance of the promisee, notwithstanding
that there is no consideration for the promise and the promise is not recorded in
the form of a formal contract as required by Article 299 of the Constitution.
is elementary that in a republic governed by the rule of law, no one, howsoever
high or low, is above the law. Everyone is subject to the law as fully and
completely as any other and the Government is no exception. It is indeed the
pride of constitutional democracy and rule of law that the Government stands on
the same footing as a private individual so far as the obligation of the law is
concerned: the former is equally bound as the latter. It is indeed difficult to
see on what principle can a Government, committed to the rule of law, claim immunity
from the doctrine of promissory estoppel. Can the Government say that it is
under no obligation to act in a manner that is fair and just or that it is not bound
by considerations of "honesty and good faith"? Why should the
Government not be held to a high "standard of rectangular rectitude while
dealing with its citizens"?
was a time when the doctrine of executive necessity was regarded as sufficient justification
for the Government to repudiate even its contractual obligations; but, let it
be said to the eternal glory of this Court, this doctrine was emphatically negatived
in the Indo-Afghan Agencies case and the supremacy of the rule of law was
established. It was laid down by this Court that the Government cannot claim to
be immune from the applicability of the rule of promissory estoppel and repudiate
a promise made by it on the ground that such promise may fetter its future executive
the Government does not want its freedom of executive action to be hampered or
restricted, the Government need not make a promise knowing or intending that it
would be acted on by the promisee and the promisee would alter his position relying
upon it. But if the Government makes such a promise and the promisee acts in
reliance upon it and alters his position, there is no reason why the Government
should not be compelled to make good such promise like any other private
individual. The law cannot acquire legitimacy and gain social acceptance unless
it accords with the moral values of the society and the constant endeavour of the
Courts and the legislature, must, therefore, be to close the gap between law
and morality and bring about as near an approximation between the two as possible.
doctrine of promissory estoppel is a significant judicial contribution in that
direction. But it is necessary to point out that since the doctrine of promissory
estoppel is an equitable doctrine, it must yield when the equity so requires.
If it can be shown by the Government that having regard to the facts as they
have transpired, it would be inequitable to hold the Government to the promise made
by it, the Court would not raise an equity in favour of the promisee and enforce
the promise against the Government. The doctrine of promissory estoppel would be
displaced in such a case because, on the facts, equity would not require that the
Government should be held bound by the promise made by it.
the Government is able to show that in view of the facts as have transpired since
the making of the promise, public interest would be prejudiced if the
Government were required to carry out the promise, the Court would have to balance
the public interest in the Government carrying out a promise made to a citizen
which has induced the citizen to act upon it and alter his position and the public
interest likely to suffer if the promise were required to be carried out by the
Government and determine which way the equity lies. It would not be enough for the
Government just to say that public interest requires that the Government should
not be compelled to carry out the promise or that the public interest would suffer
if the Government were required to honour it.
Government cannot, as Shah, J., pointed out in the Indo-Afghan Agencies case,
claim to be exempt from the liability to carry out the promise "on some
indefinite and undisclosed ground of necessity or expediency", nor can the
Government claim to be the sole Judge of its liability and repudiate it "on
an ex parte appraisement of the circumstances".
the Government wants to resist the liability, it will have to disclose to the Court
what are the facts and circumstances on account of which the Government claims to
be exempt from the liability and it would be for the Court to decide whether those
facts and circumstances are such as to render it inequitable to enforce the liability
against the Government. Mere claim of change of policy would not be sufficient to
exonerate the Government from the liability: the Government would have to show what
precisely is the changed policy and also its reason and justification so that
the Court can judge for itself which way the public interest lies and what the
equity of the case demands.
is only if the Court is satisfied, on proper and adequate material placed by the
Government, that overriding public interest requires that the Government should
not be held bound by the promise but should be free to act unfettered by it,
that the Court would refuse to enforce the promise against the Government. The Court
would not act on the mere ipse dixit of the Government, for it is the Court
which has to decide and not the Government whether the Government should be
held exempt from liability. This is the essence of the rule of law.
burden would be upon the Government to show that the public interest in the Government
acting otherwise than in accordance with the promise is so overwhelming that it
would be inequitable to hold the Government bound by the promise and the Court would
insist on a highly rigorous standard of proof in the discharge of this burden. But
even where there is no such overriding public interest, it may still be competent
to the Government to resile from the promise "on giving reasonable notice,
which need not be a formal notice, giving the promisee a reasonable opportunity
of resuming his position" provided of course it is possible for the
promisee to restore status quo ante. If, however, the promisee cannot resume his
position, the promise would become final and irrevocable. Vide Emmanuel Avodeji
Ajaye v. Briscoe".
doctrine of Promissory Estoppel is an equitable remedy and has to be moulded depending
on the facts of each case and not straight jacketed into pigeon holes. In other
words, there cannot be any hard and fast rule for applying the doctrine of
Promissory Estoppel but the doctrine has to evolve and expand itself so as to
do justice between the parties and ensure equity between the parties i.e. both
the promissor and the promisee.
principles of promissory estoppel is not applicable in the instant case as the
decision to put the Solvent Extraction Plant in the negative list was taken in
public interest since the industry is in the category of polluting industry. It
has never been the case of the Respondent that the Solvent Extraction Plant is a
non polluting industry. There is also no allegation that the decision to put the
Solvent Extraction Plant in the negative list was actuated by fraud or that the
said decision was not bona fide. In cases where the Government on the basis of
material available before it, bona fide, is satisfied that public interest
would be served by granting, withdrawing, modifying or rescinding an exemption
already granted, it should be allowed a free hand to do so. The withdrawal of
exemption "in public interest" is a matter of policy and the Courts should
not bind the government in its policy decision. The Courts should not normally
interfere with fiscal policy of the government more so when such decisions are taken
in public interest and where no fraud nor 32 lack of bona fide is alleged much
exemption is nothing but a freedom from an obligation which an assessee is otherwise
liable to discharge. In a fiscal statute, an exemption has been held to be a
concession granted by the state so that the beneficiaries of such concession
are not required to pay the tax or the duty they are otherwise liable to pay under
such statute. The beneficiary of a concession has no legally enforceable right
against the government to grant a concession except to enjoy the benefits of
the concession during the period of its grant. The right to exemption or
concession is a right that can be taken away under the very power in exercise
of which the exemption was granted.
in the fact of the instant case, it cannot be said that the Respondent had
altered its position relying on the promise in as much as even before steps
were taken by the Respondent for laying the Solvent Extraction Plant, the Petitioner
had made its intention clear through its notice dated 3.1.1996 that it was
likely to amend the law/rules in respect whereof a draft was circulated for
information of persons likely to be affected thereby so as to enable them to file
objections and suggestions thereto. Amendments in the terms of the said draft
rules were notified on 16-12-1996 substituting Schedule III appended to the
Rules whereby and where under the solvent extraction plant was included
cannot be denied that an investment was made by the Respondent in the said area
of the State of Haryana, probably on the belief that it would be entitled to the
exemption. However, the said factor alone, in the absence of any specific confirmation
cannot stop the State to amend the policy and withdraw the exemption if the
same is deemed necessary and expedient in the Public Interest. Moreover, the
said policy which was for the period of 1-4-1988 to 31-3-1997 was nearing its
Note appended to the amendment made to Schedule III (extracted hereinabove),
categorically state that the industrial units in which investment has been made
up to 25% of the anticipated cost of the project and which have been included
in the above list for the first time shall be entitled to the sales tax
benefits related to the extent of investment made up to 3-1-1996. On or about 28-5-1997
the said Rules were amended inter alia by omitting Note 2 deeming to have
always been omitted.
LLSC, while arriving at the quantum of exemption considered the conditions enumerated
in the Note 2 and keeping in view the observation made by this Court in the abovementioned
judgment, granted the exemption till 16.12.1996 i.e. date of the amendment instead
of 3-1-1996 as mentioned in the said Note. The said finding was upheld by the
Appellate Authority which found that the quantification was in accord with abovementioned
judgment passed by this Court and other principles of law.
one goes by the wording of Note 2, it appears that in order to balance the equities
and protect the interest of the investor the benefit of the exemption was
granted for the investments made up till 16-12-1996. Moreover, as the benefit
has already been granted till 16-12-1996 in terms of the ratio of the judgment
passed by this Court, in the Mahabir Vegetable case (supra) reported at (2006)
3 SCC 620 it cannot be said that even now an attempt has been made to give
retrospective effect to the said amendment.
High Court has gone on the premise that once the Appellant have themselves extended
the benefit to the Respondent they cannot further classify the benefit of
investment up to the date of amendment, putting the unit in the negative list.
It appears that the High Court while arriving at the said finding has failed to
appreciate the fact that the case of the Respondent was considered for
exemption in the light of the judgment passed by this Court in the Mahabir
Vegetable case (supra) reported at (2006) 3 SCC 620 wherein it was held that the
Respondent is entitled to exemption. However, the issue of quantum was kept
open. The High Court while giving the said finding has altogether closed itself
in considering the said issue and on the contrary has held that only because the
Respondent has been considered for grant of exemption, there is no issue of quantum
and the Respondent is entitled to entire exemption. In our opinion the said
finding is not in line with the observations made by this Court in the Mahabir Vegetable
case (supra) reported at (2006) 3 SCC 620. The quantification made by the LLSC
is in accord with the ratio laid by this Court.
we allow the appeal and set aside the impugned judgment passed by the High
Court leaving the parties to bear their own costs.
[Dr. Mukundakam Sharma ]
[ Anil R. Dave ]